Report: Half of major apparel brands fail to disclose water risks

Pictured: Workers at a leather tannery in Morocco

The report analyses the water-related risk disclosures of the top 29 fashion retail companies, calculated by adjusted revenue, to create a sample for analysis. Adjusted revenue factors in an apparel and footwear weighting to account for entities active in other segments alongside textiles.

According to the analysis, only 15 out of the 29 brands included in the analysis report to CDP on their usage of water.

Some companies including Hanesbrands, Gap, VF Corp and Kering, have been highlighted in the report for leading the way in discussing water risk. Others, like Victoria’s Secret and Ralph Lauren, are lagging behind.

The report categorises these companies into three broad groupings for comparison purposes: Luxury brands such as Kering, LVMH, and Ralph Lauren; Non-luxury brands including H&M and Nike; and Stores – mainly retail-focused corporate entities like Ross Stores or Burlington Store.

The report highlights disparities in disclosure levels among different company types, with non-luxury brands showing the highest level (69%), followed by luxury brands (29%). Stores are lagging significantly (2%).

Moreover, out of the nearly 4,000 documents analysed, including annual reports, CSR and ESG reports, transcripts from company presentations, earnings calls and shareholder meetings, only 10% of the documents included water risk-related disclosures.

A common theme across all company types in water-related risk disclosures is consumption, with prevalent terms including risk, policy and reduction.

When comparing regions, companies in both Europe and North America exhibit similar levels of disclosures when controlled for sample size, with North America primarily featuring disclosures in sustainability reports, whereas Europe sees a more even split between sustainability reports and annual reports.

Investor involvement in disclosure advocacy

The report highlights that discussions on water-related risks are predominantly found in reports rather than transcripts from events such as earnings calls or capital market events, prompting speculation on whether investors overlook water as an important topic or believe companies manage water risk effectively, relegating it to a low priority.

Last year, CDP revealed that a record number of investors, with nearly $30trn in assets, are targeting companies to report on key sustainability issues including water.  CDP noted that this direct route of engagement is leading to better disclosure from corporates.

Research demonstrates that taking action on water security within the private sector could unlock potential commercial opportunities worth $2.3trn.

Planet Tracker’s senior investment analyst Richard Wielechowski said: “The availability of water is increasingly stressed in many parts of the world due to climate change, inefficient use and untreated disposal. This could threaten textile production in key regions, disrupting supply chains.”

With nearly a quarter of the world population experiencing high water stress annually, corporate action on water is imperative both socially and economically.

Planet Tracker is urging financial institutions to include water risk in investment decisions, while considering the potential impact on supply chains and consumer pricing.

It is advocating for pushing companies to disclose water use and risks through standardised frameworks such as CDP.