Companies Must Take Bold Action To Transform Business Models

Too Few Making Progress Against Water Pollution Reduction Targets

12 Mar 2021 by The Water Diplomat
LONDON, United Kingdom

CDP Report
Cate Lamb
Cate Lamb

The financial impact of water risk could amount to $301 Billion USD versus $55 Billion USD to address those risks, according to the 2020 Global Water Report issued 3 March by the Carbon Disclosure Project (CDP).

The report also notes progress in water use, with two thirds of the nearly 3,000 participating companies saying they are reducing or maintaining water withdrawals, while more than half are monitoring the quality of their wastewater discharges.

While acknowledging the progress detailed in this year’s disclosures, Cate Lamb, Global Director of Water Security at CDP called for much more transformative action, saying: “As investors pay closer attention to companies’ management of water risks, CDP is calling for all companies to develop ambitious targets to reduce water withdrawals and eliminate water pollution, including net-zero water targets. Companies must take bold action now to transform their business models.”

However, it finds that just 4.4 Percent of businesses are making progress against water pollution reduction targets.

Among the 12 sectors covered by "A WAVE OF CHANGE: The role of companies in building a water-secure world", the scale of risk versus response is particularly stark in the manufacturing and food, beverage and agriculture sectors. In manufacturing (the largest sector), 1,375 respondents reported the potential financial impact of water risk at $191 B Billion USD, against a cost of response of $2.89 Billion USD. In food, beverage and agriculture, 414 respondents reported figures of $19.59 Billion USD and $1.10 Billion USD respectively.

Typical water-related risks identified are water scarcity, flooding and pollution.

Only two sectors, power generation and infrastructure, reported higher costs of response relative to risk.

In relation to water withdrawals, the CDP found reason for optimism, with 1,343 (64 Percent) of those companies with a high dependency on water reporting that their withdrawals were much lower, lower or about the same compared with last year. However, one fifth reported an increase.

The report reserved its greatest criticism for the “stagnation” of progress against pollution, stating: “many companies remain unaware of these [pollution] issues, let alone take responsibility for addressing them,” urging companies to “look beyond the business-as-usual responses and pursue plans to grow differently”.

Addressing the sufficiency of corporate action in response to water risk, the report states: “Not all water-related investments are equally effective in improving water security”. It identifies the two most frequent responses to water risk across all regions and sectors as “adopting water efficiency, conservation, reuse and recycling measures” and “developing flood emergency plans”.

Meanwhile, the greatest expenditure is on capital investment, addressing pollution, investment in new technology and infrastructure, and regulatory compliance.

While the CDP is encouraged by investment in technological solutions, it is concerned that “only a small fraction of companies are developing new products and markets in response to water risk, suggesting that opportunities for transforming business models are not being seized”.