The Urgency of Water Stewardship

The TakeAway: The Carbon Disclosure Project’s new Water Disclosure program establishes water risk management as an investor concern while helping companies gauge their “water footprint”.

Water is to the world what blood is to our bodies: the vetturale di natura, or “vehicle of nature”, as Leonardo da Vinci called it.  But water gives life not only to flora and fauna; it also serves as a critical commodity for business and industry, agriculture, and cities.  To wit: the Carbon Disclosure Project (CDP) unveiled its new Water Disclosure program and companion report last week, the latest in a series of initiatives and publications building awareness of the necessity for wise stewardship of our fragile water resources.

Perhaps most importantly, water acts as a barometer – and a conduit – of climate change impacts: for example, as glaciers melt, causing precipitation and turbulent weather patterns to increase, water supplies can dry up, become contaminated, or trigger flash flooding. Internationally, bad water governance and management are linked to violence and conflict.  According to the latest UN World Water Development Report, Water in a Changing World (WWDR3) and the Organisation for Economic Co-operation and Development’s (OECD) Environmental Outlook to 2030, within two decades almost half of the global population will reside in areas of “high water stress”, primarily in developing “BRIC” (Brazil, Russia, India, and China) countries, if no new policies are introduced. Domestically, a recent Natural Resources Defense Council (NRDC) study showed that one-third of US counties, across 14 states, face higher risks of severe water shortages by mid-century—a fourteen-fold increase from previous projections.

That’s why “assuring global water security for both humans and ecosystems will increasingly present opportunities for business,” writes Marcus Norton, head of CDP Water Disclosure, in The Guardian.  The CDP Water Disclosure project, which represents the concerns of 187 institutional investors overseeing assets worth $16 trillion, seeks to provide “critical water-related data from the world’s largest corporations to inform the global market place on investment risk and commercial opportunity,” according to its press release.  Preliminary data comes from a survey questionnaire on water use and water-related issues that was distributed in April and completed by 302 companies within the FTSE Global 500 Equity Index.  (The Water Disclosure project will circulate the 2011 questionnaire to a subset of the Global 500, and a sample of the largest publicly listed Australian and South African companies.)

Respondent companies operate in water-intensive sectors such as automotive, electric utilities, food and beverage, extractives, and pharmaceuticals.  According to researchers, companies exhibiting best practice in water management include Anglo American, Colgate-Palmolive, Ford, GE, PG&E, and Taiwan Semiconductor Manufacturing.

Boston-based Environmental Resources Management (ERM) analyzed the data for CDP, finding the following:

• 96% of responding companies identified their exposure to water risk, with more than half of those classifying them as current or near-term (1-5 years);

• 39% of companies already experience detrimental impacts, including business disruption due to 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; and

• Water security is climbing up 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.

It’s not just about the numbers, however.  The concept of “water stewardship”, say the authors, not only quantifies water usage, but actively promotes responsible water use—as championed by the Alliance for Water Stewardship.  Leonardo would be pleased.