Water shortage = Business problem

There is at least one global environmental issue that appears to have the business world’s attention: water shortage. For evidence, this is the text on the cover page of a new report (November, 2010) by the Carbon Disclosure Project, a non-profit based in London that holds the largest corporation oriented climate change information in the world: CDP Water Disclosure 2010 Global Report On behalf of 137 investors with assets of US$16 trillion.

The report, prepared by the private firm Environmental Resource Management (Global), draws upon a survey of 122 of the world’s largest corporations. Among the findings are:

    • - 39% of the companies are already experiencing negative impact relating to water
      - 89% of the companies have already developed water specific policies, strategies and plans
      - Awareness of water shortage problems differs across industries, for example it runs 100% in the chemical industry but only 29% for the Oil & Gas, Construction, and Real-Estate sectors.
      - Only about half the companies could identify water risks within their supply chain.
      - 62% of the companies were aware of a wide range of business opportunities related to water management, water use efficiency, and wastewater management.

  • It is interesting to note that this report, as does the CDP itself, explicitly includes global climate change as a factor in the increasing water risks for business. A segment from the press release on this first report is illuminating:

    Anne Kvam, global head of ownership strategies, Norges Bank Investment Management (NBIM), a lead sponsor of the program, said:

    “As a diversified investor with a long-term outlook and investments in a range of sectors at risk from increasingly scarce water resources, we take water management seriously. Companies that fail to consider the impact of water scarcity and other water-related risks pose a financial risk to investments.”

    Demand for water has risen and is now projected to outstrip supply by up to 40% by 2030, and approximately 80% of the world’s population already live in areas where fresh water supply is not secure.

    As the climate changes, assuring global water security for both humans and ecosystems will increasingly present opportunities to business through demand for new infrastructure, products and services. It will also bring risks including physical disruptions to operations and supply chains, changing regulatory regimes and reputational damage from misuse, or perceived misuse, of what is a shared resource.

    [Source: Carbon Disclosure Project, November 12, 2010]

    The sometimes implicit, sometimes explicit message behind this study is that institutional investors are beginning to consider a corporation’s water risk analysis and planning an integral part of their investment evaluation. In short, water risk is real, deal with it or also risk declining investment.

    For a previous and similar story: [SciTechStory: Lloyd’s report: Water scarcity a threat to business]

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