Nearly 80% of supply chain facilities with substantive water-related challenges disclosed to CDP in 2025 by Global North-headquartered companies were located in the Global South. That single figure encapsulates the central argument of Making water use in global trade more sustainable: the challenge to improve supply-chain resilience and water security in the context of geopolitical change, a May 2026 Chatham House research paper by Leslie Morris-Iveson, Joe Ray, Richard King and Laura Kelly. Water stress, the paper argues, is being systematically exported through global trade, largely unnoticed, with mounting consequences for producer regions, consumer markets and global supply chains alike.
The virtual water problem and what it costs producer regions
At the heart of the paper is the concept of virtual water, the freshwater required to produce, process and transport goods at every stage of the supply chain. Despite being a critical input across almost all traded commodities, the authors describe water as the "forgotten input" in global trade, one whose true costs are rarely reflected in sourcing decisions or trade policy.
Water stress, the paper argues, is being systematically exported through global trade
The China-Brazil soybean trade illustrates the scale of the problem. Before China joined the WTO in 2001, it imported 2 million tonnes of soybeans a year from Brazil; today that figure exceeds 50 million tonnes, massively increasing water stress in the Amazon basin. Food systems account for around 70% of global freshwater withdrawals, and G20 consumption drives 55% of the blue water (surface and groundwater) embedded in international agricultural trade. The electronics sector tells a parallel story: 16% of critical mineral mines are in highly water-stressed areas, and more than 40% of data centres are projected to face high or extremely high water stress between 2030 and 2040.
Geopolitics compounds the crisis
The paper is unambiguous that the geopolitical environment is making collective responses harder precisely when they are most needed. The EU's Corporate Sustainability Due Diligence Directive has been significantly weakened and delayed, its scope narrowed to direct suppliers. G7 aid budgets are shrinking as development spending is redirected towards defence, reducing investment in water governance in producer regions.
Water risk reframed as an economic and supply chain threat, rather than purely an environmental one, is the most realistic path to meaningful action
The authors invoke the concept of "water bankruptcy", coined in a 2026 United Nations University report, to describe a world in which freshwater systems are being depleted faster than they can be replenished, and warn that today's geopolitical environment further constrains the already limited pathways through which these impacts may be addressed.
Recommendations and the path forward
The paper sets out ten recommendations across a range of actors.
- Multilateral forums and WTO technical committees should explicitly address embedded water in global trade and lower barriers to water-saving technologies.
- Governments should recognise water stress as a structural economic risk and align public procurement with sustainability standards.
- Corporations should integrate basin-level water stress into sourcing decisions and report publicly on water dependencies across their value chains.
- Financial institutions should treat water risk as a material factor in credit assessments and investment portfolios.
- Civil society organisations have a critical role in monitoring compliance and advocating for affected communities, with particular attention to marginalised groups.
The authors conclude that targeted action remains realistic, and is most likely to gain traction where water risk is framed as a direct threat to supply chain resilience and economic stability, not only as an environmental concern.
