Treading Water: Corporate Responses To Rising Water Challenges
By James Lott 16 May, 2019
How are companies acting on water risks? Are they doing enough? CDP's Lott summarises from their latest report
Water is the lifeblood of the global economy. And with 19% of water withdrawals coming from industry, and a further 70% from agricultural supply chains, companies have a vital role to play in meeting our global water goal – SDG6.
CDP’s water security program aims to achieve a water-secure world by focusing investors, companies and cities on measuring, understanding and reducing their environmental impact. In 2018, 4,969 high impact companies were asked to provide data about their efforts to manage and govern freshwater resources through CDP. In total 2,114 companies responded, up from 1,432 in 2016.
CDP’s latest Global Water Report – “Treading Water – Corporate Responses to Rising Water Challenges” – presents the analysis of 783 of the world’s largest publicly listed companies. The findings of the report show that companies are demonstrating some progress towards key aspects of better water management.
Latest global report shows companies are demonstrating some progress towards key aspects of better water management
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However, given the scale of the water challenges we face, the incremental changes we’re seeing from many companies – acting a little more efficiently or a little more collaboratively – are unlikely to cut it.
Increasing risks, increasing withdrawals
As water crises worsen, these high impact companies are increasingly exposed to risks that could threaten their reputations, revenue and financial stability. In 2018 water-related financial losses reported through CDP reached USD36bn. Yet, despite a growing awareness of water risks, companies are not yet reducing withdrawals.
Water-related financial losses reached USD36bn in 2018…
…yet, co’s are not yet reducing withdrawals
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As shown above, an unprecedented number of companies reported water facilities ‘at risk’ through CDP. However, this growing awareness of water risks is not yet correlating to companies lowering their water withdrawals in these hot spot areas.
76% of risks reported are physical…
…e.g. Lenovo faces a potential constraint growth for its operation due to water scarcity
CDP analyzed a group of companies who have consistently responded to us over the last four years. Of this group, 75% now report water risk exposure, compared to 70% in 2015. The majority of risks reported are physical (76%), relating to water scarcity and declining water quality. Chinese computer manufacturing company Lenovo for example, report a potential constraint to growth for its operations in the Yongding He river basin due to increased water scarcity.
Yet, despite almost a doubling of the number of companies setting targets to reduce water withdrawals over the four years, there has also been an almost 50% rise in the number of corporates reporting higher water withdrawals. This worrying trend holds true both for company-wide withdrawals but also for those at sites facing substantial risks. The rise is most pronounced in the food, beverage & agriculture, manufacturing and mineral extraction sectors, as well as in Asia and Latin America. The most common explanation that companies provide for increased withdrawals is an increase in production.
No of co’s setting targets doubled…
…but also ~50% rise in higher withdrawals especially in F&B, agri & other sectors
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Unlike carbon, we are not in a race to zero when it comes to water withdrawals
Unlike carbon, we are not in a race to zero when it comes to water withdrawals. But as water availability and quality decreases around the world, a failure by business to deliver even a modest reduction on this indicator is concerning.
Incremental action is no longer enough
Delivering a water secure future not only means better water management, but, importantly, better business management. Companies must not only show that they are regularly monitoring and managing water, undertaking comprehensive risk assessments, and assessing how water issues could impact financial performance. To deliver real change companies also need a strategic and transformational response to water risks.
For example, AstraZeneca has developed a global strategy to cap water use at 2015 levels through to 2025, while doubling revenue. Whereas Sony Corporation is diversifying its business model to develop new technologies in the agricultural sector that improve productivity and reduce environmental impact. The company estimates the opportunity could be worth USD4.1bn over the next four to six years.
Last year, 31 co’s make it onto the CDP Water A List incl. Diageo, L’Oréal & Braskem…
…look forward to welcome the first Chinese Water A-list co’s in the near future
CDP is raising the bar on corporate leadership – demanding even more from companies to make it onto the CDP Water A List – and last year 31 companies met the challenge. Those companies leading the way included global drinks company Diageo, French beauty giant L’Oréal and Brazilian petrochemical company Braskem. The vast majority of companies (752) still have a way to go. The challenge has been set and we look forward to welcoming the first Chinese water A-list company in the near future.
To find out more about how companies are taking action on water security, take a look at CDP’s full report.
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