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Risky Waters: What Does My Company Do?

Submitted by: Sissel Waage

Posted: Apr 22, 2015 – 06:00 AM EST

Series: Water - Scarcity and Solutions

Tags: water, business, risk assessment

 
Sissel_waage_2015_

This is the most recent article in our series on Water - Scarcity and Solutions. For more articles, go to
http://www.csrwire.com/blog/series/77-water-scarcity-and-solutions/posts

Stranded assets and operational disruptions are not the stuff of which great careers are made. And yet, without a significant upswing in corporate work on identifying and addressing water risk, these realities will mark an increasing number of companies and people’s careers.

Water is a real corporate risk. The World Economic Forum’s 2014 “Global Risks” report listed water as one of the top three issues. Companies may face too much water (flooding), or too little (drought), as well as too polluted or too poor quality. 

Just as water risk comes in many forms, so do the corporate implications. Risk can stem from inadequate water for operations (known as physical risk). It can grow from local community, or key stakeholders’, perceptions of corporate water use, which can spark reputational and brand risks. Of course, water is also intertwined with regulatory risk, associated with changes to both wastewater-related rules as well as permissions to access to water (particularly in times of drought).

Perhaps most headline-grabbing, particularly for COOs and General Counsels, is that water can also be a material risk. According to the US Securities and Exchange Commission: "Changes in the availability or quality of water ... can have material effects on companies", as cited in a Ceres’ “Murky Waters” report.

Consider a few examples of water issues literally cutting the core for companies. Coca Cola has had to shut factories in India due to water issues, both in 2014 and 2004. Entire industries have been stalled by flooding, such as the technology sector’s hard-drive manufacturers during the 2011 Bangkok floods. Other industries face a lack of water so severe that they are underwriting desalination plants, such as BHP Billiton. Yet other industries face the unthinkable, “ecosystem malfunction” in the form of ocean water temperatures exceeding the levels required for cooling facilties, such as nuclear facilities in Connecticut and France.

To say that water issues are highly business-relevant might be an understatement.

Clearly, the next step is action, which has been laid out by the CEO Water Mandate, the Alliance for Water Stewardship, and others. For example, the CEO Water Mandate’s 2014 Guidelines recommend: “[1] measure corporate water performance; [2] assess conditions in the river basins where they operate; [3] understand water-related challenges and opportunities; [4] develop effective water management strategies, and [5] communicate these issues to stakeholders.”

Numerous science-based analytical tools now exist for corporate decision-makers to apply in assessing water risk and prioritize which areas to focus upon, as laid out in the CDP’s water disclosure guidance. For example, WRI’s Aqueduct Tool enables decision-makers draw upon best-in-class, peer-reviewed data sets and offers clear maps of multiple issue areas related to water risk. The WWF-DEG Water Risk Filter presents business people with another approach to assessing water risk. For those who want to place a monetary value on risks in particular areas, the Water Risk Monetizer is available.

Indeed, some corporate action is underway. In manufacturing and factory operations, innovation is occurring, such as with Nike’s waterless dyeing as well as Nestle’s “zero water factory expansion”. In the food industry, there are various water efficient approaches, such as precision agriculture and practices within sustainable agriculture. In the beverage industry, there is awareness of the key role of “green infrastructure” in enabling recharge of aquifers, as well as many other interrelated ecological and hydrological dynamics. In response, some companies are investing in watershed structure and function, by Coca-Cola, SABMiller, ABInBev. Others in the industry can see pathways forward in the water guidance document from the Beverage Industry Environmental Roundtable.

And yet, corporate water strategy and action is not the norm. 

Ultimately, businesses need to allocate budget and personnel. Corporate decision-makers need to conduct water use and water risk assessments. This work needs to be undertaken within a watershed and river basin-level context that enables for considering trends in total water demand versus water supply—both at present as well as projected into the (climate changing) future.

Water issues are here to stay, due to climate change as well as the simple realities of growing populations, economies, and demand for water versus supply. Long-gone are the days when a company could measure a facility’s water use and wastewater, and then call it a day. 

Just as with business competition, context is everything. While one company’s water use may be decreasing, if everyone else’s use within a watershed or river basin is going up—and total water use is spiking, along with increasing pollution levels—then a business may not be able to feel very proud for very long. Like many other things, water availability is a dance of total demand and supply, as well as cumulative effects.

The risks are clear. The ways forward is clear. The corporate opportunities for avoiding water risk in some areas and mitigating risk in other areas are available—through efficiency, innovation, and investments in ‘green infrastructure’ among other approaches. The time is now to add a corporate water risk assessment, strategy development, and water action planning to corporate to do list and budget allocations. 

This is the most recent article in our series on Water - Scarcity and Solutions. For more articles, go to
http://www.csrwire.com/blog/series/77-water-scarcity-and-solutions/posts

The opinions, beliefs and viewpoints expressed by CSRwire contributors do not necessarily reflect the opinions, beliefs and viewpoints of CSRwire.

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