Survey Examines Water-Related Risks for Industry

Nearly 60 percent of companies responding during a recent survey reported being exposed to water-related risks such as flooding ...

by James Laughlin, Managing Editor

Nearly 60 percent of companies responding during a recent survey reported being exposed to water-related risks such as flooding, scarcity, and reputational damage. That was one of the key findings of the Carbon Disclosure Project (CDP) Water Disclosure Global Report launched in mid November.

The survey found the majority of the risks were seen as near term, with 64% of risks in direct operations and 66% of risks in the supply chain identified as having the potential to occur between now and 2016. More than one-third of responding companies (38%) had already experienced water-related business impacts, including severe weather events and water shortages.

The second annual CDP Water Disclosure Global Report was 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%) of the companies responded, a 10% increase from the previous year. 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.

Deloitte Touche Tohmatsu Limited is one of the principal sponsors of the project, and consultants from the Deloitte member firm network supported CDP in analyzing the data and developing the contents of the report.

The study found that 57% of the publicly listed organizations had board-level oversight of water policies, strategies, or plans. By comparison, a report released by CDP in September showed that 94% 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.

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

The survey helped demonstrate that companies understand the relationship between water and energy use, with 72% of companies reporting a link or trade-off between water and carbon emissions.

Industry categories covered included Energy, Health Care, Industrials, Information Technology, Materials, Consumer Discretionary and Consumer Staples.

More than a third of companies were unaware of whether they are exposed to water risk in their supply chains. In the Consumer Discretionary sector, which is dominated by industries that are particularly exposed to supply chain risk (retailers, hotels, resorts, and automobile manufacturers) this figure rises to 41%.

Energy companies reported a high level of risk (72%), yet reported the lowest level of board oversight of water policies, strategies, or plans.

The biggest water risk identified by responding companies in their direct operations is water stress or scarcity (41%), followed by flooding (24%), reputational damage (23%), and higher compliance costs (21%). One company reported that it had already experienced a water-related impact at a cost of $200 million.

The CDP Water Disclosure Global Report 2011 is available for free download at www.cdproject.net.

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