Growth Club
1851 Growth Club
A Record Water Shortage May Have Lasting Impact on Franchises
A shortage has been declared on the Colorado River for the first time ever, launching global supply chain repercussions and franchise conservation efforts.
On Monday, The New York Times reported the U.S. has declared a Colorado River water shortage for the first time ever. States like Arizona will soon see about 18% of their annual apportionment cut, which means franchises may have to quickly embrace long-term changes to sustain their businesses.
The New York Times article says the current drought is another stage of an ongoing water crisis that isn’t going away. “Water levels at Lake Mead and the other large Colorado reservoir, Lake Powell, in Utah, have been falling for years,” the article said. If water conditions get worse over the next several years, it means franchises will have to adjust, water infrastructure will have to change heavily, or both.
According to a 2021 study in the journal Nature Communications, “While water scarcity is often understood as a local river basin problem, its drivers are often global in nature. Agricultural commodities (the primary source of global water consumption) are often traded and consumed outside the regions they are produced.”
The water crisis in the western U.S. can have global repercussions for a supply chain that has already faced strain this year. Agriculture cannot operate at full capacity without necessary water, and an already-growing population has forced plenty of farmland to be converted into residential and commercial development. As the world population continues to grow, the need for productive farmland is at an all-time high.
Many franchises depend on a stable water supply in some form, especially those in the restaurant industry. A decrease in available water can cause an uptick in operational costs, which could result in industry-wide conservation measures.
If farmland becomes less productive, scarcity and pricing could increase, and franchise investment strategies may begin favoring brands without a continual need for water, directly or indirectly.
The water crisis doesn’t seem to be disappearing any time soon, as significant watersheds in California could be facing water import cuts within years. For many franchises, a shortage could call for even more lasting solutions than what was needed to navigate the COVID-19 pandemic.
