Water fuels every facet of human civilisation. Besides securing our very survival, it ensures the provision of food and supports economies. Yet, for millions today, clean water is not easily accessible. Even though water is an integral part of nearly every Sustainable Development Goal, there are still 163 million people in India who do not have access to safe drinking water. This scarcity is fuelled by excessive freshwater withdrawals. Groundwater especially is overexploited as it is the major source of water for irrigation and industrial use. 

Inefficiencies in water use

By 2030, India’s per capita water availability will drop to 1,367 cubic metres annually, far below the water stress threshold. Rapid depletion necessitates market-based strategies to reward conservation. Similar to carbon credits, water credits can encourage conservation efforts.

Agriculture withdraws 80% of available water, with conventional irrigation only 25-35% efficient. The remaining 65-75% is lost to evaporation, runoff, or seepage. While water-efficient crops and conservation practices help, financial incentives can drive large-scale adoption. Carbon credits have proved that market-driven mechanisms can encourage environmental action. Likewise, water credits can also help embed measurable stewardship into corporate strategies.

How water credits work

Water credits provide a market-based approach to managing water resources. They reward individuals and businesses with water credits for water-saving, quality improvement efforts or use of treated water. These earned credits can then be traded to fund replenishment initiatives. By assigning a value to water savings, industries are incentivised to adopt efficient practices. Water credits promote fairer distribution, support marginalized communities, and encourage collaboration between industries and local communities to sustain water ecosystems.

Water credits tie usage to tangible conservation outcomes. For example, farmers can earn credits by employing practices such as land levelling, mulching, and agroforestry that prevent loss of water through runoff, seepage and evaporation.  

Similarly, industries in water-stressed regions can earn credits by funding community-led projects such as rainwater harvesting systems, reviving ponds, or building decentralized water treatment plants that directly replenish local supplies. 

Water credits as an ESG strategy

Water scarcity can disrupt supply chains and business sustainability. Water stewardship, therefore, is a strategic imperative for business. Integrating water credits into ESG (environmental, social, governance) frameworks has multiple benefits.

Integrating water credits into ESG frameworks starts with companies assessing their water footprint, which allows them to pinpoint inefficiencies and areas for improvement. By earning or purchasing credits through verified water-saving initiatives, they offset their impact while promoting sustainable practices. This process encourages better water management, reduces wastage, and supports innovative technologies. Highlighting these efforts in ESG reports also encourages transparency, bolsters corporate accountability, and reinforces companies’ commitment to sustainability.  Most importantly, by reducing dependency on scarce resources, water credits allow businesses to future-proof their operations against climate risks. 

Assigning value to water

Determining the value of a water credit involves hydrological, socioeconomic, and ecological factors. Unlike carbon, water’s value is hyperlocal, depending on basin-level scarcity, ecosystem services, and community needs. A credit’s value reflects water saved, restored, or protected beyond baseline use, and who benefits.

In highly stressed regions like India’s arid western states, credits may have higher value due to urgent replenishment needs. Credits linked to wetland restoration, biodiversity conservation, or access to clean water for underserved communities can also carry greater value. Factors like groundwater depletion rates, seasonal variability, and per capita availability influence pricing. For instance, saving 1,000 litres in a critically overexploited aquifer is more valuable than in a mildly stressed zone.

A robust valuation ecosystem is crucial. Policymakers, environmental experts, and local communities must collaborate to define baselines and ensure benefits reach those most affected by scarcity.

Water credits are the way forward 

Water credits are a practical, market-driven solution to tackle the growing water crisis. They incentivise industries, farmers and communities to adopt sustainable practices as a shared responsibility. With credible valuation and widespread adoption, water credits have the potential to transform water stewardship into a systematic, scalable pathway to guarantee the planet’s water resources remain secure for future generations.