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CDP report reveals corporations starting to take water scarcity seriously

General Motors

US automaker General Motors has modelled the implications of shutting its operations in Northern Mexico in the event of drought. Priced at $27m per month. Photograph: Henry Romero/REUTERS


Powered by article titled “CDP report reveals corporations starting to take water scarcity seriously” was written by Oliver Balch, for on Thursday 31st October 2013 11.11 UTC

It took the best part of a decade for large corporations to start reporting on their greenhouse gas emissions in significant numbers. Transparency around water, in contrast, looks set to unfold much faster.

The investor-focused CDP only persuaded 150 companies to participate when it first launched its first Water Disclosure survey four years ago.

For this year’s CDP Global Water Report 2013, launched October 31, 593 large corporations stepped up to the plate. Collectively, they represent quite a splash: 11bn megalitres of water withdrawals per year to be precise. (In layman’s terms, that’s enough water for everyone on the planet to fill a one-litre kettle 50 times a day for the next 82 years.)

Driving corporate concerns is how water – or, more accurately, lack of water – threatens to affect continued business-as-usual. In extreme cases, water scarcity fears have led to company operations being shut down. Last year’s suspension of the $4.8bn (£3bn) Conga gold and copper mining project in Peru marks a notable example. More generally, however, businesses are fretting about turning on the taps and finding them dry. US automaker General Motors, for instance, has modelled the implications of having to shut its operations in Northern Mexico in the event of drought. The price tag? A frightening $27m per month.

Potential water-related threats are becoming more immediate too. Nearly two-thirds (64%) of respondents to the CDP survey believe water-related risks will hit their businesses within the next five years. The near-term substantive risks identified by the 184 Global 500 companies on which the report’s analysis is based now stand at 614, up 16% on last year.

Will Sarni, director of enterprise water strategy at Deloitte Consulting, which crunched the numbers on CDP’s behalf, refers to the survey’s findings as a “pretty powerful set of data points”. He also notes a gradual shift in corporate boardrooms from preoccupations over the price of water to more risk-orientated mindsets. “More and more companies are starting to pay attention to potential ‘value at risk’, which means what if I don’t have water when I need it, where I need it, in the quantities that I need it, and what might be the financial impact be”, he said.

For some, the shift to a more risk-orientated approach is none too soon. Among that number is Stuart Orr, freshwater manager at conservation group WWF International. Orr is a vocal champion of so-called ‘water stewardship’, which calls on companies to manage their indirect water dependencies rather than merely concentrating on their immediate water use. “If you just focus on the (water) footprint, what you’ll have is a whole bunch of efficient factories in really really dirty environments”, he said. The same logic is now being taken up by environmental organisations such as WaterAid, The Nature Conservancy and the World Resources Institute.

There’s another reason why WWF and its ilk are so keen on a risk-minded approach to water management: it brings the investors to the table. CDP purports to represent 530 investors, representing $57tn in assets. That’s some welly. “It doesn’t take many shareholders, especially big ones, to ask a few questions … about water to make a company to do something”, Orr observed. And such questions are being heard on investors’ lips more and more, he insisted.

Structuring water conservation in pure risk terms has its potential downsides, however. What if a company has no substantial water risk to worry about? Or what if it does and chooses to ignore it?

The CDP report suggests both eventualities could be playing out. Response rates in sectors with apparently low water impacts are noticeably below average. Only 54% of Information Technology companies responded to the CDP survey, for instance, with global brands such as Google, Apple and Facebook among the notable absentees. Likewise, ‘consumer discretionary’ corporations such as Amazon, Honda and Home Depot also feature as no-shows, together with more than half (52%) their sector colleagues.

For Cate Lamb, head of CDP’s water programme, the disinterest among industries that are seemingly “non-sensitive” to water can be corrected through education. “It’s a reflection of the maturity of different sectors and their ability to realise the real value in water”, said Lamb, in reference to the varying response rates among sector groups. Going forward, CDP plans to work with industry associations to help their member firms “better understand” their dependence on water.


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