Report reveals water constraints now a boardroom issue for global corporations

CDP Water Disclosure, a new program from the Carbon Disclosure Project, recently launched its first report on the impact of water constraints on the world’s largest corporations, clearly illustrating the significance and immediacy of water as a corporate issue.

CDP Water Disclosure sent its first annual questionnaire to 302 of the world’s largest companies asking for information on their water use and other water-related business issues. It received a 50 percent response rate with 122 of these responding publicly and a further 25 companies responding on a purely voluntary basis.

The information was requested on behalf of 137 institutional investors representing US$16 trillion in assets to increase transparency and accountability on water scarcity and other water related issues, and to inform the global market place on investment risks and commercial opportunities. The data will provide valuable insight into the strategies deployed by many of the largest companies in the world in relation to water use and will be used to help drive sustainability.

The report, prepared by Environmental Resource Management (ERM), analyzes the public responses to the questionnaire and was officially launched at Bloomberg’s offices in London on November 12. The report findings show that water is already impacting business operations, with 96 percent of responding companies able to identify whether or not they are exposed to water risk and more than half of those reporting risks classifying them as current or near-term (1-5 years). 39 percent of companies are already experiencing detrimental impacts relating to water including disruption to operations from drought or flooding, declining water quality necessitating costly on-site pre-treatment, and increases in water prices, as well as fines and litigation relating to pollution incidents.

Water security is already high on the corporate agenda with 67 percent reporting responsibility for water-related issues at the board or executive committee level. The majority of companies (89 percent) have already developed specific water policies, strategies and plans, and 60 percent have set water-related performance targets.

Other CDP Water Disclosure report key findings:

• Business engagement on water issues differs widely across different industry sectors: 100 percent of companies in the chemicals sector responded compared with just 29 percent in the oil & gas, and construction, infrastructure & real estate sectors.
• Responses were received from companies in a total of 25 countries, with the most responses coming from the United States (59, 57 percent responding), the United Kingdom (14, 64 percent responding) and Japan (13, 45 percent responding). The highest response rates were from South Africa (100 percent), Germany (83 percent) and Switzerland (71 percent).
• A high number of corporations (62 percent) are identifying a wide range of water related business opportunities in areas such as water management, water efficiency and reduction, and wastewater treatment.
• Just 53 percent of companies are able to identify whether they are exposed to water risks in their supply chains, as opposed to the high levels of awareness (96 percent) of water risks in their own operations.
• Sectors reporting the greatest exposure to water risks include food, beverage & tobacco and metals & mining, with chemicals and technology & communications the least exposed. Physical risks to direct operations from drought and flooding were most frequently cited, but companies also recognize risks from changing regulations and reputational damage.
• Companies exhibiting best practice in water management include Anglo American, Colgate-Palmolive, Ford, GE, PG&E and Taiwan Semiconductor Manufacturing.

The launch of CDP Water Disclosure’s first report at Bloomberg’s offices in London, along with the availability of individual company responses at www.cdproject.net,gives investors, companies, governments and other interested stakeholders a wealth of information on companies’ water usage, the water-related risks and opportunities in their operations and supply chains, and their water management plans and performance targets.

Welcoming the launch of the first report, Jacqueline McGlade at the European Environment Agency, said: “Climate change is altering global water availability, meaning greater scarcity in some regions and more flooding in others. Such changes demand that we adapt our infrastructure and our consumption. It is encouraging to see in the Water Disclosure Report that many corporations have already started taking concrete measures. But we must facilitate this process by developing appropriate standards and tools to measure corporate water use and impacts across the whole supply chain.”

Paul Dickinson, executive chairman at the Carbon Disclosure Project, also speaking at the launch, said: “This data provides valuable insight into the strategies deployed by many of the largest companies in the world in relation to water and is a first step in helping drive investment towards sustainable water use. The changing availability of water resource is presenting opportunities to business through demand for new infrastructure, products and services and now is the time to seize these opportunities, address water challenges and build resilience – not once the well has run dry.”

Gregory Wade, global chief supply chain officer for global brewer Molson Coors, a lead sponsor of CDP Water Disclosure, said: “Transparency must serve as the cornerstone for stimulating integrated watershed resource management and CDP Water Disclosure is perfectly positioned to normalize best practice and mediate between investors and companies in valuing risks and opportunities. As we move forward, companies must accept the responsibility for their own transparency and join in this effort to help advance what will hopefully emerge as a common water reporting standard benefitting all stakeholders.”

Anne Kvam, global head of ownership strategies, Norges Bank Investment Management (NBIM), a lead sponsor of the program, said: “As a diversified investor with a long-term outlook and investments in a range of sectors at risk from increasingly scarce water resources, we take water management seriously. Companies that fail to consider the impact of water scarcity and other water-related risks pose a financial risk to investments.”

Demand for water has risen and is now projected to outstrip supply by up to 40 percent by 2030, and approximately 80 percent of the world’s population already live in areas where fresh water supply is not secure.

As the climate changes, assuring global water security for both humans and ecosystems will increasingly present opportunities to business through demand for new infrastructure, products and services. It will also bring risks including physical disruptions to operations and supply chains, changing regulatory regimes and reputational damage from misuse, or perceived misuse, of what is a shared resource.

Speakers and panelists at the launch event on November 12 included:

• John Curtis, senior partner, sustainability & climate change at ERM
• Paul Dickinson, executive chairman at Carbon Disclosure Project
• Michael Liebreich, chief executive at Bloomberg New Energy Finance
• Jacqueline McGlade, executive director at the European Environment Agency (keynote speaker)
• Colin Melvin, chief executive at Hermes Equity Ownership Services Ltd
• Sarah Mukherjee, director of environment at Water U.K.
• Marcus Norton, head of CDP Water Disclosure at Carbon Disclosure Project
• Gregory Wade, chief supply chain officer at Molson Coors Brewing Company

The full report can be downloaded at www.cdproject.net.

About CDP Water Disclosure
CDP Water Disclosure is part of CDP, an independent not-for-profit organization holding the largest database of primary corporate climate change information in the world. CDP Water Disclosure provides critical data in relation to water from the world’s largest corporations to inform the global market place on investment risk and commercial opportunity. This data will provide valuable insight into the strategies deployed by many of the largest companies in the world in relation to water and will be used to help drive investment towards sustainable water use.