The Carbon Disclosure Project (CDP) has published its first water disclosure report on world’s largest companies.

The new report reveals that water constraints are now a boardroom issue for global corporations.  

The CDP 2010 Water Disclosure Global Report on the impact of water constraints on the world’s largest corporations, illustrates the growing significance of water as a corporate issue.

CDP Water Disclosure sent its first annual questionnaire to 302 of the world’s largest companies asking for information on their water use and other water-related business issues. It received a 50% response rate with 122 of these responding publicly and a further 25 companies responding on a purely voluntary basis. Veolia Environnement was amongst a number of companies who declined to participate.

The information was requested on behalf of 137 institutional investors representing US$16 trillion in assets to increase transparency and accountability on water scarcity and other water related issues, and to inform the global market place on investment risks and commercial opportunities. The data will provide valuable insight into the strategies deployed by many of the largest companies in the world in relation to water use and will be used to help drive sustainability.

The report findings show that water is already impacting business operations with 96% of responding companies able to identify whether or not they are exposed to water risk and more than half of those reporting risks classifying them as current or near-term (1-5 years). 39% of companies are already experiencing detrimental impacts relating to water including disruption to operations from drought or flooding, declining water quality necessitating costly on-site pre-treatment, and increases in water prices, as well as fines and litigation relating to pollution incidents.

Water security is already high on the corporate agenda with 67% reporting responsibility for water-related issues at the board or executive committee level. The majority of companies (89%) have already developed specific water policies, strategies and plans, and 60% have set water-related performance targets.Other CDP Water Disclosure report key findings:
Business engagement on water issues differs widely across different industry sectors: 100% of companies in the chemicals sector responded compared with just 29% in the oil & gas, and construction, infrastructure & real estate sectors.
Responses were received from companies in a total of 25 countries, with the most responses coming from the USA (59, 57% responding), the UK (14, 64% responding) and Japan (13, 45% responding). The highest response rates were from South Africa (100%), Germany (83%) and Switzerland (71%).
A high number of corporations (62%) are identifying a wide range of water related business opportunities in areas such as water management, water efficiency and reduction, and wastewater treatment.
Just 53% of companies are able to identify whether they are exposed to water risks in their supply chains, as opposed to the high levels of awareness (96%) of water risks in their own operations.
Sectors reporting the greatest exposure to water risks include food, beverage & tobacco and metals & mining, with chemicals and technology & communications the least exposed. Physical risks to direct operations from drought and flooding were most frequently cited, but companies also recognize risks from changing regulations and reputational damage.
Companies exhibiting best practice in water management include Anglo American, Colgate-Palmolive, Ford, GE, PG&E and Taiwan Semiconductor Manufacturing.
Paul Dickinson, executive chairman at the Carbon Disclosure Project, said:

“This data provides valuable insight into the strategies deployed by many of the largest companies in the world in relation to water and is a first step in helping drive investment towards sustainable water use. The changing availability of water resource is presenting opportunities to business through demand for new infrastructure, products and services and now is the time to seize these opportunities, address water challenges and build resilience – not once the well has run dry.”
Water-related risks pose financial risk for investors

Demand for water has risen and is now projected to outstrip supply by up to 40% by 2030 , and approximately 80% of the world’s population already live in areas where fresh water supply is not secure.
As the climate changes, assuring global water security for both humans and ecosystems will increasingly present opportunities to business through demand for new infrastructure, products and services. It will also bring risks including physical disruptions to operations and supply chains, changing regulatory regimes and reputational damage from misuse, or perceived misuse, of what is a shared resource.

Anne Kvam, global head of ownership strategies, Norges Bank Investment Management (NBIM), a lead sponsor of the program, said:

“As a diversified investor with a long-term outlook and investments in a range of sectors at risk from increasingly scarce water resources, we take water management seriously. Companies that fail to consider the impact of water scarcity and other water-related risks pose a financial risk to investments.”

Water  has a direct impact on the survival of communities and business. If input costs in manufacturing grow too high, for example, an entire process can become uneconomic. The long term impact of water management is likely to become not only an operational issue, but a governance issue, as has happened with carbon management. Investment funds, from pension and insurance to sovereign funds, are beginning to assess the long term implications of water management on corporate value. The $490bn Norwegian Government Pension Fund for example, is already evaluating water risk in 1,100 companies in which it invests.

According to the UNFCCC, by 2025 more than half the nations in the world are expected to face freshwater stress or shortages, and by 2050, as much as 75% of the world's population could face freshwater scarcity.