Investors Demand Improved Water Stewardship As Water Risks Could Cost Firms A Total Of $301 Billion

Investors Demand Improved Water Stewardship As Water Risks Could Cost Firms A Total Of $301 Billion

The recent record-breaking droughts in China and Europe have demonstrated the increasingly devastating effects of climate change and highlighted the importance of addressing water risks. In China’s largest freshwater lake, Poyang lake, water levels fell by 75% to their lowest since records began. Additionally, the recent drought in Europe was shown by analysis from the European Commission's Joint Research Centre to be the worst drought Europe has seen in over 500 years. The effects of climate change, such as increasingly severe droughts, will exacerbate water scarcity in combination with other factors including growing global populations and expanding cities. According to the World Bank, unless action is taken, water will become scarce across Central Africa and East Asia, and consequently these regions could see their growth decline by up to 6% of their GDP by 2050.

In 2020, following the CDP's analysis of responses to its water questionnaire, the total potential financial impact of reported water risks was up to $301 billion, despite investment required to mitigate these risks being only $55 Billion. Additionally, only 4.4% of respondents to the CDP’s questionnaire reported progress of more than 10% towards their water pollution targets. Worsening water scarcity will cause wide-scale detrimental impacts to local communities, biodiversity and the global food system, making water risk a cross-functional problem not to be solely managed by EHS teams. In recognition of the wide-spanning impacts of unaddressed water risks which can severely affect firms long-term success and survival, Ceres launched the Valuing Water Finance Initiative on the 16th August, with a group of signatories representing $9.8 trillion in assets under management. The initiative seeks to engage 72 firms with global supply chains and a high water footprint across primarily the food and beverage, retail and tech industries. The Initiative establishes six water expectations which large firms should aim for by 2030. The expectations set out that firms must:

1. Not negatively impact water availability in water-scarce areas
2. Not negatively impact water quality
3. Work to restore and protect natural ecosystems
4. Work to achieve universal and equitable access to WASH (water sanitation and hygiene) 
5. Ensure senior management oversees water management efforts
6. Ensure public policy engagements are aligned with sustainable water resource management outcomes.

Following mounting investor demands, water stewardship is rising up the corporate agenda as an issue to be addressed by CSOs, heads of EHS and procurement alike. To build resilience, firms which are focused on complying with environmental permits should leverage water management software which can be used to track wastewater source and discharge points, compare the data against permit limits and automate pollutant calculations. Example vendors include Benchmark ESG, Sphera and Wolters Kluwer. 

Firms which are looking to address stakeholder demands, such as those outlined by the Valuing Water Initiative, should invest in well-rounded offerings from firms like FigBytes or Arcadis. Alongside its other ESG data management solutions, FigBytes offers a water stewardship digital solution for data tracking and risk analysis which provides community level impact assessments and identifies water hotspots within operational processes that users can then target. The data can be fed into reports or dashboards that can be used for stakeholder engagement. Equally, Arcadis offers consulting services for water optimization that are complimented by the digital solutions offered by Arcadis Gen, e.g its pipe predictor and ground water asset performance management tool.

For further information that corporates can leverage to evaluate digital solutions specifically for water and wastewater management, look at our Verdantix Green Quadrant: EHS Software 2021 and Verdantix Green Quadrant 2022: Digital EHS Technology Implementation Services.