Major global firms face business risks from water, says CDP

Exposure to water risks could limit growth of major global firms, according to an annual global water report released by CDP.

The recently released CDP report states that 68% of businesses in the world are exposed to water risks, which could cause a substantive effect on their business, operations or revenue.

Approximately 22% of the world’s listed organisations expect water issues can limit their business growth.

The report is based on analysis of water management data from 174 companies listed on the FTSE Global 500 Equity Index, which was provided to non-governmental organisations (NGO) following requests from 573 institutional investors, with a combined asset of $60 trillion.

Companies are concerned about water challenges, revealed by the growing number of investors pressing for corporate accountability on water and related information through CDP.

Since 2010, there is more than 300% increase in shareholders pressing for such information related to water challenges, CDP said.

Nearly 50% of reported risks can transform into competitive disadvantages for firms, either immediately or over the next three years.

Emerging markets offering growth opportunities for new businesses are more likely to feel the effect, the report states. Countries such as Brazil, China, India and Mexico are among the countries which could face water challenges.

Approximately 62% of respondents believe that issues related to water should be addressed at board level, compared to 58% in 2013.

The report says nearly 90% of firms are integrating water into their group-wide businesses and 82% set goals to reduce water usage.

CDP chief executive officer Paul Simpson said: "Water is an essential resource for any business. The potential for water-related problems to damage brand value or limit corporate growth is increasingly understood.

"We live in a time of unprecedented demand for water and have seen the number of investors seeking accountability from companies on this issue through CDP rise more than fourfold in just four years.

"It is of grave concern that such a significant group of companies is failing to communicate management of water risks to their shareholders through our global system."

Boston Common Asset Management’s head of environmental, social and governance research Constantina Bichta said: "If water scarcity prevails, companies could face constraints to growth.

"They may not be able to provide their core products and services, or may lose the ability to expand their business.

"As investors in these companies, this is something we are deeply concerned about. Companies with large supply chains also run the risk of finding themselves in conflict with communities over access to water issues, putting their license to operate at risk."

CDP is an international not-for-profit NGO which aims to establish sustainable economies and collects company reported environmental data.