Water-related risks surged five fold in 2015: CDP
Droughts, water scarcity and environmental rules have cost businesses $14bn this year, up from $2.6bn in 2015, according to a report from non-profit environmental group CDP. The costs involved were likely to be significantly underreported, as only 50% of the 1,200 leading listed companies responded to CDP, albeit up from 38% in 2015. Of the 600 that did respond, 60% said they tracked water use, compared to just 3% last year. The energy sector was noted as a laggard in disclosing water information while L’Oréal, BASF, Ford and Colgate-Palmolive were named in the 24 best brands for mitigating water risks.
Droughts, water scarcity and stricter environmental regulations cost businesses a reported $14bn (£11bn) this year, up from $2.6bn in 2015. Yet companies still aren’t doing enough to protect themselves from water risks, according to a new report.

Compiled by environmental non-profit CDP and released Tuesday at the climate summit in Marrakech, Morrocco, the report approached more than 1,200 of the largest listed companies around the world in sectors exposed to water risk. Just over 600 responded, meaning the $14bn figure is likely to be hugely underreported.

The businesses, which included consumer goods giant Unilever and oil and gas company Suncor Energy, were measured on a number of factors, such as their efforts to track their water use and goal-setting to save water.

Much of the increase in spending was related to Japanese power giant Tokyo Electric Power Company (Tepco), which spent $10bn over the past year to clean up groundwater pollution from its Daiichi nuclear power plant, damaged in the 2011 tsunami.

More than a quarter of the companies said water-related issues, including floods and pollution, had affected their bottom line, typically due to higher operating costs and a disruption in production.

One of the companies, Anglo American Platinum, said it was spending millions of dollars on infrastructure at its Mogalakwena mine in South Africa to protect its water supply against shortages, including a $6m upgrade to a nearby sewage works.

“Every business in every sector needs water in some form or another,” said Morgan Gillespy, head of water at CDP. “Addressing water risks is vital for business continuity, protecting the bottom-line and to enable an effective response to climate change.”

Many businesses rely on water for their operations, but water supplies are at risk in many parts of the world due to pressure on resources, likely to be exacerbated by the effects of climate change. Although more companies than ever are making climate change a priority [pdf] in their sustainability efforts, they still aren’t moving quickly enough to tackle water risks, says the report.

Of the companies surveyed, around 60% said they tracked their water use, up only 3% from last year. Nearly half of the companies approached responded to the survey, up from 38% in 2015. Some sectors were more forthcoming than others. Almost three-quarters of IT companies responded, followed by the consumer staples industry, which includes food and beverage companies.

The energy sector lagged behind, with less than one-third of companies responding (just 32 out of 109 firms). It’s a trend that has remained consistent, write the report’s authors, who highlight energy giants Exxon Mobile, Chevron and Royal Dutch Shell as having “failed to disclose critical water information to their investor shareholders” via CDP for the last five years.

A spokeswoman for Chevron said the company reports on its water impacts through its website and corporate responsibility report, which she says “provide a clear description of how we identify and manage water risk.” Neither Shell nor Exxon had responded to the Guardian’s request for comment at the time of publication.

“For a long time, companies have regarded water as a free and plentiful resource,” said Gillespy. “This current understanding, especially in the energy sector, means that they don’t see water as a material concern.”

Of those energy companies that did respond to the survey, more than a third said they hadn’t examined how water risk could affect their business in the future. And yet energy companies, along with materials and utility firms, were hit the hardest financially from water-related issues.

Energy companies reported being liable in their last reporting period for $78m in fines and penalties for incidents such as spills and violating environmental regulations, more than any other industry and seven times the amount that they reported paying last year.

More than half of companies said they had set targets and goals to better manage their water supply. UK pharmaceutical company GlaxoSmithKline reported it had met its target to cut the water used in its operations by 20% last year against 2010 levels.

Reducing their water use also led to energy savings, according to over 50% of companies. Food and beverage giant Nestlé cut water use by 1.7m cubic meters at the same time as reducing carbon emissions by 80,000 tons in 2015.

To make setting targets easier, CDP is teaming up with other non-profits and charities, including WWF and The Nature Conservancy, to develop a tool to help companies set water targets aligned with climate science and global efforts such as the Paris climate agreement.

“Our goal is to enable companies to set targets that would, for example, allow them to make sustainable withdrawals from the river basins they operate in, rather than compete with other local users for that resource,” says Gillespy.

The CDP report also highlighted 24 brands that were leading the way in mitigating water risks, up from eight that made the list last year. L’Oréal and German chemical company BASF were among the new additions, joining six firms that made the list for the second year in a row, including Ford and consumer goods company Colgate Palmolive.