INSIGHT by Ceres
A new benchmark analysis of 72 companies from four water-intensive industries—apparel, beverage, food, and high-tech—shows encouraging progress on corporate water management, but underscores collectively, the companies have a long way to go in meeting the necessary ambition to reduce their demands and impacts on freshwater resources.
“As the global water crisis escalates, so do the financial risks facing businesses and their investors. While some companies are demonstrating a variety of leading practices, we need to see more companies excelling on all aspects of water stewardship in order to ensure sustainable water supplies for businesses, communities and the environment.”
-Kirsten James, senior program director of water at Ceres and co-author of the report
Ceres’ report evaluates how companies of focus identified by the Valuing Water Finance Initiative are performing against the six Corporate Expectations for Valuing Water, which serve as the ambition around the full range of water issues that large companies should meet by 2030. This timeline is critical to slowing the pace of deteriorating water resources threatening communities, ecosystems, and economies across the globe and meeting the United Nations 2030 Sustainable Development Goal for Water (SDG6). More than 30% of global GDP will be exposed to high water stress by 2050, according to data released by the World Resources Institute in August. Already, 50% of stocks in each of four major U.S. stock indexes are in industries with medium-to-high water risk.
The report, developed using publicly available company disclosures, provides a unique and comprehensive view of companies’ vulnerabilities, opportunities, and strengths when it comes to managing water. While results vary by company and industry, broadly, notable findings have emerged, including:
〉Both water availability and water quality are material financial issues to the assessed companies. While 75% of the 72 assessed companies have set time-bound targets aimed at reducing the amount of water they use, only 17% of companies have done so to reduce their impacts to water quality.
〉Local considerations are necessary to properly manage water resources. Only 35% of the companies consider contextual factors—such as local watershed conditions, regulatory dynamics, and community water needs—when assessing water use risks, and even fewer—14%—consider contextual factors when assessing water quality risks.
〉Healthy ecosystems are critical for maintaining water supplies that businesses rely on. Yet, only 13% of the companies have time-bound targets to protect or restore ecosystems with specific consideration of outcomes related to freshwater supplies and aquatic biodiversity.
〉Companies’ efforts to ensure communities in areas where they operate and source from have equitable access to clean water and sanitation (WASH) are largely lacking. Only 28% of the assessed companies have taken the first step by establishing a corporate policy explicitly acknowledging water and sanitation as a fundamental human right.
〉About half of the companies have board and senior management oversight of water management strategies and also link incentives for executives to water targets and goals. However, only 36% of the companies integrate water risks and opportunities into strategic business planning for both direct operations and supply chains.
〉An internal price on water—a monetary value placed on water beyond a price or tariff paid to a water utility—can help companies make more informed decisions on water usage and overall water risk. Only 11% of assessed companies are utilizing this approach.
〉Aligning public policy engagements with sustainable water resource management can strengthen and scale companies’ water stewardship efforts and impacts, yet only 32% of the companies advocate explicitly around water-related issues with governments, businesses, civil societies, or other stakeholders.
“Companies must adapt their approach to water management to the changing state of water resources. Our benchmark provides a much-needed line of sight into where companies are on their water journey and what they need to do to accelerate and broaden their efforts to protect water supplies their operations and supply chains depend on. We highlight opportunities for all companies to learn from their peers within and across the four industries to raise their ambitions and reduce their water risk by implementing impactful solutions and collaborating with others to scale impact. For example, we found that more companies are engaging in water strategies that bring together a diverse array of stakeholders including businesses, communities, tribes, governments, and organizations to tackle urgent and shared challenges within specific basins. These collective water efforts can yield significant financial advantages and maximize impact benefiting all stakeholders.
-Shama Perveen, director of water research at Ceres and report co-author
The report adds to Ceres’ extensive research base supporting investors in the Valuing Water Finance Initiative who are making the business case for and encouraging scaled corporate action on water risk. Currently, 94 investors, who collectively represent more than $17 trillion in assets, have committed to engage with the 72 focus companies through the initiative. Benchmark results will inform these engagements, providing investors insights into financial risk and opportunities, such as where companies’ efforts are leading or lacking, and showcasing opportunities for companies to learn from and collaborate with peers and stakeholders to accelerate or broaden their water stewardship efforts.
In highlighting key findings and leading practices, the report can be a resource for all companies working to develop or evolve holistic water stewardship strategies addressing water impacts and dependencies throughout their value chains.
| about
Ceres is a nonprofit organization working with the most influential capital market leaders to solve the world’s greatest sustainability challenges. Through our powerful networks and global collaborations of investors, companies and nonprofits, we drive action and inspire equitable market-based and policy solutions throughout the economy to build a just and sustainable future. For more information, visit ceres.org and follow @CeresNews.
| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.
