Corporate Response to Water Risk Deemed ‘Inadequate'

By Andrea Vittorio

Oct. 22 — Corporate efforts to prepare for and adapt to the world’s worsening water security are improving but remain “inadequate” compared to the challenges at hand, according to an analysis the nonprofit CDP released Oct. 22.

Almost two-thirds of companies responding to CDP’s latest water survey, now in its fifth year, say water scarcity and stress pose a risk to their business, with financial impacts totaling more than $2.5 billion in 2015.

There were a few standouts, such as Colgate-Palmolive Co. and Ford Motor Co., that earned top marks in CDP's first global ranking of corporate water stewardship.

But many companies still are not paying enough attention to risks in their supply chains or putting in place robust water policies. CDP’s research shows about half of companies haven’t even taken a basic first step by conducting a comprehensive water risk assessment.

“Just as oil was to the 20th century, water is fast becoming the defining resource of the 21st century,” said Cate Lamb, head of CDP’s water program. “Unfortunately, however, unlike oil, there is no replacement for water.”

From the historic drought in California to serious water quality issues in China, water has emerged as a topic of growing concern for businesses and investors. Water topped the World Economic Forum’s annual risk ranking this year, and it is making its way into analysts’ recommendations to buy and sell stocks.

Leaders, Laggards Emerge 

On behalf of investors, CDP has built the largest global database of corporate disclosures on water by asking more than 1,000 companies about the risks and opportunities they face.

Of the 405 companies that responded to investors’ requests, only eight emerged as leaders in water stewardship and received an A rating in CDP's new global ranking.

Half of those leaders, such as South Africa’s Harmony Gold Mining Co. Ltd. and Kumba Iron Ore, operate in the materials or information technology sectors, both of which have relatively high exposure to water risk. The remainder, including Colgate-Palmolive, come from an industry less exposed to water risk: consumer products.

Other sectors, especially oil and gas, remain reluctant to disclose their water risks in the first place, despite investors’ repeated requests for information. CDP plans on naming and shaming the largest and most persistent nonresponders in its next report.

“Without company-specific data, investors have no way to deepen their understanding of the water issues faced by these companies, and potentially protect their assets,” the report said.

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com

CDP's global water report for 2015 is available at https://www.cdp.net/en-US/Pages/events/2015/water/global-water-report-2015.aspx.