Some resources require management—others require stewardship.
By Tom Carnac and Christina Copeland
November 18, 2013 marked the launch of Carbon Disclosure Project’s annual U.S. Water Report. Formally supported by 530 institutional investors representing $57 trillion in assets, it analyzes the water disclosures of 148
S&P 500 companies that responded to the CDP water questionnaire this year. The launch event in San Francisco with lead sponsor Deloitte Consulting LLP featured speakers from the investment and corporate worlds who explored the opportunities that exist from developing a holistic stewardship response to water challenges.
And what are the water challenges currently faced by U.S. corporations? The persistent drought in the U.S. has highlighted the essential role water serves in the economy as a key resource in agriculture, energy production, and manufacturing. The drought, which for some states has been the costliest in history–-coupled with new data from the U.S. Geological Survey on depletion of groundwater resources–presents ongoing concerns. A recently released study covering groundwater depletion in the U.S. from 1900-2008 revealed that “the rate of depletion from 2000 to 2008 was nearly three times greater than the average rate of depletion for the entire study period.” While many U.S. companies are increasingly facing domestic water-related risks, it is also important to note that respondents have global reaches, with operations reported in 83 water-stressed regions around the world.
It is therefore no surprise that water-related risks are increasingly being reported to CDP and impacts continue to affect business continuity. The total number of risks reported has increased 16 percent over 2012, and while the majority of risks reported (58 percent) are expected to impact businesses now or within the next five years, risks reported with unknown time frames have increased 23 percent over 2012. Furthermore, nearly half of U.S. respondents (46 percent) have already experienced detrimental impacts related to water, with costs for some as high as $400 million and projected impacts as high as $1 billion.
Alarmingly, analysis also shows that the majority of respondents appear to lack strategic responses to water-related risks. Despite the acknowledgement that water is fundamentally different from carbon, too many respondents might be looking at water through a “carbon lens,” applying the same approach that they have taken for their carbon reduction strategies to water management. Many respondents are currently focused on discrete attempts to reduce water dependency in their direct operations, with little regards to their broader value chains or local watersheds.
Based on the responses of 108 survey takers who provided descriptions, no fewer than 63 percent have targets and/or goals that are focused solely on water management and direct operations; that is, they measure usage reduction, efficiency, or compliance in isolation from the context of their broader environment.
Companies that continue employing such a narrow, inward focus are very likely missing opportunities and overlooking water-related risks. To realize greater impact, they need to rethink their approach. They should move away from looking at water through a “carbon lens” and instead evolve a more holistic, active, and long-term approach to conservation, contextual local assessments, strategy, and external engagement. When the increasing risks and impacts that U.S. companies reported to the CDP are looked at in the context of the critical state of water globally, it is clear that there needs to be a shift from water management to water stewardship. This is not a matter of semantics. It represents a significant philosophical shift.
Although the CDP’s U.S. Water Report finds that many respondents are still at the beginning of their water stewardship journey, some companies are learning to be active by developing effective and thorough water stewardship strategies to mitigate future risk, increase resilience and identify business opportunities. We welcome you to download the report from www.cdp.net. There, you will learn more about the vital water information disclosed by companies to CDP as a result of our work to catalyze action on corporate water stewardship.