Rio+20: Water Snapshot

By China Water Risk 11 July, 2012

Lisa Genasci gives us a snapshot of the side events where much of the water action happened

45 CEOs of global companies ask for water to be made a top priority and for it to be fairly priced
CERES says corporate disclosure of water-related risk on rise thanks to SEC ruling but data is still weak
Despite comprises made, Ma Jun is not displeased and there are bright spots as Israel shares key water tech

As the late June Rio+20 Summit ended, observers slammed the lack of ambition in the declaration of Common Vision approved on by heads of state, but there were interesting advances over the days for the world of water.

Whether or not politicians could agree on a text that would make everybody, or even somebody happy, the conference was a chance for government leaders, civil society and the private sector to discuss common agendas.

Clean drinking water, something to which an estimated 1.1 billion people worldwide lack access, was central to many such discussions.

And without a doubt, the UN Conference on Sustainable Development ended with a strong sense that access to water should be an integral part of corporate risk analysis.

Finally, there was wide agreement that governments can no longer afford to remain neutral on water, that it ought to be protected and valued under national natural asset accounting systems being pushed to the forefront.

So while there was wide disappointment in the Rio declaration’s loose wording and lack of concrete objectives, given the urgency of our environmental challenges, it was at the side events that much of the action happened.

Global Compact: CEOs act on water

Among the achievements over the week was a commitment to advance corporate water management practices by 45 chief executives of global companies. Under the Global Compact, the corporate leaders also called on governments attending the Rio+20 Earth Summit to make global water security a top priority.

In a communiqué, business leaders highlighted the urgency of the global water crisis, calling on governments to step up efforts to work more actively with the private sector, civil society and others.

They also urged governments to establish a, “fair and appropriate price” of water for agriculture, industry and people.

And the Rio document from the Corporate Sustainability Forum of the UN Global Compact, which has nearly 7,000 business signatories from 135 countries, participants agreed on some clear trends:

  • Water scarcity, pollution, climate change and other problematic global trends pose major challenges to businesses now and will continue to do so in the years ahead.
  • It is increasingly clear that the era of business’ easy access to water is ending, creating perhaps a greater threat to businesses than the loss of any other natural resource.
  • Corporate Water Sustainability – also known as corporate water stewardship –has emerged as a response strategy to water risk. It is seen by many as both good business and critical for the well being of communities, ecosystems and watersheds.

In their Communiqué, the CEOs, all endorsers of the Global Compact’s CEO Water Mandate, outlined public policy they believed governments should undertake to make meaningful progress on water, including:

  • Developing policies and incentives to improve water productivity and efficiency in all sectors, especially agriculture.
  • Establishing fair and appropriate valuation of water for agriculture, industry, and people
  • Increasing investment in infrastructure and developing policies toward ensuring efficient and reliable delivery of water and sanitation services.
  • Sharing policies, innovations, and tools among governments and others
  • Working more actively with the business community, private finance and civil society.

The companies themselves committed to expanding water-management practices, including:

Setting targets on water efficiency and waste-water management in factories and operations

  • Working with suppliers to improve water practices;
  • Partnering with non-governmental organizations, UN agencies, governments and public authorities, investors, and others on water-related projects and solutions.

The Communiqué includes an appendix that outlines examples of activities and commitments being undertaken by many of the endorsing companies

According to the United Nations, Population growth, urbanization, intensified industrialization and climate change estimates are that two-thirds of humanity will live in water-stressed regions by 2025. Beyond those who live without clean water, an additional 2.5 billion live without sanitation, providing a huge challenge to water systems and to public health.

A participant in the Global Compact closed-door meetings, which were held in the days before the Summit, said there was wide recognition among the business community that water needed to take center stage in sustainability discussions.

She also said, however, that business leaders were looking to governments to set the needed legal framework on which to hang new measures.

“We really need a level playing field,” she said.  “We understand the need for KPIs and verification, transparency, and we are considering how we live up to targets we set. Businesses are ready to do their part but we need government involvement to set the framework for engagement. We like to cooperate but in the end we compete.

The same executive pointed to the discussions, also during Rio side events, about natural capital as an important conversation for governments.

Ceres report shows water disclosure has risen but data provided is still weak

Also at the Rio summit, Ceres released a new report, Clearing the Waters: A Review of Corporate Water Risk Disclosure in SEC Filings, showing that corporate disclosure of water-related risk has increased since 2009 but reporting is weak and inconsistent.

Since 2010, the US Securities and Exchange Commission has required companies to disclose financially material risks from climate change to their investors. Among these are “significant physical effects of climate change, such as effects on the severity of weather (for example, floods or hurricanes), sea levels, the arability of farmland, and water availability and quality.”

Thus, Clearing the Waters analyzes changes in water risk disclosure by more than 80 companies between 2009 and 2011.  But although reporting has risen, it is lacking, especially in data on financial impacts, quantitative water metrics and potential supply chain risks.

The report covers water use in eight water intensive sectors: beverage, chemicals, electric power, food, homebuilding, mining, oil & gas and semiconductors.

Because of the increasing impacts of climate change and economic and population growth, many regions of the world are on course to suffer major fresh water deficits in the next 20 years, the report states.

Recent studies suggest the world may face a 40 percent global water shortfall by 2030. Drought and flood cycles have also led to billions of dollars in losses for corporations worldwide.

As examples, the report cites the 2012 drought in China that left 3.5 million people with limited or no access to drinking water and cost the affected provinces an estimated $2.3 billion. Flooding in Thailand in November 2011 cost the semiconductor industry an estimated $15-20 billion.

Among the key findings of the report:

  • Physical risk exposure is more widely reported: 87 percent of companies now report physical risk exposure versus 76 percent in 2009, with the biggest increases coming from the oil and gas sector.
  • More companies are making the connection to climate change: In 200only eight of the 82 companies assessed disclosed that climate change posed growing physical risks in the form of water scarcity, flooding or quality issues to their operations and supply chains. In 2011, that number jumped to 22.
  • There is a continued lack of quantitative data and performance targets: Despite improvements in overall disclosure, data on company water use and the financial impacts of water-related risks remain infrequent in financial filings.
  • There is growing, but still limited, disclosure on water management systems and performance.

Israel shares key water technology and knowledge

Finally, the leaders in the Israeli water technology and distribution spoke at a side event about their desire to share technology and knowledge with other water-scarce regions.

Israel, which suffers from drought and other stresses around water security, has developed a billion-dollar industry by marketing its skills and technologies in water recycling, security and desalination.

State-run water company Mekorot, which is responsible for nearly every aspect of water management in Israeli, is considered a global leader in water technology. The company helped build a network in Israel of some of the world’s biggest desalination plants and wastewater facilities.

Mekorot is hoping to position itself ahead of projections from the Organization for Economic Cooperation and Development that by 2050 global water demand will increase by 55 percent. Mekorot officials have said this will cost the world US$800 billion in damages if not addressed adequately.

According to Mekorot and other state water officials in Rio, 80 percent of Israeli’s waste water is now recycled, while the 95 percent efficiency in drip irrigation for agriculture is among the world’s highest.

Israel also apparently has the world’s largest desalination plants that produce drinking water at the lowest price per cubic meter anywhere. By 2020 most of Israel’s water will be from desalination.

Israel, where 93 percent of the population lives in cities, has particular experience in providing water solutions for urban areas. This is increasingly relevant as by 2030 projections are that 60 percent of the world’s population will be urban.

Clearly, there is much to be done if we are, indeed, to move toward a more sustainable world – perhaps starting with the agenda set forth in the Rio Declaration.

IPE’s Ma Jun not displeased

And back to the roundly criticized Rio text: Speaking after the side-event “Cleaning up China’s supply chains”, organised by Chinadialogue and the London-based International Institute for Environment and Development (IIED), IPE’s Ma Jun said he was not displeased.

In a Chinadialogue article you can read here, Ma Jun pointed out that, “a discussion involving both northern and southern hemispheres is bound to be more difficult” than at the Rio Summit 20 years ago. “The text is bound to be the result of compromise – but that doesn’t mean it’s a bad outcome.”

The Rio Declaration, he said, “includes many good principles for dealing with the problems.”

And looking to China, 20 years ago Beijing accepted the declaration under western guidance. “Now, it only accepts what it can genuinely agree with. And that is a huge step forward,” he said.

Meanwhile, China is taking on more responsibilities than 20 years ago. China and India, he said, will have a bigger role to play in the future.

More on Rio+20 the main summit in Moving Beyond GDP: Natural Capital.

Still not sure what Rio+20 summit is? Click here.

China Water Risk
Author: China Water Risk
We believe regardless of whether we care for the environment that water risks affect us all – as investors, businesses and individuals. Water risks are fundamental to future decision making and growth patterns in global economies. Water scarcity has emerged as a critical sustainability issue for China's economy and since water powers the economy, we aim to highlight these risks inherent in each sector. In addition, we write about current trends in the global water industry, analyze changes occurring both regionally and globally, as well as providing explanations on the new technologies that are revolutionizing this industry.
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