Business focus on water management reaching ‘record levels’, says CDP

CDP published its Global Water Report today (7 November), which analysed water data from 742 disclosing companies – including Nestlé, Diageo and Kellogg’s. The report stated a 40% increase in the number of disclosures in 2016, with 70% of companies now reporting on water targets to the board.

Disclosing businesses have pledged $23.4bn to new water projects such as desalination plants, irrigation systems and drought resistance in 2017. Investment covers 1,000 projects across 91 nations but still falls well short of the $6.4trn that the UN estimates is required to combat water scarcity by 2030.

CDP’s chief executive Paul Simpson said: “The stakes are high as we assess corporate progress towards a water-secure world. From brand damage to disrupted supply chains, increased operating costs to constrained growth, water security is now big business and poses increasingly significant threats and opportunities to global firms.”

Backed by requests from 639 institutional investors with $69trn in assets, CDP called on 4,653 companies to disclose water activities, achieving a 46% response rate. The report is based on the 742 largest firms that disclosed data, and are part of a wider selection of more than 2,000 companies that reported on water management to CDP this year. These companies collectively withdrew 5.6 billion mega-litres of water in 2017 – more than the volume of Lake Michigan.

Internal pricing

According to CDP, 53 companies – or 7% of the disclosing respondents – have created internal value costs associated to water that are otherwise absent from pricing and decision making. Colgate Palmolive measures the “true” cost of water as 2.5 times more than the purchase cost, once social and environmental impacts are accounted for.

While Colgate uses a water cost toolkit developed with Rutgers University Business School, whiskey specialists Diageo associates water costs to individual plants. As part of a wider goal to improve water efficiency by 50% by 2020, Diageo has linked water costs to business decisions and capex investments.

Despite the progress being made, the energy sector is continuing to lag. Just 37 of the 138 energy companies asked to disclose did so, with the likes of Exxon Mobil and Royal Dutch Shell failing to provide information.

Still, progress from other sectors led to a 193% increase in the number of companies taking a leadership role on water management. CDP’s Water A list now consists of 73 companies – the top performers include Burberry, Kellogg’s and Woolworths – up from 25 last year. The US had the highest number of firms on the A list, with 13, followed by 12 Japanese companies and nine from the UK.

Last year, CDP reported that water risks fuelled by climate change cost the private sector $14bn (£11.3bn), with a separate report from the organisation noting that 80 cities are seeking $9.5bn in investment to cover 89 water projects that are ‘urgently needed’ to combat water stress.

Earlier this week, the World Water Council (WWC) reported that financial investment into water infrastructure needs to triple to €255bn annually to combat climate change and meet sanitation targets.

Matt Mace