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The New Language of Sustainability: Risk and Resilience

On February 20, WRI President Andrew Steer participated in event with GreenBiz CEO Joel Makower at the annual GreenBiz summit in New York City. This post builds off that discussion.

Sustainability has become a major business buzzword in recent years. For many, though, it’s still viewed as a philanthropic initiative, disconnected from a company’s core goals, or even a burden that competes with other strategic priorities. That must change.

Fortunately, more leaders are recognizing sustainability risks. At the World Economic Forum in Davos last month, leaders in business, government, academia, and civil society named climate change and water supply as two of the top five global risks facing companies today—and with good reason.

Extreme weather and climate impacts are becoming increasingly common and carrying a significant economic toll. According to the insurance group Munich Re, the number of weather-related loss events over the past three decades has quintupled in North America, quadrupled in Asia, and increased in Africa, Europe, and South America. In the United States alone, 11 events crossed the $1 billion mark in losses in 2012. Hurricane Sandy cost U.S. taxpayers more than $60 billion, striking at the heart of a heavily populated business and financial zone. And, drought in the United States is expected to cost 1 percent of the annual GDP, making it one of the most expensive natural disasters in the country’s history.

Likewise, water risks are increasingly on companies’ radars. More than 1.2 billion people are already facing water scarcity. By 2025, two-thirds of the world’s population will likely experience water stress. According to a 2012 report by the Carbon Disclosure Project, the associated costs of water events for some companies reached $200 million, up 38 percent from the previous year.

So, how can companies link these risks to corporate strategy? How can they push the management of sustainability issues into the center of businesses’ strategic decision-making?

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Embracing Ecological Progress in China

This post originally appeared on ChinaDaily.com.

Over the past two decades, the world has witnessed a remarkable period of economic and human development: More than 2 billion people have gained access to improved drinking water; life expectancy has increased by approximately five years; more children are going to school, with 90 percent enrolled in primary education; and per capita income levels have doubled across developing countries.

China has experienced an even more profound transformation during this period. The country has sustained an annual GDP growth of around 10 percent. Five hundred million people have been lifted out of extreme poverty. People's lives have visibly improved and there are more opportunities for them.

Yet, many challenges remain. With the world's expanding population, rapid economic growth, and booming middle class, the pressure on natural resources is mounting. The truth is the world is on an unsustainable path.

China is part of this problem, but it also must be part of the solution. China faces real challenges when it comes to the environment and natural resources. Demand for water is rapidly outpacing supply, with food, energy, and domestic use intensifying for this scarce resource. The need for affordable and clean energy is on the rise. China's rapidly expanding urban population is having a significant impact on transportation, energy, and water infrastructure.

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Case Study: Aqueduct Informs Owens Corning Corporate Water Strategy

Owens Corning, a multinational building materials manufacturer, conducted a global geographic water risk assessment using WRI’s Aqueduct Water Risk Atlas. This assessment aims to identify which of Owens Corning’s manufacturing plants are located in areas facing water supply-related risks....

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Water

Water Risk to Business Is No Small Drip

At the World Economic Forum in Davos two weeks ago, I was struck by how often the issue of water risk was raised by business executives. As the global economic turmoil is receding, many CEOs and global leaders are turning to other threats—and water is high on the list. For the second year in a row, water crises were named among the top four global risks at the WEF.

It’s easy to see why. More than 1.2 billion people already face water scarcity. By 2025, two-thirds of the world population will experience water stress. That’s largely due to population increase and climate change, but also behavior patterns: Water use grew twice as fast as population growth in the 20th century. The “food-water-energy nexus” was one of the top four megatrends to watch in the recently released Global Trends 2030 report by the U.S. National Intelligence Council.

CEOs increasingly recognize that water is essential for their business models and economic growth. Disrupted availability of affordable, clean water leads to business interruptions, increased commodity costs, and reduced earnings. The extreme drought gripping much of the United States is likely to cost up to one percent of GDP, potentially making it the costliest natural disaster in U.S. history.

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