Investors need to understand a wide variety of business and market risks facing the companies in which they invest. In the 21st century, that includes water risks.
An increasing number of companies are experiencing detrimental water-related business impacts, including operational or supply chain disruptions and property damage from flooding, to name a few. These impacts can be costly--in 2011 they cost some companies up to $200 million--and have caught the attention of investors around the world.
Corporate Water Disclosure and the CDP Water Questionnaire
As water-related risks increase, companies must assure their investors that business operations will continue to be profitable and sustainable, and that the right policies are in place to secure water for operations in both the short and long term. One way to do so is by engaging in corporate water disclosure—in other words, reporting data on the current state of the company’s water management and the associated business implications and strategic responses.
Following CDP’s highly successful and standardized process for reporting carbon emissions, its Water Program has become a pre-eminent platform for corporate water disclosure. Every year, CDP sends a questionnaire to the world’s largest companies in industry sectors with the greatest connection to water issues. Disclosure through CDP is voluntary, and all companies, large or small, are encouraged to respond. So far, more than 500 investor signatories (representing more than $57 trillion in assets) have backed the questionnaire and requested that companies disclose critical, water-related information.
Aqueduct Makes Measuring and Reporting Corporate Water Risk Information Easier
WRI worked with CDP to align the Aqueduct Water Risk Atlas with CDP’s Water Questionnaire in order to facilitate a widespread and standardized corporate response.
The Aqueduct Water Risk Atlas is a publicly available tool with highly granular and up-to-date information on global water risks. Companies and others can use this information to evaluate the most prominent water quantity, water quality, regulatory, and reputational risks threatening their assets or suppliers. Aqueduct’s simple, three-step process, provides companies with highly detailed information on water-related risks for each of its locations and suppliers worldwide. This information is critical for putting water use throughout the company into context, managing the associated water-related risks, and responding with water stewardship practices.
2.1: Are any of your operations located in water-stressed regions?
2.2: Are there other indicators (besides water stress) which you wish to report which help you to identify which of your operations are located in regions subject to water-related risk?
2.3: Please specify the total proportion of your operations that are located in the regions at risk which you identified in questions 2.1 and/or 2.2.
2.5: Do any of your key inputs or raw materials (excluding water) come from regions subject to water-related risk?
3.1: Is your company exposed to water-related risks (current or future) that have the potential to generate a substantive change in your business operation, revenue, or expenditure?
3.2: What methodology and what geographical scale (e.g. country, region, river basin, business unit, facility) do you use to analyze water-related risk across your operations?
3.4: Is your supply chain exposed to water-related risks (current or future) that have the potential to generate a substantive change in your business operation, revenue or expenditure?
All this was covered in last week’s webinar by CDP and WRI, which provided step-by-step guidance on how to use the Aqueduct Water Risk Atlas to measure and report company and supply chain exposure to water-related risks. The webinar slides are now available on WRI’s Slideshare page. You can also watch a full video of the presentation by WRI and CDP, available for download here. (Note – viewing this video may require downloading a codec from GoToMeeting). If you are tasked with helping to fill out your company’s questionnaire, these resources will help make the task faster and more complete.
Improved Disclosure, Improved Water Management
By providing these tools, CDP and WRI are working to improve and standardize corporate water accounting and disclosure practices. Disclosure leads to greater transparency, which in turn increases accountability and communication between government, corporate, agricultural, and domestic water users. Only through increased collective action can we aspire to sustainably and equitably manage our water resources. Understanding and disclosing corporate water information is an indispensable step in that direction.