This World Water Week comes as many parts of the world have been experiencing deadly floods and droughts: from Japan to Turkey, Belgium to India. With the recent landmark IPCC report warning that the global water crisis will, without urgent action, intensify as climate change worsens, building resilience globally against water-based climate impacts like floods and droughts is essential.
In 2021, water shortages already affect more than three billion people with projections indicating that if we do not keep global warming below 1.5 degrees Celsius, there will be catastrophic consequences on the availability of sufficient clean water for basic human needs, including food and energy production.
One opportunity staring us in the face is to treat the water that we do have available to us with great care. However, UN Habitat tells us that 80% of wastewater is currently discharged into the environment untreated. This ‘invisible crisis’ of water pollution poses serious threats to nature, human health and economies and greatly undermines our ability to deliver a net-zero, resilient future.
At CDP, we track corporate action on this issue on behalf of 590+ investors and 47 corporate buyers. Analysis of the data we have indicates, while companies are making progress on reducing freshwater withdrawals and consumption, there is an alarming lack of action on water pollution, with just 4.4% of disclosing companies reporting any progress on water pollution targets.
The business case for action on water security is undeniable. CDP’s 2020 Global Water Report found that the cost of inaction regarding water security for businesses is up to five times the cost of action. The potential cost to business of water risks was estimated at US$310 billion whereas the cost for preventative action was estimated at US$55 billion.
If there’s ever a time for corporate leadership and innovation on water, it’s now. Two actions companies can take are: commit to eliminate wastewater pollution in their own practices and work with their suppliers to drive action at scale.
Committing to tackle water pollution with Wastewater Zero
As part of the Wastewater Zero initiative, this year WBCSD, championed by CDP and UN Habitat, launched a Business Commitment for “Wastewater Zero”, calling on companies to set ambitious targets for treating and reusing their wastewater to support the elimination of industrial wastewater pollution by 2030. The Business Commitment includes three central pillars:
- Zero pollution - releasing zero hazardous substances into the environment and treating all wastewater;
- Zero freshwater – increasing the proportion of water reused and recycled; and
- Low-carbon – adopting low carbon wastewater treatment processes.
In making the Business Commitment, companies align their targets, strategies and actions towards the three central pillars of the commitment, demonstrate raised ambition to meet SDG target 6.3 and recognize the importance of wastewater management and water reuse in contributing to climate, biodiversity and water goals.
Through the CDP water questionnaire, companies can easily track their progress against their Wastewater Zero targets and efficiently communicate this to a large number of important stakeholders.
Driving water action at scale through your supply chain
It’s important for businesses to understand the impact of freshwater pollution not just within their own operations and assets, but downstream and throughout their value chain. Over 200 major buyers with US$5.5 trillion in procurement spend are working with CDP to request environmental disclosure from their suppliers, with 47 of these specifically asking for water data. These CDP Supply Chain members have illustrated their commitment to water stewardship and supply chain management.
A water secure supply chain is essential for the long-term resilience of any business. Buyers are increasingly experiencing supply chain disruption from water-based physical impacts of climate change (e.g. floods, droughts, storms) which manifests as increased costs or failure of suppliers to deliver. Last year, suppliers reporting through CDP identified US$248 billion of company value exposed to water related risks.
Reputational risk is also growing significantly alongside the financial implications of inaction on water security. In previous years, the value of reported risks was dominated by physical water risks whereas this year we have seen a major increase in the financial value of reported reputational and market risks, which are now considered almost equal to physical risks.
Companies are coming under more and more scrutiny regarding water stewardship practices in their supply chain. Those companies that want to minimize and mitigate these environmental and financial risks urgently need to engage their suppliers on water security.
“Givaudan’s supply chain faces water security risks. We are looking for our strategic suppliers to move beyond reporting water accounting information and into active management. We take action to reduce risk by working with suppliers to understand their water impact, and take action to reduce it. This includes engaging strategic suppliers on water security through CDP as a supply chain member. We measure the success of our engagement in actions undertaken by suppliers demonstrating improvement year on year -- for instance, whether they report a structured target or goal as well as their CDP score.” - Hallvard Bremnes, Global Head of Sustainability, Givaudan
This example of engagement from Givaudan is mirrored by other corporate sustainability leaders. However, they are in the minority. Despite the significant reputational and disruptive risks being posed to companies globally from water impacts in the value chain, inaction still persists and cascading water action down the supply chain isn’t happening fast enough.
Last year, only 18% of suppliers engaged with their own suppliers on water stewardship; this is in stark contrast to other environmental areas such as climate change where 37% of suppliers are cascading action via engagement.
Act now for a water secure world
It is clear that corporate environmental leadership involves transforming business models to protect our vital water resources. By signing up to the Business Commitment to Wastewater Zero, setting ambitious targets, engaging your suppliers, and disclosing progress through CDP, companies will be joining the pioneering organizations taking bold steps to create a water-secure, climate resilient world — to ensure the future of their business and for the benefit of all life on our planet.
This World Water Week, in the shadow of the latest climate science report and in the run up to COP26, it’s clearer than ever: now is the time for corporate leadership and innovation on water.