by Brianna Crandall — November 20, 2017 — Big business is investing in water security at record levels, according to the annual Global Water Report published recently by CDP (the nonprofit global environmental disclosure platform formerly known as Carbon Disclosure Project). A Turning Tide: Tracking Corporate Action on Water Security analyzes water data from 742 of the world’s largest companies, including Nestle, Burberry and Kellogg’s, and finds escalating boardroom engagement in water management issues (70% of companies now report boardroom oversight).
The report highlights growing accountability and performance in water management, with a 40% increase in disclosure since 2016 and a 193% increase in the number of companies featured on the CDP Water A List — up from 25 last year. Top performers include Bridgestone, Burberry, Kellogg’s, Sanofi and Woolworths.
USA (13), Japan (12) and UK (9) are the three countries with the most companies on the Water A List.
Other key findings of CDP’s report about corporate action on water security include:
- Companies committed to US$23.4 billion of investment in water projects in 2017, such as desalination plants, reclaiming waste water or improved irrigation to avoid droughts — across 1,000 projects in 91 countries.
- The energy sector continues to be the biggest laggard; 101 out of the 138 energy companies asked to disclose failed to do so. Exxon Mobil and Royal Dutch Shell are among those companies persistently failing to reveal water data to investors via CDP.
- 7% of companies, including Diageo (UK), Colgate Palmolive (USA) and Nestle (Switzerland), are now putting a higher price on water internally to reflect its increasing business cost.
A group of 53 companies (7%) are establishing internal values on water that account for social and environmental costs and benefits that are often absent from pricing and decision-making. The report states that when water is undervalued, the business case for action is often misunderstood or difficult to see.
Those placing an internal price on water include Colgate Palmolive Company and Diageo Plc. On average, Colgate has found that the “true” cost of water is 2.5 times more than the purchase cost. The company uses a True Cost of Water Toolkit developed with Rutgers University Business School and its Supply Chain Management Program. Used by 95% of Colgate sites, the tool was designed to quantify some of the hidden costs of water such as pre-treatment, pumping and wastewater treatment.
Diageo Plc also uses a water cost tool that estimates the full cost of water to a given plant. This estimate allows the plant to anticipate and plan for the financial impact of any price or tariff increases, and supports Diageo’s overall goal to improve water use efficiency by 50% by 2020. The company says that understanding of the true cost of water assists its business decisions and CAPEX investments for water conservation.
Renat Heuberger, CEO, South Pole Group, CDP’s water scoring partner, stated:
From Bangladesh to Peru and the US, climate risks — and in particular water risks — have been very real in 2017. From storms to droughts, and floods to forest fires, the damage has been enormous. It is, therefore, encouraging to see a growing number of water leaders coming to the fore. South Pole Group believes companies need to continue to improve their understanding, management, and transparency of water risks in order to help inform better decision making. Together with CDP, we are committed to delivering a water-secure world.
Paul Simpson, CEO, CDP, added:
The stakes are high as we assess corporate progress towards a water-secure world. From brand damage to disrupted supply chains, increased operating costs to constrained growth, water security is now big business and poses increasingly significant threats and opportunities to global firms. Our research shows more large corporations rising to the challenge, with the number of A List companies nearly tripling in a year and 7% using internal accounting to assess the true value of water to their business. Congratulations to those organizations leading the way.
The new report is based on water management data disclosed to CDP by 742 organizations in response to requests from 639 institutional investors with $69 trillion in assets. They are part of a wider pool of 2,025 organizations worth approximately $20 trillion in market capitalization that reported on water management to CDP this year. These companies collectively withdrew 5.6 billion megaliters of water this year, more than the volume of Lake Michigan. A full 34 purchasing organizations with a combined annual spend of $1 trillion also put their name to this year’s disclosure requests.
In total, 4,653 companies were asked to report to CDP on their water activities in 2017, with a 46% response rate. While reporting progress should be celebrated, over half of requested companies fail to disclose and provide their investors and customers with water risk and opportunity data. According to the G20, global water investment of $6.4 trillion is required from the public and private sectors to meet UN Sustainable Development Goal targets by 2030.
A Turning Tide: Tracking Corporate Action on Water Security was launched at CDP’s Water Forum in Mumbai, India. More information and the full report can be found on CDP’s Water Web page.