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Leading Companies Lack Water-Related Risk Disclosures

TopScoringCompaniesThe majority of leading companies in water-intensive industries lack adequate disclosure of water-related risks and opportunities, according to a new report from the Ceres investor coalition, UBS and Bloomberg. The report covers eight sectors: beverage, chemicals, electric power, food, homebuilding, mining, oil and gas and semiconductors.

Several industries face risks from water scarcity particularly in developing regions where populations are rising and economic growth is increasing, reports Reuters. Risks from drought include food shortages and higher prices for commodities, according to the article.

The report also cites examples around the world including the states of California and Georgia as well as Peru where water shortages resulted in large revenue losses. As an example, several power plants in the U.S. Southeast nearly shut down in 2007 and 2008 because of drought, reports Reuters.

The report, “MURKY WATERS? Corporate Reporting on Water Risk” (PDF), evaluates and ranks water disclosure practices of 100 publicly-traded companies in eight key sectors exposed to water-related risks. The report shows that many companies do not include water risk and performance data in their financial filings, and do not provide local-level water data, particularly of facilities located in water-stressed regions.

Another key finding shows that none of the 100 companies provide comprehensive water data on their supply chains. Only 21 companies disclosed targets to reduce water use, 15 companies had goals to reduce wastewater discharge, 17 companies report local-level water data, and only a handful provide the information in the context of operations in water-stressed regions, says Ceres.

Investors, including Jack Ehnes, chief executive officer of the California State Teachers’ Retirement System (CalSTRS), say this clearly shows that companies are not providing the required information they need to understand the risks and opportunities posed by water scarcity.

Using a scoring scale of 0 to 100, the three highest scoring companies were UK beverage company Diageo, Swiss mining company Xstrata and U.S. electric power company Pinnacle West (owner of Arizona Public Services) with 43 points, 42 points and 38 points, respectively. Eighty of the 100 companies scored less than 30 points, says Ceres.

Companies with the lowest scores include Dr. Pepper Snapple, Florida Power & Light, Archer Daniels Midland & Bunge, Peabody Energy, Encana, Micron, Saudi Basic, and D.R. Horton, Hovnanian, Ryland, NVR.

The report scored the companies based on five key categories of disclosure: water accounting, risk assessment, direct operations, supply chain and stakeholder engagement. The mining sector scored highest overall, followed by the beverage industry. Companies in the homebuilding sector had the lowest overall scores.

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