Water Scarcity: CDP Report Argues for Broad, Locally Relevant Strategies

Increasingly dire news about the California drought prompts another look at the plea for broad water stewardship in CDP’s 2013 Global Water Report Moving beyond business as usual.  The tactic commonly used by many companies, a blanket water use reduction goal, won’t prepare us for a water-stressed future. Instead, companies need water policies that are locally relevant, risk-sensitive, and far-reaching enough to address their business impacts, risks, and the very real threat that water scarcity can mean to business continuity.

If there is a good side to the third consecutive year of drought in California, it is that many business leaders are finally taking water seriously. With the California Farm Bureau estimating that uncultivated farmland will cost the economy roughly $5billion this year, water scarcity just became tangible for many.

Local Solutions to a global issue

As problematic as a severe drought affecting one of our nation’s agricultural centers is, we should also take the long view. Even if California were flush with water right now, we would still be facing a serious water scarcity crisis, as exploding population growth is the main driver of the worsening global problem. While changing weather patterns exacerbate water scarcity – and pain – in areas that are becoming drier, skyrocketing population growth means skyrocketing water demand worldwide.

Against a constant supply of water on our planet, experts predict global demand will increase by 55 percent between 2000 and 2050. The increase for manufacturing will be in the range of 400 percent. These statistics suggest that water risk will be widespread. There are also ethical reasons to act, as the United Nations reports that one-fifth of the world’s population is already experiencing water scarcity.

CDP found water stewardship activities to be ‘notably lacking’

While there are several excellent summaries of CDP’s 2013 report of the water disclosures of 593 companies, our focus here is on the nature and adequacy of the reporting community’s responses. Describing participating companies’ water stewardship activities as “notably lacking,” CDP reported that, “The majority of respondents are currently focusing their strategic attention on discrete activities within the fence line to reduce water dependency within their operations with little attention to other aspects of their value chain or local watersheds.”

The results are quite startling.  According to CDP, companies are failing to adequately respond to problems they have already encountered – not to mention preparing for potentially greater future risks. Thirty-nine percent of respondents have already experienced water risks in their supply chains, yet only four percent have supply chain water goals.

What makes a good corporate water strategy?

The foundation of any water strategy is an understanding of business impacts, risks and opportunities at the local, watershed level. This is a more nuanced exercise than just mapping operations and supply chain activities against maps of water scarce areas – although this is an excellent starting point. As water risks can also encompass quality, infrastructure limitations, regulatory and financial barriers, and competition, the analysis for each watershed may be complex. Forward-looking companies should find out what the local issues and priorities are and look for ways to partner on solutions.

Just as companies should assess the breadth of their geographic impact, they should also tackle water issues with a broad array of tools and approaches. CDP stresses that, “Companies should include actions, targets and goals for community engagement, supply chain management, watershed management, transparency and public policy.” Respondents have a long way to go as very few companies reported goals in these areas:

• Community engagement – 6%
• Watershed management – 3%
• Transparency – 1%
• Public policy – 0%

As disappointing as the CDP findings are, there are some companies that are engaging unusual partners and pioneering water strategies that are comprehensive and effective.

• Beer manufacturer MillerCoors’s five-pronged water program includes conducting watershed risk studies in watersheds serving key breweries. As water footprinting revealed that 95 percent of the water behind each bottle of beer comes from the farm, MillerCoors has gotten creative in encouraging change at its suppliers’ farms. An innovative program in Idaho connected barley farmers with experts from The Nature Conservancy to improve water efficiency.

• Acknowledging the significant impact beverage production has on local water supplies, one of Coca-Cola’s far-reaching goals aims to “safely return to communities and nature an amount of water equal to what we use in our finished beverages and their production” by 2020.

• One of four pillars of the water strategy of retail clothing company Hennes & Mauritz AB’s (H&M) includes partnering with local and regional governments, NGOs and other companies to improve water management in river basins in China and Bangladesh.

How should companies proceed?

To check whether water strategies are hitting all the marks, there are at least two excellent paths available. One is reporting to CDP itself. The process of answering questions about risks and goals can reveal gaps and help to reset corporate agendas. The Ceres Aqua Gauge is another framework companies can use to assess their own efforts at measurement, management, stakeholder engagement and disclosure on water. But no framework is a substitute for a good understanding of the unique issues in each watershed your supply chain touches.

It’s a tremendous task. If many of the huge companies reporting to CDP have not managed to anticipate and address water risks adequately, what of smaller companies with fewer resources? The World Wildlife Fund reports that, “it’s the small and medium enterprises that often face the greatest water risk. These companies can’t simply move out of a water-scarce basin; if they close a facility, they close up shop.” But these smaller companies are often risk factors within the supply chains of large multi-national companies and their needs must be part of the equation.

It’s daunting but necessary. Let’s look for a greater number of companies to participate in next year’s CDP report with increasingly sophisticated water strategies. As the California drought demonstrates, we should have done all of this yesterday!

I asked in a 2011 article: World Water Day is March 22^nd. Will you have a plan in place?