Despite an increase in water security risks for US businesses, the majority of Standard & Poor’s 500 index companies lack strategic plans to address them, according to a report prepared by Deloitte.
The CDP US Water Report 2013, which is based on information provided by 145 companies listed on the S&P 500, says 46 percent of respondents have already experienced detrimental impacts related to water with costs for some as high as $400 million and projected impacts as high as $1 billion.
Many businesses appear to lack strategic responses to water-related risks, which could lead to larger losses. Board-level oversight of water issues has increased 13 percent over 2012. However, overall the proportion remains lows at 32 percent compared to 58 percent of companies in the global 500. Some 43 percent of respondents don’t know if key inputs or raw materials come from regions subject to water-related risk, potentially leading to a lack of a necessary response, the CDP report says.
The report says business are reporting more water-related risks, increasing 16 percent over 2012. And while 58 percent of reported risks are expected to affect businesses now or within the next five years, the number of risks with unknown timeframes have increased 23 percent since last year.
Some 63 percent of respondents have goals focused solely on water management within direct operations, such as efficiency and compliance. CDP warns companies that continue to focus only on direct water risks could be missing business opportunities and inadvertently overlooking serious risks.
A global report released in October by CDP found the world’s largest companies such as BP, Bayer, Lockheed Martin, General Motors, Nestle, Walmart and Unilever have a misguided approach to water-related risk management.
Instead of focusing on reducing water use, which CDP says threatens shareholder value and is an inadequate response to increasingly immediate water risks, firms should look to water stewardship. Water stewardship is the key to achieving water security. But it requires a significant step change. CDP is calling on investors to take a leading role in guiding companies on this issue.