Fashion, finance and fossil fuels creating ‘critical’ water risks, CDP warns

Launched today (25 August), CDP’s new water impact index assesses how more than 200 different industrial activities impact the world’s water resources, and how acutely exposed they are to water-related risks.

The index accounts for the water impact of each industrial activity across the whole value chain; for fashion, for example, cotton and livestock farming, fossil fuel extraction for synthetics production, manufacturing and dyeing are all accounted for. It also covers impacts on both water quantity and quality.

Each industrial activity is given a score from zero to 18, with zero being the lowest water impact and 18 being the highest. Scores of 15 to 18 mean the activity is deemed as having a ‘critical’ impact.

Apparel design and manufacturing received a score of 18 and textiles received 16. All activities related to fossil fuel extraction and processing received ‘critical’ impact scores, as did all activities relating to metal mining, smelting, refining and forming. Other sectors with a high portion of ‘critical’ scores included chemicals and agri-food.

Asset management received a score of 18, in recognition of the fact that many firms are investing in other high-risk activities, often without environmental conditions. The hope is for investors to use the index to assess the potential impact of their portfolios on the world’s water systems, leading to better-informed decisions on client engagement and divestment.

CDP said in a statement: “The flow of money from banks, insurers and asset managers into high impact companies is enabling agribusinesses to pump ever-increasing amounts of non-renewable groundwater, it is enabling tailings dams to be constructed at the heads of free-flowing rivers and it is enabling chemical, apparel and pharmaceutical companies to release toxic pollution, much of which is carcinogenic, posing a real and present danger to human health.”

Investors could also use the impact index to press companies that have continually failed to disclose information about their water footprint to do so. CDP has named and shamed several companies which fall within the ‘critical’ categories on the index but have failed to disclose this information through its platform for more than ten years, including Chevron, Royal Dutch Shell and ExxonMobil.

“Achieving a water-secure, net-zero future will require a complete transformation of our global economy and urgent action is needed,” CDP’s global director of water security Cate Lamb said.

“To succeed, companies responsible for the greatest impacts on water resources must transform their business models, products and practices in ways that decouple production and consumption from the depletion of water resources.”

Previous research from CDP, published this March, concluded that $301bn of business value is at risk because of water stewardship challenges, across around 2,900 large companies. Yet, it would cost these corporations around one-fifth of this sum to deliver appropriate mitigation and adaptation initiatives.

World Water Week

The launch of the water impact index falls during World Water Week, which is taking place online this year. The event is expected to convene more than 16,000 participants from 170 nations.

‘Building resilience faster’ has been selected as the theme for the 2021 conference, in light of advances in climate science which have laid bare the need to both accelerate decarbonisation and adapt to the temperature increase and weather changes that are already ‘baked-in’.

Those interested in exploring the global state of play when it comes to water stewardship, water access and sanitation are encouraged to download edie’s free report on UN Sustainable Development Goal (SDG) 6; Clean Water & Sanitation. Produced in association with the Qatar Foundation and featuring an exclusive foreword from WaterAid, the free report maps out exactly how businesses can collectively deliver progress against SDG6.

Could your business win edie’s Water Management Award?

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Entries are now OPEN. The submission deadline for the 2022 Sustainability Leaders Awards is Friday 1 October 2021. The Awards is then set to take place as a live ceremony on the night of Wednesday 2 February 2022 at the Park Plaza London, Westminster. 

Our ‘Water Management’ category is among the 23 categories to choose from. Make sure you get the recognition you, and your team, deserve. ENTER THE SUSTAINABILITY LEADERS AWARDS 2022 HERE.

Sarah George

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