Global companies fail to address water concerns at board level

The world's largest companies are not doing enough to assess water strategies or provide transparent water-related risk assessments to investors, despite a sharp rise in company reports of detrimental impacts from droughts and other water-related issues.

According to an analysis of the largest listed companies, released today by the Carbon Disclosure Project (CDP), more than half have experienced negative impacts from water-related challenges. 

The CDP Global Water Report, prepared by Deloitte, is produced for 470 investors representing $50tr in assets and is based on information submitted to CDP by 185 Global 500 companies.

53% of companies reported negative impacts, up from 38% in 2011, including water scarcity, flooding, rising compliance costs, regulatory uncertainty and poor water quality in the past five years.

In addition, the number of companies that view water as a substantial risk to their business has increased from 59% to 68%. Similarly more companies identify commercial opportunities arising from an effective water stewardship strategy, rising from 63% last year to 71% today.

This rise in awareness of water as a business priority was echoed in the study, ‘Why are business leaders prioritising sustainability?’, released by edie this month. It noted that by 2032, four times as many businesses could be at risk of flooding in the UK, and that around one in two large (48%) and extremely large (51%) companies consider flooding to be a risk to their business.

Despite this, CDP’s analysis reveals that the proportion of respondents with concrete targets in areas such as water efficiency and quality improvements has decreased from 57% last year to 55%.

Just less than a third (29%) of companies also remain unable to provide a complete picture of water risks by failing to establish if water threatens their supply chain.

The CDP claims that this could be a result of the number of companies recognising water as a board level issue, with the number of companies citing board level intervention increasing by just 1% to 58%.

Furthermore, although more than 100 additional investors have this year asked companies to report their water strategies the percentage of companies responding has remained static at 60%.

“A higher proportion of companies in 2012 identified water as a substantive risk or opportunity compared with the previous year,” said Norges Bank Investment Management (NBIM), Chief Risk Officer Jan Thomsen.

“While we welcome this increased awareness, companies need to improve transparency on their water management strategies. Companies should disclose metrics that show their exposure to water-related risks and opportunities, and that measure the performance of their water management strategy.

“This will provide important information for investors seeking to manage water-related risks and opportunities in their portfolios.”

CDP’s chief executive officer Paul Simpson added: “We look to Global 500 companies for examples of leadership, while it is encouraging that their awareness of the commercial risks and opportunities associated with water is improving, progress in responding to them is varied and in many cases insufficient.

“We need to see greater corporate accountability through more transparency, concrete targets and goals and board level oversight of water-related issues.”

Conor McGlone

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