Executive Summary Introduction
In 2011 some of the worst droughts in decades have hit regions in China, East Africa, the Middle East and the United States. Destructive flooding currently inundates Thailand and earlier this year the prolonged drought in Queensland, Australia was alleviated by 1-in-100 year floods. In this changing global environment, it is essential for global businesses to address the importance of water as a critical resource if the global economy is to become resilient to the water-related impacts from which it is already suffering.
Selected companies from the FTSE Global Equity Index Series (Global 500) and this year for the first time, from the Australian Securities Exchange (Australia 100) and the Johannesburg Stock Exchange (South Africa 100) were invited to respond to the second annual CDP Water Disclosure information request because they operate in sectors which are water-intensive or exposed to water-related risks. This year the response rate amongst the Global 500 increased to 60% from 50% in 2010, representing 190 out of 315 companies which were sent the questionnaire. Response rates from the Australia 100 (41%, 22 out of 54) and South Africa 100 (46%, 26 out of 56) were strong for their first year.
Key findings - Global 500
The majority of responding companies have identified water as a substantial risk to their business 59% (113) of respondents report exposure to water-related risk and over one third of respondents have already suffered recent water-related business impacts, with associated financial costs as high as US$200 million. 64% of all risks in direct operations and 66% in the supply chain are reported to have the potential to impact business either now or within five years.
Almost two thirds of companies have identified water-related opportunities and most opportunities are reported as near-term 63% (119) of respondents identify opportunities including cost reductions associated with increased water efficiency, revenue from new water-related products or services, and improved brand value. 79% of the opportunities reported are expected to impact business within the next five years.
Water-related issues receive less attention than climate change at the board level 57% (109) of Global 500 respondents report board-level oversight of water- related policies, strategies or plans. In contrast, 94% (371) of Global 500 respondents to the Investor CDP information request report board-level oversight of climate change1
. Why
water-related issues are given lower priority than climate change issues is unclear, especially as the majority of reported risks and opportunities are near-term.
Respondents’ ability to provide water-related usage data has improved The proportion of respondents reporting water withdrawals (95%, 181) and recycling/reuse data (58%, 111) has increased since 2010. The ability to measure and report water accounting metrics is essential for better management of water resources and demonstrates an increased awareness of water issues among respondents since 2010.
Energy companies report high levels of risk and low levels of board-level oversight The Energy sector has the lowest response rate (47%, 25 respondents) of all sectors and the lowest number of respondents that report board- level oversight of water-related policies, strategies or plans (36%, 9). A low level of board oversight is surprising since 72% (18) of Energy respondents report exposure to water-related risk compared to an average of 59% (113) across all respondents.
Australia 100 and South Africa 100
Respondents have higher levels of reported risk than the Global 500 Water issues should be high on the agenda for Australian and South African companies given that 50% (11) of respondents in the Australia 100 and 58% (15) of respondents in the South Africa 100 have experienced detrimental water- related business impacts in the past five years. A lower percentage of respondents in both the Australia 100 and South Africa 100 report having a water policy, strategy, or plan than in the Global 500, but the number of companies reporting water accounting data from these countries suggests that companies are taking steps to improve their management of water issues.
1 CDP Global 500 Report 2011: Accelerating Low Carbon Growth
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