Organizational Governance

More Companies with Large Water Footprints Are Taking Action; But Gaps Remain

Adequate water-stewardship goals must address the full range of water issues across the value chain — including amount of water used, impacts on water quality, ecosystem health and communities’ access to safe water.

Brand Provided | By Shama Perveen | Published 1 year ago | About a 5 minute read

Image: Quang Nguyen Vinh

Today, two-thirds of the world's population faces water scarcity every year. Meanwhile, the United Nations estimates more than 100 countries are not on track to have sustainably managed water resources by 2030.

While these statistics reflect the vastness of the global water crisis, they mask the magnifying impacts increasing climate change, pollution, population pressure and other factors have in different water basins across the globe. These intricacies present additional challenges for companies that are concerned about threats to business continuity and looking for guidance on how to navigate the myriad of water issues threatening their bottom lines.

Business leaders are among stakeholders gathering this week for World Water Week, the leading annual conference on global water issues, in Stockholm, Sweden. As with the UN Water Conference in March, this week’s convening will include many discussions around the private sector’s role in addressing the world’s greatest water challenges.

Industries are major contributors to the water crisis — driving critical threats to global freshwater systems including groundwater depletion, metal contamination, plastic pollution, water diversion and transfer, and eutrophication. Examining the financial risks of these water impacts reveals their material significance. In fact, Ceres analyses found the cost of addressing harmful water impacts could top nearly $1.8 billion annually for some large publicly traded packaged meat and apparel companies, and lead to a change in company valuation of up to -47 percent.

Some companies are taking notable action. Beverage company Diageo has a commitment to replenish more water than it uses for operations in 100 percent of sites in water-stressed areas by 2026. The company has also committed to reduce water use in its operations, with a 40 percent improvement in water-use efficiency in water-stressed areas and 30 percent improvement across the company. Meanwhile, Levi Strauss conducts an annual water-risk assessment of its facilities and supply chain and categorizes its facilities into areas of low, medium and high stress. Consequently, it has set a 2025 target to reduce freshwater use in its manufacturing by 50 percent in areas of high water stress.

Food company Mars is among companies addressing complex water issues by partnering with stakeholders in water-stressed basins. The company assesses water risks across its direct operations and throughout its global agricultural supply chains. For example, Mars knows the specific farms, growing regions and country of origin for 100 percent of its rice supply and has calculated the percentage sourcing from water-stressed areas.

These actions are encouraging; but bolder, broader goals are needed to avert the financial consequences facing industries that do not manage water better. These goals must address the full range of water issues across the value chain — including how much water companies use, their impacts on water quality, ecosystem health and communities’ access to safe water. That's why investors are taking notice and urging companies to improve their water-stewardship practices.

More than 90 investors have committed to engage more than 70 focus companies with large water footprints through the Valuing Water Finance Initiative, making the business case for companies to elevate water risk to the forefront of risk management and planning. These investors, who collectively manage more than $17 trillion in assets, have laid out a set of six corporate water expectations for companies to meet in order to address their broad water impacts by 2030.

The results of a benchmark analysis, slated to be made public later this year, uses existing publicly available company disclosures to assess water commitments and practices across the six corporate expectations for large companies from four water-intensive industries — food, beverage, apparel and tech. The benchmark will inform investors’ engagements with the companies, and help companies identify areas of strength and where more urgent attention is needed.

As our experts review public disclosures for the forthcoming benchmark analysis, we are assessing leading practices — such as how companies are:

Ensuring water-risk assessments are comprehensive and targets include material parts of the value chain.
Setting strong targets — focusing on the processes and actions needed to drive impact and address shared water challenges especially in high-risk watersheds.
Encouraging their suppliers to adopt sustainable water-management practices that include strategies to improve water quality, responsibly source materials and collaborate with other stakeholders on shared challenges.
Implementing integrated approaches tying water to climate and biodiversity goals, and communities’ access to water and sanitation. Recognizing the interconnected nature of these issues can help companies leverage the synergies between water-related issues and other environmental and social challenges for multiple benefits.
Focusing on collective action in a basin to drive progress on shared water challenges by collaborating with suppliers, local communities, NGOs, government entities, and industry associations to foster partnerships and share best practices.
Advancing and aligning advocacy and lobbying efforts to support water-friendly policies and industry standards to promote positive, systemic change.
Ensuring boards and senior management consider water risks and opportunities as part of business planning and investment decisions for their assets and supply chain — integrating them into decisions on strategy, risk and revenue.

For decades, we’ve seen great progress by the private sector in addressing climate risk as a material financial risk. We call on investors and companies to address water risk with the same urgency and drive the necessary action by addressing broad, interrelated water impacts. Water is a shared resource, so companies must use their sphere of influence to bring other stakeholders into the fold, making the collective inroads needed to ensure a water-secure future for the long term.