Most Big Companies Hurt by Water Problems, CDP Survey Finds

Drought, poor quality, flooding and other water-related challenges negatively affected 53 percent of the world's largest listed companies in the past five years, up from 38 percent last year, yet there's been no increase in the number of corporations providing water-related risk assessments to investors, according to the Carbon Disclosure Project.

The CDP Global Water Report, which surveyed 185 of 318 companies listed on the FTSE Global Equity Index Series (Global 500), found 68 percent of companies view water as a substantial risk to their business.

These water-related issues have become increasingly costly for companies. For example, Sasol Limited reports production losses in 2010 of about $15.6 million due to flooding of a portion of its plants; Freeport-McMoRan is investing $300 million to construct a desalination plant and pipeline near the Pacific Ocean to meet long-term water supply needs at one of its mines; and Spainish company Iberdrola reports a 22.1 percent rise in procurements costs due to lower water availability.

There has been a marked increase in awareness of supply chain risks as well, with 71 percent of respondents—up from 62 percent in 2011—now able to say whether they're exposed to such risk, the CDP said. Nearly four in 10 respondents (39 percent) require their key suppliers to report on water-related risks, up from 26 percent in 2011.

However, despite increased awareness and activity among some companies, 60 percent of companies responding to the survey—the same result as last year— indicated a lack of transparency with investors. Only 44 percent of energy companies contacted responded to the survey, despite reporting the highest exposure to risk, the CDP said.

A notably low proportion of North American companies (35 percent) report board-level oversight of their water policies, strategies or plans compared to European companies, in which 75 percent have board-level oversight, the CDP said.

The CDP praised some companies for their transparency and efforts to take action including:

• General Motors has improved the water efficiency of its manufacturing plants. Its assembly plant in San Luis Potosi, Mexico was designed with a zero discharge concept and 90 percent its wastewater is treated onsite and re-used to make vehicles. Well water consumption has been reduced by 20 million gallons per year, as a result.
• Hennes & Mauritz was singled out for creating a cleaner production program that focuses on suppliers located in water scarce areas. To date, the program has worked with 21 mills and helped generate 10-30 percent water savings per factory.
• Starbucks is installing manually operated hand-meter faucets to replace dipper wells. This allowed the company to conserve about 100 gallons of water per store per day.

Other companies singled out for praise included Volkswagen, Heineken, Anheuser Busch InBev, Imperial Tobacco Group, Unilever, Statoil, Cenovus, Sasol, Baker Hughes, BG Group, Talisman Energy, Merck, GlaxoSmithKline, Pfizer, GE, UPS, Saint-Gobain, Nokia, Taiwan Semiconductor Manufacturing, Intel, Dell, Syngenta International, BASF, Antofagasta, Rio Tinto, PG&E, Dominion Resources, Exelon, Energias de Portugal and Southern Company.

Last month, CDP's 2012 Global 500 Climate Change report found 81 percent of reporting companies have identified physical risks from climate change, compared to 71 percent in 2011, with 37 percent perceiving these risks as a “real and present danger,” up from 30 percent in 2011 and 10 percent in 2010.