Companies urged to improve governance in water-energy nexus
Companies have been warned they must tackle the realities of water scarcity if they are to succeed in a low-carbon future. The Earth Security Group's report spotlights depletion of groundwater and underground aquifers as the most significant risk to businesses operating in 45 developing and water scarce countries. The report calls for a new form of business leadership to work with governments to strengthen policies in developing areas.

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That is the warning from the third annual Earth Security Index (ESI 2016) – released on behalf of the Earth Security Group – a risk evaluation tool for business leaders and government bodies. The report warns that businesses must align themselves to societal priorities in the countries that they operate as part of a new “business diplomacy for sustainable development”.

Examining the 75 largest publicly-listed multinationals across the infrastructure, extractives and agriculture sectors, the report notes that the depletion of groundwater and underground aquifers – a body of permeable rock which can contain or transmit groundwater – is the most significant risk to companies operating in 45 developing and water scarce countries.

“The ESI creates an unparalleled view of reputational vulnerabilities specific to resources in the emerging markets where multinationals operate, and blueprints how to confront these risks through a business leadership position,” ESI’s author Alejandro Litovsky said.

“What we’re seeing with aquifers is a geopolitical challenge that is beyond a corporation’s sole ability to fix; it is a risk so great, countries and multinationals must find a way to collaborate beyond compliance.”

Stewards of the future

Alongside water scarcity, the report identifies land conflicts, social opposition to projects, employment pressures and electricity instability as the five major systemic risks most likely to escalate to crisis points.

With the majority of aquifers lying across national borders, companies have to deal with water scarcity issues without governance. To mitigate political stress, the report urges businesses to create a new type of business leadership that works with governments to strengthen policies in developing areas. With the Sustainable Development Goals (SDGS) highlighting clean water as an objective, the report claims that SDGs could be used as a platform to build relationships.

The report urges the calls for collaboration to be combined with efforts to improve existing resource efficiency and corporate responsibility strategies, with a focus on building trustful relationships with stakeholders, as part of a shift to become “stewards of limited resources”.

In order to become stewards, the report recommends that companies should work to increase public engagement over regional issues, while also increasing the communication on the work they’re already doing to mitigate groundwater risks. Once these systems are in place, companies should collaborate through “leading pre-competitive industry platforms” to share data and best practices.

Something in the water

Having previously been urged to collaborate to solve ‘forgotten problems’ of water scarcity, companies have started the push to promote water stewardship. Coca-Cola Enterprises reinforced its efforts in a ground-breaking collaboration with WWF to restore vital wetlands and floodplains along the Danube River.

With countries from the Middle East likely to be exposed to ‘extreme water stress’ by 2040, threatening national security in the process, a new online tool that allows businesses to work out how water-scarcity will impact their revenue has been formed.

Matt Mace