Corporate Perspectives on Water How are leading companies responding to this emerging challenge?
Corporate Perspectives on Water – How are leading companies responding to this emerging challenge? Corporate Citizenship Knowledge Series 27 September 2012
Marcus Norton Head of Water & Investor Initiatives, CDP marcus.norton@cdproject.net
Lead Sponsors
2
CDP seeks corporate disclosure on behalf of investors
Investors Authority Information
Authority
Information
Corporations 3
3
Investors are waking up to water risk “Water scarcity on a global scale represents a financial risk to the fund. Economic growth, industrialisation and population growth are driving the increasing demand for water, while factors such as climate change, pollution and regulation are affecting the supply and costs related to water.”
NBIM Investor Expectations, 2009
“Corporate disclosure of water-related risk is seriously inadequate … The financial impact of water shortages on sectors and companies is unclear, because information on water use data and impacts is spotty and partial.”
JPMorgan, Watching Water, 2008
4
4
Material impacts already felt by companies
5
5
Catalysing action on corporate water stewardship
Raise awareness and understanding of the business risks and opportunities around water
6
Support and accelerate the development of standard measures and performance benchmarks
Make meaningful reporting on water standard corporate practice globally
6
Disclosure drives behaviour change
7
Disclosure process improves performance
Benchmarking accelerates learning
Data informs investor analysis and engagement
• “What gets measured gets managed” • Qualitative disclosure drives strategic thinking
• Comparing performance and strategies with peers, neighbours and leaders helps all to learn faster
• Investors increasingly use CDP data to target and inform engagement • As water data matures expect its integration in analysis 7
CDP uses a 3-part questionnaire
1. Water management & governance
8
2. Risks & opportunities
3. Water accounting
8
Questionnaire sent to ~650 companies in 2012
S&P 500
Focus is on companies in industry sectors that are most water-dependent and have greatest potential to impact water resources, including: • apparel • chemicals • food & beverage • metals & mining • oil & gas • pharmaceuticals • power generation • semiconductors 9
Global 500
JSE 100
ASX 100
9
Overview of 2011 Global findings 1. Water is impacting companies already and presents a significant near-term risk 

10
38% of companies have suffered detrimental impacts from water in the past 5 years 59% report risks; two-thirds of these are near-term (current or within 5 years)
10
Risks reported Water scarcity reported most frequently
59% of companies report at least one risk 50% 40%
None 41%
Direct operations only 32%
41
30% 24
20%
23
21
18 10% 8
Direct operations & supply chain 23% Supply chain only 4% 11
0%
Direct operations
6
4
Supply chain 11
Overview of 2011 Global findings 1. Water is impacting companies already and presents a significant near-term risk
38% of Global 500 respondents have suffered detrimental impacts from water in the past 5 years 59% report risks; two-thirds of these are near-term (current or within 5 years)
2. The maturity of corporate responses to water risk varies considerably
12
Board-level oversight lags climate change Awareness of supply chain risk is limited There is a growing body of leading practice to learn from
12
“Corporate Water Management Maturity” Improve operational water performance
Understand how the company interacts with basins
Develop a comprehensive water strategy
Leverage improved performance in the value chain
Advance sustainable water management and collective action
Performance
Context
Business opportunities
Performance (value chain)
External engagement
Compliance
Business risks
Policies, governance & targets
Business risks (value chain)
Internal actions
External impacts
Key
Internal actions (value chain)
Current state Implications Response
13
Source: CEO Water Mandate “Corporate Water Disclosure Guidelines” Public exposure draft, August 2012
13
Corporate responses to risk 0%
20%
40%
60%
Reported a figure for total water withdrawal
14
100%
95%
Developed specific water policies, strategies or plans
93%
Responsibility for water policies etc. at board or executive committee level
57%
Set a concrete water-related performance target or goal
57%
Required key suppliers to report water use, risks and management
80%
26%
14
Percentage of respondents
Supply chain awareness is limited Respondents that are unaware of potential risk 50%
48
40%
47
43
41
41
38
36
30%
29
24
20% 10%
23
14 7
0%
Direct operations
7
Supply chain
• 38% of responding companies have not assessed whether or not they are exposed to supply chain risk
15
• 26% of responding companies require key suppliers to report water use, risks and management plans
15
Reported exposure to risk vs. response rate 100% Health Care
Response rate
80% Information Technology
60%
Industrials
40%
Consumer Staples
Materials
Utilities
Consumer Discretionary
Energy
20%
0% 0% 16
20% 40% 60% 80% 100% Percentage of respondents reporting exposure to risk 16
Leading practice examples Operational performance Anglo Platinum, Ford
Collective action Hess, Sanofi Aventis
Value chain Astra Zeneca, H&M, Puma
17
Basins/context Coca Cola, SABMiller
Strategy & targets BASF, Bayer, L’OrÊal, Unilever 17
Questions Marcus Norton Head of Water & Investor Initiatives, CDP marcus.norton@cdproject.net
Lead Sponsors
18
Corporate Perspectives on Water How are leading companies responding to this emerging challenge?
+1.7million
XXXXXXXXXXXX XXXXXXXXXXXX XXXXXXXXXXXX XXXXXXXXXXXX 23
24
I don't know, 8% I don't mind which one, 11%
The EA should decide how much water is available and water companies should bid against each other for their supplies, to get the water their customers‌ In areas26 of the country where water is scarce, which one of the following options do you think is the best approach?
The EA and water companies should work together to plan the best ways to distribute water fairly and economically, in the interests of customers and the‌
Transfers do happen‌
27
100,000,000 litres saved
70,000,000 litres saved 31
32
Water Treatment Works
River
Town
Wastewater Treatment Works
Water Treatment Works
Advanced Treatment Works
Wastewater Treatment Works
Town
Sea 33
33
560,000 litres saved
xxxxxxxxx xxxxxx
36
162 litres/person/day 130 litres/person/day
37