In an era defined by resource constraints and the urgent need for sustainable development, water emerges not only as a fundamental human need, as acknowledged in the different resolutions of the UN General Assembly (UNGA) on human rights to water and sanitation, but also as a key driver of economic competitiveness. Across industries and geographies, access to and management of water resources shape industrial productivity, influence trade patterns, and determine long-term resilience. Despite its centrality, though, water remains a frequently downplayed factor of comparative advantage: a reality that must change if businesses and policymakers are to ensure sustained economic and social prosperity.
The Economic Value of Water in Global Competitiveness
Historically, discussions on economic competitiveness have focused on capital, labour, and technology as primary drivers of industrial success. However, as research has shown for decades, water abundance or scarcity significantly influences a nation’s trade patterns. Countries with abundant renewable water resources tend to specialise in water-intensive industries, from agriculture to certain manufacturing processes. Conversely, nations facing water stress are often forced to import water-intensive goods, thereby structuring global trade flows around this essential, yet often invisible resource.
Despite the robustness of this principle, water’s role as a source of comparative advantage has traditionally been understated relative to other factors of production. Unlike capital or skilled labour, whose market valuations are relatively straightforward, water is often underpriced or misallocated due to regulatory distortions, subsidies, and inefficient distribution systems. This has led to excessive consumption in some regions and severe scarcity in others, exacerbating risks to economic stability and critical supply chains.
Water and the Corporate Competitive Edge
Beyond national economies, businesses must now recognise that water is not merely a cost centre but a strategic asset that can enhance (or hinder) competitiveness. Companies operating in water-intensive sectors, from construction materials to energy production, are increasingly facing operational and reputational risks tied to water scarcity. The need for proactive water stewardship has never been more urgent.
This long-standing scenario is undergoing a profound transformation. The rules of the game are shifting, as it is now possible to implement management systems that integrate newly available water sources (the so-called non-conventional resources), facilitate managed aquifer recharge (functioning akin to batteries in renewable energy) and deploy other innovative mechanisms to mitigate resource uncertainty.
Countries with a long-term vision are already formulating 5-year strategies to enhance water security across key sectors: urban domestic supply, industrial use, and emerging initiatives for agricultural applications. Within this evolving landscape, countries incorporating such measures into their strategic planning are recognising water not merely as a cost but as a critical and strategic asset, increasingly emphasising its value over its price.
In our own international operations, we have seen first-hand how effective water management can transform industrial delivery models. The activity carried out by my team is 100% international, and our experience in this field has enabled countries to change their delivery models or replicate initiatives we have developed elsewhere. We have been both disruptive and innovative, securing our position as respected leaders in the sector. As major developers, financiers, and operators, we have built an ecosystem in which stakeholders (including partners, B2B clients, and EPC contractors) collaborate in a manner that ensures water efficiency and long-term sustainability. The proof lies in the successful replication of our model across new geographies, demonstrating that sustainable water management can serve as a blueprint for competitiveness in multiple markets.
The European Perspective: Water in the Context of Industrial Strategy
For Europe, the strategic role of water must also be considered within broader discussions on industrial competitiveness, particularly in light of the Draghi Report on the future of the European competitiveness, that was released back in September 2024. The report highlights the need of strengthening Europe’s industrial base while ensuring resilience against external shocks, one of which is undoubtedly long-term water scarcity.
Europe has historically been at the forefront of environmental regulation, but challenges remain. Many industries, including essential ones such as cement, chemicals, and food production, depend on reliable water supplies, making them vulnerable to climate variability and regulatory shifts. The EU’s competitiveness hinges not only on innovation and digitalisation but also on securing sustainable resource flows, of which water is a primary concern, and not just one for southern European countries.
Strategic Recommendations: Rethinking Water as a Competitiveness Lever
Given the mounting pressures on global water resources, both companies and governments must adopt a more strategic approach to water management. The following measures are critical:
- Pricing Water More Accurately: Governments must move towards pricing mechanisms that reflect the true cost of water use, encouraging efficiency and innovation in water-intensive industries. Incorporating the value of water into the equation within a given scenario to assess the opportunity cost of its unavailability.
- Investing in Water Efficiency Technologies: From advanced desalination to closed-loop recycling systems, industries must embrace technologies that mitigate their water footprint.
- Embedding Water Risk into Corporate Decision-Making: Companies must integrate water risk assessments into financial and operational strategies, recognising water as a core component of resilience planning.
- Enhancing Water Governance: Public-private partnerships should play a greater role in ensuring sustainable water infrastructure and equitable access, particularly in regions prone to scarcity.
- Leveraging Trade as a Water Management Tool: Given that water is effectively ‘traded’ through water-intensive goods, international trade policies should account for virtual water flows, promoting efficiency in global supply chains.
Bottomline
The evidence is clear: water is no longer just a passive input in production but a determinant of competitive advantage at both national and corporate levels. Businesses that fail to integrate water stewardship into their long-term strategies risk operational disruptions, financial losses, and diminished competitiveness. Conversely, those that proactively address water management will not only future-proof their operations but also gain a crucial edge in a rapidly evolving economic landscape.
Water is not merely an environmental concern, if a critical one: it is a cornerstone of economic strength, innovation, and sustainable development. Those who recognise and respond to this reality will shape the competitive economies and industries of the future.
