By Donna Vincent Roa
Water is a requisite resource for business. Without regular or continuous access to clean water, businesses either have to raise prices, shut down or both. Industries that rely on water for operations or manufacturing are the most vulnerable and most at risk.
Throughout the world, water scarcity, water quality, climate change, rapid industrialization, deforestation, unsustainable agricultural practices and fast growing populations are putting pressure on companies to understand how water issues can destabilize, radically alter, or halt business performance.
The 2011 Carbon Disclosure Project's Gaining Competitive Advantage in a Water Constrained World, prepared with Deloitte, reveals that over half of 185 Global 500 companies in water-intensive sectors or those exposed to water-related risks have experienced negative impacts from water-related challenges in the past five years. Two years ago, 39 percent of the companies responding reported negative impacts.
Water: A Critical 21st Century Business Issue
Business-as-usual water management practices need to change. Businesses need to make water management a priority and evaluate water risks across social, environmental, hydrological, geopolitical, and broad environmental contexts. Water is a resource that they do not own, yet must take ownership for its responsible usage and implement an integrated water stewardship approach that will create value for all stakeholders.
An enterprise-wide water stewardship strategy is no longer a luxury. Being responsible stewards requires proactively managing water issues, cataloging and identifying the uncertainties to mitigate risk, and putting processes and policies in place to sustainably manage water. Companies need to identity threats and the corresponding ambiguities, and clearly state how and whether water quality and both increases and decreases in water affect their operations, performance and supply chains.
In a recent Deloitte press release, William Sarni, Director and Practice Leader of Enterprise Water Strategy says, "Global business leaders, especially in Global 500 companies, must understand their business value at risk from water related issues and implement strategic plans to help mitigate these risks. Increased competition for water, a finite and irreplaceable resource, from increased competition requires prompt action now. These companies can set the tone for how smaller business can contribute to making informed water decisions."
Water Not Getting the C-Suite Attention It Deserves, Though the Picture is Changing
According to recent reports, water is not getting the C-suite attention it deserves. But, that picture is slowly changing. External pressure from shareholders, investors, accountants, regulators, and developers of innovative and disruptive water technologies is causing behavior change and favorably affecting the value of water paradigm.
Shareholders, regulators, and investors, in particular, are requiring a stepped up evaluation of the water-related risks and responsibilities from a financial perspective, a closer look at the effects that exposure to these risks has on business, and better disclosure of corporate water performance and risks.
Further, in 2010, leading institutional investors and others petitioned the U.S. Securities and Exchange Commission to provide interpretive guidance on what information public companies need to disclose regarding the changes in the availability or quality of water.
Technology & Innovation Important Component in Water Stewardship
In Ernst & Young's Water Related Risks and Responsibilities: Moving From a Risk-Based Approach to Active Management, the findings indicate that water has come dramatically back into focus and its time for businesses to actively manage water risks and treat it as a shared resource. The Ernst & Young report also advocates the application of tailored technological innovations, such as membrane technology for wastewater recycling.
Paul O'Callaghan, CEO of BlueTech Research, a water market intelligence firm, agrees.
"Innovative and disruptive water technologies have the potential to advance water conservation and quality, enhance water security, and create business value. Every water stewardship strategy should have a technology investment component. We see large corporations and smaller tech companies identifying specific market needs and capitalizing on market opportunities for dynamic water solutions and innovative partnerships. From the manufacturing plants that implement water-saving technologies to the technologies used for laser leveling of irrigated land and many others, companies are and should be applying technological innovation to address the challenges of appropriately managing water resources," O'Callaghan adds.
Building A Resilient Future Requires New "Value of Water" Mindset
There's no more room for water denial. Business decisions and behaviors regarding water not only affect public water resources, but can positively or negatively affect a company's reputation, brand image and value, social license to operate, and regulatory and legal compliance. Being a good water steward can enhance or detract from each of these elements and directly affect the bottom line. For businesses, the priority to do list includes:
Determine actual water footprint and "outside the fence lines" water risks and impact of operations on adjacent ecosystems
Document how operations and physical assets could be affected by water quality, supply, reliability and price
Evaluate organizational preparedness to manage water risks
Consider the business impacts of and on water-stressed or ecologically-sensitive regions
Deliver holistic water management approaches
Force intelligent water usage organization-wide
Identify vendors in the value chain whose businesses may also be affected by water issues
Engage stakeholders in collectively managing the water that is available to them
Explore external partnerships for managing water resources and restoring water ecosystems
Evaluate the macro-changes (e.g., demographic, economic, and climate change) on business operations and water availability.
Treat Water with Strategic Importance and Take a Proactive Approach to Water Stewardship
Paul Simpson, CEO of the Carbon Disclosure Project, in the Gaining Competitive Advantage in a Water Constrained World, says that every company should "treat water with the strategic importance it deserves...(a)ccounting for and valuing the world's natural capital is fundamental to building economic stability and prosperity, and the global economy will favor businesses that take a pro-active approach to water stewardship."
With a water stewardship strategy and pro-active attention to water management, corporate leaders have the chance to shape the future and value of water, manage the business risks and opportunities water scarcity brings, and support the sustainability of their businesses.
Alliance for Water Stewardship, World Business Council for Sustainable Development Global Water Tool, GEMI Local Water Tool, GEMI Solutions Tool Matrix, IPICA Global Water Tool for Oil and Gas, Carbon Disclosure Project, BlueTech Research, Collecting the Drops: A Water Sustainability Planner, Exploring Pathways to a Sustainable Enterprise: SD Planner, The Water Footprint Assessment Manual, and The True Value of Water: Best Practices for Managing Water Risks and Opportunities.
Written by Donna Vincent Roa, water sector communication expert and Managing Partner & Chief Strategist of Vincent Roa Group, a strategic business and environmental science communication firm that provides executives with world-class communication, brand management, and on-call premium research, editing, and writing services. Donna is "Who The CEO Calls."