The annual index, published yesterday, highlights companies implementing best practices in sustainable water management. This year, 24 companies made the CDP Water A List, up from eight last year. The 24 includes two US companies — Colgate Palmolive and Ford — both appearing for the second consecutive year on the Water A List.
“A Water A List company is one that is on the path to truly sustainably managing water,” Lance Pierce, CDP’s North America president told Environmental Leader in an email from Marrakesh. “It is a company that has evolved its approach from just looking at its own operations, and is taking into account the wider context of the water challenges it faces and how it is managing them.”
The Water A List is published in a new CDP report that was released at COP22 in Marrakesh yesterday. The report, Thirsty business: Why water is vital to climate action, is based on data provided by 607 companies in response to CDP’s request for information made on behalf of institutional investors.
Pierce says other companies can — and should — learn from Ford’s and other A Lister’s examples.
“Ford, who is on our A list for the second year running, has for example set a new goal to cut water use per vehicle by 72 percent in the next four years, compared with 2000,” he said. “They conduct comprehensive risk assessments across all their direct operations and suppliers, using tools such as the Global Water Tool and Aqueduct to determine which facilities are located in water-scarce regions, both now and in 2025. They are teaching their suppliers about energy, water- and waste-reduction initiatives that the company has implemented to encourage suppliers to implement some of these initiatives in their own manufacturing facilities.”
The CDP report evaluates corporate performance over five key metrics relating to water management, including tracking water use, reporting and target-setting. This year 61 percent of companies say they track their water use — just 3 percent more than did last year.
Meanwhile, water-related impacts costs companies $14 billion, or more than five times more than they did the previous year ($2.6 billion). These financial impacts come from drought, flooding, tightening environmental regulation and the cost of cleaning up water pollution and fines.
Pierce says while a significant chunk of this increase comes from Japan’s electric utility Tepco reporting a nearly $10 billion cleanup cost of continued nuclear contamination to water sources following the 2011 tsunami, it’s still a noteworthy increase.
“Even without [Tepco] however, the financial impacts have climbed. We’ve had 175 US companies disclose this year, around 40 more than did last year. However, their reported financial impacts this year (at over $3 billion) eclipse the total value disclosed by our entire global sample last year.”
Many US water-related costs were drought related, Pierce said, such as General Motors, which spent $8 million on increased water rates and hydro-electric costs linked to drought conditions.
“The slow response to this is concerning, but it speaks to the fact that large corporations still regard water as a free and plentiful resource,” he said. “This reality is rapidly evaporating. As our findings show, to ensure business continuity and avoid bottom-line impacts, companies must invest in evaluating and responding to water risks.”
Companies that did not respond to the investor request for data received an F for failure to disclose. More than half (677) of the companies asked to disclose by investors failed to do so. US companies matched the global average with 52 percent of those asked failing to disclose investment-relevant information on water.
The energy sector continues to lag behind other industry sectors on water transparency, with only 29 percent of those companies requested to disclose providing information to their investors via CDP this year. ExxonMobil, Chevron and Shell are the three largest energy companies that, since 2012, have failed to respond to investor requests for disclosure.
Pierce says while he can’t comment on Exxon, Chevron and Shell’s water management efforts, energy companies that did disclose are acknowledging the long-term interest of their shareholders and the role water plays in their business risk.
“Over 600 institutional investors with $67 trillion in assets ask for this data, not out of mere curiosity, but because they have a clear interest in corporate water management and how that relates to their portfolios,” he said. “They ask companies to disclose this information through CDP’s platform because they are after a market-wide view of how companies are addressing this challenge.”
This year’s report also links corporate water management with emissions goals — a connection that is frequently overlooked by firms looking to improve their energy efficiency and shrink their carbon footprint. CDP analysis found one in four (24 percent) of greenhouse gas emissions reduction activities reported by companies depend on a stable supply of water. Water can help facilitate — or unravel — these low-carbon efforts.
“For the most part, it appears companies are hurtling towards this transition without checking that they have one of the most fundamental ingredients needed for meeting that goal: water,” Pierce said. “The science is clear that climate change is fueling water scarcity and stress. Without effective strategies in place to manage water risk, corporations could struggle to secure their own operational continuity, let alone have enough water to meet their climate goals.”
So what can companies do to better manage and reduce their water-related risk? The first step is assessing water use and setting measurable targets. But unlike corporate carbon emissions, “no universally accepted standard exists for the setting of meaningful and measurable corporate water targets,” Pierce says. To address this, CDP has partnered with the UN CEO Water Mandate, The Nature Conservancy, World Resources Institute and WWF to develop a methodology that will help companies set context-based water targets — essentially a science-based targets approach to water management.
“The project began with a discussion paper launched at Word Water Week 2016 setting the case for context-based water targets,” Pierce said. “Once funding is secured, the next phase will be to develop a consensus-driven protocol, plus a tool to support implementation across sectors. We would look to pilot the context-based targets methodology with our corporate partners. The project will leverage existing work on science-based targets, the GHG Protocol, and research and findings on effective corporate water stewardship and disclosure.”
Considering that companies expect more than half (54 percent) of the 4,416 water risks they identified to materialize in the next six years, we expect no shortage of corporate interest in test-driving the upcoming water methodology.