Businesses Wake Up To Water Risks, But Now They Need To Act Or They Will Be In Trouble

Water is one of life’s essentials, not just for people but for businesses, too. A huge swathe of the business community relies on having enough water available, and of the right quality, in order to be able to operate. Yet, for too long, companies have taken for granted that water will be available when they need it, even as the world becomes more water stressed.

But global businesses are starting to become more aware of the risks related to water, a new study shows. Some 75% of companies surveyed for the study say they are exposed to substantive water risks, up from 70% in 2015. Most of these risks are physical, relating to a lack of water and a decline in water quality. Companies report that these risks could disrupt production, cause brand damage and lead to the loss of their license to operate in certain regions.

However, despite this growing awareness, they are not actually reducing their consumption or putting in place policies to encourage water efficiency, according to the latest analysis from CDP, Treading Water .

Despite this growing risk awareness, and the number of companies setting targets to reduce water withdrawals doubling, there has been an almost 50% rise in the number of companies reporting higher water withdrawals over that same period (2015 – 2018). This is most pronounced for companies operating in Asia and Latin America, as well as in the Food, Beverage and Agriculture, Manufacturing, and Mineral Extraction sectors.

Fewer than a third of companies in high impact sectors have incentives in place for executives to tackle water-related issues, and companies reported $38 billion of water-related losses in 2018, the environmental non-profit said.

Retailers were the least transparent sector, outstripping fossil fuels for the first time, while leaders in water management include pharmaceuticals company AstraZeneca, software giant Microsoft, drinks conglomerate Diageo and cosmetics group L’Oreal.

CDP analysed water data from almost 800 publicly-listed companies worth $18 trillion and employing between them 36 million people.

With industry accounting for 19% of global water withdrawals and a further 70% coming from agricultural supply chains3, companies have a massive role to play in meeting the global water goal - SDG 6, CDP said. “And with three in every four jobs globally dependent on a stable supply of water, and companies reporting US$38billion in water-related financial losses in 2018, there is a clear economic imperative to act.”

But despite the scale of the challenge, just 31 of the companies reporting their water data to CDP have made enough progress to make the group’s Water Security A list, which requires businesses to demonstrate “not only that they regularly assess their risk exposure, but also show they have implemented a strategic response to these risks”.

Cate Lamb, Director of Water Security at CDP, commented: “ The world is not on track to meet our global water goal of ensuring access to sustainable water and sanitation for all. The companies reporting to CDP are responsible for a huge proportion of global water use and pollution. While many of their practices and procedures currently contribute to the depletion of freshwater resources, these companies could also hold the key to a water secure future. This transition is full of possibility and opportunity - to succeed, those companies that affect our water, must work to protect it.”

The retail sector had the lowest proportion of respondents and it also performed poorly on risk assessment and governance and strategy, with just 36% of companies publishing a water policy and only 32% undertaking comprehensive assessments of the risks they may face.

“With revenues anticipated to reach US$28 trillion this year, this sector is more powerful than ever. Made up of companies near the top of the agricultural value chain, the retail sector has the potential to drive substantial improvements in water performance in meat manufacturers, crop growers and dyehouses around the world,” CDP pointed out.