New analysis has revealed that water management is trailing climate change on the boardroom agenda, despite the fact that the majority of reported water-related risks and opportunities are recognized as near term.

The latest Carbon Disclosure Project (CDP) Water Disclosure global report finds that 57% of the 190 publicly listed organizations that participated in the survey report board-level oversight of water policies, strategies, or plans. By comparison, a report released by CDP in September 2011 showed that 94% of Global 500 companies report board-level oversight of climate change, suggesting that corporate understanding of water as a business concern trails that of climate change.

The second annual CDP Water Disclosure Global Report is based on a questionnaire sent to 315 companies on the Global 500 index that are identified as operating in the most water-stressed locations or industry sectors. This year, 190 (60%) of these companies responded—a 10% increase from the previous year—showing improved transparency on water management. CDP Water Disclosure collects data annually on water use, strategies, and risks and opportunities from companies on behalf of 354 investors representing US$43 trillion in assets.

Over half (59%) of companies surveyed report exposure to water-related risks such as flooding, scarcity, and reputational damage. The majority of these risks are near term: 64% of risks in direct operations and 66% of risks in the supply chain are identified as occurring between now and 2016. Illustrating the urgency of water risk, more than one-third of responding companies (38%) have already experienced water-related business impacts, such as disruption to operations from severe weather events (e.g., flooding) and water shortages.

Underscoring the opportunities associated with effective water management, 63% of respondents say that water presents commercial opportunities, most of which (79%) are near term. The most commonly identified opportunities are associated with cost reductions from increased water efficiency, revenue from new water-related products or services, and improved brand value.

Paul Simpson, chief executive officer at CDP said:

“Some of the largest multinational companies have experienced the detrimental effects that water can have on their bottom line. The findings released today illustrate the very near-term nature of water-related impacts. We need to see more companies understand that water is a critical issue, requiring greater board-level attention than it currently receives. Those corporations that navigate the challenges effectively will be able to profit from the significant opportunities that result from a robust water strategy.”

Further CDP Water Disclosure global report findings include:

• Companies are demonstrating that the relationship between water and energy use is widely understood, with 72% of companies reporting linkages or trade-offs between water and carbon emissions.
• Over a third of companies (38%) are unaware of whether they are exposed to water risk in their supply chains.
• Energy companies report a high level of risk (72%), yet report the lowest levels of board oversight of water policies, strategies, or plans (36%).
• The biggest water risk facing businesses in their direct operations is water stress or scarcity (41%), followed by flooding (24%), reputational damage (23%), and higher compliance costs (21%).
• One company reported that it had already experienced a water-related impact at a cost of US$200 million.

The launch of CDP Water Disclosure’s second report at www.cdproject.net, provides investors, companies, governments, and other stakeholders with a range of information on companies’ water usage, and related issues.

Chris Scott, Managing Director, Black & Veatch Water EMEIA,commented:

"Water is no longer ignored by business, this is clear. But, given water-related risks are near-term, the report also raises issues that require swift consideration. Water risk is inextricably linked to climate change. The separation of board level oversight for climate change and water policies indicated in the report may become a barrier to the development of effective, holistic mitigation plans. 

"Understanding of water and energy’s interdependence is growing, but the relationship needs to be more widely recognised and better managed. For example: although energy respondents indicate the greatest level of detrimental water-related impacts, and a very high level of exposure to water related risk, the sector also reports the lowest level of board-level oversight for water policy. 

"Recognising that water has a value beyond price is central to ensuring its sustainable stewardship. The report indicates this is understood by some companies. Sustainable management of water resources, however, requires the appreciation of water’s true value to grow both within and beyond the business sector."