Business and Water Scarcity: The Reports Are In

Benjamin Franklin wrote, “When the well is dry, we learn the worth of water.” Residents of cities around the world are learning that lesson right now. Atlanta risks running out of drinking water before the end of the year if a severe drought holds and the city doesn’t take dramatic steps to curb consumption or find new water supplies. On the other side of the globe, some Chinese cities must now dig wells 600 feet deep to find clean drinking water in regions where aquifers were eight feet below the surface just a few decades ago. Millions of residents of Mumbai and Delhi – even those who are comfortably middle class – must wake up at 3 a.m. to turn on their taps in order to capture water that’s only available for a few hours a day.
If every cloud has a silver lining (though not enough raindrops), the growing crisis of global water scarcity is finally raising awareness of the need for every sector of society to do more to address the issue. A few years ago, Trillium Asset Management Corporation (“Trillium”) commissioned leading experts on global water trends at the Pacific Institute to develop one of the first studies to look specifically at how water scarcity threatens business and what companies should do to alleviate the crisis. Now there’s a growing body of additional studies and research focusing on corporate activity in this area.
Drops of Awareness, but a Drought of Action
Increasingly, warnings about the global water crisis are coming not just from environmental groups and community advocates, but from traditional business organizations. Giant insurance broker Marsh Inc. has created a new think tank called the Marsh Center for Risk Insights, which found in a September 2007 survey of executives at 100 of the Fortune 1000 companies: “Nearly half (47 percent) of the executives interviewed say access to water is critical or very important to the day-to-day operations of their company. Forty-one percent say if they were faced with a severe water shortage it would cause a complete or partial shutdown of their business. Amazingly, only 17 percent have taken any steps to prepare for reduced access to water.” (Note that word “amazingly.” The Marsh report puts these results under the heading “Water Denial.” That’s unusually strong language from an organization of staid insurance executives and risk experts.) Neal McGarity, Senior Vice President Corporate Communications for Marsh, told SocialFunds.com: “The global demand for water is increasing. The point is that companies need to plan now for the impact of water shortages on their business operations.”
The Marsh study found that companies’ water-related costs are climbing, as manufacturers increasingly have to treat their output water as well as the water they use as inputs to their production processes. Nor is this an issue limited to companies in industries with particularly high water consumption. Marsh found that “Even non-water-intensive businesses are being affected as suppliers pass on their own water-related costs.”
Another report released this summer fleshes out how companies are reporting on water risks. With financial support from foundations and a small contribution from Trillium and the Interfaith Center on Corporate Responsibility, researchers at the Pacific Institute analyzed coverage of water issues in the corporate social responsibility reports of 139 of the largest companies across 11 water-intensive industry sectors. It identified some areas of progress, finding “The vast majority of companies in water-intensive industries now report water information as standard practice. The few companies not reporting in these sectors are the exception, not the norm.” However, they also found many gaps in information they’d hoped to find in the reports they read. Among the elements they identified as missing:

• Information on companies’ water-related risks is not widely reported. Only one in five mentioned water risks and challenges or describes programs to assess water risks.
• Quantitative water-related targets are not commonly published. Only 30 percent of the reports provided quantitative targets, and even these often did not cover all the indicators reported by the company.
• Supply chain issues are often overlooked. Only 10 percent of reports mentioned supply chain considerations involving water management. None reported on the actual water use or wastewater data of their suppliers.

A Wellspring of Solutions
The Pacific Institute and others aren’t just criticizing companies for not doing more. They are offering tools and frameworks to help them better manage water risks. The Pacific Institute partnered with Business for Social Responsibility (BSR) to issue a joint report recommending ways companies can begin to think strategically about decreasing their own water use and impacts, and about partnering with others to protect and restore wetlands and other ecosystems that safeguard water resources and biological diversity. (The report, titled At the Crest of a Wave: A Proactive Approach to Corporate Water Strategy, is available online at http://www.pacinst.org/reports/crest_of_a_wave/crest_of_a_wave.pdf.) The study warns that given current global freshwater trends, “The challenge for businesses will be ensuring access to needed water within more competitive contexts while coordinating with, rather than being in conflict with, local community water priorities.” The report notes there aren’t simple ways to achieve this, but recommends businesses adopt a “multifaceted approach that combines efficiency and conservation measures, innovation at the process and product level, and investments in natural systems that replenish and purify water long into the future.”
While the Pacific Institute-BSR report lays out a framework for companies to develop a comprehensive water sustainability strategy, the Global Environmental Management Initiative (GEMI) recently released a tool intended to help individual factory and facility managers translate their company’s water strategies into action on the ground. Connecting the Drops Towards Creative Water Strategies: A Water Sustainability Planner (http://www.gemi.org/waterplanner/index.htm) contains three modules that help site managers conduct water risk assessments that look at: (1) their facility’s specific water needs in comparison to the availability of water in the region, (2) operational impact on available water resources, and, (3) case studies on reducing water use and impacts.
Another tool that seems to offer great promise at bridging both a corporate-wide global perspective and a facility-specific component needed for is the World Business Council for Sustainable Development’s new Global Water Tool (http//:www.wbcsd.org/web/watertool.htm). The WBCSD launched the tool this summer amid the hydro-hoopla of World Water Week in Stockholm, an annual Mardis Gras of sorts for hydrologists and water policymakers. The Global Water Tool allows companies to plot the location of each of their facilities, offices, and even key sourcing areas onto a global computer map overlaid with water scarcity data. That map can then help companies identify and prioritize areas of current water risk and future risk based on projected water scarcity trends. The tool also provides a framework to compile facilities’ water use and discharges to help companies monitor their water consumption and efficiency rates at both a facility and corporate level. The tool was developed by the giant environmental and engineering firm CH2M HILL with input from more than 20 companies across industry sectors. Significant corporate water users like PepsiCo have already begun to use it.
Eager to see these reports translate into positive change in the corporate sector rather than just sitting on the shelf, Trillium so we’ve organized a series of conference calls to share their findings with socially responsible investment firms and shareholder advocates. We’ve also reached out to a dozen or so companies in our holdings that we think could contribute the most to a more sustainable water future to better understand what they are doing to manage their impacts and to share these findings with them. We expect these efforts and others like them are the front end of a wave that will continue to crest in the years ahead.