Corporate Water Footprinting: Why is it important? (Part 2) 2

Water scarcity represents an ever growing risk to businesses in all sectors across the globe.  Business related water risk can be categorized into three areas: Physical, Regulatory, and Reputational. 

Physical risk refers to the direct limitation of business activities, supply of raw materials, and product use. Declines or disruptions in water supply can affect production, irrigation, material processing, cooling, and cleaning. Reputational Risk deals with competition for water supply (especially in water-strained areas), and can lead to community or local unrest regarding water withdrawal.

Regulatory Risk is directly caused by a combination of water scarcity and concern in local communities, and often forces local authorities to take action by allocating water, increasing prices, setting permitting standards, and developing rigorous wastewater quality standards.

The CDP Water Disclosure Global Report 2011 highlights some key statistics regarding water and the Global 500:

  • 59% of respondents cited water as a substantial risk to the company, while water-related risk has already impacted  1/3 of the reporting businesses. 
  • 63% of respondents identified opportunities including cost reductions and increased water efficiency, revenue from new water-related products or services, and improved brand value.
  • Less than 50% of respondents identified water policy as a board level issue, indicating that water is receiving less attention than climate change and energy conservation.  

Large companies throughout the world are aware of various water related risks, and recognize that there is opportunity for improvement, but water scarcity is still not receiving the attention it deserves. Corporate water footprinting can be an appropriate step in identifying these risks and opportunities to mitigate potential problems surrounding this limited resource.  

Please visit  our blog next week as we discuss corporate water footprinting and sustainability.

2 comments

  1. I would like to thank you for the efforts you’ve put in writing this website. I am hoping the same high-grade web site post from you in the future too. In fact your creative writing skills has inspired me to get my own site going now. Really blogging is spreading its wings and growing rapidly. Your write up is a great example.

  2. Bill, an important topic, and ylawas of interest across all sorts of audiences companies, raters, investors and civil society alike. I, too, have followed the development of these rating systems, as well as the standards and practices around sustainability reporting, for a long time, and have had many of the same observations as you. The challenge I see is that the raters are unlikely to want to put in the effort to achieve the result you’re rightly calling for.Trying to rate companies on their true sustainability’, or sustainability impact’ is an entirely necessary challenge, but it is extremely complex. The notion of biological carrying capacity is a very useful one, but it’s not an idea with a great deal of consistent application, especially when you’re talking about the activities of a single company. Take the example of water use: we all know water scarcity is a major strategic and sustainability challenge, but it is meaningless at a global level. Water scarcity is by definition a local/regional issue it matters how much water a company uses in Spain, but not Scotland. The picture gets vastly muddier when you start bringing in the social dimensions of sustainability, notwithstanding the efforts you describe above. For instance, a company’s human rights performance is not only a local issue (like water, dependent on the degree of risk at a local level), it depends in practice on factors like the government’s ability and willingness to uphold human rights. Against these contextual factors, a company’s performance may be better or worse, even given uniform policies and practices.It is for these reasons that investors have increasingly begun speaking of sustainability risks’ such as what proportion of a company’s operations are located in water-stressed regions or areas of weak governance. This is virtually the definition of sustainability context’; evaluating it is necessary to an understanding of sustainability performance.But can you imagine the evaluation exercise that would be necessary for a rater to make the bold claims they do? These ratings all call themselves the 50 most sustainable or top ten corporate citizens or some such broad, sweeping accolades that ought to demand a serious and reliable review of all of these issues. But real sustainability’ just seems too difficult for the ratings game really they should be called best corporate reporters or best reputations or other, more modest titles. Nobody wants to call their survey the 100 companies that have done the most to identify and manage myriad sustainability risks, resulting in measurable performance benefits , even though it would be more honest, and probably more useful than what we have. So this seems to be the trade-off the raters have made: in the belief that an evaluation of some parts of the sustainability equation is better than no evaluation at all (true), ratings tend to over-promise and under-deliver, running the risk of appearing all hat and no saddle.

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