Water Means Business: Corporate Perspectives on Water

Water means business: Corporate perspectives on water

Water Means Business | October 2012 | © Corporate Citizenship Page 1 Page 2 © Corporate Citizenship | October 2012 | Water Means Business Contents

Foreword...... 2

Executive summary...... 3

1 Introduction...... 4

2 Is water the next carbon?...... 5 A more complex challenge...... 5 Water means business...... 6 Navigating the challenges...... 6

3 Developing a strategic response...... 7 1. Quantify your water footprint (direct and indirect)...... 7 2. Map water risks (direct and indirect)...... 7 3. Identify high priority areas for action...... 8 4. Identify improvement areas in high priority areas...... 9 5. Establish a strategic framework...... 9 6. Establish collaborative partnerships...... 10

4 Emerging best practice...... 10 A. Extensive water partnerships...... 10 B. Water value-pricing...... 10 C. Water metrics and reporting...... 11 .D. Net zero water consumption...... 11

5 Conclusion...... 12

About Corporate Citizenship...... 12

6 Appendix: a note of thanks...... 12 About the authors...... 12

Water Means Business | October 2012 | © Corporate Citizenship Page 1 Foreword

It is becoming something of a cliché to say that blue is the new green – and yet it is true that many of the most pressing environmental issues do rapidly lead back to water. Remember, it is not climate change that is going to do for us all in the end, but its effects on water – too much, too little, in the wrong places, at the wrong times, too dirty to drink or to use in agriculture or industry. And when water – that universal human necessity – goes wrong, the effect on humans is far-reaching: thirst, food shortages, rising costs, less energy, civil un- rest, land grabs… ultimately wars over watershed regions. That makes it all the more surprising so few companies are really planning ahead for the uncertain future that faces us. In this paper, my colleagues at Corporate Citizenship have set out what needs to be done – the likely trends that will affect your company, examples of best practice to learn from, ideas for a robust strategy, and, practical as ever, a six step plan of action. Our point of view is simple: whether the colour of water is blue or green, your business risks going into the red, unless you act now. Read on.

Mike Tuffrey Director, Corporate Citizenship October 2012

Page 2 © Corporate Citizenship | October 2012 | Water Means Business Executive summary

Often referred to as ‘the next carbon’, water is emerging 1. Quantifying the direct and indirect water footprint as a major sustainability challenge facing societies 2. Mapping water risks (direct and indirect) globally. Mega-trends such as population growth, 3. Identifying high priority areas for action forecast to reach nine billion globally by the middle of the 4. Identifying improvement opportunities in century; the resultant increased agricultural demand; high priority areas and climate change, are among the main drivers of this 5. Establishing a strategic framework issue. 6. Establishing collaborative partnerships.

The complexity of the water landscape, as well as the We cite a number of case-study examples of companies, interconnectedness of global supply chains and that of in a variety of sectors, that have adopted a similar consumers of water in any given location, means that approach to managing water-related risks, including a business-as-usual approach to addressing water as such leading businesses as Unilever, Puma, Duke a business risk is untenable. Leading companies have Energy, Marriott, Thames Water, SABMiller, HSBC and recognised this and have already begun to take proactive Coca-Cola. Additionally, we have identified examples steps to quantify, map and mitigate their exposure to of the emerging best practice trends adopted by these water-related risks. companies, including: A. Extensive water partnerships Based on a series of interviews and interactions with B. Water value-pricing leading companies and practitioners in this area, C. New water metrics and reporting Corporate Citizenship has identified six key steps D. Net zero water consumption. towards addressing the complexities involved in strategically managing direct and indirect water- We conclude that the issue of water sustainability is a related risks, and four emerging areas of best practice touch-point for businesses to begin to collaboratively among companies at the leading-edge of water risk address the sustainability challenges facing society management. as a whole. By better understanding the risks and opportunities faced in relation to water use and changing These steps towards practically and strategically weather patterns, we believe proactive steps can be managing water-related risks are described in detail in taken to avert the most negative repercussions of these this paper and include: trends.

Water Means Business | October 2012 | © Corporate Citizenship Page 3 1 Introduction

Among the world’s leading companies, much of the Similarly, the UK this year experienced its fifth driest focus of corporate activity on the environment has March in more than a century, triggering hose-pipe been centred on reducing the climate change impacts bans in Southern parts of England. This was following of their business operations. This is reflected in the two consecutive years of relatively dry winters that had way that voluntary reporting of corporate greenhouse depleted water reservoirs and aquifers supplying the most gas emissions has proliferated over the past decade; densely populated parts of the country, including London. the formalisation of corporate strategies and publicly By April and June 2012, the pendulum swung to the other reported targets and objectives to reduce corporate extreme with the UK experiencing its two wettest months greenhouse gas emissions; and the growing presence on record - some parts of the country received up to a of various regulatory and market mechanisms to half or more of a year’s worth of rain within hours. Experts mitigate climate change impacts. The most notable of predict that this type of extreme pattern of weather is these include emissions trading schemes established likely to increase as a result of climate change. Yet, despite in Europe, Australia, California and, most recently, the potential for significant disruption and cost, relatively Guangdong, China. few companies have disclosed robust strategies to address these concerns, particularly in relation to their However, there is now broad recognition that climate wider value chains. change, and indeed energy consumption, sits within a wider context of interconnected issues, including water In order to explore this issue further, Corporate scarcity, extreme weather events and supply chain Citizenship conducted a series of interviews during 2012 shocks. The issue of water – either too much or too little with a number of leading companies on this topic. We – is central to these concerns. This year’s hot and dry also held a seminar for sustainability practioners on the weather in the US, the country’s worst drought in over question of how companies respond to the challenge of five decades, is a prime example of how these issues sustainable water use. We have combined the findings can play out. As at the end of July 2012, 38 percent of from these interviews and discussions, together with our the contiguous United States was experiencing severe to own experience of having worked with a number of our extreme drought, and 57 percent moderate to extreme clients in this area, to develop a practical guide for CSR drought. 85 percent of the US corn crop is located within and sustainability managers seeking to better understand those drought-affected areas and the US Department and respond to concerns around water. This paper also of Agriculture is predicting that this year’s corn crop identifies a number of future trends in terms of emerging will be the lowest in six years. The soybean crop yield best practice over the short to medium term. is expected to be the lowest in nine years. The US is by far the world’s largest producer and exporter of corn While the shocks associated with water may be and soybean. As such, drought in the US has major unavoidable over the coming decades, the impact implications for food prices globally. Farming regions in of these shocks may be mitigated if companies take Russia and South America are suffering similar woes, proactive steps to analyse, address and engage with leading experts to predict that agricultural commodity other stakeholders on water risk. Here, we explore how prices will hit a new record in 2013. this can be done.

Page 4 © Corporate Citizenship | October 2012 | Water Means Business 2 Is water the next carbon?

Water is already recognised as the next big global a more sustainable way. However, the characterisation environmental challenge. Mega-trends such as of water as ‘the next carbon’, while conveying the population growth, rapid urbanisation, increasing significance and wide-scale relevance of the risks affluence in emerging markets, and climate change, are associated with this issue, in certain ways glosses over all placing new demands on society to steward water in the unique complexities involved.

Future projections • Global population is projected to grow by 2 to 3 billion by within their territory. 60% of the world’s 276 international 2050. Combined with economic growth and increasing river basins lack any type of cooperative management influence shifting diets from predominantly starch-based framework. foods to meat and dairy, this is expected to require • Water-related hazards account for 90% of all natural approximately 70% more water by 2050. hazards, and their frequency and intensity is generally • Agriculture accounts for approximately 70% of global rising. In 2010, some 373 natural disasters killed more than freshwater withdrawals and up to 90% in some fast- 296,800 people, affected nearly 208 million others and growing economies. cost nearly US$110 billion. By 2050, rising populations in flood-prone lands, climate change, deforestation, loss of • After agriculture, industry is the second largest user of wetlands and rising sea levels are expected to increase the water. The amount of water used varies widely by industry, number of people vulnerable to flood disaster to 2 billion. but the largest single industrial use is cooling in thermal power generation. Water used for cooling power plants • The cost of adapting to the impacts of a 2°C rise in in the USA represents 40% of its industrial water use. In global average temperature related to water could China, the proportion of industrial water used for cooling range from US$13.7 billion (drier scenario) and $19.2 power stations is expected to reach 30% by 2030. billion (wetter scenario) per year between 2020 and 2050, predominantly through water supply and flood • Water is not confined to political borders. Approximately management. 2 billion people worldwide depend on groundwater supplies that include 273 transboundary aquifer systems. Source: UNESCO World Water Development Report 4 and sources therein. An estimated 148 states have international water basins

A more complex challenge Globally, water is considered to be under-valued intensity of industrial and commercial demand, sensitivity and under-priced. The financial incentives that spur of downstream users and local habitats to variability in companies to manage water more efficiently are thus throughput, and nature of the regulatory, socio-political lacking, even as the risks associated with water-related and geo-political context – all these factors and more can shocks become more and more pronounced. But while play an important part in determining the risks associated the direct costs associated with water abstraction may with water security in a given location. By contrast, a tonne remain low for some time to come, the constraints and of greenhouse gases emitted anywhere in the world has negative economic impacts associated with water have the same potential contribution to global warming and the the potential to create large-scale, disruptive ripple effects effects of climate change, and so far only relatively few across the value chain. regions of the world have imposed regulatory or market mechanisms to mitigate climate change. Like carbon, the failure to internalise the risks associated with water consumption into water-pricing represents a huge market failure. Unlike carbon, the risks associated “Water has important differences in relation to carbon. with water are fundamentally characterised by the local All water is local, all carbon is not. With a tonne of or regional context in which they occur – making it much carbon – geographic location is irrelevant.” more difficult to identify potential hotspots in an already complex global economic marketplace. The variability of Eric Myers, Director – Integration, Energy and rainfall, quality of local infrastructure, population density, Environmental Policy, Duke Energy

Water Means Business | October 2012 | © Corporate Citizenship Page 5 Water means business While most companies have historically identified water Industries with a high dependence on water have been the as one of the key aspects to be addressed as part of most active in developing and articulating comprehensive their environmental policy commitments, only leading water strategies. These include manufacturing, food and companies have begun to assess the risks associated beverages, utilities, metals and mining, and the agricultural with water use on their direct operations and across industry. However, in a world running short of supply and their value chains. Some of the heightened business increasing in meteorological, hydrological and climatological risks faced by companies include physical constraints risk, water represents an emerging area of concern for all to operations in water stressed regions; increased businesses, well beyond the most water-intensive sectors. likelihood of extreme weather events such as drought and flooding having knock-on impacts on key product “Commitment to sustainability has historically been the or service inputs; reputational or financial damage driver for addressing water use; going forward, scarciity associated with the over-abstraction or pollution of and cost will be key factors.” freshwater resources; price shocks along the value chain; regulatory intervention; and, last but not least, Andrew Boyd, Group Supply Chain Sustainability litigation. Manager, Unilever

Companies can face the following water- related risks: • Physical risks including exposure to water stress, flooding • Litigation risks including compensation for damages to and pollution; local ecosystems, livelihoods, property and well-being;

• Regulatory risks including higher tariffs, the redistribution • ‘Other risks’ including geopolitical risks (due to conflict of water rights and more stringent regulations governing or political disagreement over transboundary water water abstraction or water quality; resources), infrastructure risk (disrupting operations), and product risk (felt through decreased demand for • Reputational risks including harm to the corporate brand water-intensive products). and diminished goodwill among stakeholders whether they be customers, local communities, local authorities, regulators, investors, employees, NGOs or others;

Navigating the challenges The World Business Council for Sustainable Development that are relevant for their business, industry and global (WBCSD) has identified three water challenges to be operations. How do managers actually go about developing addressed by businesses: and implementing a water strategy? What does it mean for • Efficiency: more drops for less and more value per drop; companies in practical terms? What are the different stages • Security: quantity and quality for all; involved in developing a water stewardship management • Interconnectivity: accounting for the sustainability of approach? the whole system. Below we have identified six steps that companies can take Other groups, such as the UN CEO Water Mandate, have in order to develop their own water sustainability strategy articulated similar goals for companies seeking to address and a few examples of leading-edge initiatives adopted the risks associated with growing water resource concerns. by businesses to mitigate water risks and maximise However, companies often face a steep learning curve in opportunities around water. translating these goals into actionable and strategic plans

Page 6 © Corporate Citizenship | October 2012 | Water Means Business Figure 3: Steps toward managing water risk and maximizing opportunities

Quantify your Water 1 Footprint (Direct & Indirect)

Establish Collaborative Map Water Risks 6 Partnerships 2 (Direct & Indirect)

Establish a Strategic 5 Framework of Policies, Identify High Priority Programmes & Initiatives 3 Areas for Action

Identifiy Improvement 4 Opportunities in High Priority Areas

3 Developing a strategic response

1. Quantifying the direct and indirect water footprint Without understanding the volume of water consumed in techniques as practicable. When investigating indirect the different parts of the value chain – from raw material water use, one should ideally prioritise effort based on the inputs, through to direct operations and end-use – it is volume and/or spend on the specific inputs or outputs impossible to develop a coherent strategy on water. The involved. The aim, in the first instance, should be to first step is therefore to quantify your direct water use identify potential hotspots in the value chain rather than based on direct measurements and/or estimations, where to come to a precise figure (which may be impractical or necessary, along with your indirect water use, targeting tier too resource intensive to do to begin with). one and two suppliers or using life-cycle analysis (LCA)

2. Mapping water risks (direct and indirect) Having established where and how water is consumed security or where wider social and environmental impacts in the value chain, the next step is to correlate this with might apply. Most companies will begin by addressing global or regional assessments of water scarcity or water their direct risks first, but indirect risks in the supply chain stress (or indeed other applicable water risk factors) to or associated with products and services should not be develop a risk map. This should identify where high or ignored, since they may constitute a company’s greatest growing water use coincides with concerns over water areas of exposure to risk.

Water Means Business | October 2012 | © Corporate Citizenship Page 7 A number of tools and methodologies exist to support Coca Cola. It is designed to help companies and the initial water footprinting and risk assessment stages. investors understand the strategic importance of Among the most commonly referenced are: reducing water risk exposure in high stress areas. a. CERES Aqua Gauge - This is an Excel scorecard Aqueduct can help users identify potential sources of that allows investors to grade a company’s water water risk in their operations and supply chains, and management activities against in depth definitions of select and implement risk mitigation solutions. leading practice. f. WWF-DEG Water Risk Filter - The Water Risk Filter b. GEMI Local Water Tool - This is an online tool that can be used to assess water related risks in companies assesses the local water risks of a specific site. It allows operations, suppliers or growth plans. The Filter covers companies to quantify water risks using a system of all aspects of water risks, all industries and countries. weighted risk indicators and provides a template for a It interprets scientific data and translates it into risk management plan. numbers based on a questionnaire. Users can then c. Water Footprint Network (WFN) Water Footprint map assessed facilities on different water related map Assessment Tool - This creates a water footprint overlays. It provides a highly structured set of risk analysis based on geographical and agricultural indicators. commodity information. The tools noted above tend to focus on water stress as d. WBCSD Global Water Tool - This tool was developed a key driver of risk, however, it should be noted that there by the WBCSD to visualise, analyse and prioritise water may be other environmental risk factors that apply. These risks. It maps location, water use and discharge data in may include the risk of coastal and inland flooding, or relation to water data. It also provides a mapping tool in the likelihood of high impact water pollution incidents in relation to the organisation’s sites. ecologically sensitive locations. Such factors should not e. WRI Aqueduct - This is an online water risk mapping be ignored when mapping the risk exposure of a particular and measurement tool, partly based on data from business and/or its value chain in any given location.

Unilever – Water risk mapping In 2009 Unilever used a tool developed by the World include a commitment to maintain water abstraction across Business Council for Sustainable Development (WBCSD) the company’s global factory network at or below 2008 levels to identify levels of water stress at each of its then 264 by 2020, as well as a commitment that all newly built factories manufacturing sites. This, combined with sites’ water usage, will aim to abstract less than half the water of those in the formed the basis of assessing possible negative impacts in company’s 2008 baseline. The assessment took into account water stressed locations and to identify priority locations for current environmental performance and growth factors, and future reductions. resulted in the generation of a detailed list of projects per site that would have the greatest impact on water efficiency. In 2010, the company went further by conducting a site-by- site study to better understand how they could meet the http://www.unilever.com/sustainable-living/ourapproach/eco- efficiencyinmanufacturing/ company’s Sustainable Living Plan targets. These targets

3. Identify high priority areas for action The risk map provides a high-level analysis of where the refining its list of priority areas. Additional components impact of water constraints are likely to be material to the that might come into play when doing this at a more business, based on current or expected demand. This is granular level (particularly for direct operations) may only a rough guide to prioritising areas for action. The next include: the sources of water abstracted and consumed step would then be to corroborate this top-down analysis (e.g. groundwater, surface water or mains supply; with more in-depth site-specific or product-specific freshwater versus brackish/grey water); the existence of research to substantiate the initial risk assessment. competing demands for available water resources at a Companies often find that the actual risks on the ground watershed level; the role of climate change in terms of may be more or less acute than originally suspected – the variability of water supply (based on local/regional or perhaps that different assessment tools generate meteorological forecasts, if available); the impact of varying assessments of the level of exposure to risk and regulation; the treatment of wastewater; the sensitivity of as such there is need for more information before a final downstream receptors of wastewater; etc. Supply chain assessment can be made. This stage is perhaps the most and downstream products would be subject to a different critical in terms of strategy development and will generally set of considerations depending on the nature of the require each company to adopt its own framework for company’s value chain.

Page 8 © Corporate Citizenship | October 2012 | Water Means Business 4. Identify improvement opportunities in high priority areas Having identified the largest impact areas of the value may also involve dialogue with upstream or downstream chain and specific water-stressed or water scarce users to identify ways of collaborating at a watershed geographical markets or locations, the next step is to level; or consultation with suppliers and third-party establish what measures can be taken to minimise organisations, such as NGOs if appropriate, to discuss impact and mitigate risk in those areas. This step will again supply chain concerns and to solicit creative solutions to involve engaging with local operations to generate ideas the issues identified. By prioritising the areas of highest to address the specific risk factors involved, or engaging risk, businesses will be able to identify the key areas in with technical experts on new and innovative techniques which it makes sense to undertake this level of in-depth for water management in the specific areas of concern. It engagement and analysis, as required.

Puma – Addressing the supply chain PUMA has set targets to reduce water use in PUMA offices, stores, warehouses and direct supplier factories by 25 % by In 2011 PUMA became the first company ever to publish a 2015. The company has also asked strategic suppliers to global environmental profit and loss account as a means reduce their water use by 25%. of placing a monetary value on the environmental impacts across its value chain. Due to the relative significance of water consumption in PUMA’s supply chain, PUMA focuses its water conservation The overall impact of GHG emissions and water, efforts on its fabric suppliers, tanneries and cotton suppliers considered to be its most significant environmental where water savings will have the greatest impact. Although impacts, was valued at EUR 94.4 million in total for 2010 PUMA’s offices and factories do not consume significant (of which water accounted for EUR 47.4 million and GHGs amounts of water for industrial purposes (the majority of EUR 47.0 million). However, PUMA’s direct operations water used is for sanitary purposes and gardening water), accounted for only 0.001% of the water consumption the company has also installed water-saving and rainwater analysed (and 15% of GHGs) – the rest was accounted for harvesting technology at its headquarters. in the supply chain. http://safe.puma.com/us/en/category/environmental/

5. Establishing a strategic framework Having done a deep-dive analysis of the risks and operations, the specific risk factors involved and the level of opportunities, consideration should be given to the policies, influence the company can have throughout its value chain. programmes and initiatives required across the value chain However, a fundamental part of any strategy will involve the or in specific geographic locations in order to drive change. establishment of new metrics and targets in order to track This will vary depending on the nature of the company’s performance and drive improvement in key areas.

Duke – Articulating a water strategy design of its new power plants, and has also invested in over 1,000 MW of wind and solar generation capacity Duke Energy is a leading US power company, based in over the past four years, which requires far less water use Charlotte, North Carolina. Water is a critical resource for than conventional generation capacity. Duke Energy, used to power hydro plants, and as cooling water for its nuclear and fossil fuel plants. The company 2. Partnerships – Duke Energy participates in a number withdraws over 3 trillion US gallons of water per year, of of successful partnerships with government agencies, which 98% is returned to source and is available for other community groups and the private sector to improve uses, such as public water systems, industry, wildlife and the management of shared water resources. An example recreation. of this is the Catawba-Wateree Drought Management Advisory group, which comprises large water users along In order to address challenges associated with increasing the Catawba-Wateree river basin. The group works water demands and periodic drought conditions, to establish detailed action plans and procedures to particularly in the Carolinas, Duke Energy has taken a two- collectively manage water withdrawals during times fold approach to managing its water resources: of drought, prior to those very incidences of drought 1. Technology solutions – as part of its capacity expansion occurring. and modernisation efforts, the company has sought http://sustainabilityreport.duke-energy.com/environmental-footprint/ to minimise the impact on local water resources in the water-a-critical-resource/

Water Means Business | October 2012 | © Corporate Citizenship Page 9 6. Establish collaborative partnerships Leading companies are already demonstrating the value suit. resulting in interesting collaborations between of partnerships in managing water risk in their value producers, consumers, regulators, development chains. We expect that as water-related risks expand agencies and technology providers. and intensify, more and more companies will follow

Marriott – Collaborating with technology To this end, Marriot has recently formed a partnership providers with Nalco, a water treatment and process improvement company, to produce 450 million gallons in water savings Marriott has an integrated global environmental strategy from 2010 to 2012. Nalco’s monitoring equipment and water that includes a target on water efficiency, among other key treatment chemistry have already been installed in 168 aspects. To date, the company has made considerable hotels around the world, helping to improve water treatment progress in reducing its overall water use. Since 2007, in the hotels’ chillers and cooling towers. This programme is Marriott has reduced water consumption by 11.6 per cent per also being rolled out to additional properties, with expected occupied room. Marriott’s sustainability goals include a target savings of at least 125 million gallons of water per year. to achieve an overall reduction in water consumption of 20 http://www.marriott.com/corporate-social-responsibility/corporate- per cent by 2020 relative to a 2008 base year. environmental-responsibility.mi

3 Emerging best practice

A. Extensive water partnerships The complexity of the water landscape, as well as the Thames Water’s Waterwisely drought campaign and interconnectedness of global supply chains and that of Unilever’s USLP consumer product water-use campaigns consumers of water in any given location, means that are prime examples of how companies are engaging with to address this issue effectively requires a collaborative the downstream consumer base to promote sustainable approach. Organisations have to work together with their behaviour change. SABMiller’s Water Futures partnership communities, competitors, suppliers, customers, local with GIZ targets watershed protection in regions facing authorities and, in some cases, national governments in significant water risks. an integrated manner. HSBC’s US$100 million five-year Water Programme, As mentioned above, leading companies are not only looking a collaborative partnership with WWF, WaterAid and to their direct water-related risks but their indirect ones as Earthwatch, targets the world’s most populous water well. In most high risk cases, where local demand for water basins, and is another good example of a proactive, is growing or where climate change is demanding greater partnership-led approach to tackling water issues. It is attention to how basin-wide water resources are managed, also an example of how strategic community investment it will not be possible for companies to address the risks programmes can be linked to delivering sustainability they face in isolation of their wider context. Successful risk benefits and securing growth opportunities in water- management will therefore be determined by the ability of stressed markets. companies to establish functional partnerships and create movements among various stakeholder groups.

B. Water value-pricing There is broad acceptance of the argument that the low resorting to shadow-pricing or value-pricing water use price of water is a barrier to private companies investing (taking into account the cost of abstraction, treatment, heavily in water-saving technology or even infrastructure transport and discharge, business continuity benefits upgrades. To overcome this barrier and to reflect the etc.), in order to evaluate their investments. It may be that opportunity cost of water-intensive activities or projects, governments will seek to encourage or regulate for better leading companies in water-intensive industries are valuation of water just as they do for carbon.

Page 10 © Corporate Citizenship | October 2012 | Water Means Business By establishing a more accurate internal price for water, increase the overall operational energy-intensity, or companies can ensure that long term investments vice versa. are future-proof, taking into account risks and opportunities that may not be reflected in the nominal Puma’s EP&L water valuation methodology is an price. It will also help to resolve any potential trade- interesting example of how accounting for the value of offs between water-efficiency and other sustainability water can be incorporated into corporate sustainability objectives such as energy or carbon efficiency, where strategy, but there may be other ways of valuing water that an investment in reducing the water-footprint may companies can adopt.

C. New water metrics and reporting

There are already signs that corporate reporting Additionally, companies will increasingly adopt on water will soon come to occupy a similar level of new ways of reporting overall exposure to water significance and prominence as carbon reporting risk, supplementing traditional reporting of water does today. Leading companies are already reporting consumption, discharge by volume and wastewater on water-related risks in more detail than any other quality with more sophisticated risk-based metrics. environmental aspect barring carbon and – like carbon Such metrics will seek to account for not just reduced – there will be an increasing trend towards voluntary (or volumes of water consumed as the key measure of even mandatory) water reporting. success but also company-specific assessments of factors that might influence the risks associated with The CDP Water Disclosure initiative has been requiring the volumes involved. The CEO Water Mandate’s companies to report on their water-related performance Corporate Water Disclosure Guidelines points a and strategies for the past three years, driven primarily way forward in this respect, providing guidance to by interest from the investment community. Going companies on communicating their performance more forward, as societal concerns over the issues associated holistically to their stakeholders. with water risk gain greater momentum, it is anticipated that not only investors, but other stakeholders As watershed-level data becomes more accessible to including regulators, business-to-business customers, companies operating in different parts of the globe, this local communities and indeed consumers will have will allow for more detailed analysis by companies of an interest in ensuring that companies are actively not only their direct risks but also indirect risks across managing and mitigating their water risks. their value chains.

D. Net zero water consumption Coca Cola’s target to become ‘water neutral by 2020’ As an example of this, Unilever South Africa’s new Indonsa is perhaps the first or most famous example of net foods factory – which is located near Durban, South Africa zero water consumption thinking. However, with – has been consciously designed to minimise water risks pressures on increasingly scarce and unpredictable by being completely water neutral (meaning self-sufficient water resources on the rise, the concept of net zero without requiring any water from municipal supplies in water consumption is only set to become more normal conditions) within one year of full operation. By commonplace. Office buildings, hotels, manufacturing becoming water neutral at this facility, one of Unilever’s sites, and new large residential developments will all largest in the world, the company expects to mitigate the be required to meet higher standards (both voluntary impact of its activities in a water stressed location. With and mandatory) in relation to water use in the future, advances in rain-harvesting and water recycling technology, including net zero water consumption, particularly in this kind of approach will become increasingly normal for water stressed areas. businesses operating in water constrained markets.

By 2050, the world’s population is expected to reach 9 The issue of water sustainability is a touch-point for some billion. Already, at 7 billion, we are seeing the unsustainable of these considerations. By better understanding the risks impact of meeting society’s demands for food, clothing, and opportunities faced in relation to sustainable water shelter and energy, on our ecosystems, water resources use and changing weather patterns, perhaps companies and climate. Like birth pangs, the signals of a looming will be able to identify ways to minimise or avert the crisis are already apparent, with contractions quickening most negative repercussions associated with the trends every year and every decade that passes. Businesses, and identified above. At Corporate Citizenship, we are of the indeed whole economies, have entered a new era of global view that even if the fundamental drivers behind these shocks, the socio-economic and ecological parallels of issues remain unavoidable, the worst effects can be which have never been seen before. A business-as-usual avoided through proactive effort on the part of leading approach to this new era of global crises is thus untenable. companies. We invite your views and comments on the Businesses, if at all possible, must begin to look beyond points raised in this paper and welcome the opportunity the boundaries of previous limitations to consider the very to work together with other companies to define practical real dilemmas facing the structure of society as a whole. solutions to these challenges.

About Corporate Citizenship For further information about the report and our services, please contact: Corporate Citizenship is a global corporate responsibility consultancy that uses clear insight and a simplified approach to sustainability to deliver growth and long-term value for business and Yohan Hill Associate Director society. We work globally across industry sectors. Our work takes us [email protected] to Europe, USA, Asia, Africa and Latin America. We help our clients make the smart choices that will enable them to survive and thrive in an increasingly challenging business environment. Corporate Maggie Law Marketing and New Business Executive Citizenship promotes the idea that companies can be a force for [email protected] good. We advise a global client list on a number of areas: strategy, reporting, supply chain, socio-economic impact, inclusive business models and assurance. Our longstanding clients include Unilever, Shell, Abbott and Vodafone.

5 Appendix: a note of thanks

We would like to thank all those who gave their time to Andrew Boyd, Unilever participate in the formulation of the ideas expressed in Eric Myers, Duke Energy this paper. In particular, we would like to thank: Marc Selby, Thames Water Marcus Norton, CDP Water Disclosure

About the Authors Yohan Hill is an Associate Director with Corporate Nicole Clucas is a Consultant with Corporate Citizenship and has extensive experience in Citizenship, with a Masters from Imperial College corporate social responsibility and sustainability. London in Environmental Technology. She is also an Over the last 10 years, he has worked with clients Associate Member of the Institute of Environmental across a range of industrial and commercial sectors Management and Assessment. Since joining on sustainability issues, providing advice and Corporate Citizenship, Nicole has developed support in the areas of sustainability management, particular expertise in the areas of sustainability strategy development and reporting. His clients strategy development, environmental management have included such leading companies as Johnson Matthey, Land and sustainability reporting. Her clients have included Hiscox, Securities, Molson Coors and National Grid, among others. Yohan Pearson, Unilever and Whitbread. Nicole previously worked in the holds an MSc from Imperial College London in Environmental CSR team at Pfizer and in the Sustainability team at the London Technology and is an Associate Member of the Institute of Borough of Richmond upon Thames. Environmental Management and Assessment.