The Role of Water Cost in Corporate Performance: Is It Impacting Corporate Water Usage and Efficiency?

Abstract

Corporations are increasingly exposed to water related challenges, including scarcity, pollution, and rising water costs. This study investigates the relationship between water costs and firm performance in food and beverages sector where water is a critical production input. Using panel data from 2014 to 2023 of 40 firms the analysis applies Generalized Method of Moments (GMM) to address profitability persistence and endogeneity. The key variable-water charges as a ratio to cost of production -captures firm’s exposure to water related expenses. Results reveal a significant and positive association between water costs and Return on Assets (ROA), suggesting that firms translate water cost pressures into efficiency improvements or scale advantages. The study offers novel firm-level evidence from an emerging economy, demonstrating that resource costs can act as a driver of profitability and efficiency measures. Policymakers should consider integrative ecological service valuation and stricter disclosure norms to promote water efficiency and sustainable industrial growth.