More companies in touch with water risk, but data is murky

Close to 90 percent of large companies in water-intensive industries are worried about water scarcity or quality issues, according to a new Ceres analysis.

A growing number of large public companies are disclosing their business risks related to extreme weather, droughts and other threats to the world water supply but the data they are reporting is still rather cloudy, according to a new report from sustainable business advocacy group Ceres.

The report, "Clearing the Waters: A Review of Corporate Water Risk Disclosure in SEC Filings," assesses information published by 82 large public companies representing eight water-intensive industries from beverages to semiconductors.

Close to 90 percent of the companies said they faced some exposure to physical water risk, up from 76 percent of the companies in 2009. Slightly more than one-quarter of the companies tied climate change to water scarcity, flooding or quality issues that could potentially affect their supply chains. Just two years ago, only 10 percent of the reporting companies suggested this could be a problem.

The report draws particular attention to the food companies considered in this report, noting that of the 11 companies considered only Archer Daniels Midland, Bunge, PepsiCo and Smith seem to have a handle on the specific risk posed to their business by water scarcity. The rest cite this as a general worry.

According to some research, big businesses have about 18 years to really get a grip on their water consumption. That's because a study by McKinsey suggests that the world may face a water shortfall of 40 percent by the year 2030, if consumption continues growing at the current pace and weather patterns continue to shift.

Ceres identifies four sorts of risks that companies face due to water shortages:

  1. Physical risks
  2. Reputational risks
  3. Regulatory risks
  4. Litigation risks

Mindy Lubber, president of Ceres, commented on the report:

"Water issues are one of the most immediate and deeply felt impacts of climate change across the world, and leaders at Rio+20 are well aware of that reality. Whether through water scarcity, extreme weather or loss of property to floods, corporations and their suppliers across the globe are exposed to water risks and can do more to avoid them. Disclosure is the first step, and it must be followed quickly by action."

Among the recommendations that Ceres suggests water-intensive companies consider:

  1. Spend more time getting a grip on specific water-related risks, surfacing more relevant data.
  2. Add more quantitative data to SEC filings.
  3. Comply with the SEC guidance on water risk exposure.
  4. Provide investors with information on steps being taken to mitigate risks.

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