This is the regular newsletter from Everloop where we share how not to get lost in sustainability. This month we look at water, arguably the biggest climate and nature risk, and one of the most basic pieces of infrastructure any organisation depends on, and the one most consistently left out of the plan.
Slough has 125 data centres planned. During this summer's hosepipe ban, one water company reported that these projects were asking for as much as 3 million litres a day, drinking-quality water, while the south and east of England were told to stop watering their gardens. The UK government has designated data centres as critical national infrastructure. Water itself hasn't been given the same status.
Water UK, the trade body representing the country's water companies, has called the government's AI growth plans "fatally flawed" for not accounting for data centre water use at all, and a House of Lords report from May this year put England on track for a 5 billion litre shortfall by 2055.
The thing every data centre, factory and farm depends on absolutely isn't planned as infrastructure. The thing it depends on is.
The Kerala village's local council refused to renew Hindustan Coca-Cola's licence in 2004 after residents' wells ran dry and water turned toxic; Coca-Cola shut the plant permanently in 2005 rather than fight indefinitely for water access. Compensation claims (₹216 crore, roughly $26m) are still unresolved almost 20 years later, and it became one of the most cited corporate water-risk case studies globally, credited with pushing Coca-Cola and peers toward formal water stewardship programmes.
Do we need to wait and see how this plays out in AI space before water stewardship is adopted?
Everyone understands water - we encounter it every day, and this is precisely why it feels like it is always going to be there. Until there is not enough - the maths catches up and it gets costly.
In this newsletter we want to address a few misconceptions and questions about water risks that we often hear.
1. How can a region that is in drought also have floods?
It does not happen at the same time, but one leads to the other one. A site can be under a drought warning in June and a flood warning in September. NASA's satellite record confirms both extremes, drought and flood, have become more frequent over the past two decades. Scientists have started calling the swing between them "hydroclimate whiplash."
Warmer air holds more moisture, roughly 7% more for every extra degree, pulling water out of soil and vegetation faster between rain events, deepening dry spells. It also means that when rain does come, there's more of it, it tends to arrive faster onto ground that's no longer able to absorb water.
This video provides the best illustration for how this works: Experiment Shows Risk of Flash Flooding After Drought
Your takeaways:
Know your climate risk exposure for critical locations - run a physical climate risk assessment. Get in touch if you do not know where to start.
Consider the compounding effects of heat, droughts and floods on your operations and supply chain. This means looking at the business implications over a longer period of time and taking into account how one would affect the other in terms of financial consequences.
Review your business resilience and emergency protocols - do they address the interrelationship?
2. There has been no flooding in our area, we are safe
Flood maps are historical records, built from past rainfall data. FEMA's own officials have said as much: maps describe where water has gone before, not where it's going. The future patterns are changing fast.
A 2023 US assessment using climate-adjusted rainfall data found almost twice as many properties exposed to a 100-year flood than the official maps showed. In France, on average, 45% of flood claims annually are outside the official flood zones. French insurers have reported paying out a total of over 16 billion euros in 2022 and 2023 due to climate disasters. According to 30-year statistics, in France, on average, 50% of insured losses are caused by floods. Additionally, flooding is the primary climate risk in terms of the number of municipalities affected.
The same blind spot shows up in water availability planning, and the AI growth zone story is the clearest current example. Government projections for water demand "explicitly exclude" data centre usage, according to Water UK's evidence to MPs, despite data centres being fast-tracked as nationally important. Up to 60% of the projected shortfall could reportedly be closed through demand management and leakage reduction. It hasn't been, because nobody with the authority to act has been forced to look at the two numbers side by side. Water will magically appear where needed, or those who need it simply won’t get it elsewhere to compensate. Which one do we think is more likely?
Your takeaways:
If you're relying on a public map, a licence, or a government projection for your water exposure, check whether they are up to date.
When in doubt, commission accurate flood map and forecast assessments
If you are building or relying on a pierce of infrastructure, ask your regulator or local authority whether cumulative demand (including new developments) has actually been modelled against supply, before concluding what your risk exposure is.
3. There is enough water on the planet
Droughts and heatwaves are the main natural drivers of water scarcity. To this date, the global freshwater use has increased by a factor of six over the past century and continues to grow, with groundwater withdrawal tripling since 1960. According to the 2030 Water resources Group the demand for water by 2030 could surpass the supply by as much as 40%, with some recent figures suggesting the gap has already reached 56%.
During droughts and extreme heatwave events, restrictions are applied to groundwater use. To protect the population and the environment, government water authorities can prohibit water usage for certain facilities. Today water scarcity is a real barrier to the development of new production facilities.
Thermal power plants, automotive factories and mineral ore production sites in India, Germany and Chile lose millions in profit because of severe water shortages driven by physical climate risks. Over two thirds of companies across all industries have already reported exposure to water risks.
Taiwan, 2021. The island's worst drought in 56 years hit the reservoirs supplying the Hsinchu and Taichung science parks, home to TSMC and other chipmakers producing the majority of the world's semiconductors. Water rationing of 15–17% was imposed on manufacturers; TSMC and others resorted to trucking in water, with TSMC alone reportedly spending over NT$0.5 billion (~€24m) on water trucks that year, well above budget. It landed in the middle of a global chip shortage already squeezing car makers in the US, Germany and Japan, and analysts at AlixPartners estimated the semiconductor sector could lose $110 billion in sales that year from component shortages broadly (not water alone, but water was one clear contributing shock).
Your takeaways:
Do not treat your climate / nature risk assessment as separate to your business risk assessment. The former is not a compliance issue - the resulting costs will come out from the same pocket as the latter.
If you are building or relying on a piece of infrastructure, ask your regulator or local authority whether cumulative demand (including new developments) has actually been modelled against supply, before concluding what your risk exposure is.
4. We do not have nature risk exposure, we are not in agriculture-related industry
If you rely on water directly or in the supply chain, you do. We see when we run a Nature Impact assessment for clients - water shows up every time, and most times the risk exposure to the business is a surprise.
Cosmetics - need water to grow ingredients, process them and manufacture products. AI & Digital - data centres need cooling, and chip fabrication depends on ultra-pure water for cleaning and rinsing wafers between production steps, metals - water is essential for iron ore extraction and metals manufacturing. Packaging - all needs water in processing, whether it is paper or plastic. Any textile - synthetic or natural fibres require water at every stage, the dyeing and finishing stage alone uses roughly 30-50 litres of water per kilogram of cloth, and the sector as a whole withdraws around 4% of global industrial freshwater, mostly at the factory, not the field. Even circular reuse systems - all need water to wash out the used containers ready for refill.
The map below shows the overall water stress levels globally - this takes into account availability of water, pollution, risk exposure etc.
Source: Water Aqueduct tool
If you are sourcing from Europe - look at this map of water depletion, which is the ratio of total water consumption to available renewable water supplies.
Source: Water Aqueduct tool
If your operations are in the UK, you might be interested to know that the Environment Agency's own modelling projects a shortfall equivalent to over a third of the water currently available for public consumption.
Thames Water reported water use running 10% above normal in the Thames Valley, an extra 100 million litres a day, "equivalent to adding all the homes in Manchester to the network." Separate analysis (Cebr/Kingfisher) projects seven regions facing severe stress by 2030, rising to 12 of 171 water resource zones by 2040.
There are multiple reasons for this, beyond climate change and therefore some can be addressed.
Consumption. The average person in England uses about 140 litres a day, and Britain uses more water per head per day than almost anywhere else in Europe. The EA's own scenario shows that cutting this to 100 litres/day and halving leakage would free up enough water for an additional 20 million people without taking any more from the environment, i.e. the shortfall is largely a demand-management failure.
Leakage. Roughly 3 billion litres a day are lost to leaking pipes in England and Wales, equivalent to the daily water use of over 20 million people. At the current pace of infrastructure replacement, the National Audit Office found it would take 700 years to replace the existing water network.
Investment gap. The sector needs new infrastructure projects and new reservoirs that hadn’t been built for decades, even as population and demand grew.
Your takeaways:
Conduct your water risk assessment across operations and supply chain to know where your exposure sits.
Act on water stewardship locally - educating your staff, reducing consumption, supporting local water stewardship initiatives and NGOs, implementing water saving measures on your sites - inside and outside of the building (e.g. water harvesting, preventing water run off, green spaces are all feasible and impactful measures..
5. We have dual sourcing - we are covered if there is an issue
Dual sourcing is not the same as supply chain diversification and effective mitigation strategy if it does not cover geographic/water-basin diversification as well.
A few examples where companies found out the hard way:
PC makers like HP, Dell and Apple had spent years diversifying their hard-drive supply across multiple named vendors, Western Digital, Seagate, Toshiba to avoid single-supplier risk. Most of those "different" suppliers, plus critical component makers were all clustered in the same industrial estates along the same flooded river corridor, the Bangkok–Ayutthaya basin. The floods in 2011 knocked out around 40% of the world's hard-drive production in one event with total recovery cost in the hundreds of millions of dollars, with a widely cited figure of $199 million directly attributed to the flood. Its net income fell 36% that quarter. Seagate, whose plants happened to sit outside the flood zone, saw the opposite: net profit jumped from $150 million to $563 million in the same period, purely because supply-constrained pricing worked in its favour.
The same flood also devastated Japanese-owned automotive parts plants (Honda, Toyota) clustered in the same region, since Thailand's industrial estates concentrate multiple unrelated sectors on the same floodplain.
Record-low water levels on the Rhine, Europe's main inland chemicals shipping artery, meant barges couldn't carry full loads or navigate at all. BASF had to shut its Ludwigshafen toluene diisocyanate plant outright because barges couldn't deliver raw material, and reported around €250 million in additional costs from the disruption. Evonik cut production at all six of its Rhine-dependent German sites. Covestro issued a profit warning citing the low water directly. Ineos, Solvay and ArcelorMittal all declared force majeure. German chemical and pharmaceutical production fell roughly 10% over three months, and economists estimate the Kiel Institute figure of roughly 1% industrial output loss per month of low water. It happened again, less severely, in 2022 and 2023, so companies have since invested in more rail/road flexibility and smaller barge fleets as a direct strategic response.
Drought in Morocco has reduced argan yields even as beauty-industry demand has pushed argan oil prices up roughly 24-fold over three decades, with L'Oréal, Unilever and Estée Lauder all sourcing through the same strained supply chain.
Roughly 70% of global cocoa comes from a narrow band of West African countries, Ivory Coast and Ghana account for most of it, all exposed to the same El Niño-driven drought and heat stress in the 2023/24 season. Ghana's harvest came in around 40-50% below forecast, its lowest in over a decade. Prices went from roughly $2,000-3,000/tonne historically to over $12,000/tonne at the April 2024 peak, a move that caught chocolate manufacturers' cost models off guard badly enough that several (Hershey, Mondelez among them) cited cocoa cost inflation explicitly in earnings calls as a margin surprise, not something priced into annual planning. It's continuing to resurface: drought concerns in the same two countries were pushing prices up again as recently as March 2026.
Even if your sourcing is not concentrated on an industrial estate, regional concentration carries a risk.
In the highly industrialised Sichuan province of China, with a population of 85 million - hydropower supplies as much as 80% of total energy. During the summer of 2022, hydroelectric generation dropped by more than 50% due to a decline in water levels. As a result, for 6 days more than one hundred factories had to come to a complete stop, and faced restrictions for another week after. This interruption created a shortage of electronic chip supply, which in turn, disrupted global suppliers including Apple's manufacturing partner Foxconn, Tesla, Toyota and Volkswagen.
Your takeaways:
Ask your suppliers what climate/water risk management plans they have and how concerned you need to be about security of supply.
Supply diversification needs to reflect geographic/water-basin diversification as well.
Get in touch via [email protected] if you need support with your climate risk assessment, climate resilience advise or are looking for climate risk data to integrate in your own analysis or tools.
Recent Insights from Everloop
For your toolkit
NASA: Warming makes droughts, extreme wet events more frequent, intense
Taking action on nature: resources to start integrating nature in procurement and supply chains
Business & Water Day Zero Toolkit: a guide to making the first steps in understanding the relationship and dependencies of the business on water
Meme of the month
Recap of Good News this month
💫 That’s it for this month. We hope it sparks a change for you and your organisation - we’d love to hear what you’re doing differently. Let us know!
Is there an advice that has been very helpful to you, or insights you think others would find helpful too? Please share by emailing [email protected].
