Water Disclosure Up, But Board Oversight Still Low, CDP Says
Only 57 percent of organizations report board-level oversight of water policies, strategies or plans, compared with 94 percent for climate change, according to the second annual global water disclosure report from the Carbon Disclosure Project.
But the survey sent to 315 companies on the Global 500 index, all identified as operating in the most water-stressed locations or sectors, this year had a 60 percent response rate. This was up from 50 percent last year, which CDP says shows improved transparency on water management.
September’s carbon report had a slightly different sample, surveying all Global 500 companies.
CDP said the different approaches to carbon and water are surprising, given that most reported water-related risks are near-term: companies in the water survey identified 64 percent of direct operational risks and 66 percent of supply chain risks as occurring between now and 2016. More than one third of respondents (38 percent) have already experienced water-related business impacts, such as operational disruptions from severe weather or water shortages. One company reported that it had already experienced a water-related impact at a cost of $200 million.
Meanwhile, 59 percent of companies reported exposure to water-related risks. Companies said the biggest water risk for direct operations is water stress or scarcity (41 percent), followed by flooding (24 percent), reputational damage (23 percent), and higher compliance costs (21 percent).
Energy companies report a high level of risk at 72 percent, yet CDP said they reported the lowest levels of board oversight, at 36 percent.
In the survey, 63 percent of respondents said water presents commercial opportunities, with 79 percent of those opportunities being near-term. The most commonly cited opportunities were cost reductions from water efficiency, revenue from new water-related products or services, and strengthened brand value.
For example, Colgate Palmolive said an improved cleaning process at site in South Africa has saved the company 388,000 liters of water a year, and increased product output by two tons daily because of reduced downtime. In a collaboration with three printed circuit board assembly partners, Cisco Systems instituted a new soldering practice that eliminated the need for a water-intensive wash stage, saving over $1 million a year.
The report found that respondents’ ability to provide water-related usage data has improved. The proportion of companies able to report water withdrawals (95 percent) has increased since 2010 (86 percent), as has the ability to report water recycling/reuse data (58 percent compared to 42 percent in 2010).
Will Sarni, director and practice leader for enterprise water strategy at the U.S. branch of Deloitte – which wrote the report for CDP – said a new paradigm is emerging for water management, with initiatives including improved data and analytics, improved efficiency, energy-efficient water treatment technologies, and efforts to extract energy and nutrients from wastewater.
In the report, companies indicated that they mostly understood the relationship between water and energy use, with 72 percent reporting linkages or trade-offs between water and carbon emissions.
But 38 percent of companies were unaware of whether they are exposed to water risk in their supply chains, compared to only 7 percent for direct operations. CDP said that the consumer discretionary sector is particularly exposed to supply chain risk, but 41 percent of respondents in this sector cannot state whether their supply chain is exposed to water-related risk.
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