Water is one of our most important natural resources, and it is quickly becoming a significant business growth and development risk. Climate change, population growth and increasing living standards are the culprits, each contributing to rising pressure on already scarce water resources.
Investors are beginning to take note, as it becomes more and more clear that sustainable water management is needed to mitigate business risks and help ensure access to sufficient quality and quantity of water supplies.
A new report by WWF and German development bank DEG contains some sobering news. According to DEG and WWF, 191 out of 319 companies studied as part of the report showed high potential business risks related to freshwater. These risks break down into three broad, inter-related categories:
Physical the result of too little, too much, or polluted water.
Regulatory regulations are bound to become stricter and more pervasive.
Reputational public and media awareness is on the rise.
As the report points out, the root cause of water risk is often associated with governance. " . . . unless an entire river basin is managed in a sustainable way, one company's improved efficiency will likely be overshadowed by increased usage by a competitor or a neighboring community," WWF says. "This makes water the ultimate shared resource and everyone's responsibility."
The report also includes a list of six action steps to help you "get active on water":
Define your unique water-related risks.
Integrate water strategy into your operational plans and manage your supply chain.
Explore in detail your business's dependence on water and the potential implications.
Identify the policy and governance gaps that fuel your risk, and seek solutions with policymakers and local partners.
Engage stakeholders on the ground where you work and contribute to the global water debate.
Achieve compliance with all relevant policies and become 1) active in efforts to set standards for water use, 2) adaptable to change and 3) with WWF, a strong advocate for government accountability.
For more details, see the full 60-page report, Assessing Water Risk: A Practical Approach for Financial Institutions, available here.