07 November 2017
Big corporates are investing in water security at record levels while some of them are starting to adopt internal water pricing policies, a report has found.
Around $23.4 billion has been committed by companies on water projects in 2017, according to the global water report from charity CDP.
As a result, the number of companies that made the CDP Water A List, which focuses on a company’s commitment to transparency around environmental risks, has almost tripled from 25 in 2016 to 73 this year.
Cate Lamb, head of water at CDP, told Environmental Finance: “Companies are waking up to the need to spend more money to address water security issues and protect their operations and their supply chain.
“They are also setting much more ambitious goals to reduce their impacts on water resources.”
The increase in the number of companies included in the CDP Water A List coincided with 70% of the firms reporting boardroom oversight on water issues.
Lamb said: “I think it’s predominantly down to the fact that more investors are applying pressure on companies and are asking more strategic questions when they meet with the boards of these companies.
“Investors are increasingly expecting boards to demonstrate how they manage this issue.”
As Environmental Finance reported earlier this week, shareholder support for climate risk initiatives surged in 2017.
The report analysed water data from 742 of the world's largest companies including Nestle, Burberry and Kellogg’s. Fifty-three of those companies, or 7%, are now putting a higher price on water internally to reflect its increasing business cost. Although this number is quite small, Lamb said it is at least “a start”.
“While this is encouraging, it’s still a small number and we would like to see the number of companies applying these policies to increase,” she said.
“There is quite a range of approaches being taken here, some companies are factoring prices that only affect the direct cost on the company itself.
“But companies still have to take into account the costs for the communities and the environments on which those companies depend, so we would like to see a greater level of sophistication applied on pricing.”
US food group Kellogg’s reported that water prices charged to several of its manufacturing facilities in Mexico have risen 300% since 2012. On the other hand, the report found that the energy sector continues to be the main laggard as 101 out of the 138 companies asked to disclose their water risks failed to do so.
Lamb told Environmental Finance: “It is a great concern because these companies will be expected to lead the transition to a low-carbon economy and, in order to do that, a stable supply of good quality fresh water is fundamental.”
Paul Simpson, CEO of CDP, said: “The stakes are high as we assess corporate progress towards a water-secure world.
“From brand damage to disrupted supply chains, increased operating costs to constrained growth, water security is now big business and poses increasingly significant threats and opportunities to global firms.”