PESTEL analysis of the water industry
This is a detailed PESTEL analysis of the water industry. It explores how this industry is influenced by several external forces. It is worth mentioning that this industry is usually divided into two categories, i.e. bottled water, and tap water. However, without looking into these two separately, this article addresses the industry holistically.
Political factors that affect the water industry
The government policies have an impact on the water industry. In countries like China and the US, the government provides subsidies for water projects and gives low-interest loans. This supports growth in the industry.
For instance, China issued over $8.87 billion in subsidies for local water conservation development for 2021 (Reuters, 2022). In the USA, there are many sources of federal funding for drinking water. However, this sort of support is not always the case for many countries due to their financial limitations.
Some of the most important political factors that affect the water industry are regulations on safe drinking water, environmental regulations, and regulations on contaminants. These regulations have been put into place virtually in all countries and territories to help protect people and ban companies from selling unsafe or contaminated water.
Economic factors that affect the water industry
The economic environment is a key part of this PESTEL analysis of the water industry. The economic factors that affect the global water industry vary across countries. The health of the economy affects how much money people can afford to spend.
For instance, if the economy is not doing well, people will not have much money to spend on luxury items like bottled water (literarily, bottled water is luxury in many societies). The price of bottled water may therefore be lower.
As water becomes scarcer, the price of it is highly like to increase. Many companies have been accused of wasting water thereby causing scarcity. Therefore, sustainable use of water is essential.
Many people who rely on well-water, use filtration systems to remove contaminants from their drinking water. This increases the demand for water filtration devices. However, the cost of water treatment and the cost of new technologies can affect the prices of water.
Social factors that affect the water industry
Drinking water is necessary for human existence. In the past, most people had to rely on a public water supply. However, things have changed dramatically in the last decade.
Many people around the world now buy bottled water regularly. This is to avoid potential contaminants that include arsenic, pesticides, and bacteria in community wells. Water contamination is a major issue, particularly in some developing countries. However, buying bottled water regularly is beyond the purchasing power of most people.
According to Ridder (2022) top 5 countries in the world by per capita consumption of bottled water are Mexico, Thailand, Italy, the USA, and France. Bottled water companies are doing very well in those countries. The top 3 bottled water brands in the USA are Dasani, Aquafina, and Glacéau Smart Water.
It is worth noting that overpopulation is a big factor that devastates the water supply in many places around the world. Shockingly, two billion people (one-quarter of the human population) are without access to safe drinking water (Lisbona, 2021). Therefore, new policies and technologies need to be in place to address this before it is too late.
Technological factors that affect the water industry
Technology is also a key part of this PESTEL analysis of the water industry. In recent years, the water industry has been greatly impacted by technological factors. For instance, automatic leak detection systems that use acoustic sensing technology to detect leaks in pipes are available in many countries.
Water quality sensors are out there that monitor levels of chemicals in drinking water, and stormwater. However, it is also true that tech glitches sometimes cause water supply disruptions.
Mobile applications that offer a wide range of services including guidance for safe water intake and notification of any potential contamination events are modestly used globally. Many people also use smart meters that track water usage and collect data about usage habits.
Environmental factors that affect the water industry
Environmental factors can also have a significant impact on the water industry. For instance, changes in climate such as an increase in temperatures, and rainfall can affect the supply of fresh water and its quality.
The increased frequency of natural disasters has created more problems for wastewater infrastructure systems across the US. Damage to water infrastructure left many communities with unsafe and unreliable water supplies in the past.
Water is an essential resource for life. As the world’s population increases, the need for clean water increases too. However, droughts, storms, flooding, and pollution can threaten access to clean water regularly around the globe. Similarly, plastic bottles used by water companies are harmful to the environment.
Legal factors that affect the water industry
The last area of discussion in the PESTEL analysis of the water industry is the legal environment. The water industry is a heavily regulated industry. This means that it is subject to several rules and regulations which may have local, national or international implications.
For instance, the UK has been subject to several different pieces of legislation over time e.g. the Water Act 1973, and the Water Resources Act 1991. Likewise, the US Congress passed the Safe Drinking Water Act (SDWA) in 1974 (with amendments in 1986 and 1996) to protect drinking water.
Summary of PESTEL analysis of the water industry
The water industry is a major contributor to the global economy, and it is constantly evolving. From the development of advanced water treatment systems to the use of sensors and data analytics to monitor water quality, this industry continues to innovate in order to meet the ever-growing demand for water.
The water industry is subject to a variety of political, economic, and regulatory issues. As such, it is essential to stay informed and up to date on the latest developments concerning the industry.
Water is an integral part of life, and therefore, it is essential to ensure that it is managed and supplied in an efficient and sustainable manner. With the right technologies and regulations in place, the water industry can continue to play a major role in the global economy.
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Last update: 24 February 2023
Lisbona, M. (2021) Finding answers to the world’s drinking water crisis, https://www.bbc.co.uk/news/business-57847654 (24 February 2023)
Reuters (2022) China issues $8 billion subsidies for water conservation development, available at: https://www.reuters.com/business/sustainable-business/china-issues-8-bln-subsidies-water-conservation-development-2021-04-30/ (accessed 20 February 2023)
Ridder, M. (2022) Per capita consumption of bottled water worldwide, available at: https://www.statista.com/statistics/183388/per-capita-consumption-of-bottled-water-worldwide-in-2009/ (accessed 24 February 2023)
Author: Joe David
Joe David has years of teaching experience both in the UK and abroad. He writes regularly online on a variety of topics. He has a keen interest in business, hospitality, and tourism management. He holds a Postgraduate Diploma in Management Studies and a Post Graduate Diploma in Marketing Management.