Water stress index

The water stress index is an indicator that quantifies the pressure human water demand places on the renewable freshwater available in a given area. It is expressed as a percentage relating total annual water withdrawals to total renewable freshwater resources.

When this value exceeds 40%, a region is considered to be under high water stress, according to international references such as the World Resources Institute (WRI) and the Food and Agriculture Organization (FAO). Above 80%, it is described as extremely high water stress, a situation that seriously compromises the environmental and socio-economic sustainability of a territory. The same ratio underpins SDG indicator 6.4.2 (level of water stress).

How it is calculated

The index uses the following formula:

Water stress index (%) = (total annual water withdrawals / annual renewable water resources) x 100

It can be calculated at national, regional, river-basin or even sub-basin level, and is typically updated each year in global water-security assessments such as WRI's Aqueduct Water Risk Atlas.

What does a high value mean?

A high index means a region is withdrawing water at an unsustainable rate, leaving little room for aquifers to recharge naturally, for rivers to maintain their environmental flow, or for future needs to be met. It also implies high exposure to shortages in the event of drought or rising demand.

In other words, the water stress index identifies areas where human water use exceeds, or is about to exceed, the limits of the hydrological system. This affects food production, public health, industrial activity, biodiversity and political stability.

Factors that worsen water stress

Although the index is a technical ratio, its increase is driven by several structural causes:

• Rapid population growth without a proportional expansion of infrastructure.
• Intensive agriculture based on high-consumption crops (for example avocado, rice or sugar cane).
• Lack of wastewater treatment and reuse.
• Inefficient industrial use and water lost through urban network leaks.
• Climate change, which alters rainfall patterns and reduces aquifer recharge.

These factors act in cascade, creating situations where demand consistently outstrips supply and the water system degrades progressively. The result is growing water scarcity.

Consequences of operating in water-stressed regions

• Reduced food security due to a shortage of water for irrigation.
• Conflicts between sectors (agricultural vs urban, industrial vs ecological).
• Higher water costs and the risk of rationing.
• Loss of biodiversity and collapse of aquatic ecosystems.
• Reputational and operational risks for companies that withdraw water in vulnerable areas.

Use in public policy

The water stress index is a key indicator in water planning, the allocation of abstraction permits and infrastructure investment. It allows governments to define priority areas for intervention, set abstraction limits and environmental flows, plan water-efficiency measures in key sectors, and justify investment in desalination, rainwater harvesting or reuse.

Importance for companies and ESG analysis

From a business perspective, operating in regions with a high water stress index is a material risk. Companies should assess their exposure, measure their water footprint and take decisions that reduce their vulnerability.

Frameworks such as CDP Water and the GRI standards require companies to report the location of their operations in relation to local water stress, and climate-related disclosures aligned with the former TCFD recommendations are now consolidated into IFRS S2. Failing to disclose can erode the trust of investors, customers and regulators.

How to reduce water stress

• More efficient irrigation (drip irrigation and soil-moisture sensors).
• Greywater reuse for non-potable uses.
• Removing perverse subsidies for intensive water use.
• Water circular-economy strategies in industry and municipalities.
• Education for responsible use and conservation.

A thermometer of water sustainability

The water stress index is a warning signal about the sustainability of current production and consumption models. Monitoring it and acting accordingly is essential to safeguard water security in the decades ahead.

At Manglai we help companies measure their environmental and water footprint and prepare their sustainability reporting. Discover how Manglai can help you.