A new report by CDP, "Thirsty business: Why water is vital to climate action", launched 15th November at COP22 in Marrakesh, reveals that drought, flooding and increased water stress fueled by climate change, tightening environmental regulation and the cost of cleaning up water pollution and fines resulted in US$14 billion worth of water-related financial impacts to business in 2015,
607 companies responded to CDP’s request for information made on behalf of 643 institutional investors with US$67 trillion in assets.
The report evaluates corporate performance over five key metrics relating to water management, including measuring and monitoring use, reporting and target-setting. Year-on-year trends show company progress is almost stagnant, for example 61% of companies say they track their water use – just 3% more than did last year. While companies have made progress on transparency – 2016 saw the largest response yet to CDP’s request for information, over half (677) of the companies asked to disclose by investors failed to do so.
The Report argues that water could make – or break – global efforts to implement the Paris Agreement and that companies will need to get a handle on water management in order to achieve their climate goals. Analysis reveals one in four (24%) greenhouse gas (GHG) emissions reduction activities reported by companies depend on a stable supply of water. However, better management of water could enable companies to reduce their carbon emissions. More than half of companies said more efficient use of water has led to lower GHG emissions.
CDP’s CEO Paul Simpson described the water disclosure picture, and understanding of water risk as a "glass that is half full, half empty...this year’s findings offer two clear lessons for the private sector. Firstly, that water risks can rip the rug from right under business, posing a serious threat to bottom lines. Secondly, and crucially, that water will be a fundamental global commodity in the transition to a low-carbon economy. Every drop of clean, sustainable water will be essential for the emissions reduction activities countries and companies have planned. This is a wake-up call to companies everywhere to take water more seriously.”
For the second year in a row, CDP scored companies on their environmental management and governance of water and published a Water A List – of companies who are judged to be following best practice in the field of sustainable water management. 24 companies were named on the list this year, up from eight named in 2015. This year’s Water A List includes BASF SE, Coca-Cola European Partners, L’Oréal and Suntory Beverage & Food. Six firms have made it to the A List for the second year running, including Colgate Palmolive Company, Ford Motor Company and Toyota Motor Corporation.
Companies who did not respond to the investor request for data received an F rating from CDP, denoting failure to disclose. The energy sector continues to be the laggard industry on water transparency, with only 29% of those companies requested to disclose providing information to their investors via CDP this year. The report highlights Exxon Mobile Corporation, Chevron Corporation, Royal Dutch Shell as the three largest energy companies (by market capitalization) who, since 2012, have consistently failed to respond to investor requests for disclosure through CDP’s water program.
Morgan Gillespy, the report lead author and CDP’s head of water, says: “For a long time companies have taken water for granted as a free and plentiful resource. But these assumptions are unraveling as the impacts of climate change gather pace. From the US$100 billion worth of energy infrastructure at risk from rising sea levels in Louisiana to Chinese industry facing tightening restrictions on water use, investors are right to worry about the impacts of water risks on their assets.
There are reasons to be hopeful however. The growing list of companies on our Water A List is testament to the fact that many executives have understood the value in better water management and are seeking to raise the bar. And, as our report shows, this will make all the difference to companies working to fulfill their carbon reduction potential and the sustainable development goals.”