Governance

The risks of increased water efficiency requirements: The carbon disclosure project global water report 2012

This article presents the 2012 report of the CDP water disclosure project initiated by global financial institutions. The project sought to help industries identify water related risks and ideally, work cooperatively to address them.

Author : Deloitte
Cover of the CDP water disclosure report

Background:

Goal:

In this report, we learn of the importance of management of water risk through the viewpoints of the project team, investors and strategists. Since many industries depend on water at some point in the production chain, they are vulnerable to water risk. This vulnerability extends to the companies that have invested in them. In order to protect their  investments, financial institutions need to ensure that the companies they invest in have strategies to manage this risk. This includes influencing water policies to minimise risk to corporate institutions. Sharing water related information, through platforms like this report, have the potential to encourage collective action among companies.

Observations:

  • The response rate has not changed from the last year.
  • There is a nearly 40% increase in the number of respondents that are facing water-related costs problems.
  • On the other hand water issues, offer business opportunities; an increasing number of companies are aware of these. These include sales of water-related products and services.
  • Companies require their suppliers to report on water risk, use and management; but are not as forthcoming in their own boardrooms.

Statistical information presented:

  • Consumer discretionary
  • Consumer staples
  • Energy
  • Health care
  • Industrials
  • Information technology
  • Materials
  • Utilities

Collaborative action:

Given its importance, this report aims to provide guidelines to companies to work collectively between companies as well as with other partners such as local suppliers, NGOs and governments. It also reports on collaborative actions taken by companies to minimize their water risk and understand future problems.

Working with universities to develop water risk assessment tools, working with communities to secure an uninterrupted water supply, and engaging in water quality research with pharmaceuticals all ultimately help companies retain profits. Working with competitors helps the creation of solutions to water risk, as is  proven by alliances such as the Sustainable Apparel Coalition and 'Field to Market', International Petroleum Industry Environmental Conservation Association (IPIECA)and the International Council on Mining & Metals.

Unanswered questions:

This report raises and leaves unanswered several questions. If pressure is brought to align water policies to corporate interests, what will become of environmental concerns? Will ensuring that mining companies have adequate water prove detrimental to the concerns of subsistence economies? Will safeguarding investments ultimately prove costly to the earth?

The answers to these questions are not within the scope of this report, or even within its world-view.The fact that increased water efficiency requirements are perceived as a risk indicates the focus on the bottom line.

While the report is an effective analysis of water risks that may threaten investments, water policies ideally need to keep in mind a world beyond stock markets.

Download the entire report here.

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