This piece was co-authored by Keith Liao, Senior Engineer with the AU Optronics Corporate Sustainability and Environment Department
Companies are increasingly feeling the financial impacts of water risks like shortages and pollution. Ceres’ most recent report, Clearing the Waters, highlights the fact that companies are falling short on identifying key areas where their operations are exposed to physical water risks. Mitigating these threats, then, requires doing more to assess, disclose, and address them.
In an effort to learn more about how companies can better understand and manage water risks, the World Resources Institute’s Aqueduct program recently partnered with AU Optronics (AUO) to assess water risks faced by the company’s fabrication plants around the world. Headquartered in Hsinchu, Taiwan, AUO is a leading manufacturer of electronic screens, otherwise known as thin-film transistor liquid crystal displays (TFT-LCDs). AUO makes up 17 percent of the world’s market share of TFT-LCDs and generated $12.5 billion in annual sales revenue in 2011.
Water Is a Key Ingredient in Manufacturing
While billions of people around the world use electronic devices every day, few realize how important water is to the business of manufacturing digital displays. Companies like AUO rely heavily on large quantities of ultra-pure water for rinsing and cooling during panel manufacturing, and they work with a wide range of chemicals that require proper treatment and discharge.
After being forced to truck in water at significantly increased costs during a water shortage in Taiwan in 2002, AUO realized that it needed to make water management a central part of its corporate strategy. AUO currently collects water data on use, quality, and recycling rates across direct operations, but the company is now looking to develop an even more comprehensive water strategy that reflects international standards and guidelines for better water management. To help develop this strategy, AUO turned to Aqueduct’s Water Risk Atlas to complete a geographic water-risk assessment of the company’s fabrication plants around the world.
Using Aqueduct’s Water Risk Atlas to Calculate Business Threats
With Aqueduct’s Water Risk Atlas, AUO was able to plot the locations of its fabrication plants and water sources on global water-risk maps. These maps indicate current water-stressed regions as well as projected changes in water stress driven by climate change, population growth, and economic development. According to the Water Risk Atlas, the majority of AUO’s fabrication plants and the municipalities from which the company sources water are located in areas facing relatively low water risk. However, by 2025, the locations of many of these fabrication plants and municipalities are expected to experience worsening water stress.
The knowledge of how and where water risks are projected to increase will help AUO decide where to implement more in-depth, facility-level water risk assessments, as well as how to develop risk-mitigation strategies. Often, the biggest risks stem from a company’s value chain. As a result of this assessment, AUO plans to use Aqueduct’s Water Risk Atlas to assess the water risks of 20 of its top suppliers. AUO will share conservation technologies with these suppliers, which may have far-reaching impacts on reducing exposure to water risks and improving watershed conditions. AUO also used the results of this assessment to disclose the number of its fabrication plants located in water risk regions in the 2012 Carbon Disclosure Project (CDP) Water Project’s questionnaire, one of the leading disclosure initiatives.
Circles represent AUO facility locations. Map credit: World Resources Institute, 2012
What to Look for in the Future
In an increasingly water-constrained world, more and more companies around the world will need to get a better understanding of geographic water risk. Aqueduct’s water risk maps give companies, investors, and other water users an easy starting point for evaluating where and how water risks may impact their operations. To provide more comprehensive information on water risks, Aqueduct is developing a revised and updated set of maps as part of its new Water Risk Framework. These updated global maps, due to be released to the public by the end of 2012, will provide the latest data and insights, including information on regulatory and reputational risks such as water quality, ecosystem degradation, uncertainty in regulation due to poor water governance, and access to improved water sources.
AUO will use Aqueduct’s Water Risk Atlas to develop a comprehensive water strategy focused on communities and surrounding ecosystems. A working paper describing the results of the AUO-Aqueduct case study will be released online later this summer.