By Lily Andrews, Environmental Analyst
Mismanagement of waste and water is not just an environmental issue but a major driver of emissions. True sustainability lies in prevention, reduction, and efficiency — not carbon-intensive quick fixes.
Key Takeaways
- Focusing solely on carbon emissions overlooks the significant climate impacts associated with poor water and waste management.
- As carbon, water and waste are intrinsically interlinked, climate change worsens the impacts of landfill waste and water scarcity.
- “Green” strategies corporations use to address excessive waste generation and water scarcity are often energy-intensive, carbon-emitting and high-cost.
- Sustainability efforts should prioritise proactive strategies that prevent overconsumption, rather than reactive solutions that merely address the consequences of excessive resource use.
- The truly sustainable solution is the reduction of energy use, waste generation and water withdrawal by increasing operational efficiency.
Environmental investing and sustainability strategies often focus primarily on carbon emissions, overlooking the equally critical issues of water and waste management. Yet, poor management of water and waste not only causes serious environmental harm but also directly contributes to greenhouse gas emissions and climate change.
Further, current corporate strategies often prioritise technological fixes such as desalination of water and incineration of waste for power generation, both of which are carbon intensive. Whilst these practices are often framed as “green”, they fail to address the root causes of waste and water issues: excessive water usage and waste generation. A meaningful sustainability strategy should instead focus on reducing water and waste footprints and increasing resource efficiency.
Waste as a Driver of Global Emissions
Waste is one of the greatest environmental challenges of our time. Whilst it is commonly treated as a local issue, associated with pollution, human health, and biodiversity loss, its mismanagement is also a significant source of global greenhouse gas emissions.
Effective waste management is therefore integral to carbon management. Using plastic as a prime example: in 2019 alone, plastic production and disposal were responsible for 3.4% of global emissions. Not only are they primarily made from fossil fuel-derived petrochemicals, such as oil and natural gas, but their production is also highly energy-intensive, especially during the heating processes. As a result, nearly 90% of plastic-related emissions arise from the extraction, production, and conversion of fossil fuels into plastic materials. The Centre for International Environmental Law (CIEL) also projects that by 2050, cumulative emissions from plastics could consume 10–13% of the remaining global carbon budget.
Beyond plastic production, landfills are another major waste-related emissions source. As organic material decomposes in landfills, it releases landfill gas (LFG), primarily composed of methane and carbon dioxide. Methane is particularly concerning, as it has a global warming potential at least 28 times greater than CO₂ over a 100-year period. The IPCC reports with high confidence that one of the key factors driving methane levels, alongside fossil fuels, is waste. The issue is further exacerbated by climate change. Increased surface temperatures accelerate bacterial decomposition in landfills, leading to even greater LFG production, which in turn creates a dangerous positive feedback loop. Reducing waste sustainably is not just an environmental or health issue, but a climate imperative.
But how ‘Green’ are popular alternatives to landfill waste?
Increasingly, corporations are incinerating waste as a power source to reduce the volume of waste sent to landfill. However, these methods are not benign, and large amounts of carbon emissions are also released from these processes. Waste incineration disposal methods can be used as a way to meet landfill reduction targets, rather than reducing waste itself. The impacts of incinerating waste for power generation are significant. Incineration not only undermines climate goals but also poses serious public health risks through the release of air pollutants such as particulate matter.
Waste incineration for energy can sometimes release more emissions than both fossil fuels, such as fossil fuels or natural gas, as well as other disposal methods like recycling. While figures vary, the incineration of municipal solid waste is estimated to emit approximately 0.4 tonnes of CO₂ equivalent per tonne of waste, compared to 1.8 tonnes CO₂ equivalent from landfill gas. However, the difference is not always clear-cut; some studies indicate that under certain conditions, incineration can result in even greater emissions than landfilling. In contrast, recycling significantly reduces emissions, producing as little as 80 kilograms of CO₂ equivalent per tonne, and this can be reduced even further by decreasing waste generation and improving operational efficiency during production.
In countries with overstretched waste management infrastructure, such as China, which leads the world in electricity generation from municipal solid waste, as well as India and Indonesia, incineration has emerged as the default method of waste treatment due to the lack of sufficient recycling and composting systems. Rather than supporting circular economy principles, which such methods are often advertised as, these strategies reinforce a model of overconsumption and disposal, and have the potential to disincentivise waste reduction and recycling.
Emerging Market (EM) companies, particularly in high-waste sectors such as food production, frequently report incineration as a key waste disposal route. One such example is Want Want China Holdings, a Chinese food and beverage company, which provides waste directly to local governments for them to incinerate for power as part of its disposal process. The company, when contacted on this issue, stated that it works with government partners to avoid landfill options and instead prioritises “environmentally friendly waste disposal options”: incineration for power generation alongside recycling. Weiming Environmental is a further example. The Chinese company primarily operates waste incineration facilities, which generate energy in a way they claim is environmentally friendly compared to coal power generation. While framed as an environmentally friendly option in both cases, these approaches have the potential to replace one environmentally damaging practice with another, rather than taking the most sustainable route of reducing initial waste generation.
This strategy is not limited to the EM, and even in Developed Markets (DM), waste is frequently burned for energy. Unless paired with carbon capture and storage systems, which are currently expensive and commercially unviable, this practice remains environmentally harmful. The real issue lies in the reliance on end-of-pipe secondary solutions: methods that address environmental impacts and pollution after they have been produced rather than reducing impact in the first place. Regardless of whether waste is landfilled or incinerated and used for energy recovery, all disposal methods incur environmental costs. The focus therefore must move upstream, prioritising waste reduction, reuse, and redesign. Ultimately, this is why the European Union uses a waste hierarchy, which gives top priority to waste prevention, shown in the figure below.
From a cost-efficiency perspective, reducing waste in the upstream processes offers significant benefits. By minimising waste, companies reduce expenses on materials that do not contribute to final products, while simultaneously reducing costs linked to waste management and disposal. Although waste-to-power incineration methods can sometimes generate revenue for usable energy sold, entities that supply waste to local governments do not typically receive financial compensation. Focus should therefore be on reducing waste in the first place, as cost reductions aid profitability.
Water Mismanagement’s Role in the Climate Crisis
The mismanagement of water resources presents a similar issue, with inefficient water usage contributing significantly to greenhouse gas emissions. To make water suitable for industrial production and human consumption, it must undergo extensive treatment and distribution. These processes are highly resource- and energy-intensive, relying heavily on electricity, often from fossil fuel sources. As a result, the overconsumption of water systems can become large drivers of carbon emissions.
Poor water management creates a damaging positive feedback loop. Inefficiency and overuse drive emissions, which worsen climate change, leading to more frequent and severe droughts, floods, and extreme weather. This in turn increases water insecurity, and as environmental conditions deteriorate, the energy required to pump, treat, and transport water increases, compounding the problem. Rather than improving water efficiency, reliance on high-carbon solutions like desalination has the potential to perpetuate a cycle of escalating emissions and water insecurity.
Desalination is a Controversial Solution to Water Insecurity
As climate change intensifies water scarcity around the world, companies are increasingly turning to desalination, the process of converting seawater into viable water, as a solution. Desalination involves applying high pressure to seawater to force water molecules through a semi-permeable membrane, effectively removing salt and other impurities. Older plants will also use heat in a process similar to distillation. While these processes produce potable water, they also demand substantial amounts of energy, often derived from fossil fuels. If not coupled with the use of clean energy sources, desalination could cause a projected 180% increase in emissions by 2040.
As a result, desalination contributes significantly to greenhouse gas emissions, with the carbon footprint of desalinated seawater thought to range between 0.4 and 6.7kg CO₂ equivalent/ m3. This is because the desalination process requires 3–12 kWh of electricity per m3 of water, depending on the method. To compare with the UK for example, mains water supply produces a carbon footprint of just under 0.2kg CO₂ equivalent/ m3. In addition to higher footprints, desalination can also lead to “lower mineral content, higher salinity, crop toxicity and soil sodicity” (IPCC 2022, p. 636). Despite these drawbacks, desalination is increasingly being framed as part of sustainable water usage and water security strategies across both EM and DM companies, and across sectors.
An example is PT Indofood Sukses Makmur Tbk, a food production company in Indonesia. According to its 2024 Sustainability Report (p. 127), the company has eliminated its groundwater use by implementing Seawater Reverse Osmosis (SWRO) systems, however this likely comes at the cost of increased energy consumption. The SWRO process, like all forms of reverse osmosis, relies on high-pressure pumps that consume large amounts of electricity. Whilst the entity does report high use of renewable energy in its direct operations, there is no mention of what energy source type is being used for this process. Although the company presents this initiative as environmentally sound, it neglects to address the climate implications tied to the energy and carbon footprint of its water production.
In the mining industry, similar patterns emerge. Rio Tinto, the world’s second largest metals and mining corporation, has announced a $395 million investment in a seawater desalination plant in Pilbara, Western Australia, to support its future water needs and to “strengthen water security”. At the same time, desalinated water is already being used at the Escondida mine, the world’s largest copper operation, where Rio Tinto owns a 30% stake. These measures have been implemented to respond to increased drought and water insecurity in the local area, yet they raise critical concerns. The firm not only neglects to address the emissions associated with desalination in its own website articles and the firm’s 2024 Sustainability Fact Book, but has also faced opposition from local Indigenous communities in Chile, who argue that desalination is an inadequate response to the extreme drought conditions made worse by excessive industrial-scale water extraction.
The growing reliance on desalination reveals a broader issue. The focus is increasingly on securing new means of water supply, rather than reducing water demand. Desalination should not be mistaken for a viable long-term solution to water insecurity, which is worsened by excessive industrial use and climate change. Without addressing the fundamental issue of overuse, water security strategies like desalination will continue to undermine broader climate goals.
Desalinated water is also not cost-effective due to its high capital and operating expenses. Constructing a seawater reverse osmosis (SWRO) plant can cost between $1,000 and $2,500 per cubic meter of daily water production capacity, with even higher costs in rural areas. Beyond initial investment, the plants require continuous investment in labour, maintenance, and regulatory compliance.
Desalination is highly energy-intensive, with energy use often comprising up to 50% of total operational costs. It also generates large volumes of brine discharge, a salt byproduct, that must be safely disposed of to avoid marine ecosystem damage, adding further expense. While exact cost comparisons vary, desalinated water is widely recognised to be significantly more expensive than municipal or tap water. Companies that use desalination as a last resort would therefore be better served by prioritising water reduction strategies before resorting to costly and resource-intensive solutions like desalination.
True Sustainability Starts with Resource Reduction
While many companies claim progress by turning to “green” technologies like waste-to-power incineration or desalination, these approaches frequently exacerbate the problem rather than solve it. Such “solutions” are energy-intensive and carbon-emitting, and mask the root causes of waste and water issues, which are excessive resource consumption and inefficiency. Framing these carbon-intensive responses as environmentally sound undermines genuine climate progress.
Water and waste management are not peripheral sustainability issues, and rather core components of effective climate action. Poor management of water and waste systems significantly contributes to global greenhouse gas emissions and cannot be disaggregated. The real path to sustainability lies upstream, through reducing resource use. Improved waste and water management are therefore key not only to prevent local environmental issues, but also essential strategies for mitigating climate change.
Moreover, waste and water reduction strategies are not only more sustainable but also more cost-effective than expensive end-of-pipe alternatives. Minimising upstream waste generation and water usage significantly reduces material and disposal costs, with the potential for enhanced profitability. Resource efficiency should therefore be a strategic priority, not just for environmental benefits, but for achieving long-term cost savings as well.
This document was prepared and issued by Osmosis Investment Research Solutions Limited (“OIRS”). OIRS is an affiliate of Osmosis Investment Management US LLC (regulated in the US by the SEC) and Osmosis Investment Management UK Limited (regulated in the UK by the FCA). OIRS and these affiliated companies are wholly owned by Osmosis (Holdings) Limited (“Osmosis”), a UK-based financial services group. Osmosis has been operating its Model of Resource Efficiency since 2011.
None of the company examples referred to above are intended as a recommendation to buy or sell securities. The examples are being shown as an example of the MoRE analysis and may or may not be held in the portfolio as of the date of this presentation. The information does not constitute an offer or solicitation for the purchase or sale of any security, commodity or other investment product or investment agreement, or any other contract, agreement, or structure whatsoever.