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Global companies need to improve focus on water risk, report warns

17th November 2011
Big companies are failing to recognise and act on water-related risks, according to new analysis.
The Carbon Disclosure Project (CDP) Water Disclosure global report launched today finds that 57 per cent of the 190 publicly-listed organisations that participated in the survey report board-level oversight of water policies, strategies, or plans.

By comparison, a report released by CDP in September 2011 showed that 94 per cent of Global 500 companies report board-level oversight of climate change, suggesting that corporate understanding of water as a business concern trails that of climate change.

According to the report authors, this is surprising, given that the majority of reported water-related risks and opportunities are recognised as near term.

Deloitte Touche Tohmatsu Limited (DTTL), one of the principal sponsors of this project, supported CDP on analyzing the data and developing the contents of the report.

The second annual CDP Water Disclosure Global Report is based on a questionnaire sent to 315 companies on the Global 500 index that are identified as operating in the most water-stressed locations or industry sectors.

This year, 190 (60 per cent) of these companies responded – a 10 per cent increase from the previous year – showing improved transparency on water management. CDP Water Disclosure collects data annually on water use, strategies, and risks and opportunities from companies on behalf of 354 investors representing $43 trillion in assets.

Over half (59 per cent) of companies surveyed report exposure to water-related risks such as flooding, scarcity, and reputational damage. The majority of these risks are near term: 64 per cent of risks in direct operations and 66 per cent of risks in the supply chain are identified as occurring between now and 2016.

Illustrating the urgency of water risk, more than one-third of responding companies (38 per cent) have already experienced water-related business impacts, such as disruption to operations from severe weather events (e.g. flooding) and water shortages.

Underscoring the opportunities associated with effective water management, 63 per cent of respondents say that water presents commercial opportunities, most of which (79 per cent) are near term. The most commonly identified opportunities are associated with cost reductions from increased water efficiency, revenue from new water-related products or services, and improved brand value.

Paul Simpson, chief executive officer at CDP, said: "Some of the largest multinational companies have experienced the detrimental effects that water can have on their bottom line. The findings released today illustrate the very near-term nature of water-related impacts. We need to see more companies understand that water is a critical issue, requiring greater board-level attention than it currently receives. Those corporations that navigate the challenges effectively will be able to profit from the significant opportunities that result from a robust water strategy."

Nick Main, leader global sustainability, DTTL, added:  "It is promising to see that a growing number of companies are recognising the importance of having strategies that respond to the increasing risks and opportunities arising from dependencies on this increasingly vulnerable resource. There is a need for broader action by companies to address water stewardship both at the enterprise and product levels. DTTL believes that development of standard measures and performance benchmarks around water use are critical steps toward achieving that broader action."

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