Businesses primed to unlock $436bn water stewardship opportunities

Companies can benefit from a $436bn market opportunity by investing in water stewardship initiatives, more than offsetting the $392bn in water-related impact costs, new research has found.

Businesses primed to unlock $436bn water stewardship opportunities

Research published today (21 March) by CDP has found that more companies are now taking action to respond to growing water-related risks and could benefit financially as a result.

The research found that tackling water security offers businesses an “unexplored” commercial opportunity worth at least $436bn. In contrast, the current financial impacts of water risks, including shortages and pollution, sit at $392bm. However, CDP notes that the actual benefits could be significantly higher – upwards of $1trn – as only 55% of companies asked to disclose were able to identify opportunities in this area.

In total, 3,909 companies provided water-relevant data to investors – an 85% increase compared to five years ago. The investors asking for this information control more than $140trn in assets.

Of the disclosing respondents, 1,500 were able to outline opportunities such as new water markets, water efficiency improvements, supply chain resiliency and new products and services. Companies including Ford, L’Oréal and Fujifilm, were all able to outline market opportunities, while Spanish bank BBVA has created a $2,4bn water footprint loan. Additionally, more than 1,000 companies are now linking chief executive performance reviews to corporate water goals.

CDP collected water-related data from 2,934 businesses in 2020, representing 67% of all listed companies globally. CDP has previously warned that some $301bn of business value is at risk because of water stewardship challenges, yet it would take corporates just $55bn to deliver appropriate mitigation and adaptation initiatives.

CDP’s global director of water security Cate Lamb said: “There has never been a better time for Governments to step up and take the global water crisis seriously. As world leaders gather in New York to discuss this urgent issue, we have a once-in-a-generation chance to turn the tide. The private sector is playing its part, and if more corporate action is taken, there are huge benefits to be gained.

“Most importantly the window to act is closing fast. World leaders should raise the bar and make water disclosure mandatory once and for all. This is the silver bullet to accelerate action and ambition in our fight against the water crisis.”

By UN estimates, one-third of the population – or more than 2.5 billion people – currently live in water-stressed regions and nations. It is estimated that water scarcity could displace 700 million people by the early 2030s.

CDP has therefore expressed concern that 4,568 companies including Apple, Tesla  and Shell refused to respond to their requests to disclose water-related data. These companies may end up being outliers though, as more investors ask for water data.

Last year, a group of global investors joined a new “valuing water” initiative set up by Ceres that will engage with more than 70 of the world’s biggest corporate water users and polluters to drive better action on water stewardship.

The Valuing Water Finance Initiative is engaging with 72 of the world’s biggest companies, including Unilever, Nestle, Danone and Amazon, to offer new guidelines to act on water-related issues. The Valuing Water Finance Initiative will examine corporates across a broad spectrum of issues ranging from water quality and scarcity based on their locations, how they protect and improve ecosystems and whether they improve access to water and sanitation. Corporates will also be engaged around board-level oversight of water issues and public policy engagement.

The report was launched on the eve of the UN 2023 Water Conference in New York, which marks the first time in almost 50 years that heads of state are meeting to discuss water security. CDP’s Lamb will be providing edie with post-event reflections in due course.

Action inspires action. Stay ahead of the curve with sustainability and energy newsletters from edie