In a pinch, when your factory is absolutely tapped out of coolant for CNC machines, you can use water. However, it is definitely not the best option for most machining applications. Whoever does the purchase ordering for supplies will need to get on this right away to get better coolants. In the meantime, you should know why plain old water is not ideal for most machining applications.
It Softens Wood and Causes It to Split or Smoke
Water, when used to machine wood, causes the wood to soften. The natural fibers of trees reabsorb water and moisture when they encounter any sort of dampness. The softwood then has the ability to split, bend, or warp. Additionally, if you have a CNC boring bit going a hundred miles an hour on a piece of wood that is wet from the water used to prevent the bit from igniting the wood, you are going to get a lot of smoke. A water and oil or straight-up oil mixture is less likely to cause any problems with machining wood because the wood cannot so easily absorb the oil.
It Causes Metals Containing High Amounts of Iron to Rust
Lower grade steels and sheet metals or metal alloys containing higher amounts of iron can rust when water is used as a machine coolant. One second you are cutting cleanly through sheet metal using only water as a lubricant, and the next you have cut metal rapidly rusting in the next room just a few days later. (Of course, you could always halt production on such orders to avoid contact with water, but then your machinists might have to take a forced day off if there are no other projects on which to work.) A synthetic coolant is ideal in this case because it will not cause the metal to slip, rust, or become etched accidentally by some of the machining tools.
Higher Water Content in Coolant Causes Increased Bacteria and Fungus Growth
Bacteria and fungi often build up on machining tools, the direct result of machining natural materials and metals on the same machines. Water is a very good friend to bacteria and fungi, which means that if you use solely water on your tools as a coolant, you are going to end up with more bacteria and more fungi. More bacteria and more fungi ruin your tools, and then you have to spend more to replace the tools than you would have had you just overnighted more machining coolants with less water in them.