Certified Environmental Social and Governance Analyst (CESGA) EFFAS Practice Test 2025 - Free CESGA Practice Questions and Study Guide

Water scarcity is a common environmental risk that companies face because it can significantly impact various sectors, especially those dependent on water for their operations, such as agriculture, manufacturing, and energy production. When water resources are limited, companies may experience increased operational costs, regulatory challenges, and reputational damage if they are seen as unsustainable or irresponsible in their water use. Additionally, water scarcity can lead to disruptions in supply chains and could force companies to invest in alternative resources or technologies to mitigate the impact, which can further strain financial resources.

Other options like high employee turnover, investor dissatisfaction, and low profit margins are more closely related to internal operational issues or markets rather than direct environmental challenges. These factors, while important, do not encompass the pressing external environmental issues that water scarcity embodies.