Organization's are underestimating and underreporting water risk.
Companies with large supply chains also run the risk of finding themselves in conflict with communities over access to water issues, thus putting their license to operate at risk:
- Almost one quarter (22%) of companies reporting to the CDP in 2014 reported that issues around water could limit the growth of their business.
- These pressures are likely to be felt most keenly in the high-growth emerging markets that offer the greatest corporate opportunity, countries such as Brazil, China, India and Mexico. According to the World Bank, almost 40% of the groundwater use in Mexico is estimated to be above the recharge rate.
There is a need for comprehensive methods to evaluate corporate water risk
Water scoring represents the next wave in corporate reporting. Starting this year, reporting water risks and opportunities through the CDP will move to a new level of expectations: scoring will be applied to all respondents to the CDP.
Without such an adequate/comprehensive understanding of water risks, companies are in danger of misdirecting risk mitigation strategies, or of setting targets that fail to address their key exposures.
A corporate water stewardship approach allows companies to report and react meaningfully to water risk
If water scarcity prevails, companies could face constraints to growth. They may not be able to provide their core products and services, or may lose the ability to expand their business. As investors in these companies, this is something we are deeply concerned about.
Governments, cities, the private sector and civil society have a great opportunity to take bold actions and build momentum in the run up to the Paris 2015 meeting. The decisions we make today can lead us to a profitable and secure future. A future that we can all be proud of.
The global economy will favor businesses that take a pro-active approach to water stewardship. What engaged investors want to see, and what leading companies are beginning to implement, are integrated, strategic, corporate water stewardship strategies in response to water risks.