Water Scarcity and Industrial Productivity: Assessing the Economic Consequences of Corporate Water-Resource Management in Emerging Economies

Water is a small line in most manufacturers’ cost accounts, which has led many firms and policy makers to treat scarcity as an environmental concern rather than a productivity concern. This paper argues that the economic consequences of scarcity operate mainly through reliability and not through price: a plant with committed capital and labor that cannot obtain enough water loses output on every shortage day, and the loss is far larger than the water bill. The paper synthesizes peer reviewed work published before 1 January 2023 on physical water scarcity, the macroeconomic effects of water variability, the plant level effects of infrastructure unreliability, and corporate environmental management and performance. The evidence shows widespread and seasonal scarcity, consistent growth and output losses at aggregate scale, and large firm level losses from unreliable utilities, but direct plant level evidence linking corporate water management to productivity in emerging economies is thin. The paper therefore develops an analytical model in which a plant faces shortages of frequency p and depth d, chooses a recycling and reuse share r and a storage buffer, and loses expected output Λ = p(1−β)(d −r)+/(1−r). The model yields a resilience threshold (r ≥ d), a gap between the market price and the shadow value of water, an investment rule with a corner solution at the threshold, a payback calculation, and a commons externality from private groundwater selfsupply.
It proposes a Water Stewardship Capability Index (WSCI) built by geometric aggregation so that a weak component cannot be offset by strong ones, together with threshold, interaction, and event study tests. In an assumed numerical example, expected shortage loss is 2.2 times the water bill under high stress, and reuse to the resilience
threshold raises annual profit by 8.5% with a payback of about four years. Corporate water management raises productivity chiefly where stress is high, where capability is balanced, and where private self-supply is coordinated.