Companies Are Taking Water Security Seriously – Here’s How
By Cate Lamb 16 January, 2018
CDP's Lamb on their latest 2017 Global Water Report
Last summer’s drought in Northern China underscored yet again that rising global temperatures are putting pressure on water security. Not only did the drought impact livelihoods, it also caused a drop in hydropower production – which in turn pushed up demand for coal power, contributing to China’s rising emissions.
At CDP Water, we aim to achieve a water-secure world by focusing investors, companies and cities on measuring, understanding and reducing their environmental impact. Our latest Global Water Report – “A Turning Tide: Tracking corporate action on water security” – demonstrates that corporates are taking unprecedented action to address the water risks they face.
First, and fundamentally, it shows more corporates are disclosing than ever before. In its eighth year, the CDP water programme now holds corporate water data from 2,025 companies. That’s a 41% increase compared to 2016.
In its eighth year, the CDP water programme now holds corporate water data from 2,025 companies…
…that’s a 41% increase compared to 2016
Second, a record number of corporates has achieved an ‘A’ score on their CDP disclosure. A CDP score indicates how committed a company is to transparency around its environmental risks, and how sufficiently it is responding to them. Our Water A list has risen dramatically – from just eight companies in 2015 to 74 companies in 2017.
A record number of corporates has achieved an ‘A’ score on their CDP disclosure…
Disclosure is the first step on a journey towards water stewardship. Through disclosure, businesses can show investors and purchasers that they are taking steps to limit their impact on water resources. And when companies are faced with the right questions in CDP’s water questionnaire, they begin asking the right questions internally.
Thirdly, our report highlights that many of the world’s largest companies are now weaving water into the fabric of their business. We looked at data disclosed by a sample of 742 companies that collectively withdraw 5.6 billion megaliters of water – more than the volume of Lake Michigan, the second largest of the Great Lakes in the USA.
Board level oversight of water issues in these companies has risen from 67% to 72% since 2010. This development is important: when companies provide board members with the information and tools to plan for a transition to a water-secure world and publicly monitor their progress, they can truly integrate water stewardship into their modus operandi.
Companies are committing significant funds to address the water risks they face
Companies are also committing significant funds to address the water risks they face. In 2017, our sample committed USD23.4 billion across more than 1,000 projects to tackle water risks across 91 countries, including desalination, reclaiming waste-water and improving irrigation to avoid droughts.
For example, in 2016 Volkswagen sites in China had a “Year of Water”, during which they held several workshops across their facilities to identify and implement measures to reduce water demand, primarily looking at water consumption data at the shop floor or sub-shop floor levels. Of the measures identified, one of the largest investments is the installation of a new USD14 million wastewater treatment plant that will recycle about 60% of the treated waste water in one of its plants.
And Volkswagen is far from alone in investing in water management. General Motors invested USD1.6 million in wastewater recovery systems and rain water storage tanks in their facilities at Dongyue and Qingdao in the Yellow River Basin.
Meeting the targets for water set out in the SDGs requires USD6.4tn by 2030
It is encouraging to see so many companies investing in water infrastructure and risk management strategies. This is a step in the right direction, but there is still a long way to go. According to the G20, meeting the targets for water set out in the UN Sustainable Development Goals (SDGs) requires USD6.4 trillion of investment by 2030.
A price on water: the next step for companies
We know that in most parts of the world the price of water does not account for all the environmental and social benefits it provides. In other words, the fundamental importance of water is not currently reflected in its market value, with users often paying below-cost rates for their water supply.
But, as water security worsens, this could change. For example, a new regulation in Shanxi province will double water prices for companies that exceed standard water usage. Encouragingly, we are seeing that a small vanguard of companies is trying to set a price on water that more closely reflects its true value. This can be a big step towards better decision-making: accounting for water’s true price gives companies a clear business case for investment to reduce waste, eliminate pollution and manage supplies sustainably.
A group of 53 co’s, including Nestlé S.A. are anticipating potential regulatory changes by establishing internal values on water
CDP data reveals that a group of 53 companies from the sample are anticipating potential regulatory changes by establishing internal values on water.
Swiss food giant Nestlé S.A., for example, assigns a theoretical price on water ranging from around USD1 to USD5 per square meter, depending on a factory’s physical risk score generated by the Nestlé Combined Water Stress Index. Applying a notional price on water helps the company conduct scenario analysis of regulatory and tariff changes at a local level.
Failing to act now puts co’s at risk of constrained business growth
It’s clear that the transition to a water-secure world is underway. It is now up to all companies to play their part in delivering it. Companies not yet disclosing their water data will reap the rewards of doing so. Failing to act now puts them at risk of constrained business growth and of missing out on the business opportunities that water stewardship presents.
To find out more about how companies are leading action on water security, take a look at CDP’s full report.
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