As the year draws to a close, we reflect on our support of companies’ corporate disclosure and reporting initiatives. In 2014, water issues were top of mind, with a noticeable increase in water-related disclosures and stakeholder expectations. So we asked – what is occurring within the water space that has been a “game changer” over the past year or so?
The reality is that water presents the “perfect storm” for companies with the interaction of four key elements:
Increasing overlap of key markets and water-related pressures – Many leading organizations are projecting a 40% or greater demand gap in as little as 15 years, with key markets in India, China, Brazil, South Africa, and Mexico most stressed. While water stress has historically been most felt in arid regions of the world, this has rapidly been changing. For example, Brazil is undergoing the worst drought in history, resulting in unprecedented water rationing and potential exacerbation of ongoing political unrest. The global ‘pressure points’ around water, as well as the nexus of energy and water, are increasing in complexity and scale across every continent.
Water challenges are becoming real for many companies – According to the CDP 2014 Water Report, almost one quarter (22%) of responding companies report that water issues could limit the growth of their business, with one-third of these companies expecting that constraint to be felt in the next 12 months. While the primary drivers of reported risks are physical (scarcity and declining water quality), organizations are also challenged with increasing water prices, investments in treatment, regulatory limits, and community opposition. The unknown impacts of climate change, economic development, and population growth further complicate the future. Furthermore, the challenges are very location specific in terms of issues, stakeholders, and potential implications.
We are living in the age of hyper transparency – Significant advancements in social media and technology have made risk data and corporate information more publicly available than ever before. A wide range of stakeholders (from investors to activists) now have access to resources such as Google Earth, free and publicly available water risk mapping tools (e.g., WRI Aqueduct, WBCSD Global Water Tool), and consolidated databases such as the Bloomberg Terminal and Choke Point. This unprecedented access to information by diverse stakeholders has made it more difficult for companies to maintain control of ‘their story’ and demonstrate consistent standards, accountability, and proactive engagement across each operating region. This element is especially applicable to water stewardship as risks and opportunities are highly localized and dynamic making it difficult for companies to continually monitor the implications to their business and brand/reputation.
Corporate water disclosure expectations continue to increase – Expectations for corporate water disclosure have increased through published water-specific guidance (e.g., CEO Water Mandate Guidelines for Corporate Water Disclosure, Alliance for Water Stewardship Standard), detailed disclosure questionnaires (e.g., CDP Water), and local-level accountability.
Very few businesses are immune to water-related challenges and increasing stakeholder requests to disclose on water strategies and performance. From our experience supporting clients with both corporate water stewardship and reporting and disclosure, we offer the following three suggestions:
- Get started now on assessing water risks and opportunities. Use a tiered approach (high-level screen to localized assessments of only the highest risk locations) to keep the effort manageable and focused on identifying the highest priority locations and specific risk drivers.
- Leverage available tools and guidance to pursue a more holistic water strategy:
- Ceres Aqua Gauge
- CEO Water Mandate
- BIER Water Stewardship Definition
- Start early on 2015’s reporting and disclosure cycle, including a review of CDP’s new Corporate Water Program. An early start will allow your team to work effectively and feel confident that your external disclosures will appropriately communicate your water stewardship story.
By remaining proactive – rather than reactive – with your corporate disclosure and reporting initiative in the coming year, you should be able to weather the storm just fine.