CEO GUIDE to WATER - BUILDING RESILIENT BUSINESS 3 CEO GUIDE FOREWORD Represents a Significant Portion of the Business Depends on Water

Guide CEOto BuildingWater resilient business CONTENTS

4 FOREWORD 6 KEY WATER CHALLENGES 8 THE FOR WATER BUSINESS CASE 8 WATER IMPACTS YOUR BOTTOM LINE

10 WATER PRESENTS RISKS

12 WATER OFFERS OPPORTUNITIES

14 OPPORTUNITY IN ACTION – THE SUSTAINABLE DEVELOPMENT GOALS 16 A FOR BUSINESS WATER TOOLBOX 22 IN ACTION BUSINESS 24 WATER @ WBCSD

TO WATER - BUILDING RESILIENT BUSINESS 2 CEO GUIDE TO WATER - BUILDING RESILIENT BUSINESS 3 CEO GUIDE FOREWORD represents a significant portion of the Business depends on water. The materiality of water risks is Water demands energy mix. You share it with people, clear and urgent. cities, other businesses already exceed supply in many places. Without action, there will be no water and nature. The impacts of climate change available to meet future societal and are primarily channeled through environmental needs. , with This competition will get worse. changes in the water cycle According to the World Bank, within uneven consequences across the globe. Major natural disasters such the next three decades the global Water is central to the delivery as droughts are increasing, which food system will require between of a low-carbon world, stability, Carbon influence migration, impact food 40 - 50% more water; municipal and prosperity and peace. industrial water demand will increase capture and storage are notably highly prices and can by 50 - 70% and water demand for water intensive and biofuel crops pose lead energy will increase by 85%.1 significant demands on water supply. to social Water is Water scarcity can induce a security unrest. central to the risk in countries where hydroelectricity achievement of the Paris Agreement and Sunny Verghese Peter Bakker Ivan Menezes the Sustainable Chair of WBCSD, Co-founder President & CEO, WBCSD CEO, Diageo and Group CEO, Olam Development Goals

TO WATER - BUILDING RESILIENT BUSINESS 4 CEO GUIDE water in decision- Business is paying the price too. Water should be a priority in the • Integrate When there is no water available for making, disclosure, and make smart boardroom of every company in operations, businesses must either Managing water better is a investment decisions; the world. significantly invest into or abandon key opportunity for business to create with other water users certain sites. and develop competitive advantages, • Collaborate while securing their license to and stakeholders to address shared risks and seize opportunities. Water risks directly a ect bottom operate, reducing financial losses and To better plan for future shocks lines. altogether ensuring continuity We encourage you to and become resilient, there needs to show of operations. and become a sound be a fundamental shift in the way that leadership water steward by companies value water. As a decision maker, you need to: stepping up to one the level of your of the most pressing sustainability • Understand company’s exposure to and sharing challenges we face. of water risks in direct operations and across supply chains;

Gilbert Ghostine Magdi Batato Indra K. Nooyi Antoine Frérot CEO, Firmenich Executive Vice President & Head Chairman and CEO, PepsiCo CEO, Veolia of Operations, Nestlé SA

TO WATER - BUILDING RESILIENT BUSINESS 5 CEO GUIDE KEY WATER CHALLENGES

The world will face a • Inadequate access to water 40% water 2 by 2030 if the following and sanitation costs the global supply gap challenges are not urgently addressed: economy US$323 billion every 4 • Local water scarcity has global year. Over two billion people financial effects. Today, local don’t have access to safe drinking

freshwater crises are one of the main water, and over four billion don’t threats to the global economy. For have access to safe sanitation.5 example, a drought in Brazil directly This has severe consequences for affects food prices in Europe. productivity as well as health and gender equality. • Water is a precious but undervalued resource. In many • Deteriorating water quality is a countries, water is underpriced major factor in increasing global or subsidized, failing to reflect water scarcity as it reduces its true costs the quantity of water that is and values. safe to use. Globally, 80% of municipal wastewater is discharged 1 in 4 of the untreated.6 Run-off from industry world’s cities and agriculture puts water bodies faces water under significant threat. insecurity3

TO WATER - BUILDING RESILIENT BUSINESS 6 CEO GUIDE Credits: Nestlé Côte d’Ivoire Nestlé Côte Credits:

• Groundwater levels are declining. Nearly two thirds of the largest aquifers in the world are already being depleted, putting businesses Water is essential to and communities at risk.7 public health. That’s • Globally, agriculture uses 70% why we're leveraging of available water.8 If agricultural our science to water efficiency is not improved, improve hygiene other water management efforts by government and industry won’t and sanitation, while suffice. reducing our water • Water users are interdependent. footprint by 25% Local water scarcity is not just by 2020. a threat to your company but to everyone in the same catchment. Gilbert Ghostine One water user's actions can put at CEO, Firmenich risk operations of another.

TO WATER - BUILDING RESILIENT BUSINESS 7 CEO GUIDE THE FOR WATER BUSINESS CASE

Water is underpriced across the world. Businesses Supply chains often fail to understand the full value of water, and to Insurance premiums incorporate water-related risks in their planning. Operating/ production costs Water risks affect business Water profitability Capital costs impacts Water risks can lead to growth your constraints by increasing your bottom business’ risk profile and ultimately Revenues its cost of capital. A 2017 Trucost line study showed that if the full costs of water availability and water quality Credit worthiness impairment had to be absorbed, this would equate to an average Production capacity decline in profits of 44% for utilities and 116% for food and beverage companies.9

TO WATER - BUILDING RESILIENT BUSINESS 8 CEO GUIDE Water is a material business Investors are paying closer will drive disclosures on water as issue and risk attention to water demand from investors for improved As competition for water increases, An increasing number of investors climate-related financial disclosures regulation will tighten. Business will are recognizing the value of water increase. come under closer scrutiny and water- and striving to better account for it in As part of the recommendations, related expenditures will rise. investment decisions. For example, water is identified among potential the recently-launched Drought Stress disclosure metrics, targets, and Testing Tool11 reveals that even when climate-related opportunities.12 exposed to drought scenarios of only medium severity, most companies see their credit ratings downgraded. Fund and asset We integrate water manager ACTIAM management into our aims to make The Task Force on Climate- voting decisions for our related Financial Disclosures investee companies. its investments (TCFD) water neutral The recommendations recently Carine Smith Ihenacho 10 by 2030 developed by the TCFD and Chief Corporate Governance Officer, Norges Bank Investment implemented by leading businesses Management (Source CPD, 2017)

TO WATER - BUILDING RESILIENT BUSINESS 9 CEO GUIDE THE FOR WATER BUSINESS CASE

Companies face physical Continuity and and non-physical risks growth constraints Increased regulation driven by competition for water, pollution, regulation, and climate change. Brand damage Increased price Operational risks Business disruption due to water Water scarcity or flooding presents • In Brazil, drought pushed up Threat to license to operate risks water costs by over US$2 Exposure to litigation million in 2015 while increasing electricity costs by close to US$6 million due to reduced availability of hydropower. General Motors Company Community conflicts Stakeholder concerns responded by increasing water conservation efforts and energy efficiency measures.13

TO WATER - BUILDING RESILIENT BUSINESS 10 CEO GUIDE Legal and regulatory risks Financial risks More stringent legislation or Increased cost of capital and reduced allocations; fines or reduced financing options penalties for water pollution • Morgan Stanley Capital Index incidents Research shows that the total value • Water prices charged to The of sales or reserves at risk from Kellogg Company manufacturing water scarcity amounts to US$221 facilities in Mexico have risen 300% billion for All Country World Index since 2012, which directly impacted (ACWI) goldminers, close to US$21 operating costs in these locations.14 billion for MSCI US Investable Market Index (IMI) electric utilities and over Reputational risks US$17 billion for MSCI Brand damage; loss in market share; 14% of green ACWI steel producers.16 loss of social license to operate bonds issued • The Coca-Cola Company was forced to abandon plans to build in 2016 were a US$81 million new bottling plant for water- in Tamil Nadu, India after fierce resistance from local farmers, who related 17 feared the company would cause a projects fall in the water table.15

TO WATER - BUILDING RESILIENT BUSINESS 11 CEO GUIDE THE FOR WATER BUSINESS CASE

Investing in sustainable water management offersopportunities Cost savings to gain a competitive advantage. For example, to transition to a circular economy, businesses can implement and offer products and solutions to Competitive advantage reuse water and recover resources out of used water. This is one of the largest Enhanced reputation Water untapped opportunities to move from waste to resources. o ers opportunities

Sale of new Water is far too products & services precious a resource to be used just once. Increased resilience Antoine Frérot CEO, Veolia

TO WATER - BUILDING RESILIENT BUSINESS 12 CEO GUIDE Case study: Turning a crisis into an opportunity

On Australia’s west coast, where water availability had been declining and water prices were on the rise, companies needed to maintain access to a suitable water source and lower their production BP Credits: costs. ENGIE and BP implemented programs and activities for reducing water use. With the Water Corporation and Government of Western Australia, other industrial users and the local regulator, they also worked to develop an alternative source of water. This collaboration delivered the Kwinana Water Reclamation Project (KWRP). One company’s wastewater became a source of industrial water for another. The switch to recycled water has saved costs by reducing water use and chemicals, helping to secure future operations while increasing potable water supplies. In one plant alone, it saved a company US$1.5 million.18

TO WATER - BUILDING RESILIENT BUSINESS 13 CEO GUIDE OPPORTUNITY IN ACTION

ChangingTHE the SUSTAINABLE way water is valued and managed canDEVELOPMENT help the world achieve the 17 SDGs. GOALS

Water security is at the core of society’s sustainable future. Valuing water inclusively and comprehensively is critical for a sustainable business and for collectively achieving our goals towards a water secure world. Businesses can be the inspiration and take the lead. The High-Level Panel on Water calls and counts on the business community to partner, lead and inspire, by example, and value water right.

Henk Ovink Special Envoy for International Water Affairs, Kingdom of the Netherlands and Sherpa to the UN / World Bank High-Level Panel on Water

TO WATER - BUILDING RESILIENT BUSINESS 14 CEO GUIDE Now and in the future, water scarcity represents a real and significant risk to many businesses. Understanding and managing the business impact of water is an absolute priority for Diageo. Ivan Menezes CEO, Diageo

TO WATER - BUILDING RESILIENT BUSINESS 15 CEO GUIDE A FOR BUSINESS ConsiderWATER the following sevenTOOLBOX steps to design and implement your water stewardship journey in the order that best suits your business. Set meaningful, ambitious goals and targets at industrial unit, country and global level 2 Ensure board level oversight to integrate water into business strategy 1 ER TOOLBO AT X Value water and planning W FO 3 EP R appropriately to respond T B -S U to true risks and N S I E N opportunities V E

Advocate for policy and E S

S finance enablers by calling for S policies that support business 7 investment in water-smart solutions Implement innovative 4 business solutions to achieve your goals and targets Raise awareness and create engagement among your 6 employees, suppliers, and consumers 5 Collectively address shared water risks and opportunities

TO WATER - BUILDING RESILIENT BUSINESS 16 CEO GUIDE Planet is screaming at us, and the language it uses is water.

Peter Bakker President & CEO, WBCSD

TO WATER - BUILDING RESILIENT BUSINESS 17 CEO GUIDE A FOR BUSINESS WATER TOOLBOX IDENTIFY, MEASURE AND VALUE RISKS Establish a cross-sectoral team Use global and local Value water, considering to understand impacts and tools to assess sites its true costs and values dependencies Consider scenario analysis

CHAINS PLY UP S 1 D INTEGRATE RISKS INTO BUSINESS STRATEGY N A Integrate water risks into Set accountability Set policies and S corporate enterprise risk within the company context-based targets N

O management for water I Ensure board T

R level oversight to E

P integrate water

T into business

C MANAGE RISKS

E strategy and

I Engage with stakeholders Engage with investors Identify collaborative

planning

S at watershed level to opportunities to secure

O implement a water water supply and R

C A stewardship strategy improve water quality

Nestlé is certifying its good practices at priority manufacturing sites with the REPORT RISKS Disclose water-related risks Alliance for Water Stewardship Standard. and financial impacts in mainstream reports Magdi Batato Executive Vice President & Head of Operations, Nestlé SA

TO WATER - BUILDING RESILIENT BUSINESS 18 CEO GUIDE 2 3

Set meaningful, Value water ambitious goals appropriately and targets at to respond to industrial unit, true risks and country and opportunities global level

DIAGEO NESTLÉ By 2020, reduce water use A theoretical price of water through a 50% improvement (between US$1 – 5 / m3) in water use efficiency is established for Capex at all owned production payback calculations sites and in water stressed purpose, depending on a areas replenish the amount site’s physical risk score OLAM of water used in the final DIAGEO (Combined Water Stress By 2020, 100% of priority product. An internal cost of water Index). supply chains have Water tool estimates the full Resources Management cost of water to a plant, to plans and 100% of Olam’s inform the business case direct operations in high for investment in water water risk areas participate and help achieve water in a water stewardship efficiency goals. program. UNILEVER VEOLIA By 2020, halve the The True Cost of Water water associated with tool takes into account the consumer use of the direct and indirect company's products costs as well as financial (2010 baseline). implications of water risks.

TO WATER - BUILDING RESILIENT BUSINESS 19 CEO GUIDE 4

Implement innovative business solutions to achieve your goals and targets

DRIVER Continuity of Employee health Water supply in Water efficiency Climate resilience operations and safety scarce environments in agriculture

BUSINESS Water stewardship: Access to water, Circular water Water-smart Investing in natural SOLUTION Working with relevant sanitation and hygiene management: 5Rs agriculture: “Smart” infrastructure: stakeholders (WASH): Provide approach of reducing, agricultural solutions Harnessing the to improve adequate access in reusing, recycling water, to address production services that nature sustainability of local your own operations, recovering resources, in contexts of growing provides for business watersheds supply chains, and local and replenishing water scarcity, pollution needs, while bringing communities watersheds and climate change important benefits to nature and society

WBCSD Sharing water, engaging WASH at the workplace Business guide Co-optimizing Natural Infrastructure RESOURCES* business Pledge (includes Guiding to circular water solutions for water for Business (NI4Biz) Principles, management and and agriculture: platform (includes Business guide to water Self-Assessment tool accompanying case lessons from India business case, tools, valuation and case studies) studies for water scarcity case studies)

*These resources are available at www.wbcsd.org.

TO WATER - BUILDING RESILIENT BUSINESS 20 CEO GUIDE 5 6 7

Advocate for Raise awareness policy and finan e Collectively and create enablers by calling address shared engagement for policies that water risks and among your support business opportunities employees, investment in suppliers, and water-smart consumers solutions

27 corporate and environmental partners Unilever’s Lifebuoy Handwashing In the roll-out of the Zero Liquid convened in California to address water scarcity program is one of the world’s largest Discharge (ZLD) policy in India, through different solutions such as groundwater hygiene behavior change programs, with businesses are advocating for realistic recharge and corporate collective action in the a goal of reaching one billion customers timeframes given significant investments California Water Action Collaborative. by 2020. and manpower skill required to implement the policy.

TO WATER - BUILDING RESILIENT BUSINESS 21 CEO GUIDE IN ACTION BUSINESS

Integrated water resource Water reuse in manufacturing Increasing resilience management 95% reuse of cleaning water at a Chinese Quarry areas converted into storm water First agribusiness site certified by the Alliance manufacturing site, responding to strict areas to reduce flooding risk, create wetlands, for Water Stewardship (AWS) for sustainable regulatory requirements and local water and harvest rainwater. Driven by regulatory water management within and beyond the scarcity. requirements and community demand. company fence. Impact: Over 60,000 m3 in annual water Impact: Flood protection for local Impact: Convened the different water users savings. Today, this site is the company’s communities, increased biodiversity and into a formal water users association, to international benchmark for water reuse. water supply, and a recreational area for address the shared water challenges faced the local community. by 300,000 people living in the river basin.

More crops per drop Business case for WASH in agriculture Going water-circular Replaced flood irrigation with drip irrigation with Zero-water withdrawal technologies have been farmers on more than 2,600 acres, provided Implementation of WBCSD WASH Pledge in used at a water-scarce site by recovering water training on efficient practices, and invested in own operations & work with selected supply from milk (in a milk powder production facility in new technologies to save water in India in 2016. chain farmers on WASH provision where the issue is identified as priority e.g. in Tanzania, Mexico) for daily operational water needs. Impact: Annual water savings of over 800 Kenya, Nigeria, Cameroon and Ghana. Impact: The dairy factory can operate without million liters in Maharashtra (2016, verified by using any groundwater, running solely on Deloitte) and greater reliability of supply of Impact: Reduced incidences of water-borne water recovered from milk. potatoes for the growers and PepsiCo. diseases, increased school attendance; women spend less time sourcing water.

TO WATER - BUILDING RESILIENT BUSINESS 22 CEO GUIDE US$302 billion of investment is needed to close the current gap on access to drinking water and sanitation, including wastewater treatment19

TO WATER - BUILDING RESILIENT TO THE BUSINESS WATER 23 CEO GUIDE CEO GUIDE WATER @ WBCSD Water is a key enabler of large scale systems transformation and it is integrated into our programs on Food, Land and Water, Redefining Value, Energy & Circular Economy, People and Cities & Mobility. WBCSD also represents the voice of forward-thinking business on water in global fora and policy platforms.

We provide members with leadership opportunities to advance the strategic business case for action and collaboration on water. Work with us to get latest information on water trends and opportunities at your finger-tips, to collaborate to incubate and implement innovative business solutions with peers and to amplify your voice.

TO WATER - BUILDING RESILIENT BUSINESS 24 CEO GUIDE Water leadership group

At CEO level, 15 companies lead the development and implementation of business solutions and represent the voice of business on water at key policy and advocacy platforms. The ambition is to scale knowledge and practice in key water-stressed geographies of the world to foster action on the ground where companies are directly facing water risks, while contributing to the advancement of the global water agenda.

TO WATER - BUILDING RESILIENT BUSINESS 25 CEO GUIDE Key WBCSD contacts

Tom Williams Deepa Maggo Swapna Patil Director, Water Manager, India Water Program Associate, Water [email protected] [email protected] [email protected]

For a complete list of sources used in this Guide, please refer to the online version on our website.

TO WATER - BUILDING RESILIENT BUSINESS 26 CEO GUIDE ENDNOTES

1 World Bank (2016): High and Dry: Climate 7 Earth Security Group (2016): CEO Briefing: Report of Corporate Water Disclosure. Change, Water, and the Economy. http:// Global Depletion of Aquifers. Global https://www.cdp.net/en/research/global- www.worldbank.org/en/topic/water/ companies must take an active role in reports/global-water-report-2016 publication/high-and-dry-climate-change- groundwater governance to avoid existential 14 Ceres (2015): Feeding Ourselves Thirsty: water-and-the-economy risks. https://earthsecuritygroup.com/ How the Food Sector is Managing Global 2 2030 Water Resources Group (2012): The strategy-briefs/ceo-brief-global-depletion- Water Risks. https://www.ceres.org/ aquifers Water Resources Group: Background, Impact resources/reports/2015-analysis-feeding- and the Way Forward. http://www3. 8 World Bank (2016): World Development ourselves-thirsty-how-food-sector- weforum.org/docs/WEF/WRG_Background_ Indicators. https://data.worldbank.org/ managing-global-water Impact_and_Way_Forward.pdf indicator/er.h2o.fwag.zs 15 Financial Times (2015): Coca-Cola forced to 3 World Bank (2016): High and Dry: Climate 9 Trucost (2017): Why companies and abandon India bottling plant plans. https:// Change, Water, and the Economy. http:// investors need to value water differently. www.ft.com/content/9e7d36da-e8e5- www.worldbank.org/en/topic/water/ https://www.trucost.com/trucost-blog/why- 11e4-87fe-00144feab7de publication/high-and-dry-climate-change- companies-and-investors-need-to-value- 16 Swedish Water House, SIWI, Nordea water-and-the-economy water-differently/ Investment (2014): Water Risks for Swedish 4 Global Agenda Councils & Water Leaders 10 ACTIAM (2017). ACTIAM seeks to achieve Businesses - Scoping Study 2014.http:// (2017): A new model for water access - a water-neutral investment portfolio by 2030. www.siwi.org/latest/new-study-on-water-as- global blueprint for innovation. http://www. https://www.actiam.nl/en/newsroom/2017/ a-financial-risk/ globalwaterleaders.org/water_leaders.pdf actiam-seeks-achieve-water-neutral- 17 Climate Bonds Initiative (2016): Green Bonds 5 Estimations by UNICEF / WHO Joint investment-portfolio-2030 Highlights 2016. https://www.climatebonds. Monitoring Programme (JMP) for Water 11 RMS/GIZ/NCFA (2017): Drought Stress net/files/files/2016%20GB%20Market%20 Supply, Sanitation and Hygiene (2018). Testing - Making Financial Institutions More Roundup.pdf https://washdata.org Resilient to Environmental Risks. http://www. 18 WBCSD (2017), Circular Water Management naturalcapitalfinancealliance.org/resources case studies. http://www. wbcsd. 6 UNESCO (2012): Managing Water under 12 TCFD (2016): Draft Report: org/Clusters/Water/Circular-Water- Uncertainty and Risk - 4th edition of the UN Recommendations of the Task Force on Management/Resources/Case-studies World Water Development Report. http:// Climate-related Financial Disclosures. 19 Global Agenda Councils & Water Leaders www.unesco.org/new/en/natural-sciences/ https://www.fsb-tcfd.org/publications/ (2017): A new model for water access - a environment/water/wwap/wwdr/wwdr4- recommendations-report/ global blueprint for innovation. http://www. 2012/ 13 CDP (2016): Thirsty business: Why water globalwaterleaders.org/water_leaders.pdf is vital to climate action. CDP 2016 Annual

TO WATER - BUILDING RESILIENT BUSINESS 27 CEO GUIDE World Business Council for Sustainable Development Maison de la Paix Chemin Eugène-Rigot 2B CP 2075 1211 Geneva 1 Switzerland