Businesses must “strive for stewardship” when it comes to the social, environmental and financial risks that come from water negligence, according to CDP’s global water report for 2013. Current approaches, which chiefly involve reducing usage, have been described as “outdated” and “inadequate”.
A need for a step change in water risk management, which uses data from 180 companies listed on the FTSE Global 500 Equity Index, suggests investors can be the driving force in helping shape water strategies fit for the 21st century.
The study was written by audit firm Deloitte at the request of 530 investors worth $57 trillion (£35 trillion). Nearly three-quarters (70%) of firms that took part described water as a “substantive” risk to their business.
CDP said current methods of tackling water risk posed serious threats for investors, and urged major firms to formulate plans to address water stress, scarcity, quality and flooding, among other issues.
“Although we are seeing great strides in corporate ability to identify water-related risks, the approach to managing those risks is misguided”, said Cate Lamb, head of CDP’s water programme.
“If businesses are to become truly resilient to the growing threats that water poses, they must strive for stewardship. A 60% annual increase in companies using our water programme is promising.
“The resultant data we have published […] will provide unparalleled insight to investors aiming to seize a leadership position by educating their portfolio companies on this issue.”
CDP, formerly known as the Carbon Disclosure Project, said only a small percentage of firms (6%) have plans in place to engage with the local community on water risks. This figure was equally low when it measures to deal with supply chains (4%), water management plans (3%) and transparency (1%).
Johann Clere, a global director at Veolia Water, one of the world’s largest suppliers of water services, welcomed the CDP study and urged the financial community engage with its findings.
“Global supply chains are beginning to acknowledge the risks related to water, but we need to extend this knowledge to chief financial officers”, he said.
“The only ways to do this is to monetise the risks and assess the true cost of water. Naturally, with any kind of risk come big opportunities.”
In May, Piet Klop, senior adviser for responsible investment at PGGM Investments, suggested that ranking multinational companies on their water usage and efficiency would go a long way to driving change and reducing their water footprints.