1
Moving beyond business as usual
A need for a step change in water risk management CDP Global Water Report 2013
Written on behalf of 530 investors with US$57 trillion in assets
Lead sponsor and report writer 2 The evolution of CDP
With great pleasure, CDP announced an exciting change this year.
Over ten years ago CDP pioneered the only global disclosure system for companies to report their environmental impacts and strategies to investors. In that time, and with your support, CDP has accelerated climate change and natural resource issues to the boardroom and has moved beyond the corporate world to engage with cities and governments.
The CDP platform has evolved significantly, supporting multinational purchasers to build more sustainable supply chains. It enables cities around the world to exchange information, take best practice action and build climate resilience. We assess the climate performance of companies and drive improvements through shareholder engagement.
Our offering to the global marketplace has expanded to cover a wider spectrum of the earth’s natural capital, specifically water and forests, alongside carbon, energy and climate.
For these reasons, we have outgrown our former name of the Carbon Disclosure Project and rebranded to CDP. Many of you already know and refer to us in this way. Our rebrand denotes our progress as we continue to catalyze action and respond to business, finance, investment and environmental needs globally.
We now have a bolder, more dynamic look and logo that reflects the scale of the work we must undertake in the coming years to move the markets ahead of where they would otherwise be on these issues and realize truly sustainable economies.
Over 1,000 companies from all over the world have been asked to report vital water-related information to CDP this year;
More than 593 of the world’s largest companies1 engage with CDP to enable effective measurement and management of water-related issues, including reduction of risks and detrimental impacts;
This is a 59% increase in the number of companies using CDP to communicate their water management efforts to investors since last year, making the primary corporate water information now available at www.cdp.net the largest and most comprehensive set in the world.
1 This includes respondents who have submitted corporate CDP is a not-for-profit organization. If you would like to support our vital water-related information through CDP’s supply work to safeguard water resources through donations or sponsorship chain program. Please refer to CDP’s website opportunities, please email the Head of Water, [email protected]. for information on this program. https://www. cdproject.net/en-US/ Programmes/Pages/ CDP-Supply-Chain.aspx 3 Contents
CEO foreword p4 Executive summary p6 Global 500 responding companies p6 Substantive water risks are becoming more immediate p8 Company efforts to mitigate risk and achieve water stewardship p13 The case for investor intervention p19 Commentaries p22 Sector summaries p26 Appendices p42
To read 2013 company responses in full please go to www.cdp.net/en-US/Results/Pages/responses.aspx
Important notice The contents of this report may be used by anyone provided that acknowledgement is given to CDP. This does not represent a license to repackage or resell any of the data reported to CDP and presented in this report. If you intend to do this, you need to obtain express permission from CDP before doing so.
Deloitte and CDP prepared analysis in this report based on responses to CDP’s 2013 water questionnaire. Deloitte and CDP do not guarantee the accuracy or completeness of this information. Deloitte and CDP make no representation or warranty, express or implied, and accept no liability of any kind in relation to the report including concerning the fairness, accuracy, or completeness of the information and opinions contained herein. All opinions expressed herein by CDP and/or Deloitte are based on their judgment at the time of this report and are subject to change without notice due to economic, political, industry and firm-specific factors. Guest commentaries where included in this report reflect the views of their respective authors.
This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte Network”) is, by means of this communication, rendering professional advice or services. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this communication.
Deloitte and CDP and their affiliated member firms or companies, or their respective shareholders, members, partners, principals, directors, officers and/or employees, may have a position in the securities discussed herein. The securities mentioned in this document may not be eligible for sale in some states or countries, nor suitable for all types of investors; their value and the income they produce may fluctuate and/or be adversely affected by exchange rates.
As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.
“Carbon Disclosure Project” and “CDP” is a United Kingdom company limited by guarantee, registered as a United Kingdom charity number 1122330.
© 2013 Carbon Disclosure Project. All rights reserved. 4 CEO Foreword
As countries around the world seek economic growth, strong employment and safe environments, corporations have a unique responsibility to deliver that growth in a way that uses natural resources wisely. The opportunity is enormous and it is the only growth worth having.
The economic effects of mismanaging water resources increasingly water stressed world. A report released are becoming increasingly apparent. The newly earlier this year by CDP and Eurizon Capital analyzing released Intergovernmental Panel on Climate Change the metals & mining sector, revealed that companies (IPCC) report forecasts longer periods of drought acting to manage water strategically, perform better and heavier extreme rainfall. The United Nations has financially. reported that several countries are close to their water limits but that food output must increase by up to Companies that are responding to water challenges 100% by 2050 if current population growth is to be and are using CDP’s unique system are able to sustained. identify profitable business opportunities as a result. General Motors, for example, forecast that recognized These factors will limit economic development brand value in areas of water stress where it has and greatly exacerbate rural poverty, particularly demonstrated leadership in water efficiency and in emerging and developing economies. Already conservation could have a direct impact on revenue. countries such as China and India are realizing they A 10% rise of vehicle sales in Mexico would yield an have to solve water problems if they are to sustain additional US$301 million in revenue. General Electric growth or improve quality of life. The Indian Planning has established that reducing projected water use Commission last year established that the country’s at a Texan site by 52% would save an estimated existing approach to water jeopardizes its economic US$230,000 per year. growth and political stability. In China, home to 20% of the global population but only 7% of its fresh water, While some companies are realizing water-related former premier Wen Jibao said water shortages gains, a significant disparity between investor threaten “the very survival of the Chinese nation”. expectations and company actions exists. The number of investors requesting corporate water data through In Peru, violent protest from communities fearing for CDP has quadrupled in just three years, the number their own water supply has led to the suspension of Global 500 companies taking action and disclosing of a US$4.8 billion gold and copper mining project. this has not matched this pace. A shift in practice is This was Peru’s largest such investment and clearly required if companies are to realize the true benefits demonstrates companies face a license to operate of water stewardship, achieve business resilience risk if they are unable to effectively manage complex and competitive advantage. Using the insights from demands on water resources. standardized company disclosures, investors can enhance risk management of this critical issue. It is therefore no surprise that investors are filing record numbers of environmental and social policy Paul Simpson, resolutions, particularly in the United States2. Investors CEO, and companies that understand the complexities of CDP 2 Sustainable water and devise and implement a strategy that drives Investments Institute (Si2), 20th August 2013. water stewardship will be the long term winners in an 5
There has been a 59% increase in the total number of companies using CDP to communicate their water management efforts to investors since last year. 6 Executive summary
CDP is proud to present the results from the fourth Key findings year of water reporting by the world’s largest listed corporations. It was an impressive year. Substantive water-related risks are becoming more immediate. In 2013, 530 institutional investors representing Almost three quarters of respondents (70%) have approximately US$57 trillion in assets and a number identified water as a substantive business risk. For some of major purchasing organizations called for greater respondents, anticipated financial impacts are as high transparency on corporate water issues from 1,036 as US$1 billion, and the majority (64%) of reported risks companies. 593 companies from Antofagasta to are expected to impact now or within the next five years. Hewlett-Packard and L’Oreal to Unilever responded; In one year, the number of near-term substantive risks a 59% increase since last year. This analysis and report reported by companies has increased by 16% to 614 is presented to provide those investors and purchasers risks. with insight on the adequacy of the corporate response to water issues. Respondents’ water stewardship activities are notably lacking, potentially exposing their company In this report, CDP and Deloitte Consulting LLP and investors to risks that could be mitigated. (Deloitte) present results of the analysis based on the The majority of respondents (63%) set concrete targets water disclosures of 184 Global 500 corporations3 that and goals for their direct operations and, in general, participated this year; a 60% response rate. Together, many of these are focused on reducing water use these corporations account for approximately 11 billion or increasing water recycling/reuse. Companies that megaliters of water withdrawals per year, enough to continue with such a narrow focus could be missing provide 50 liters of water per day to the world’s current potential opportunities and overlooking serious risks. population of approximately 7 billion people for nearly 82 years. Over 90% of these companies now have water Investors must encourage a step change within management plans in place, and companies report more companies to address water-related risks and than 1,300 actions, targets and goals to reduce their associated impacts to financial performance. impact on water resources, and thus their exposure to Through CDP, investor signatories are promoting water risks. corporate water stewardship as a risk reduction strategy. They recognize that water stewardship is associated Although there are signs of progress in addressing with a forward-looking, resilient company with a sound corporate water risks, challenges remain. This report understanding of its risk profile contributing to the is divided into two parts. The first presents the investor company potentially being viewed as a more attractive case for water stewardship and the benefits that investment. investors, corporations and policy makers can secure through reducing risk, increasing business resilience and safeguarding water resources. The second half provides insight into how corporations are responding to water risks and striving towards better water stewardship.
CDP acknowledges the hard work and dedication of many of the world’s corporations in measuring and reporting these important data, particularly those that have consistently disclosed through CDP since the water program began in 20104.
This report finds that business as usual is often 3 530 investors embedded in corporate water strategy and that a representing US$57 trillion in assets asked significant shift in approach is required to avoid large A note on the Text: All data and information 305 Global 500 scale value destruction. It concludes with a call to action corporations to report presented in this report is based on the 180 self- for investors and policy makers to assist and guide vital water data through disclosed responses from Global 500 companies CDP’s water program companies to move rapidly beyond existing practice, this year; 180 responded received by August 9, 2013. To protect to establish regular engagement with stakeholders by the deadline. To read confidentiality, companies that chose not to make the full-text response and lead a collaborative approach to safeguard water of any company in the their responses publicly available are removed as a vital shared resource to contribute to sustainable survey, or for more from aggregated statistics when two or fewer information about any revenue generation and a more resilient future. aspect of CDP’s work on non-public responses were identified. water, please visit www. cdp.net. A full list of all reporting corporations is Full responses on a corporation-by-corporation available on page 46 of basis are available to all investor signatories and this report. 4 These companies are via the CDP website, www.cdp.net. highlighted in appendix IV, page 46 of this report. 7
Water scarcity, especially in developing regions, may lead to greater political and economic instability and in turn affect VINCI’s operations.
VINCI 8 184 Global 500 responding companies
Europe
United Kingdom 74% (67/91) 79% Germany (19/24) 83% East Asia (10/12) 42% Canada Switzerland (21/50) 67% 89% (8/12) (8/9) Japan
United States 70% (14/20) North America 59% France 60% (71/120) 89% Greater China (79/132) (16/18) 20% (3/15) South & West Asia 63% (5/8) India
Africa 57% Australia (4/7) Latin America 100% (2/2) 75% 43% (3/4) (6/14) South Africa 100% Southeast Asia & Oceania (2/2) 63% (5/8)
1 Companies reporting per sector Consumer Consumer Information Materials Energy Health Care Industrials Utilities Staples Discretionary Technology 37 29 26 23 21 18 16 14 9
Europe
United Kingdom 74% (67/91) 79% Germany (19/24) 83% East Asia (10/12) 42% Canada Switzerland (21/50) 67% 89% (8/12) (8/9) Japan
United States 70% (14/20) North America 59% France 60% (71/120) 89% Greater China (79/132) (16/18) 20% (3/15) South & West Asia 63% (5/8) India
Africa 57% Australia (4/7) Latin America 100% (2/2) 75% 43% (3/4) (6/14) South Africa 100% Southeast Asia & Oceania (2/2) 63% (5/8)
2 No. of risks reported per country (countries with >10) 952 total risks reported (all countries)
United States: 97 Mexico: 51 Greater China:Australia: 34 33 South Africa:India: 33 27 Brazil: 23Chile: 17Canada: 11 10 Substantive water-related risks are becoming more immediate
Companies are more aware of the breadth and significance of water-related risk, such as business interruption due to inadequate public infrastructure, supply chain disruption due to water scarcity and reputational damage. Almost three quarters of Methods of water use, sources of water, consumption respondents (70%) report exposure to one or more volumes and potential contamination are issues of water-related risks that could substantively affect their business. In two years, the percentage of companies interest to the public, media and regulatory bodies recognizing the risks that water presents has increased in areas where groundwater is used for multiple by 17%. purposes. Water-related risks are also becoming more immediate. These issues are especially visible and important in Two thirds of risks expected to impact both direct operations (65%) and supply chains (62%) are areas where hydraulic fracturing is used. Perceived anticipated to materialize now or within the next impact to groundwater resources by Apache would five years. In just one year, the number of near-term result in unfavorable public perception. substantive risks reported by companies has increased by 16% to 614 risks. Apache Further, more than half of respondents (53%) have already experienced detrimental impacts related to water in the past five years. For example,Noble Energy reports that the severe drought conditions of previous years have resulted in detrimental impacts to operations including increased operational costs. These impacts include delays to hydraulic fracturing and regulatory compliance difficulties. Specifically, the drought conditions have resulted in low surface water flows and an inability to withdraw water for use in hydraulic fracturing operations in some areas. We acknowledge that changes in water availability will have an impact on our company and we believe Some companies demonstrate a mature understanding it deserves serious attention. of the range of water-related risks. The Coca-Cola Company, for example, reports that “water stress has many faces and should not be defined solely as Mondelez International physical availability. The risks to any particular location are a function of a number of factors including physical availability, water quality, infrastructure existence/ pressure, pricing, drought, competing use, increasing demand, climate change, policy, public sector management capacity, regulatory limits and social acceptance.”
This improved ability to identify and forecast risk scenarios may demonstrate a degree of maturation in the corporate understanding of the relationship between water resources and corporate activities. However, increasing social, political and regulatory focus on water globally is another likely driver.
The growing level of reported risk is accompanied by more investors turning their attention to water. The number of investors calling for greater corporate transparency on water has quadrupled in the last three years; the case for company action is both clear and immediate. 11
3 CDP’s water investor signatories and assets over time 4 Investor signatory breakdown-type
CDP water signatories Banks Pension Funds CDP water signatory assets (US$) Foundations SRI Asset Managers Insurance Other Mainstream Asset Managers
600 137 354 470 530 60 Investor types 16 43 50 57 18 199 29 Other 500 50 30 Insurance Foundations Assets (US$ Trillions) Number of signatories 35 SRI Asset Managers 400 40 Banks Pension funds Mainstream Asset Managers 300 30
200 20 89 128 100 10
0 0 2010 2011 2012 2013
5 Respondents reporting exposure to substantive 6 Timeframe of risks and near-term substantive risks reported water-related risks (% of respondents) (# of risks)*
4 Near-term Respondents reporting exposure to substantive water-related risks (% of respondents)Long-term Unknown Direct Operations and Supply Chain near term substantive risks (# of risks)
Direct operations Supply chain
Yes Yes 123 Water stress or scarcity 66% 39% 61 Flooding 124 57 Rising discharge compliance costs 46 Declining water quality No 614 44 Higher water prices 214 38% 42 Reputational damage 39 Water withdrawal limits No 39 Regulatory uncertainty 32 Water efficiency requirements 31% 19 Restricted operational water permits 18 Inadequate infrastructure Don’t know 23% 81 Other risks Don’t know 3%
* The following risks were also reported: Changed product standards (2 respondants), Litigation (2 respondants) and Product risk (9 respondants).
Unknown Timeframe of water-related risks (% of risks) Long-term (>5 years)
Near-term (0-5 years) 12 Substantive water-related risks
Physical risk: General Motors Regulatory risk: American Electric Power Increases in the frequency of drought conditions New EPA regulations, which will govern the can further depress water availability for potential effects of water intake structures on production in water-stressed areas. GM has fish populations, could affect as many as 31 production facilities in Mexico, an area that was power plants owned and operated by AEP. hit hard by drought in 2012, and there is a risk The EPA is also expected to propose changes that increases in the frequency of such events to regulations that govern the treatment and could disrupt production due to lack of water discharge of power plant waste waters. The availability. Mexico accounts for about 6% of impact of these new regulations could cost as total global production. A one month disruption much as US$1 billion for the entire AEP fleet of GM’s production, for example, could result in of coal-fired power plants. loss of US$27 Million in net income.
952 614 7 substantive water-related risks reported near-term substantive water-related risks reported by each respondent on risks reported average 13
7 Total number of detrimental impacts experienced in past 5 years (# of impacts)
Detrimental impacts experienced in past five years (# of impacts)
183 98 73
2013 2012 2011
8 Sectors most exposed to substantive 9 Sectors most impacted by water in the water risks (% of respondents) past five years (% of respondents)
2013 2013 2012 2012
Energy Materials 82% 76% 87% 68% Materials Utilities 79% 67% 71% 71%
Consumer Staples Industrials 74% 67% 78% 44%
415 338 58 physical risks regulatory risks reputational risks 14 Detrimental water-related impacts
Water impacting the bottom line: E.ON Business suspended: Barrick Gold experienced water shortages, leading to experienced a water shortage at one of its mines reduced water flow for its hydroelectric power in Papua New Guinea in 2010 that forced a plant generators in 2011 that resulted in 0.5 billion to shut down for two weeks straight, resulting in kWh (9%) less power generated than usual. an undetermined loss of revenues. 15 Company efforts to mitigate risk and achieve water stewardship
Water risk stems from the impact an organization has on water resources. For example, corporations that degrade already scarce water supplies, perhaps through over consumption, are potentially exposed to penalties and reputational damage. The businesses that fail to build long-term, holistic plans to reduce their impact Investors also know how damaging inaction, on water resources are potentially exposed to costly inappropriate action or delaying interventions on physical, regulatory and reputational water-related risks as outlined in Figure 6. water-related issues can be... The global economy will favour businesses that take a pro-active The pressing questions for many investors and approach to water stewardship. companies are not whether they face water risks, but how severe impacts will be, how soon they will be Eurizon Capital felt and how frequently they will impact corporations. There are several ways that these water-related risks and impacts can be mitigated, but the majority of respondents are currently focusing their strategic attention on discreet activities within the fence line to reduce water dependency within their operations with little attention to other aspects of their value and comprehensive ways to address water-related risks chain or local watersheds. Two thirds of respondents both within their watersheds and throughout their value (63%) report concrete targets or goals for their direct chains. operations. In general, the majority of these are focused on reducing water use or increasing water recycling/ As Gianluca Manca from Eurizon Capital states, reuse in an effort to reduce freshwater dependence. “Investors also know how damaging inaction, inappropriate action or delaying interventions on The “within the fence line” focus may be attributed to a water-related issues can be.” As has already been tendency to apply carbon mitigation strategies to water, demonstrated, water impacts can severely reduce coupled with a bias to tackle the most readily achievable profit in a number of ways, including delays in securing targets first – water efficiency in direct operations. Due licenses to operate, infrastructure damage and halts to water’s temporal and spatial nature, water in one in production. Investors increasingly understand that basin is not the same as water in another basin so companies should be evaluated not just on the amount applying a blanket strategy that focuses on reducing of water they use, but on the water-related risks they water use, similar to a carbon strategy, will be insufficient face and how they plan to manage these over both the to mitigate the underlying risks. While focusing on water short and the long-term. usage is an important first step that may indicate where efficiency and reduction opportunities lie, companies that continue with such a narrow focus could be missing opportunities and overlooking serious risks. Water Stewardship
When considering the risks being reported - and the Companies with robust water stewardship rapidly changing physical, regulatory and social contexts strategies are characterized by having a surrounding them – it is evident that many cannot be comprehensive knowledge of water use across tackled solely by efficiency gains within the fence line. their value chain and the impact (current and Companies should include actions, targets and goals projected) that water-related issues have on their for community engagement, supply chain management, business and vice versa. Most importantly, they watershed management, transparency and public have appropriate plans and processes in place to policy. A robust strategy for minimizing risk and building mitigate risks that give adequate consideration long-term resilience will take each of these factors into to priorities of the local water basin in which they account. However, respondents’ activities in these areas operate. are notably lacking, potentially exposing their company and investors to risks that could be reduced. Only 6% of Respondents must consider their water needs respondents set concrete targets or goals for community and corporate interests against the backdrop of engagement, 4% for supply chain, 3% for watershed the water basin in which they operate. Those management, 1% for transparency, and no respondents that become water stewards will more effectively set concrete targets or goals around public policy. mitigate risks by reducing their impact on water resources. By managing their risks, they will be Corporations need to ‘know their basin’ and understand better able to avoid value destruction and seize the impact they have upon it. Only then can appropriate competitive advantage, thereby building business action be established. In addition to striving for greater resilience. efficiency, corporations should seek innovative, strategic 16
10 Water management and governance responses (% of respondents)
2013
2012
Water policy, Board-level Concrete targets Report water Report water Identify water Water and carbon Require suppliers strategy or plan oversight or goals withdrawals recycling/reuse discharges linkages/trade-offs to report on water
11 Proportion of respondents setting concrete targets or 12 Board-level oversight vs. risk exposure by sector goals by type (% of respondents) (%Sector of respondents)
2013 80
Direct Community Supply operations engagement chain 63% 6% 4% 70 Health Care Materials
Industrials Consumer Discretionary 60 Global 500
Consumer Staples Board-level oversight of policy, strategy or plan oversight of policy, Board-level
Utilities Energy 50
Information Technology
40 50 60 70 80 90 Exposed to risks in direct operations or supply chain Watershed Transparency Public management 1% policy 3% 0% 17 When efficiency is not enough
AU Optronics5: “The Longtan site received Israel Chemicals6: The Dead Sea is a significant its environmental impact assessment approval source of raw materials for Israel Chemicals; in 1996 and entered production in 2001. The however, the water levels drop by around plant has also received a government permit one meter each year. Solutions proposed by to discharge into the Xiaoli River. Even though the Israeli Government are likely to affect the nearly 20 factories discharge into the Xiaoli composition of the sea water and, hence, the River, river water and underground water is still quantity of materials the company can produce. used for irrigation in the area. As a result, local “Today, before these effects have been examined residents have lobbied the AUO Longtan plant scientifically and the planning decisions made, to stop discharging wastewater into the river on it is difficult to determine the impact of the many occasions over the years. The Longtan proposals, although, we can expect significant site had previously proposed to pipe wastewater expenses.” to the Laojie River in Taoyuan County. The move has been delayed due to a lack of government cooperation.”
5 Other responding company 6 Other responding company 18 Water stewardship
Nestle: Nestle Water North America spend about Imperial Tobacco Group: The Group’s US$8 million annually to maintain and protect the subsidiary Manufacture de Cigarettes du Tchad quality of their spring sources and their immediate (MCT) is helping to put in place deep water watershed areas. Approximately 14,000 acres of pumps in villages in the east of Chad. The first land around their spring sources are managed as was installed in Magarine, followed by three open space and are an environmental benefit to more wells providing drinking water to remote the local community. settlements. MCT is also supporting a project that helps former tobacco growers in the south of Chad switch to a more suitable crop to cope with the country’s changing environment. In the last five years, MCT has invested around US$190,000 on improving communities. “In a country where many live on less than £1 a day, we have a duty as a responsible business to support community projects.”
Effective water stewardship will require that provisions are made firstly for water to meet the human right to water, then to ensure that ecosystems are able to function, and finally to ensure that water is used efficiently for agricultural and industrial use.
Nestle 19 The case for investor intervention
While some progress has been demonstrated since 2011, such as a 15% increase in the proportion of respondents setting concrete targets and goals, a 39% increase in the proportion of respondents requiring key suppliers to report water use, risks and management, and a 39% increase in the proportion of respondents As the manager of about €140 billion of pension identifying opportunities, there is still some way to go to assets, water risk is affecting PGGM investments in address water-related risks: a variety of ways. The problem however, is that the business value at water risk remains unclear because 23% remain unable to identify whether or not they are exposed to risks across their supply chains; company information on water is rarely comparable and meaningful. CDP’s work on improving and 19% remain unable to identify water discharges by standardizing water risk disclosure is therefore vital in destination, treatment type and quality; helping PGGM assess the water risk in our portfolios. Beyond that, we want companies to reduce their 15% fail to meet discharge regulations; water use and increase collective water security. 42% of boards are not engaged on water; and Piet Klop, Senior Advisor Only 37% require key suppliers to report on water Responsible Investment risks and management despite more than half PGGM Investments (52%) sourcing key inputs or raw materials from regions subject to risk.
To move companies beyond business as usual Although there is no globally agreed definition of water approaches and to protect assets from current and stewardship, CDP and its Water Advisory Council, which future water-related risks, investors must provide includes experts from Deloitte Consulting LLP, NBIM, the guidance and leverage needed to cause a step the Pacific Institute, RobecoSAM, Sasol and the World change in thinking. There is a clear and urgent need for Wildlife Fund (WWF), are working alongside a range companies to develop effective risk mitigation responses of stakeholders to define what responsible corporate to sustain corporate activities, avoid value destruction water use and engagement means on a practical level. and help ensure resilience in the face of water risks. We all agree that it goes beyond reducing water use to reducing impact on resources. There are 530 investor signatories with a total of US$57 trillion in assets holding companies accountable for the Emerging corporate water stewardship frameworks economic, environmental and human consequences prescribe a much broader range of actions. For of their water use and management. Corporate water example, the Alliance for Water Stewardship Standard7, stewardship is increasingly being recognized by the CEO Water Mandate’s Water Management Maturity investors, policy makers and NGOs as a useful way to Progression8 and WWF’s Five Steps to Better Water appropriately manage water-related risks. In response, Stewardship9 encourage companies to look beyond a framework of shared risk and water stewardship is their direct operations to consider supply chain and emerging. watershed management; collective action; public policy; and community and stakeholder engagement.
7 http://www.alliancefor- waterstewardship.org/ what-we-do.html#water- stewardship-standard 8 http://ceowaterman- date.org/files/Ceo_wa- ter_mandate.pdf 9 http://wwf.panda. org/what_we_do/ how_we_work/con- servation/freshwater/ water_management/ stewardship_steps/ 20 Shareholder action on water
Calvert Investments (Calvert) reports that “strong votes The water crisis can be alleviated, but to do this an on Calvert shareholder resolutions demonstrate growing updated way of thinking with increased momentum is investor focus on corporate sustainability.”10 required; we need to act now.
Calvert actively engages with their portfolio companies To increase water security, companies, investors to improve corporate sustainability and financial and countries must glean insights from information, performance. One engagement strategy to improve understand trade-offs among policy choices, and environmental, social, and governance performance establish mechanisms to support execution and is to take an issue directly to the board of directors, investment in water security. senior management and fellow shareholders by filing shareholder resolutions. Calvert filed 22 proposals Arguably, investors have a significant influence on the during the 2013 proxy season on a broad set of issues economy, and as a result they can drive positive change. including water scarcity. Investors have the ability to conduct shareholder resolutions or even divest from companies that they For example, recognizing that “water scarcity poses perceive to be managing water issues poorly. significant business risks and climate change is expected to exacerbate such risks,” shareholders CDP’s signatory investors recognize that the sectors voted on a Calvert proposal that a particular company approached through the CDP water disclosure process exposed to such risks “issue a sustainability report are the most exposed to water-related risks due to that includes a discussion of sustainability risks and industrial and commercial requirements for water and opportunities, including an analysis of material water- the polluting nature of certain types of wastewater. related risks.” The 2013 proposal received a very high Furthermore, many of the markets that these companies supporting vote (>45%), representing an 11% increase are targeting for growth are water-stressed countries, in support from the same proposal issued in 2012. such as Chile, China, and India, where corporate water This sends a strong message to the board and senior practices receive intense stakeholder scrutiny. management that nearly half of their shareholders believe it is important for the company to report on its Many of these investors now realize that a company’s approach and management of water-related risks. social license to operate rests on good environmental stewardship and stakeholder engagement. Through As another example, recognizing that “water shortages CDP, investor signatories are promoting corporate water can cause production shortfalls, price volatility, higher stewardship as a risk reduction strategy. They recognize energy costs, and regulatory action, all while increasing that water stewardship is indicative of a forward-looking, competition for this scarce resource,” Calvert presented resilient company with a sound understanding of its risk a shareholder proposal asking another company “to profile contributing to the company potentially being describe its approach for managing water risks in viewed as a more attractive investment prospect. its supply chain.” Although support for the proposal decreased from 31% in 2012 to 29% in 2013, this With recent research from the Sustainable Investments level of support continues to demonstrate that a Institute11 finding that investors are filing more significant group of investors want the company to take environmental resolutions in the United States than ever steps to address these supply chain risks and protect before, coupled with the increasing number of investor shareholder value. signatories to CDP’s water program, companies must move quickly, efficiently and collectively to address the global challenge posed by water. For details on more Calvert proposals, please see: In the interest of protecting current and future assets http://www.calvert.com/newsArticle. from the risks and challenges that lie ahead, investors html?article=20454. must continue to engage with their portfolio to break the trend of business as usual and contribute to stable, For details on additional water-related shareholder long-term returns. resolutions over the past few years, please see: http://www.ceres.org/investor-network/ resolutions#!/subject=&year=&company=&filer=&se ctor=&status=&memo=&all=water.
10 http://www.calvert. com/newsArticle. html?article=20454 11 http://siinstitute.org/ press/2013/08202013_ Si2_Press_Release_ Proxy_Review_FINAL.pdf 21 Water stewardship safeguarding business value
SABMiller: Drinking water quality Sasol: Securing a license to grow improvements Sasol has successfully responded to mitigate water In 2009, SABMiller’s operation in Colombia entered supply shortfalls by investing in the Vaal River into a partnership with The Nature Conservancy, Eastern Sub-system VRESAP pipeline and a water Colombia’s National Parks administration, and recovery project for Secunda to accommodate the Aqueduct and Sewage Company of Bogotá growth projects. The VRESAP pipeline investment to improve the quality of the drinking water has increased the price of water delivered to consumed by people in Bogotá, and ecosystem the Sasol Secunda complex by 30%. While the conditions, by preventing excessive sediment company acknowledges that this is a significant delivery to the Chingaza and Tunjuelo Sumapaz price increase, they report that it is still a relatively rivers. This would also have important implications small contribution to total operating costs. In on the quality of water received by the brewery addition, Sasol has made greater efforts to better from the municipality. The partnership has used understand the water resource planning process a combination of conservation and educational adopted by the Department of Water Affairs. initiatives, environmental protection measures, and Continuous engagement has been undertaken improvements in the management and sustainable with the authorities to have a greater opportunity to use of ecosystems to achieve its objectives and influence management decisions on the catchment is supported by the establishment of a collective to address identified water supply shortfalls in the fund to provide resources for the activities. When first instance. completed, the project will have extended across nearly 59,000 hectares and is projected to raise US$60 million for conservation projects over the next 10 years. 22 Catalyzing action on corporate water stewardship
Companies and investors must move quickly, efficiently and collectively if the global challenges posed by water are to be addressed.
As a not-for-profit that works to deliver sustainable It has been an impressive journey but there is still economies, CDP strives to move the market ahead of much to be done to achieve the main objective of where it would otherwise be on environmental issues. CDP’s water program to safeguard water resources Now in its fourth year, the water program provides the by catalyzing greater corporate water stewardship. In only global, standardized platform for companies to 2014: measure, manage and disclose vital water information. We are proud of the leadership position we have A revised water questionnaire that will facilitate better established in a nascent market in terms of visibility disclosure, drive greater water stewardship and elicit and the comprehensiveness of the data collected. This water data that the markets require will be introduced; was recently acknowledged in a Greenbiz survey12 of almost 300 sustainability leaders and there is much to Our work on water will grow in reach, starting with celebrate: India and Japan in 2014 and China, Latin America and Europe in 2015; and The number of investor signatories to CDP’s water program has almost quadrupled in the space of just The world’s first public water scoring methodology will three years; be introduced and trialed13.
1,036 of the world’s largest corporations in sectors that These water scores will be a key component in driving have the greatest potential to impact or be impacted by improved disclosure and corporate water stewardship. water issues were asked to disclose; For investors and other stakeholders scores will highlight how prepared a company is in the face of 593 companies have already disclosed, a 59% increase rising water challenges. in comparison to 2012; and 12 http://www.greenbiz. com/blog/2013/08/19/ Companies and investors must move quickly, efficiently why-cdp-gri-djsi- CDP holds the largest and most comprehensive and collectively if the global challenges posed by water stand-out-among- sustainability-frameworks set of publicly reported corporate water information are to be addressed. The markets will favor companies 13 The scoring – spanning 112 countries, 91 industry sub-sectors - that lead a collaborative approach to safeguard water as methodology will initially be tested on a providing insights into corporate water risk exposure a vital shared resource, to ensure sustainable revenue confidential basis with and mitigation strategies. generation and contribute to a more resilient future. Global 500 respondents only (i.e. a company’s score will be made By posing questions to corporations on their CDP is proud to be a leader in this space and looks available only to that relationship with water on behalf of investors and forward to continuing to catalyze the rapid step change company). A wide range of stakeholders will be purchasing organizations, CDP has successfully that is so desperately required. consulted throughout sparked a dialogue and debate around water that until 2014 to test and refine the methodology which 2010 was limited in both scope and reach. Cate Lamb will be fully implemented Head of Water across all respondents in 2015. CDP 23 Translating water risks to potential “value at risk” and business opportunities
While progress has been made since the last CDP report, there is much to be done to quantify business value at risk from water and to develop new products, services and collective action programs to address these business risks.
CDP’s 2013 global water report highlights two major is within reach if not already achieved. trends – one with businesses and the other with investors. We applaud these companies in addressing one of our CDP’s water program has chronicled the maturing view most important resource challenges, water scarcity. by businesses that water represents both a business risk and a potential opportunity. With increasing In parallel to actions by companies such as those recognition of current and projected risk exposure, responding to CDP’s water program, investors are also companies have begun to build strategies to mitigate on a path to better understand the financial impact of these risks. These strategies are now commonly referred water-related risks on their investments. While this is to as “water stewardship.” While the definition and challenging due to the complexity of water, investors components of water stewardship are currently being are exploring how to simplify the abundance of water framed by organizations such as CDP, the Alliance for risk data and quantifying water-related “business value Water Stewardship, the CEO Water Mandate, the World at risk”. We are getting closer to simplifying water risks Wildlife Fund and by consultants such as Deloitte, to support decisions by investors. there are a few key aspects many can agree upon. These include the need for stewardship strategies to: Investors and businesses will need to work together evaluate water-related risks across the entire value to translate water-related risks to “business value at chain; promote water efficiency and water recycling/ risk” to understand how best to mitigate these risks. reuse; develop local watershed strategies; and pursue We must also be mindful that with business risks come “collective action” with stakeholders. business opportunities. This is also an important trend and investors are paying attention – what are the new While the framework for “water stewardship” is being technologies and business models? We believe that solidified, some companies are in parallel moving from CDP has an important role to play in focusing the investor managing water risk within their direct operations to community on how they can address water-related risks evaluating and, in some cases, mitigating water risk in their investment portfolios. Quantifying value at risk from across their entire value chain. This year at events water scarcity and quality is at the center of mobilizing such as Stockholm World Water Week, there were action to address these private and public sector issues. discussions of what leadership in addressing water- related risk looks like; what are the expectations of While progress has been made since the last CDP stakeholders for companies to address water-related report, there is much to be done to quantify business risks and who in fact are the leaders? value at risk from water and to develop new products, services and collective action programs to address A “maturity model” for water stewardship is being crafted. these business risks. For those companies mitigating water risk across their value chain, engaging in collective action programs and Will Sarni taking responsibility for externalities such as WASH Director and Practice Leader, (access to clean water, sanitation and hygiene), leadership Enterprise Water Strategy Deloitte Consulting LLP 24 Investor perspective
NBIM looks forward to continued joint efforts with CDP to promote transparent water reporting and sustainable water management by companies.
NBIM is exposed to water-related risks through its CDP’s Global Water Report provides investors with investments in about 7,500 companies, many of critical information on how companies identify, manage which rely on water as an input or output factor in their and mitigate risks and opportunities related to water. operations and supply chains. Water Management has We welcome the release of CDP’s 2013 Global been a strategic focus for NBIM since 2009. Within a Water Report and corresponding response data as context of increasing water scarcity and adverse water- it facilitates an understanding of water related risks. related events, the Fund’s long-term return may be The reports indicate that water-related events may impacted through company specific risks or increased have increased in magnitude, emphasizing the need systematic risks driven by these externalities. Mapping for companies and investors to better understand the and understanding such risks can be a challenge but is events and likelihood of future water risks. More than fundamental in supporting investment decisions. half of the respondents have already experienced detrimental water-related business impacts in the past The Government Pension Fund Global is broadly invested five years, with respondents in the industrial sector in several water-intensive sectors including Basic reporting a 52% increase in impacts. In addition, Resources, Chemicals, Food & Beverage, Health Care, the 2013 report highlights that approximately three Oil & Gas, Personal & Household Goods, Technology and quarters of respondents have identified water as a Utilities. The World Bank highlights wide global disparities substantial business risk with more than 60% of those in water resources, with increasing needs being placed risks expected to materialize in the next five years. As on the supply of concentrated freshwater in emerging companies move towards an increasingly resource- economies. China and India alone account for over one constrained world, water-related risks may affect the third of total global water demand. Over-taxed aquifers global competitive landscape and may need to be in developing economies have elevated concerns, and managed. inadequate resources to meet growing needs from population and industries in developing economies may As a lead sponsor of CDP’s water program since 2009, impair future economic growth. NBIM looks forward to continued joint efforts with CDP to promote transparent water reporting and sustainable water Transparent water reporting will help investors understand management by companies. The continued development the specific risk exposures of different companies, as of CDP’s water program and risk related response data, well as sectorial or regional challenges. Granularity together with the introduction and testing of scoring in of information reported at company and site levels is 2014, is an important milestone in helping investors secure essential to understand the operational business resilience valuable information in their investment decision process. of companies to local water challenges and relevance Beyond 2014 we look to further developments to increase of risk mitigation strategies. This is a necessary step depth in the figures to better measure performance and towards assisting investors in managing and mitigating risk at corporate and company site levels. risks across their investment portfolio and a valuable process to support sustainable water management. NBIM Jan Thomsen, encourages CDP’s water program to develop deeper and Chief Risk Officer richer reporting of water-related risks. Norges Bank Investment Management (NBIM) 25 Sector Summaries
Consumer Discretionary Consumer Staples Energy Health Care Industrials Information Technology Materials Utilities 26 Consumer Discretionary
Risks in Direct Operations Risks in Supply Chain
Yes No ? Yes No ? (% of respondents) 57% 38% 5% (% of respondents) 57% 29% 14%
Water stress or scarcity 38% Water stress or scarcity 33%
Higher water prices 29% Declining water quality 10%
Flooding 24% Flooding 10%
Declining water quality 14% Reputational damage 10%
Regulatory uncertainty 14% Water efficiency requirements 5%
Rising discharge compliance costs 10% Regulatory uncertainty 5%
Reputational damage 10% Higher water prices 5%
*Rising discharge compliance costs, restricted operational water permits, Water withdrawal limits 10% product risk, and inadequate infrastructure were also reported by 3% of respondents’
*Inadequate infrastructure and water efficiency requirements were also reported by 5% of respondents
Response rate Key findings Overall risk exposure 57% of respondents report exposure to Although the sector has a relatively low risks in direct operations, with two thirds response rate when compared to other (66%) of these risks expected to materialize sectors, respondents appear to be now or within the next five years. making progress in certain aspects of 48% water stewardship. Interestingly, respondents experiencing water-related business impacts in the (21/44) The proportion of respondents unable past 5 years decreased 30% since to identify risk exposure has decreased. 2012; however, impacts reported remain • 2012 response rate: 51% (23/45) There has been a 63% reduction in the significant. “Operations at the Nissan • Industry response rate breakdown: proportion of respondents unable to Motor Thailand (NMT) plant at Samut identify whether or not they are exposed Prakan remain unaffected by [regional Auto Components: 2/5 to risks in direct operations and a 34% flooding], but due to shortages in parts Automobiles: 6/11 reduction in supply chain compared to supply, production at the plant was 2012. suspended. The total production loss Hotels, Restaurants & Leisure: 5/5 in Thailand due to the floods is around Household Durables: 1/1 The supply chain remains a significant 40,000 units.” area of risk, and as such, more Internet & Catalog Retail: 0/3 respondents are engaging suppliers and Many respondents (57%) also report Media: 0/2 setting concrete water-related targets or exposure to supply chain risks (compared goals for their supply chain. to 39% in the Global 500), 60% of which Multiline Retail: 1/2 are expected to materialize now or within Specialty Retail: 3/7 the next five years. Encouragingly, 71% of respondents require key suppliers to Textiles, Apparel & Luxury Goods: 3/8 report water use, risks and management; the highest among all sectors for the third (see Appendix IV for a list of consecutive year. In addition, 14% of companies that did not respond, respondents set concrete water-related classified as DP, IN or NR) targets or goals for their supply chains to mitigate these risks, compared to just 4% in the Global 500. For example, Starbucks 27
Management and Governance Opportunities (% of respondents)
Report water withdrawals 100% Yes No ? (% of respondents) 67% 29% 5%
Water policy, strategy or plan 90% Increased brand value 48%
Water and carbon linkages/trade-offs 76% Cost savings 38%
Concrete targets or goals 71% New products/services sales 29%
Require suppliers to report on water 71% Other 10%
Board-level oversight 62%
Identify water discharges 62% Working on solutions helps us to secure a ‘license to operate’ in diverse global locations Report water recycling/reuse 38% and can enhance our reputation in local communities. Ford Motor
set a target to ensure that 100% of its coffee Risk mitigation strategy Case study is ethically sourced by 2015. The Starbucks’ Inditex H&M (Hennes & Mauritz): Water C.A.F.E. Practices guidelines include Inditex works closely with suppliers and stewardship strategy strategies for farmers and mills to protect subcontractors to build the technical In 2012, H&M adopted a new water water sources and reduce water use. capacity needed for proper use and strategy based on WWF’s five steps disposal of chemicals; they conduct to water stewardship and the six key Management and governance supplier audits and create master plans to elements of the UN Global Compact’s The ability to measure and report water help suppliers manage water sustainably CEO Water Mandate. H&M entered into accounting metrics is essential for better and efficiently; and they work with local a three year partnership with WWF to management of water resources and authorities, international organizations, implement the water strategy. Recognizing demonstrates an awareness of water issues. NGOs, universities and other stakeholders that its largest water impacts are in raw Although all respondents in the sector report to provide new solutions in water material production and wet processing in water withdrawals, only 38% report water management. its supply chain, the strategy to address recycling/reuse and just 19% verify that those impacts will be implemented across data (both the lowest among all sectors), Carnival all markets. All 750 direct suppliers and indicating that there is room for improvement. Carnival is engaged with regulators and many fabric manufacturers will receive interested stakeholders either directly or information about the new water strategy. Seizing opportunities through industry trade organizations to Increased brand value and cost savings are address water concerns and to discuss Considerations for respondents the most frequently reported opportunities, feasible solutions. The R&D program Continue to obtain comprehensive water but sales of new products or services manager is tasked with managing action accounting data and take steps to improve demonstrated the most significant increase plans related to researching and testing water measurement and management. since 2012. potable water production and wastewater treatment technologies to address water- Continue to develop water stewardship “Buildings account for the use of 40% of related risks applicable to both existing strategies to mitigate near-term risks. all energy, 68% of electricity and 88% of fleet and future new builds. all potable water throughout the world. By performing water and energy retrofits on facilities, we help customers reduce energy and water consumption up to 50% through conservation and operational changes.” - Johnson Controls 28 Consumer Staples
Risks in Direct Operations Risks in Supply Chain
Yes No ? Yes No ? (% of respondents) 69% 26% 6% (% of respondents) 74% 20% 6%
Water stress or scarcity 51% Water stress or scarcity 46%
Flooding 40% Declining water quality 26%
Declining water quality 31% Flooding 17%
Rising discharge compliance costs 23% Water withdrawal limits 11%
Water withdrawal limits 20% Reputational damage 11%
Higher water prices 20% Regulatory uncertainty 9%
Reputational damage 20% Higher water prices 6%
Restricted operational water permits 9%
*Inadequate infrastructure, regulatory uncertainty, water efficiency requirements and product risk were also reported by 9% of respondents and 3% reported litigation
Response rate Key findings Overall risk exposure 69% of respondents report exposure to The Consumer Staples sector has the risks in direct operations and 74% report highest response rate among all sectors. exposure to supply chain risks, with the majority of risks expected to materialize Respondents report a greater level of now or within the next five years. Moreover, 76% exposure to supply chain risks than any 80% of respondents report key inputs or other sector. raw materials coming from regions subject (37/49) to water-related risk; the highest among all Worryingly, the majority of concrete sectors. • 2012 response rate: 71% (32/45) targets or goals remain focused on • Industry response rate breakdown: direct operations and the proportion of 57% of respondents have experienced respondents requiring key suppliers to water-related business impacts in the past Beverages: 7/9 report water use, risks and management 5 years - a 30% decrease since 2012. has declined since 2012. However, some of the reported impacts Food Products: 8/13 have had significant consequences. For example, Diageo experienced water Food & Staples Retailing: 9/12 shortages at two of its facilities in Ghana over the past 5 years that directly impacted Household Products: 2/2 the company’s ability to produce and ship product. The current estimated impact Personal Products: 5/5 to the business in lost sales due to these production stoppages is in excess of £2M. Tobacco: 6/8 Management and governance (see Appendix IV for a list of Although the sector has the highest companies that that did not respond, proportion of respondents with concrete classified as DP, IN or NR) targets or goals, the majority of these are focused on direct operations despite reported risk exposure being greater in the supply chain. Furthermore, respondents requiring key suppliers to report water use, 29
Management and Governance Opportunities (% of respondents)
Report water withdrawals 100% Yes No ? (% of respondents) 74% 20% 6%
Identify water discharges 91% Cost savings 51%
Water policy, strategy or plan 90% Increased brand value 31%
Water and carbon linkages/trade-offs 86% New products/services sales 23%
Concrete targets or goals 80% Other 31%
Board-level oversight 54%
Report water recycling/reuse 46% We are committed to optimizing the use of
Require suppliers to report on water 40% water associated with sourcing, manufacturing and use of our products and to protect the water resources that we may impact. Hillshire Brands1
1 Other responding company risks and management has declined 17% Risk mitigation strategies Case study since 2012 to 40%. Nestle PepsiCo: Water and energy Water Resource Reviews (WRR) are field conservation opportunities The Coca-Cola Company has set a goal assessments that evaluate potential impact PepsiCo’s ReCon tool guides to “replenish the water used in finished on a community’s right to water, as well as manufacturing facilities through detailed beverages by participating in locally the long-term availability of water resources self-audits of their resource management relevant community water projects that around factories at a watershed level, practices to identify and prioritize water support communities and nature, and meet especially in water stressed/water scarce and energy conservation opportunities by and maintain this goal by 2020.” regions. The reviews consider five pillars mapping all streams within the facility and related to the impact of direct operations assigning relative values to each of these Seizing opportunities on local water resources: quantity, quality, streams based on local economics. ReCon Over half of the respondents identify cost regulatory compliance, site protection, and Water maps all water uses and determines savings as a water-related opportunity. stakeholder relations. the effective cost of each use based on the However, sales of new products or services cost of water, of energy used to heat and have increased the most since 2012. For Colgate Palmolive pump water, and of chemicals used to treat example, Unilever intends to reach 200 Colgate’s Supplier Responsible Sourcing water. million consumers with products and tools Assessment (SRSA) asks suppliers about that will help them to use less water while the following topics: written policy on Considerations for respondents washing and showering by 2015, and the water management, targets for reduction In general, since agricultural water company has a goal to reach 400 million or reuse of water, impact of water usage use within the sector accounts for the by 2020. on the water catchment, water stress or largest consumptive use of water, it is shortage and management of impact on recommended that respondents engage “Through its company-wide water supply water quality and wastewater discharge. In more actively with their suppliers. risk assessment, SABMiller developed 2012, Responsible Sourcing Assessments further opportunities to ensure business were conducted for 30% of Colgate’s direct Engagement and collective action in continuity. It also provides a strong materials spend. watershed management are strongly basis for the implementation of relevant encouraged. mitigation actions at the watershed level, notably through the creation of public- private partnerships.” 30 Energy
Risks in Direct Operations Risks in Supply Chain
Yes No ? Yes No ? 82% 14% 5% 9% 55% 36% (% of respondents) (% of respondents)
Water stress or scarcity 45% Water stress or scarcity 9%
Regulatory uncertainty 41%
Rising discharge compliance costs 36%
Reputational damage 32%
Water withdrawal limits 27%
Water efficiency requirements 23%
Flooding 18%
Restricted operational water permits 18%
*Declining water qualiy and higher water prices were also reported by 18% of respondents and 9% reported inadequate infrastructure
Response rate Key findings “Hydraulic fracturing has become a significant concern to stakeholders due For the third consecutive year, the Energy to the types and amounts of chemical sector has the lowest response rate yet additives used in the frac fluids, the the highest proportion of respondents volumes of freshwater needed, the quality reporting exposure to risks. and amount of returned water, and its 47% management method… major regulatory Although all Energy respondents report restrictions on hydraulic fracturing could (26/55) having a water policy, strategy or plan, limit access to shale reserves and future only half of respondents report having production, increase exploration and • 2012 response rate: 44% (25/57) board-level oversight of water issues and production costs, and extend timelines.” – • Industry response rate breakdown: set concrete targets or goals. Hess Energy Equipment & Services: 2/5 The low response rate, lack of board-level 59% of respondents have experienced oversight and concrete target/goal setting water-related business impacts in the past Oil, Gas & Consumable Fuels: 24/50 contrast the reported exposure and five years, a 24% increase since 2012. For immediacy of risks to direct operations. example, Baker Hughes was affected (see Appendix IV for a list of by back-to-back hurricanes in the United companies that did not respond, States in 2008, which caused severe classified as DP, IN or NR) Overall risk exposure flooding in its facilities and significantly 82% of respondents report that water disrupted its operations. The company poses a substantive risk to their business. estimated over US$78 million in revenue Almost two thirds (64%) of risks to direct and US$50 million in profit before tax operations are expected to materialize was lost as a result. In addition, the cost now or within the next five years. Many to rebuild the facilities damaged by the (54%) of the reported risks to direct hurricanes and remediation activities was operations are categorized as regulatory more than US$2.5 million. risk types; however, respondents reporting reputational damage increased significantly Management and governance since 2012. Energy is the only sector in the Global 500 where all respondents report having a water policy, strategy or plan, but only 31
Management and Governance Opportunities (% of respondents)
Report water withdrawals 100% Yes No ? 77% 18% 5% (% of respondents)
Water policy, strategy or plan 100% Cost savings 36%
Identify water discharges 86% New products/services sales 18%
Report water recycling/reuse 86% Increased brand value 9%
Water and carbon linkages/trade-offs 77% Other 50%
Board-level oversight 50%
Concrete targets or goals 50% Water is an essential component of our value
Require suppliers to report on water 14% chain that must be managed sustainably and strategically. Noble Energy
half of respondents report having both Risk mitigation strategy member companies have shared 445 board-level oversight and concrete targets Sasol distinct technologies and innovations or goals. Although these figures have Sasol seeks to mitigate water supply worth more than US$700 million to improved significantly over 2012 (28% and shortfalls to accommodate growth projects develop. Through this program, Devon can 64%, respectively) such a low percentage through: continuous engagement with accelerate the pace of water performance is surprising given the scale and immediacy the Department of Water Affairs and improvements. of reported risks to direct operations. government authorities involved with the setting of water prices, water pricing Case study Although respondents report taking action policies, long-term planning of water Apache: Utilizing non-potable water in some areas such as public policy and infrastructure to support catchment sources watershed management, no respondents initiatives, and research and development Apache has invested in technology to have set concrete targets or goals in these of alternative treatment technologies able increase recycling and reuse of water areas. Rather, a significant proportion of to handle poorer quality feed streams. in drilling operations and to utilize other reported concrete targets or goals are water sources that are not in high focused on water recycling and reuse. For Suncor Energy demand, reducing its exposure to potential example, BG Group set a goal of 100% Suncor Energy recognizes that as you future legislative changes. This activity reuse of flowback water and 50% reuse of strive towards 100% water recycle or addresses multiple water-related risks produced water. zero liquid discharge, you can potentially in that it decreases vulnerability to price increase your carbon footprint (energy fluctuations and any restrictions to access Seizing opportunities requirements) and land footprint (landfilled of the source, providing the assurance of 77% of respondents identify water-related solid waste). Suncor Energy has developed a constant supply. Approximately 95% of business opportunities, and 81% of a tool through the Oil Sands Leadership Apache’s total water withdrawals come opportunities are expected to materialize Initiative to evaluate the net environmental from non-potable water sources such as now or within the next five years. effects of a project or decision to find the saline aquifers or seawater. balance between land, air, and water. ‘Other’ water-related opportunities, such Suncor Energy has used it in decision- Considerations for respondents as innovation in water management making around selection of new water Many respondents reported increasing and improved production, are the most sources and disposal needs. public concern over water withdrawals and frequently reported opportunities. For water quality. As such, Energy companies example, Devon Energy in Canada should continue to explore innovative is participating in Canada’s Oil Sands water treatment technologies and water Innovation Alliance (COSIA), whose recycling/reuse. 32 Health Care
Risks in Direct Operations Risks in Supply Chain
Yes No Yes No ? (% of respondents) 64% 36% (% of respondents) 41% 36% 23%
Flooding 41% Water stress or scarcity 18%
Water stress or scarcity 36% Flooding 18%
Rising discharge compliance costs 27% Rising discharge compliance costs 18%
Water withdrawal limits 27% Water withdrawal limits 9%
Reputational damage 23% Reputational damage 5%
Declining water quality 23% Higher water prices 5%
Higher water prices 18% Inadequate infrastructure 5%
Water efficiency requirements 14%
*Regulatory uncertainty was also reported by 14% of respondents; inadequate infrastructure by 9%; and restricted operational water permits, changed product standards and product risk were reported by 5%
Response rate Key findings Reporting of regulatory uncertainty risks in direct operations increased by 64% Strategic responses to risks are over 2012, perhaps due to the potential increasing. More Health Care introduction of regulations in Europe respondents have a water policy, and the US limiting the discharge of strategy or plan, board-level oversight pharmaceuticals to the environment. 74% and concrete targets or goals than ever before. Further, risk exposure in the supply chain (23/31) remains an issue with 41% of respondents Similarly, supply chain risks are receiving reporting a total of 23 supply chain risks • 2012 response rate: 77% (24/31) greater attention with more respondents such as water stress or scarcity. For • Industry response rate breakdown: requiring key suppliers to report water example, Bristol-Myers Squibb reports use, risks and management. that “readily available water is needed to Biotechnology: 4/6 produce medicines and access to water is Water-related opportunities are ready a criteria in the selection of manufacturing Health Care Equipment & Supplies: for exploitation. The vast majority of locations and key suppliers.” 3/6 opportunities identified are expected to materialize now or within the next five Interestingly, the proportion of Health Life Sciences Tools & Services: 1/1 years. Care respondents that have experienced water-related business impacts in the past Pharmaceuticals: 15/18 Overall risk exposure 5 years is significantly lower than that of the Awareness of risks in direct operations Global 500 (27% vs. 53%). (see Appendix IV for a list of is increasing. 64% of respondents have companies that did not respond, identified water as a substantive risk to Management and governance classified as DP, IN or NR) their direct operations, with the majority Perhaps as a result of this risk exposure, of risks expected to materialize now the strategic response to water-related or within the next five years. 23% of issues has increased, as evidenced by respondents report declining water quality an increase in respondents with a water as a substantive risk to direct operations policy, strategy or plan as well as board- likely as a result of the sectors’ reliance on level oversight (now the highest among high quality water as both an ingredient as all sectors) and concrete targets or goals. well as for use in processing and cleaning. 2013 also saw a 45% increase in the 33
Management and Governance Opportunities (% of respondents)
Report water withdrawals 100% Yes No (% of respondents) 73% 27%
Water policy, strategy or plan 91% New products/services sales 32%
Identify water discharges 86% Cost savings 32%
Water and carbon linkages/trade-offs 77% Increased brand value 23%
Concrete targets or goals 77% Other 14%
Report water recycling/reuse 68%
Pfizer engages directly with institutional and Board-level oversight 68% socially responsible investors such as ICCR and PGGM. Engagement has been both proactive Require suppliers to report on water 36% (informing of water initiatives and outcomes) as well as reactive (response to investor demands for water sustainability initiatives). Pfizer
proportion of respondents requiring key Risk mitigation strategy Case study suppliers to report water use, risks and SANOFI Merck & Co.: Capital fund management compared to 2012. Regarding the PIE issue, the Group is Merck has established a capital fund collaboratively working with pharmaceutical to invest in the company’s water and Despite the increasing public and and academic stakeholders to expand wastewater infrastructure with the goal regulatory scrutiny over pharmaceuticals scientific knowledge in this area and assess of reducing water demand, improving in the environment (PIE) reported by the potential impact of pharmaceuticals water quality, strengthening its compliance respondents, just 9% of respondents report in the environment, including impact position, improving operational efficiency having paid penalties/fines for significant on human health. Furthermore, the and addressing the discharge of active breaches of discharge regulations; this Group detects and quantifies active pharmaceutical compounds from represents a 45% decrease since 2012. pharmaceutical ingredients within effluents manufacturing plants. To date, over 24 at its production facilities. projects have been chartered. Seizing opportunities Almost three quarters (73%) of respondents Bayer Considerations for respondents identify water-related business opportunities, Concrete measures to mitigate the risk Pharmaceuticals in the environment (PIE) 71% of which are expected to materialize of declining water quality include: (1) is an area of emerging concern and should now or within the next five years. constructing a river reservoir in Brazil to continue to be a focus for action. become independent from the municipal Sales of new products or services remains water supply when the Sarapui River is Given that high quality water is an essential the most commonly reported opportunity. too polluted; (2) installing a new water input, respondents should consider their For example, Johnson & Johnson filter system to improve tap water quality role in wider watershed conservation recognizes that infectious diseases may in Turkey; (3) joining “Project Catalyst” initiatives. become more prevalent as a result of an initiative aimed at improving water climate change due to factors such as quality from agricultural catchments and; Since production of ionized water is energy migration to cities, malnutrition, and water (4) continually monitoring the risk of poor intensive, respondents should be mindful of scarcity. The company’s infectious diseases water quality at its sites. potential trade-offs going forward. segment, including medicines that treat HIV, tuberculosis, and other bacterial infections, earned approximately US$3.2 billion in 2012, with 11-17% sales growth for HIV drugs and 30% sales growth for other infectious diseases. 34 Industrials
Risks in Direct Operations Risks in Supply Chain
Yes No Yes No ? 50% 50% 28% 33% 39% (% of respondents) (% of respondents)
Water stress or scarcity 39% Water stress or scarcity 17%
Reputational damage 22% Higher water prices 11%
Regulatory uncertainty 17% Rising discharge compliance costs 11%
Product risk 17% Flooding 6%
Higher water prices 11% Water efficiency requirements 6%
Flooding 11% Water withdrawal limits 6%
Water withdrawal limits 11% Restricted operational water permits 6%
Declining water quality 6%
*Water efficiency requirements and litigation were also reported by 6% of respondents
Response rate Key findings While identification of flooding as a risk to direct operations has decreased 33% from The proportion of respondents that have 2012, it has still caused significant impacts. already experienced detrimental impacts For instance, in Thailand, due to flooding related to water in the past 5 years has in Bangkok and neighboring regions, one risen dramatically this year compared to of Hitachi’s electric appliance plants was last. submerged for 49 days in 2011 and took 47%(18/38) nearly 3.5 months to restart its production. Uncertainty remains in relation to • 2012 response rate: 47% (18/38) supply chain risk exposure. More than A significant proportion of respondents • Industry response rate breakdown: one third of respondents are unable (39%) are still unable to identify whether to identify whether or not they are or not they are exposed to substantive Aerospace & Defense: 3/10 exposed to substantive water-related water-related risks in their supply chains, and risks across their supply chains, and a respondents also have difficulties identifying Building Products: 1/1 large proportion of the supply chain risks the anticipated timeframe associated with reported have an unknown timeframe. supply chain risks. 67% of supply chain risks Construction & Engineering: 2/2 are reported to have an unknown timeframe. The majority of Industrials respondents Electrical Equipment: 0/2 identify water-related opportunities that Management and governance are expected to materialize now or within There is continued improvement in Industrial Conglomerates: 4/8 the next five years. management and governance responses to water-related issues with increased Machinery: 6/12 Overall risk exposure board-level oversight, increased concrete Two thirds (67%) of Industrials respondents targets or goals, all respondents reporting Road & Rail: 0/1 report that they have experienced water- water withdrawals, and almost all (94%) related business impacts in the past 5 respondents reporting a water policy, Trading Companies & Distributors: 2/2 years, a dramatic increase of 50% since strategy, or plan. However, only 44% 2012. However, just half of respondents report water recycling/reuse (compared to (see Appendix IV for a list of report that water poses a substantive risk 66% in the Global 500) and only half are companies that did not respond, to business, with 50% of risks reported to able to identify discharges by destination, classified as DP, IN or NR) direct operations anticipated to materialize treatment type and quality (the lowest now or within the next five years. among all sectors). 35
Management and Governance Opportunities (% of respondents)
Report water withdrawals 100% Yes No ? 83% 11%6% (% of respondents)
Water policy, strategy or plan 94% New products/services sales 50%
Concrete targets or goals 67% Cost savings 17%
Water and carbon linkages/trade-offs 67% Increased brand value 11%
Board-level oversight 61% Other 33%
Identify water discharges 50%
Our corporate strategy is to continue the Report water recycling/reuse 44% development and deployment of products and services that respond to growing water Require suppliers to report on water 22% demand[s] and the need to manage limited global water resources. Layne Christensen1
1 Other responding company
“In 2012, the Action Committee for Risk mitigation strategy Case Study Environmental Sustainability (ACES) Siemens Aktiengesellschaft VINCI: Eco-design completed an initiative to analyze the Siemens considers the entire product As environmental concerns are increasing, materiality of environmental issues, lifecycle in the design, development, eco-design of buildings, infrastructures and including water, across our value chain. manufacturing and marketing of products districts represent a growing opportunity The data collected through this effort and services so as to protect the for VINCI companies. VINCI has created identified that 88% of our water footprint environment and human health in a manner several tools to develop eco-design exists in raw materials processing in our that meets or exceeds any applicable projects, which take into account water supply chain. The most notable item is regulations, and in order to minimize the consumption and toxicity on water habitats steel which represents 55% of our water impact on natural resources. of infrastructures during their lifecycle to footprint. As we continue to develop our facilitate reduced water consumption and comprehensive sustainability goals, metals ACCIONA1 improved water quality. VINCI has also will be a primary focus.” - Cummins ACCIONA has a corporate tool for partnered with ParisTech to create the management of regulatory risks. The tool Chair of Eco-design and develop new eco- Seizing Opportunities is coordinated at the corporate level and responsible construction tools. In 2012, 83% of respondents identify water-related has been managed by each Business Line eco-design studies were carried out for business opportunities, with the majority and Division since 2010. In this way, the 229 projects and 18 projects were carried of these (84%) expected to materialize tool allows the Corporate Environment out under the Oxygen eco-commitment. now or within the next five years. These Management to monitor the identification opportunities predominantly focus on of legal requirements and other regulations Considerations for respondents sales of new products or services. For applicable to each facility, as well as Greater awareness of potential supply example, General Electric works with evaluation of their compliance. In 2012, chain risk exposure is essential for this over 50,000 industrial and municipal clients 97% of ACCIONA facilities had access to sector. globally to help them manage stakeholder and implemented the tool. conflicts and assist with their overall water Given that two thirds of respondents optimization strategy and execution, and have experienced water-related business Deere & Company’s product and service impacts in the past 5 years, but only half offering enables its customers to manage report water as a substantive risk to their agricultural water through efficient irrigation, business, the sector may potentially be soil moisture management, water-efficient underestimating its exposure to risks in tillage practices, and laser-leveled fields. direct operations, and as a result, more robust risk assessments are encouraged. 36 Information Technology
Risks in Direct Operations Risks in Supply Chain
Yes No ? Yes No ? 42% 50% 8% 25% 25% 50% (% of respondents) (% of respondents)
Water stress or scarcity 33% Water stress or scarcity 17%
Flooding 25% Flooding 8%
Rising discharge compliance costs 25% Declining water quality 8%
Higher water prices 17% Regulatory uncertainty 8%
Water efficiency requirements 17% Higher water prices 8%
Product risk 8%
*Regulatory uncertainty was also reported by 14% of respondents; inadequate infrastructure by 9%; and restricted operational water permits, changed product standards and product risk was reported by 5%
Response rate Key findings One quarter (25%) of respondents have experienced water-related business Only 50% of respondents report that impacts in the past 5 years (the lowest water poses a substantive risk to their among all sectors). For example, Quanta business. Computer1 estimates that the annual typhoon damage it sustains to its property 54% Uncertainty remains in relation to supply exceeds US$16,329 (100,000 Yuan). chain risk exposure. (14/26) A significant proportion of respondents Perhaps as a result of the low reported (50%) are unable to report whether or not • 2012 response rate: 63% (19/30) risk exposure, fewer respondents they are exposed to risks in the supply • Industry response rate breakdown: disclosed to CDP this year compared to chain. Furthermore, 44% of substantive last and few respondents report board- supply chain risks reported have an Communications Equipment: 2/3 level oversight and water-related concrete unknown timeframe, indicating that targets or goals. uncertainty remains about how the sector Computers & Peripherals: 4/5 may be affected by water issues. Overall risk exposure Electronic Equipment, Instruments & Reported exposure to water-related risks Management and governance Components: 2/4 in the Information Technology sector is low Perhaps unsurprisingly, the sector has the with only 50% of respondents reporting lowest proportion of respondents (42%) Internet Software & Services: 1/5 that water poses a substantive risk to their reporting board-level oversight of their business, the lowest among sectors for the water policy, strategy or plan. Furthermore, IT Services: 0/2 second consecutive year. However, 17% only half of the respondents have concrete of respondents report having the majority targets or goals, compared to 66% in Semiconductors & Semiconductor of operations located in regions at risk, the Global 500, and fewer companies Equipment:3/4 which is a 217% increase from 2012. With responded to CDP’s water questionnaire 75% of respondents relying exclusively on this year compared to last (15% decrease). Software: 2/3 water stress to identify regions subject to water-related risk (compared to 47% in the In addition, only 58% of respondents (see Appendix IV for a list of Global 500), more robust and thorough risk identify linkages or trade-offs between companies that did not respond, assessments are encouraged for the sector. water and carbon (lowest among classified as DP, IN or NR) all sectors). One example of how 37
Management and Governance Opportunities (% of respondents) Report water withdrawals 100% Yes No (% of respondents) 67% 33%
Water policy, strategy or plan 92% New products/services sales 42%
Report water recycling/reuse 83% Cost savings 33%
Identify water discharges 75% Increased brand value 17%
Water and carbon linkages/trade-offs 58% Other 8%
Concrete targets or goals 50%
Board-level oversight 42% TI recognizes that water is a precious resource – yet it is crucial to semiconductor manufacturing, which is why the company Require suppliers to report on water 42% conserves and reuses water and works to preserve water quality to every extent possible. Texas Instruments
1 Other responding company respondents are managing this linkage Risk mitigation strategy Case study is AU Optronics1; the company has a Intel EMC: Technology zero discharge system, which reduced In 2011, Intel requested baseline data In EMC’s new Durham Data Center in North the wastewater output of its facilities from and reduction goals from top suppliers for Carolina, efficiency design innovations 18,000 cubic meters per day to 400 cubic water, energy, and waste and collected include a rooftop water collection system meters. This new system also uses just responses from 98% of its top Tier 1 that has reduced water usage at the facility 0.6% of the diesel needed in traditional suppliers. Intel also requested water and by more than 40% - one inch of rain on the systems. The recovery part of the zero waste metrics and looked for the presence 450,000 square foot roof equals 280,000 discharge system also produces less than of established goals, placing an emphasis gallons of water. Air-intake plenums around
3% of the CO2 that traditional systems on suppliers located in water-stressed the perimeter of the building and air-side create. countries. In 2012, 80% of Intel’s top Tier 1 economizers provide free cooling during suppliers tracked water metrics. cool months - approximately 5,000 hours Seizing opportunities per year - reducing water consumption 67% of respondents identify water-related Taiwan Semiconductor required to cool the data center. business opportunities, again, the lowest TSMC, the R.O.C. Ministry of Economic proportion among all sectors. However, Affairs Water Resource Agency, and the Considerations for respondents 80% of opportunities are expected to Taiwan Water Environment Association Greater transparency of water-related materialize now or within the next five years. (TWEA) jointly held a Water Resource risk exposure is essential for this sector. Forum, a new industry-led initiative for Comprehensive risk assessments that “IBM’s Smarter Water initiatives use adapting to global climate change and cover the supply chain as well as direct the broad capabilities of IBM, including lowering water resource risk. At the operations should be considered. integration, consulting and services, meeting experts in the field shared their leading edge software and analytics experience in water resource recycling as Many respondents haves been able to technologies, and the worldwide resources well as developing and allocating water capitalize on water-related business of IBM Research to provide a robust IT and resources, aiming to build consensus opportunities, yet identification of information infrastructure to address some and collaborate to lower Taiwan’s water opportunities by the Information of the most pressing water management resource risk. Technology sector is still the lowest among challenges.” - IBM all sectors. Respondents should further evaluate the true value associated with potential opportunities. 38 Materials
Risks in Direct Operations Risks in Supply Chain
Yes No Yes No ? 79% 21% 34% 48% 17% (% of respondents) (% of respondents)
Flooding 52% Water stress or scarcity 21%
Water stress or scarcity 45% Flooding 21%
Water withdrawal limits 41% Higher water prices 10%
Rising discharge compliance costs 38% Water withdrawal limits 7%
Higher water prices 31% Declining water quality 7%
Restricted operational water permits 28% Water ef ciency requirements 7%
Declining water quality 24% Rising discharge compliance costs 7%
Reputational damage 21% Restricted operational water permits 3%
*Regulatory uncertainty, inadequate infrastructure and water efficiency requirements were also reported by 17% of respondents and 10% of respondents reported litigation
Response rate Key findings Perhaps unsurprisingly therefore, 79% of respondents report exposure to risks in The Materials sector has one of the direct operations, compared to 66% in the highest response rates as well as one of Global 500. Almost three quarters (73%) of the highest proportions of respondents these risks are expected to materialize now reporting water as a substantive business or within the next five years. 74% risk. While only 34% of respondents report (29/39) The sector also has the highest exposure to supply chain risks, 76% of all proportion of respondents that have supply chain risks reported are expected • 2012 response rate: 74% (31/42) experienced detrimental impacts related to materialize now or within the next five • Industry response rate breakdown: to water in the past 5 years. years. Yet, less than half of the respondents reporting supply chain risk exposure also Chemicals: 11/16 Respondents in the Materials sector are require key suppliers to report water use, increasingly recognizing the immediacy of risks and management. Construction Materials: 2/3 potential water-related opportunities. Management and governance Metals & Mining: 16/20 Overall risk exposure Board-level oversight in the sector 76% of respondents have experienced decreased by 15% from 2012. This is (see Appendix IV for a list of detrimental impacts related to water in surprising given that such a high proportion companies that did not respond, the past 5 years - the highest among all of respondents have reported water- classified as DP, IN or NR) sectors and significantly higher than the related business impacts and exposure Global 500 average of 53%. For instance, to substantive risks. Barrick Gold, for JSW Steel1 faced a complete lack of water example, reports that reputational risks in one of its factories in India that spanned could lead to higher costs of capital or 10 consecutive days, severely restricting decreased share price and loss of social production at the facility. More respondents license to operate leading to business than any other sector (37%) also report disruption. It could also make it more having the majority of their operations difficult to get access to land or lengthened located in regions at risk. permitting processes for new mines or expansions. 39
Management and Governance Opportunities (% of respondents) Report water withdrawals 100% Yes No (% of respondents) 93% 7%
Water policy, strategy or plan 97% Cost savings 48%
Identify water discharges 90% New products/services sales 34%
Water and carbon linkages/trade-offs 90% Increased brand value 31%
Report water recycling/reuse 83% Other 55%
Board-level oversight 66%
The sustainable use of water and the Concrete targets or goals 66% conservation of water resources are an integral part of the BASF strategy and important for Require suppliers to report on water 34% our company’s future success.
BASF
1 Other responding company
However, this has also been accompanied Risk mitigation strategy Case study by a 56% increase in respondents with POSCO Newmont Mining: Water supply for concrete water-related targets or goals. For There are regions with higher water costs surrounding communities instance, Akzo Nobel1 has set a target for due to water stress, thus increasing In partnership with rural neighbors and 100% sustainable freshwater management operational costs. Additionally, higher costs local authorities, Yanacocha built a 6 at all production sites by 2015. Its of water represent higher costs of raw million cubic meter reservoir, which is sustainable freshwater management materials and products for sale. POSCO’s now linked to rural projects that directly assessment tool evaluates individual site response strategy is to secure supply of benefit recipients’ agricultural production. risks related to: water sources, supply water from non-conventional sources such Yanacocha committed to bringing potable reliability, efficiency, quality of discharges, as rainwater harvesting, reclaimed water water to 100% of surrounding communities compliance and social competitive factors; and recovery water from store processes. and has achieved over 80% currently. each location needs to obtain a low risk Water from the reservoir flows to family score in all six areas to achieve sustainable Ecolab reservoirs and watering systems for more freshwater management. In 2012, Ecolab signed a two-year than 5,000 users, allowing agricultural agreement with the World Wildlife Fund activities to take place throughout the year Seizing opportunities (WWF) to work with the Alliance for Water rather than only during the rainy season, Almost all respondents (93%) identify Stewardship (AWS) to test the beta increasing crop yields as well as incomes. water-related business opportunities; the draft version of the AWS International highest proportion among all sectors. Water Stewardship Standard with select Considerations for respondents Additionally, 89% of these opportunities customers in the Yangtze Basin in Suzhou, With such a high proportion of respondents are expected to materialize now or within China. The AWS Standard provides water reporting water-related business impacts the next five years. For instance, Pioneer, users with an approach for evaluating and exposure to substantive risks, board- a DuPont business, is investing in drought the existing processes and performances level oversight of water issues should be tolerance research to develop corn within their sites, and ensures that pursued. products that produce higher yields in responsible stewardship actions are in areas that have limited precipitation. place to minimize negative impacts and Given the immediacy of reported supply maximize positive impacts on a particular chain risks, additional supplier engagement watershed. is encouraged. 40 Utilities
Risks in Direct Operations Risks in Supply Chain
Yes No Yes No ? 73% 27% 13% 60% 27% (% of respondents) (% of respondents)
Regulatory uncertainty 60% Flooding 7%
Water stress or scarcity 53% Changed product standards 7%
Restricted operational water permits 47% Regulatory uncertainty 7%
Declining water quality 47% Litigation 7%
Flooding 40% Reputational damage 7%
Rising discharge compliance costs 40%
Water withdrawal limits 40%
Higher water prices 33%
*Litigation and reputational damage were also reported by 27% of respondents; water efficiency requirements was reported by 20%; and indequate infrastrcture by 7%
Response rate Key findings “Stricter requirements on water quality/ quantity may be approved… impacting our Almost three quarters of respondents operations. In Europe, the implementation of report that water poses a substantive risk the Water Framework Directive comprises a to their business yet uncertainty remains series of management actions at river basin across the supply chain. level…This Directive was, is and will be the 70% main source of regulation upon minimal Respondents report significantly higher environmental flow, a critical issue especially (16/23) exposure to regulatory risks than the for our hydropower assets in Europe.” – Global 500 average. ENEL • 2012 response rate: 63% (19/30) • Industry response rate breakdown: Despite respondents showing 67% of respondents report that they have improvements across all management already experienced water-related business Electric Utilities: 11/16 and governance indicators since 2012, impacts in the past five years, compared they still trail all other sectors in having to 53% in the Global 500. For example, Gas Utilities: 1/2 a water policy, strategy or plan and CLP Holdings experienced the detrimental concrete targets or goals. effects of water flooding at its Yallourn Independent Power Producers & mine in 2012, which greatly decreased Energy Traders: 0/1 Overall risk exposure coal mine operations and forced Yallourn Almost three quarters (73%) of respondents Power Station to produce less power. Multi-Utilities: 4/4 in the Utilities sector report exposure to The associated cost was US$102 million risks in direct operations, compared to (HKD790 million). (see Appendix IV for a list of 66% of respondents in the Global 500. The companies that did not respond, immediacy of these risks is also apparent 13% of Utilities respondents report exposure classified as DP, IN or NR) with 61% of risks reported to direct to supply chain risks (55% decrease from operations expected to materialize now 2012), compared to 39% in the Global 500; or within the next five years. Regulatory however, a quarter of respondents remain uncertainty is the most frequently reported unable to identify whether or not they are risk to direct operations with 60% of exposed to risks in their supply chain. respondents reporting exposure, compared to 20% in the Global 500. 41
Management and Governance Opportunities (% of respondents) Identify water discharges 100% Yes No ? 7% (% of respondents) 73% 20%
Report water withdrawals 100% Increased brand value 40%
Report water recycling/reuse 93% Cost savings 33%
Water and carbon linkages/trade-offs 87% New products/services sales 20%
Water policy, strategy or plan 87% Other 47%
Board-level oversight 53%
Iberdrola is very proud to participate in Concrete targets or goals 47% [CDP’s water program] 2013 and is totally convinced that water is an essential resource Require suppliers to report on water 33% and fundamental to its business development, being aware of the importance of water management and conservation. Iberdrola
Management and governance Risk mitigation strategy Case study The Utilities sector has the lowest Fortum1 Dominion Resources: Collective action percentage of respondents with a water Fortum started on-site sustainability Dominion has joined with other companies policy, strategy or plan at 87%, as well as auditing, including environmental issues of and government agencies to collaborate the lowest proportion with concrete targets fuel suppliers in 2011. Water management on wetland restoration projects in or goals at 47% (a 32% decrease from issues will be discussed in these audits Massachusetts and Virginia. Projects 2012). With regards to water and carbon whenever the supplier operates in a water include restoration of a wide variety of linkages and trade-offs, some respondents stressed area. aquatic habitats — from salt marshes and report that trade-offs will occur with carbon fish runs along the coast to rivers, lakes and capture technologies. According to The Endesa freshwater wetlands. Southern Company water use could Endesa´s Legal Department analyzes increase by 33% to 90% on a per net all emerging legislation to be prepared Considerations for respondents megawatt-hour basis with carbon capture for potential regulatory measures, and Respondents should continue to focus systems. Not only does the process regulatory changes are also considered on improving performance in relation to of carbon capture and sequestration in its Risk Management System, with its management and governance indicators potentially increase the use of water, but it Risk Ranking annually reviewed. Endesa such as development of water policies, also requires additional energy to compress actively participates in various industry strategies or plans and concrete targets or and transport carbon. association working groups, which analyze goals. the potential impact of all emerging Seizing opportunities regulations related to the industry, including Given the immediacy of reported water- 73% of respondents identify water-related water-related regulations (UNESA, related business opportunities, respondents business opportunities; one of the lowest Eurelectric, etc.). In addition, Endesa is should continue to identify and evaluate proportions among all sectors. However, actively involved in water planning activities potential opportunities. 73% of all opportunities are expected in Spain and Brazil through participation to materialize now or within the next five in local River Basin Committees. Endesa years. While ‘other’ opportunities, such collaborates with the Commission of as water efficient electricity generation Regional Electric Integration (CIER) in and alternative water supplies, are most the development of an environmental frequently reported, increased brand value, legislation database for Latin American cost savings, and sales of new products or countries and Spain, with water being one services all increased by more than 40% of the topics covered. from 2012. 1 Other responding company 42 Appendix I – Report methodology
For the purposes of this report, respondents from the management targets or goals, was responded to Global 500 are categorized into eight sectors based by some companies with qualitative goals or goals on the Global Industry Classification Standard (GICS): without concrete targets. Wherever the percentage Consumer Discretionary, Consumer Staples, Energy, of respondents with concrete targets or goals is Health Care, Industrials, Information Technology, referenced in the report, the figure is based only on Materials, and Utilities.1 respondents that provided concrete, quantitative targets or goals as part of this question. 1 Companies that are Response rates are based on responses received considered to have the greatest potential to from companies that were sent CDP’s 2013 water Questions 1.1c and 1.2 were re-worded in CDP’s impact, or be impacted questionnaire. Other responding companies are 2012 and 2013 water questionnaires. As a result, by, water resource 2 issues were invited to excluded from these calculations, but responses may direct comparison of response percentages to these respond to CDP’s 2013 be used in leading practice examples, quotations, questions is not possible, and analysis of questions water questionnaire. and case studies. In addition, analyses, findings, 1.1c and 1.2 may be combined to gain a full These companies were selected from the largest and conclusions discussed in the report are based understanding of the actions (both within and outside publicly listed companies only on invited companies that responded; these water policies) companies are taking to address the by market capitalization at the time of the insights cannot be attributed to either companies who six key areas defined by the CEO Water Mandate analysis (Q4 2012). The were invited but did not respond; other non-invited to develop a comprehensive approach to water Global 500 is based on the FTSE Global Equity companies for a particular geography, sector, or management. Index Series. other division; companies that responded as either a 2 Other responding companies include subsidiary or entities that merged during the reporting For questions 7.1a and 7.2a, if a company included a companies that were process whose responses reflect those of their parent range of verification percentages for water withdrawals not formally invited as part of the Global 500, companies; or companies that submitted after August and recycling/reuse data, the resulting verification but chose to answer 9, 2013.3 percentage is based on the range provided for the CDP’s 2013 water questionnaire. majority of water withdrawals/quantity of water recycled 3 Companies that For the Global 500, analysis and discussion in the or reused. If a company reported one verification responded as either a subsidiary or entities Consumer Discretionary, Consumer Staples, Energy, percentage for all data, then that percentage is used. that merged during Industrials, and Materials sectors reflect all responding the reporting process companies (public and non-public). However, given the When comparing data year-on year, the percentage and companies that submitted after August 9, small number of non-public responses in the Health change is based on the newer data minus the older 2013 are included in the Care, Information Technology, and Utilities sectors, data, divided by the older data. For example, if a response rates but not in the analyses, findings, analyses, findings, and conclusions in the sector response percentage was 95% in 2013 and 90% in and conclusions. summaries reflect responses only from companies that 2012, the percentage change is calculated as: (95-90) 4 Geographical regions are defined in elected to make their submissions public. Except for / 90 = 5.6%. accordance with CDP number of responses and response rate, non-public Cities definitions as follows: North America responses are not included to protect the confidentiality Except where otherwise stated, all figures, tables, - Canada, US; Latin of these companies’ submissions. Non-public findings, and conclusions in the report are based on America - Brazil, Chile, Colombia, Mexico, responses are also excluded from the Brazil and India CDP’s 2010-2013 water questionnaires and do not Peru; Europe - Belgium, country analysis included in the Geographic coverage reflect external research or analysis by CDP or Deloitte. Czech Republic, 4 Denmark, France, and response rates section of this report. Germany, Ireland, Additional notes describing the methodology are Italy, Luxembourg, Netherlands, Norway, For most metrics, the percentage of responses is provided throughout the report. Spain, Sweden, based on the number of reporting companies for the Switzerland, United relevant geography, sector, or other division.5 Blank Kingdom; Africa - South Africa; East Asia - responses to particular questions are tabulated as Greater China (including “No” or “Don’t know” when calculating quantitative China, Hong Kong, Taiwan), Japan, Russia, responses, based on the question which has been South Korea; South asked.6 & West Asia - India, Israel; Southeast Asia & Oceania - Australia, The percentage of respondents indicating that they Indonesia, Thailand. 5 Other metrics are have board-level oversight is based on question 1.1a, also evaluated based which requests information on the position of the on the total number of responses reported: person responsible for the company’s policy, strategy, questions 1.1c, 1.2, or management plan. Board-level includes: board/ 2.1a, 2.1b, 2.5a, 3.1a, 3.4a, 4.1a, 5.1a, 6.1a, executive board, individual board member, sub-set of 9.1, and 9.2. the board, and committee appointed by the board. 6 Blank responses tabulated as “No” include The percentage is based on the highest position 1.1, 1.1b, 1.2, 2.2, 3.3, described for each company. 6.1, 7.1, 7.1a, 7.2, 7.2a, 8.1, 8.2, 9.1, and 9.2; questions tabulated as Question 1.1c, which requests information on “Don’t know” include community engagement, direct operations, public 2.1, 2.5, 3.1, 3.4, 4.1, 5.1, 7.4, and 8.3. policy, supply chain, transparency, and watershed 43 Appendix II – Global 500 companies by country
Public Non-public Total Region Country respondents respondents respondents Total invited North America 69 6 75 132 Canada 8 0 8 12 USA 65 6 71 120 Latin America 3 3 6 14 Brazil 1 2 3 5 Chile 0 0 0 2 Colombia 0 1 1 1 Mexico 2 0 2 5 Peru 0 0 0 1 Europe 52 15 67 91 Belgium 1 0 1 1 Czech Republic 0 0 0 1 Denmark 0 0 0 1 France 12 4 16 18 Germany 7 3 10 12 Ireland 0 0 0 1 Italy 1 1 2 4 Luxembourg 1 0 1 2 Netherlands 2 0 2 7 Norway 1 0 1 1 Spain 3 1 4 5 Sweden 1 2 3 5 Switzerland 6 2 8 9 United Kingdom 17 2 19 24 Africa 2 0 2 2 South Africa 2 0 2 2 East Asia 16 5 21 50 Greater China 3 0 3 15 Japan 10 4 14 20 Russia 2 0 2 8 South Korea 1 1 2 7 Middle East 3 1 4 8 Israel 0 0 0 1 South Asia India 3 1 4 7 Southeast Asia and Oceania 4 1 5 8 Australia 3 0 3 4 Indonesia 0 0 0 1 Thailand 1 1 2 3 Totals 153 31 184 305 44 Appendix III – Summary of key indicators
Key Indicators Consumer Discretionary Consumer Staples Energy Health Care Industrials Information Technology Materials Utilities 2013 Global 500 2012 Global 500 2011 Global 500 Total respondents 21 37 22 23 18 14 29 16 180 191 190 Public respondents 14 32 18 22 12 12 24 15 149 156 156 Non-public respondents 7 5 4 1 6 2 5 1 31 35 34 Non-respondents 23 12 33 8 20 12 10 7 125 127 125 Response rate 48% 76% 47% 74% 47% 54% 74% 70% 59% 60% 60% Water Management & Governance Respondents with a water policy, strategy or plan 90% 94% 100% 91% 94% 92% 97% 87% 93% 92% 93% Respondents with board-level oversight of their policy, strategy or plan 62% 54% 50% 68% 61% 42% 66% 53% 58% 58% 57% Respondents with concrete targets or goals 71% 80% 50% 77% 67% 50% 66% 47% 66% 55% 57% Respondents reporting actions, targets or goals to manage water resources 95% 97% 95% 95% 100% 92% 97% 93% 96% 97% NA Respondents that require key suppliers to report water use, risks and management 71% 40% 14% 36% 22% 42% 34% 33% 37% 39% 26% Risks & Opportunities Respondents able to identify whether or not their operations are located in water-stressed regions 90% 94% 100% 100% 94% 92% 100% 100% 96% 95% 89% Respondents with the majority of operations located in regions at risk 0% 11% 32% 5% 6% 17% 38% 13% 16% 15% 11% Respondents with key inputs or raw materials from regions subject to water-related risk 71% 80% 27% 50% 39% 25% 55% 33% 52% 43% NA Respondents able to identify whether or not they are exposed to risk in direct operations 95% 94% 95% 100% 100% 92% 100% 100% 97% 96% 93% Respondents exposed to risks in direct operations 57% 69% 82% 64% 50% 42% 79% 73% 66% 63% 55% Respondents able to identify whether or not they are exposed to risk in supply chain 86% 94% 64% 77% 61% 50% 83% 73% 77% 71% 62% Respondents exposed to risks in supply chain 57% 74% 9% 41% 28% 25% 34% 13% 39% 37% 27% Respondents exposed to risks in either direct operations or supply chain 67% 74% 82% 68% 50% 50% 79% 73% 70% 68% 59% Respondents that have experienced water-related business impacts in past 5 years 33% 57% 59% 27% 67% 25% 76% 67% 53% 53% 38% Respondents that identify opportunity 67% 74% 77% 73% 83% 67% 93% 73% 77% 71% 63% Respondents that identify linkages or trade-offs between water and carbon 76% 86% 77% 77% 67% 58% 90% 87% 79% 80% 72% Water Accounting Respondents that report water withdrawals 100% 100% 100% 100% 100% 100% 100% 100% 99% 97% 95% Respondents that verify the majority of water withdrawal data 57% 60% 68% 73% 56% 33% 62% 53% 60% 55% 56% Respondents that report water recycling/reuse 38% 46% 86% 68% 44% 83% 83% 93% 66% 63% 58% Respondents that report water sources significantly affected by their water withdrawals 5% 9% 14% 5% 0% 0% 38% 20% 12% 9% 8% Respondents able to identify discharges by destination, treatment type and quality 62% 91% 86% 86% 50% 75% 90% 100% 81% 85% 81% Respondents that paid penalties/fines for significant breaches of discharge regulations 5% 26% 9% 9% 11% 0% 24% 27% 15% 17% 15% Respondents that report water bodies/habitats significantly affected by their discharges or runoff 0% 3% 0% 9% 6% 0% 17% 27% 8% 10% 7% 45
Key Indicators Consumer Discretionary Consumer Staples Energy Health Care Industrials Information Technology Materials Utilities 2013 Global 500 2012 Global 500 2011 Global 500 Total respondents 21 37 22 23 18 14 29 16 180 191 190 Public respondents 14 32 18 22 12 12 24 15 149 156 156 Non-public respondents 7 5 4 1 6 2 5 1 31 35 34 Non-respondents 23 12 33 8 20 12 10 7 125 127 125 Response rate 48% 76% 47% 74% 47% 54% 74% 70% 59% 60% 60% Water Management & Governance Respondents with a water policy, strategy or plan 90% 94% 100% 91% 94% 92% 97% 87% 93% 92% 93% Respondents with board-level oversight of their policy, strategy or plan 62% 54% 50% 68% 61% 42% 66% 53% 58% 58% 57% Respondents with concrete targets or goals 71% 80% 50% 77% 67% 50% 66% 47% 66% 55% 57% Respondents reporting actions, targets or goals to manage water resources 95% 97% 95% 95% 100% 92% 97% 93% 96% 97% NA Respondents that require key suppliers to report water use, risks and management 71% 40% 14% 36% 22% 42% 34% 33% 37% 39% 26% Risks & Opportunities Respondents able to identify whether or not their operations are located in water-stressed regions 90% 94% 100% 100% 94% 92% 100% 100% 96% 95% 89% Respondents with the majority of operations located in regions at risk 0% 11% 32% 5% 6% 17% 38% 13% 16% 15% 11% Respondents with key inputs or raw materials from regions subject to water-related risk 71% 80% 27% 50% 39% 25% 55% 33% 52% 43% NA Respondents able to identify whether or not they are exposed to risk in direct operations 95% 94% 95% 100% 100% 92% 100% 100% 97% 96% 93% Respondents exposed to risks in direct operations 57% 69% 82% 64% 50% 42% 79% 73% 66% 63% 55% Respondents able to identify whether or not they are exposed to risk in supply chain 86% 94% 64% 77% 61% 50% 83% 73% 77% 71% 62% Respondents exposed to risks in supply chain 57% 74% 9% 41% 28% 25% 34% 13% 39% 37% 27% Respondents exposed to risks in either direct operations or supply chain 67% 74% 82% 68% 50% 50% 79% 73% 70% 68% 59% Respondents that have experienced water-related business impacts in past 5 years 33% 57% 59% 27% 67% 25% 76% 67% 53% 53% 38% Respondents that identify opportunity 67% 74% 77% 73% 83% 67% 93% 73% 77% 71% 63% Respondents that identify linkages or trade-offs between water and carbon 76% 86% 77% 77% 67% 58% 90% 87% 79% 80% 72% Water Accounting Respondents that report water withdrawals 100% 100% 100% 100% 100% 100% 100% 100% 99% 97% 95% Respondents that verify the majority of water withdrawal data 57% 60% 68% 73% 56% 33% 62% 53% 60% 55% 56% Respondents that report water recycling/reuse 38% 46% 86% 68% 44% 83% 83% 93% 66% 63% 58% Respondents that report water sources significantly affected by their water withdrawals 5% 9% 14% 5% 0% 0% 38% 20% 12% 9% 8% Respondents able to identify discharges by destination, treatment type and quality 62% 91% 86% 86% 50% 75% 90% 100% 81% 85% 81% Respondents that paid penalties/fines for significant breaches of discharge regulations 5% 26% 9% 9% 11% 0% 24% 27% 15% 17% 15% Respondents that report water bodies/habitats significantly affected by their discharges or runoff 0% 3% 0% 9% 6% 0% 17% 27% 8% 10% 7% 46 Appendix IV – Response status and sector by company
Responders Key to Response Status: AQ Answered questionnaire Seven & I Holdings AQ AQ(NP) Answered questionnaire but response not made Souza Cruz (see British American Tobacco) AQ(SA) publicly available Sysco AQ AQ(SA) Company is either a subsidiary or has merged during the reporting process; see Company in parenthesis for The Coca-Cola Company AQ further information Unilever AQ on company’s status Wal Mart de Mexico AQ AQ(L) Answered questionnaire after submission deadline Walgreen AQ(NP) Responded to investor requests consistently since 2010 Wal-Mart Stores AQ Wesfarmers AQ Consumer Discretionary Woolworths AQ Company Response Status BMW AQ(NP) Energy Bridgestone AQ(NP) Company Response Status Carnival AQ Anadarko Petroleum AQ(L) Christian Dior AQ(NP) Apache AQ Compagnie Financière Richemont AQ Baker Hughes AQ Compass AQ(NP) BG Group AQ Daimler AQ(NP) BP AQ Ford Motor AQ Canadian Natural Resources AQ(L) General Motors AQ Cenovus Energy AQ H&M Hennes & Mauritz AQ Devon Energy AQ Inditex AQ Ecopetrol AQ(NP) Johnson Controls AQ Eni AQ(NP) LVMH AQ EOG Resources AQ(L) McDonald's AQ(NP) Gazprom AQ Nissan Motor AQ Halliburton AQ Philips Electronics AQ Hess AQ PPR AQ Husky Energy AQ(L) Starbucks AQ Inpex AQ Target AQ Noble Energy AQ Volkswagen AQ Novatek AQ Yum! Brands AQ(NP) Occidental Petroleum AQ Oil & Natural Gas AQ Consumer Staples PTT AQ(NP) Company Response Status PTT Exploration & Production Public AQ Company Altria Group AQ Sasol AQ Anheuser Busch InBev AQ Statoil ASA AQ Associated British Foods AQ Suncor Energy AQ Beiersdorf AQ Total AQ(NP) BRF Brasil Foods AQ(NP) British American Tobacco AQ Carrefour AQ Health Care Colgate Palmolive AQ Company Response Status CVS Caremark AQ Abbott Laboratories AQ Danone AQ Allergan AQ Diageo AQ Amgen AQ General Mills AQ Astellas Pharma AQ Heineken AQ AstraZeneca AQ Hindustan Unilever AQ(SA) Baxter International AQ Imperial Tobacco Group AQ Bayer AQ ITC AQ Biogen Idec AQ Kellogg AQ Bristol-Myers Squibb AQ Kimberly-Clark AQ Celgene AQ L'Oréal AQ CSL AQ Mondelez International AQ Eli Lilly AQ Nestlé AQ Essilor International AQ(NP) PepsiCo AQ GlaxoSmithKline AQ Pernod Ricard AQ Johnson & Johnson AQ Philip Morris International AQ Medtronic AQ Procter & Gamble AQ Merck & Co. AQ Reckitt Benckiser AQ(NP) Novartis AQ SABMiller AQ Pfizer AQ Roche Holding AQ 47
Sanofi AQ Linde AQ(NP) Takeda Pharmaceutical AQ Newmont Mining AQ Thermo Fisher Scientific AQ POSCO AQ Potash Corporation of Saskatchewan AQ Industrials Praxair AQ(NP) Company Response Status Rio Tinto AQ 3M AQ Shin-Etsu Chemical AQ Atlas Copco AQ(NP) Syngenta International AQ Cummins AQ Teck Resources AQ Deere & Company AQ Vale AQ General Electric AQ Xstrata AQ(NP) Hitachi AQ Illinois Tool Works AQ(NP) Utilities Komatsu AQ Company Response Status Larsen & Toubro AQ American Electric Power AQ Lockheed Martin AQ Centrica AQ Mitsubishi AQ(NP) CLP Holdings AQ Mitsui & Co. AQ(NP) Dominion Resources AQ Raytheon AQ E.ON AQ Saint-Gobain AQ Electricite de France (EDF) AQ Sandvik AQ(NP) Endesa AQ Siemens Aktiengesellschaft AQ ENEL AQ United Technologies AQ(NP) Exelon AQ Vinci AQ Gas Natural SDG AQ(NP) GDF Suez AQ Information Technology Iberdrola AQ Company Response Status National Grid AQ Automatic Data Processing AQ Power Assets Holdings AQ Canon AQ RWE AQ Cisco Systems AQ The Southern Company AQ EMC AQ Hewlett-Packard AQ Non-responders Intel AQ Key to Response Status: International Business Machines (IBM) AQ DP Declined to participate IN Provided information Microsoft AQ NR No response Mitsubishi Electric AQ QUALCOMM AQ Samsung Electronics AQ(NP) Consumer Discretionary Taiwan Semiconductor Manufacturing AQ Company Response Status Texas Instruments AQ adidas DP Yahoo Japan AQ(NP) Amazon.com NR Astra International NR
Materials Belle International NR Company Response Status Continental NR Air Liquide AQ Denso NR Air Products & Chemicals AQ eBay DP Anglo American AQ Hermes International NR Antofagasta AQ Honda Motor NR Arcelor Mittal AQ Hyundai Mobis DP Barrick Gold AQ Hyundai Motor NR BASF AQ Kia Motors DP BHP Billiton AQ Kinder Morgan DP Dow Chemical AQ Lowe's Companies DP E.I. du Pont de Nemours and Company AQ Luxottica Group NR Ecolab AQ NIKE NR Freeport-McMoRan Copper & Gold AQ Prada NR Fresnillo AQ Priceline.Com NR Glencore International AQ(NP) S.A.C.I. Falabella NR Goldcorp AQ The Home Depot NR Holcim AQ Thomson Reuters NR Kumba Iron Ore AQ TJX Companies DP Lafarge AQ(NP) Toyota Motor DP 48
Consumer Staples Industrials Company Response Status Company Response Status Ambev - Cia de Bebidas das Américas DP ABB NR Archer Daniels Midland NR BAE Systems DP Costco Wholesale DP Boeing DP Femsa - Fomento Economico Mexicano DP Caterpillar IN H.J. Heinz NR Danaher NR Kraft Foods NR EADS DP Magnit DP Eaton NR Reynolds American NR Emerson Electric DP Tesco DP Empresas COPEC DP Unilever Nv Cva NR Fanuc NR Want Want China Holdings NR General Dynamics NR Grupo Mexico S.A.B. de CV NR Energy Honeywell International DP Company Response Status Hutchison Whampoa NR Canadian Natural Resources NR Jardine Matheson NR Chevron DP Jardine Strategic NR China Petroleum & Chemical NR Precision Castparts NR CNOOC NR Rolls-Royce DP Coal India NR Schneider Electric DP ConocoPhillips DP Volvo NR Enbridge IN Exxon Mobil DP Information Technology Formosa Petrochemical NR Company Response Status Imperial Oil DP Apple NR Lukoil NR ASML Holding NR Marathon Oil DP Corning NR Marathon Petroleum IN Ericsson NR National Oilwell Varco NR Facebook NR PETROCHINA NR Google NR Petróleo Brasileiro - Petrobras DP Hon Hai Precision Industry NR Phillips NR MasterCard DP Reliance Industries NR Oracle DP Repsol DP Tencent Holdings NR Rosneft NR Visa DP Royal Dutch Shell NR Yahoo! DP Schlumberger NR Spectra Energy NR Materials Surgutneftegas NR Company Response Status Tenaris NR Industrias Peñoles NR TransCanada NR LG Chem DP Tullow Oil DP LyondellBasell Industries NR Valero Energy IN Monsanto NR Williams Companies NR MMC Norilsk Nickel OSJC IN Woodside Petroleum DP Nippon Steel & Sumitomo Metal NR PPG Industries NR Health Care Siam Cement NR Company Response Status Southern Copper NR Alexion Pharmaceuticals NR Uralkali NR Covidien NR Gilead Sciences NR Utilities Intuitive Surgical NR Company Response Status Novo Nordisk NR CEZ NR Stryker NR Duke Energy DP Teva Pharmaceutical Industries DP Hong Kong & China Gas NR Valeant Pharmaceuticals International NR Korea Electric Power DP NextEra Energy NR NTPC NR SSE DP 49 Other responding companies
Other Responding Companies Key to Response Status: TAV Havalimanlari Holding Industrials AQ AQ Answered questionnaire UPS Industrials AQ AQ(NP) Answered questionnaire but response not made publicly available Weckerle Industrials AQ(NP) AQ(SA) Company is either a subsidiary or has merged during AU Optronics Information Technology AQ the reporting process; see Company in parenthesis for Bel Fuse Information Technology AQ further information Gold Circuit Electronics Information Technology AQ(NP) on company’s status AQ(L) Answered questionnaire after submission deadline HTC Information Technology AQ(NP) Responded to investor requests consistently since International Rectifier Information Technology AQ 2010 IO Data Centers Information Technology AQ(L) Lexmark International Information Technology AQ Marvell Technology Group Information Technology AQ Response Nokia Group Information Technology AQ Company Sector Status Quanta Computer Information Technology AQ Asiatan International Consumer Discretionary AQ SK Hynix Information Technology AQ(NP) Caesars Entertainment Consumer Discretionary AQ(NP) Sony Information Technology AQ Duratex Consumer Discretionary AQ STMicroelectronics Information Technology AQ Fiat Consumer Discretionary AQ Suyin Optronics Information Technology AQ Hanesbrands Consumer Discretionary AQ Toshiba Information Technology AQ LG Electronics Consumer Discretionary AQ(L) Unidata Automação Information Technology AQ Lululemon Athletica Consumer Discretionary AQ Akzo Nobel Materials AQ Maples Industries Consumer Discretionary AQ(NP) Aquarius Platinum Materials AQ METRO Consumer Discretionary AQ(L) Arrium Materials AQ Panasonic Consumer Discretionary AQ(NP) Asian Bamboo Materials AQ PrimeAsia Leather Consumer Discretionary AQ Atlas Iron Materials AQ Reed Elsevier Group Consumer Discretionary AQ China Steel Materials AQ Staples Consumer Discretionary AQ Cia. Siderurgica Nacional Materials AQ(L) Sun International Consumer Discretionary AQ(NP) - CSN Valeo Consumer Discretionary AQ(NP) CRH Materials AQ Bunge Consumer Staples AQ Croda International Materials AQ C&C Group Consumer Staples AQ Graphic Packaging Materials AQ(NP) Fresherized Foods Consumer Staples AQ HudBay Minerals Materials AQ Hillshire Brands Consumer Staples AQ Israel Chemicals Materials AQ JBS Consumer Staples AQ JSW Steel Materials AQ KAO Consumer Staples AQ Kemira Materials AQ Kirin Holdings Consumer Staples AQ Koninklijke Materials AQ(L) Marfrig Alimentos Consumer Staples AQ Norsk Hydro Materials AQ Nordzucker Consumer Staples AQ(NP) PTT Global Chemical Materials AQ Olam International Consumer Staples AQ Resolute Forest Products Materials AQ Unilever Indonesia (see Consumer Staples AQ(SA) Rexam Materials AQ(NP) Unilever) Sesa Goa Materials AQ Crescent Point Energy Energy AQ Tata Chemicals Materials AQ Talisman Energy Energy AQ(L) UPM-Kymmene Materials AQ Banco Santander Financials AQ AT&T Telecommunication AQ Bank of America Financials AQ Services Corcoran Management Financials AQ Colbun Utilities AQ(NP) Industrial Development Financials AQ(L) EDP - Energias de Utilities AQ NYSE Euronext Financials AQ Portugal AbbVie Health Care AQ Eskom Utilities AQ(L) Coloplast Health Care AQ Fortum Utilities AQ ACCIONA Industrials AQ Snam Utilities AQ CSX Industrials AQ Cummins India (Cummins) Industrials AQ(SA) Grindrod Industrials AQ Hindustan Construction Industrials AQ Layne Christensen Industrials AQ Nankai Electric Railway Industrials AQ Obrascon Huarte Lain Industrials AQ (OHL) Owens Corning Industrials AQ(L) Parsons Brinckerhoff Industrials AQ Royal BAM Group Industrials AQ South African Post Office Industrials AQ Taisei Industrials AQ 50 Appendix V – Investor signatories
530 financial institutions Bayern LB Delta Lloyd Asset Management BayernInvest Kapitalanlagegesellschaft mbH Deutsche Bank AG with assets of US$57 trillion BBC Pension Trust Ltd Development Bank of Japan Inc. were signatories to the CDP BBVA Dexia Asset Management Bedfordshire Pension Fund DLM INVISTA ASSET MANAGEMENT S/A 2013 water questionnaire Beetle Capital Domini Social Investments LLC dated February 1st 2013 Befimmo SA Dongbu Insurance Bentall Kennedy Doughty Hanson & Co. Berenberg Bank Earth Capital Partners LLP Signatory investors Blom Investment Bank Ecclesiastical Investment Management 3Sisters Sustainable Management LLC Blumenthal Foundation Ecofi Investissements - Groupe Credit Aberdeen Asset Management BNP Paribas Investment Partners Cooperatif ABRAPP - Associação Brasileira das Boston Common Asset Management, LLC Edward W. Hazen Foundation Entidades Fechadas de Previdência Breckinridge Capital Advisors EEA Group Ltd Complementar British Airways Pensions Eko Achmea NV British Coal Staff Superannuation Scheme Elan Capital Partners Active Earth Investment Management British Columbia Investment Management Element Investment Managers Acuity Investment Management Corporation (bcIMC) Environment Agency Active Pension fund Addenda Capital Inc. Brown Advisory Epworth Investment Management Advanced Investment Partners BT Financial Group Equilibrium Capital Group Advantage Asset Managers (Pty) Ltd BT Investment Management equinet Bank AG Aegon N.V. CAAT Pension Plan Erik Penser Fondkommission AEGON-INDUSTRIAL Fund Management Co., Cadiz Holdings Limited Erste Asset Management Ltd CAI Corporate Assets International AG Erste Group Bank AG AK PORTFÖY YÖNETİMİ A.Ş. Caisse de dépôt et placement du Québec Essex Investment Management Company, LLC Alberta Investment Management Corporation Caisse des Dépôts ESSSuper (AIMCo) Caixa de Previdência dos Funcionários do Ethos Foundation Alberta Teachers Retirement Fund Banco do Nordeste do Brasil (CAPEF) Etica SGR Alcyone Finance Caixa Econômica Federal Eureka Funds Management AllenbridgeEpic Investment Advisers California Public Employees’ Retirement Eurizon Capital SGR S.p.A. Alliance Trust System (CalPERS) Evangelical Lutheran Church in Canada Allianz Elementar Versicherungs-AG California State Teachers’ Retirement System Pension Plan for Clergy and Lay Workers Allianz Global Investors AG (CalSTRS) Evangelical Lutheran Foundation of Eastern Allianz Group California State Treasurer Canada Altira Group Calvert Group, Ltd. F&C Asset Management AmpegaGerling Investment GmbH Canada Pension Plan Investment Board FAELCE – Fundacao Coelce de Seguridade Amundi AM (CPPIB) Social Antera Gestão de Recursos S.A. Canadian Labour Congress Staff Pension Fund FAPERS- Fundação Assistencial e APG Group CAPESESP Previdenciária da Extensão Rural do Rio Apsara Capital LLP Capital Innovations, LLC Grande do Sul Arisaig Partners Capricorn Investment Group Fédéris Gestion d’Actifs ASB Community Trust CARE Super FIDURA Capital Consult GmbH ASM Administradora de Recursos S.A. Caser Pensiones E.G.F.P FIM Asset Management Ltd ASN Bank Catherine Donnelly Foundation FIM Services Assicurazioni Generali Spa Catholic Super Financiere de l’Echiquier ATI Asset Management CBRE Group, Inc. FIPECq - Fundação de Previdência Atlantic Asset Management Cbus Superannuation Fund Complementar dos Empregados e Servidores Australian Ethical Investment CCLA Investment Management Ltd da FINEP, do IPEA, do CNPq AustralianSuper CDF Asset Management First Affirmative Financial Network, LLC Avaron Asset Management AS Celeste Funds Management First Commercial Bank Aviva Central Finance Board of the Methodist First State Investments Aviva Investors Church Firstrand Limited Baillie Gifford & Co. Ceres Five Oceans Asset Management BaltCap Change Investment Management Florida State Board of Administration (SBA) Banco Comercial Português SA Christian Brothers Investment Services Inc. Folksam Banco do Brasil Previdência Christian Super Fondation de Luxembourg Banco do Brasil S/A Christopher Reynolds Foundation Forma Futura Invest AG Banco Espírito Santo SA Cleantech Invest AG FRANKFURT-TRUST Investment Gesellschaft Banco Nacional de Desenvolvimento ClearBridge Investments mbH Economico e Social (BNDES) Climate Change Capital Group Ltd Friends Fiduciary Corporation Banco Popular Espanol CM-CIC Asset Management Fukoku Capital Management Inc Banco Sabadell Colonial First State Global Asset Management FUNCEF - Fundação dos Economiários Banco Santander Comgest Federais Banesprev – Fundo Banespa de Seguridade Comite syndical national de retraite Bâtirente Fundação AMPLA de Seguridade Social - Social CommInsure Brasiletros Bank of America Commonwealth Bank of Australia Fundação Atlântico de Seguridade Social Bank Sarasin & Cie AG Commonwealth Superannuation Corporation Fundação Banrisul de Seguridade Social Bank Vontobel Compton Foundation, Inc. Fundação de Assistência e Previdência Social Bankhaus Schelhammer & Schattera Concordia Versicherungs-Gesellschaft a.G. do BNDES - FAPES Kapitalanlagegesellschaft m.b.H. Connecticut Retirement Plans and Trust Funds Fundação Forluminas de Seguridade Social - Bankinter Conser Invest FORLUZ BankInvest Co-operative Asset Management Fundação Itaipu BR - de Previdência e Banque Degroof Co-operative Financial Services (CFS) Assistência Social Banque Libano-Francaise Daegu Bank Fundação Promon de Previdência Social Barclays Daesung Capital Management Fundação Rede Ferroviaria de Seguridade Basellandschaftliche Kantonalbank Daiwa Securities Group Inc. Social – Refer BASF Sociedade de Previdência Dalton Nicol Reid Fundação Vale do Rio Doce de Seguridade Complementar de Pury Pictet Turrettini & Cie S.A. Social - VALIA Baumann and Partners S.A. DekaBank Deutsche Girozentrale FUNDIÁGUA - FUNDAÇÃO DE PREVIDENCIA 51
COMPLEMENTAR DA CAESB LBBW Asset Management North Carolina State Treasurer Futuregrowth Asset Management Investmentgesellschaft mbH Northern Ireland Local Government Officers’ General Equity Group AG LD Lønmodtagernes Dyrtidsfond Superannuation Committee (NILGOSC) Generali Deutschland Holding AG Legal & General Group plc Northern Trust German Equity Trust AG Legg Mason, Inc. Northward Capital Global Forestry Capital S.a.r.l. LGT Capital Management Ltd. Northwest and Ethical Investments L.P. (NEI GLS Gemeinschaftsbank eG Light Green Advisors, LLC Investments) GOOD GROWTH INSTITUT für globale Limestone Investment Management OceanRock Investments Inc. Vermögensentwicklung mbH Living Planet Fund Management Company Oddo & Cie Governance for Owners S.A. oeco capital Lebensversicherung AG Government Employees Pension Fund Lloyds Banking Group ÖKOWORLD (“GEPF”), Republic of South Africa Local Authority Pension Fund Forum OMERS Administration Corporation GPT Group Local Government Super Ontario Teachers’ Pension Plan Greater Manchester Pension Fund LOGOS PORTFÖY YÖNETIMI A.Ş. OP Fund Management Company Ltd Green Cay Asset Management London Pensions Fund Authority Oppenheim & Co Limited Green Century Capital Management Lothian Pension Fund Opplysningsvesenets fond (The Norwegian GROUPAMA EMEKLİLİK A.Ş. LUCRF Super Church Endowment) GROUPAMA SİGORTA A.Ş. MainFirst Bank AG OPSEU Pension Trust (OP Trust) Groupe Crédit Coopératif MAMA Sustainable Incubation AG Oregon State Treasurer Groupe Investissement Responsable Inc. MAPFRE Orion Energy Systems GROUPE OFI AM Maple-Brown Abbott Osmosis Investment Management Gruppo Monte Paschi Marc J. Lane Investment Management, Inc. Panahpur Harbour Asset Management Maryland State Treasurer Parnassus Investments Harrington Investments, Inc Matrix Group Pax World Funds Hauck & Aufhäuser Asset Management GmbH McLean Budden Pensioenfonds Vervoer Hazel Capital LLP Meeschaert Gestion Privée Pension Protection Fund Healthcare of Ontario Pension Plan (HOOPP) Mercy Investment Services, Inc. Pensionsmyndigheten Helaba Invest Kapitalanlagegesellschaft mbH Mergence Africa Investments (Pty) Limited Perpetual Investments Henderson Global Investors MetallRente GmbH PETROS - Fundação Petrobras de Seguridade Hermes Fund Managers Metzler Investment Gmbh Social HESTA Super Midas International Asset Management PFA Pension HIP Investor Miller/Howard Investments PGGM Holden & Partners Mirae Asset Global Investments Co. Ltd. Phillips, Hager & North Investment HSBC Holdings plc Mirae Asset Securities Management Ltd. Humanis Missionary Oblates of Mary Immaculate PhiTrust Active Investors Hyundai Marine & Fire Insurance Co., Ltd. Mistra, Foundation for Strategic Environmental Pictet Asset Management SA Hyundai Securities Co., Ltd. Research Pinstripe Management GmbH IBK Securities Mitsubishi UFJ Financial Group, Inc. Pioneer Investments IDBI Bank Ltd Mitsui Sumitomo Insurance Co.,Ltd Piper Hill Partners, LLC Illinois State Board of Investment Mizuho Financial Group, Inc. PKA Ilmarinen Mutual Pension Insurance Company Mn Services Pluris Sustainable Investments SA Impax Group plc Momentum Manager of Managers (Pty) Ltd PNC Financial Services Group, Inc. Independent Planning Group Monega Kapitalanlagegesellschaft mbH Pohjola Asset Management Ltd Industrial Bank of Korea Mongeral Aegon Seguros e Previdência S.A. Portfolio 21 Investments Industrial Development Corporation Morgan Stanley PREVHAB PREVIDÊNCIA COMPLEMENTAR Inflection Point Capital Management MTAA Superannuation Fund PREVI Caixa de Previdência dos Funcionários ING Group Mutual Insurance Company Pension-Fennia do Banco do Brasil Insight Investment Management (Global) Ltd Natcan Investment Management PREVIG Sociedade de Previdência Instituto Infraero de Seguridade Social - Nathan Cummings Foundation, The Complementar INFRAPREV National Australia Bank Progressive Asset Management, Inc. Instituto Sebrae De Seguridade Social - National Bank of Canada Provinzial Rheinland Holding SEBRAEPREV National Grid Electricity Group of the Electricity Prudential Investment Management IntReal KAG Supply Pension Scheme Psagot Investment House Ltd Investec plc National Grid UK Pension Scheme PSP Investments Investing for Good National Pensions Reserve Fund of Ireland Q Capital Partners Co. Ltd Irish Life Investment Managers National Union of Public and General QBE Insurance Group Jessie Smith Noyes Foundation Employees (NUPGE) Rabobank JPMorgan Chase & Co. Nativus Sustainable Investments Raiffeisen Fund Management Hungary Ltd. Jubitz Family Foundation Natixis SA Raiffeisen Kapitalanlage-Gesellschaft m.b.H. Jupiter Asset Management Natural Investments LLC Railpen Investments Kaiser Ritter Partner Privatbank AG (Schweiz) Nedbank Limited Rathbone Greenbank Investments KB Kookmin Bank Needmor Fund RCM (Allianz Global Investors) KBC Asset Management NV Nelson Capital Management, LLC Real Grandeza Fundação de Previdência e KCPS and Company Neuberger Berman Assistência Social KDB Asset Management Co., Ltd. New Alternatives Fund Inc. REI Super KEPLER-FONDS Kapitalanlagegesellschaft New Amsterdam Partners LLC Representative Body of the Church in Wales m. b. H. New Forests River Twice Capital Advisors, LLC KEVA New Mexico State Treasurer RLAM KeyCorp New York State Common Retirement Fund Robeco KfW Bankengruppe (NYSCRF) RobecoSAM AG Killik & Co LLP Newton Investment Management Limited Robert & Patricia Switzer Foundation Kiwi Income Property Trust NGS Super Rockefeller Asset Management Kleinwort Benson Investors NH-CA Asset Management Rose Foundation for Communities and the KLP Insurance Nikko Asset Management Co., Ltd. Environment Korea Technology Finance Corporation Nipponkoa Insurance Company, Ltd Rothschild KPA Pension NORD/LB Kapitalanlagegesellschaft AG Royal Bank of Canada La Banque Postale Asset Management Nordea Bank Royal Bank of Scotland Group La Financiere Responsable Norfolk Pension Fund RREEF Investment GmbH Lampe Asset Management GmbH Norges Bank Investment Management (NBIM) Russell Investments 52
Sampension KP Livsforsikring A/S The University of Edinburgh Endowment Fund Samsung Fire & Marine Insurance The Wellcome Trust Samsung Securities Threadneedle Asset Management Sanlam Tobam Santa Fé Portfolios Ltda Tokio Marine & Nichido Fire Insurance Co., Ltd. Santam Ltd Toronto Atmospheric Fund Sarasin & Partners Trillium Asset Management, LLC SAS Trustee Corporation Triodos Bank Schroders Tri-State Coalition for Responsible Investment Scottish Widows Investment Partnership Turner Investments SEB Asset Management AG UBI Banca Seligson & Co Fund Management Plc Union Asset Management Holding AG Sentinel Funds Union Investment Privatfonds GmbH SERPROS - Fundo Multipatrocinado Unionen Service Employees International Union Benefit UNISON staff pension scheme Funds UniSuper Servite Friars Unitarian Universalist Association Seventh Swedish National Pension Fund (AP7) United Methodist Church General Board of Shinhan Bank Pension and Health Benefits Shinhan BNP Paribas Investment Trust Universities Superannuation Scheme (USS) Management Co., Ltd Vancity Group of Companies Shinkin Asset Management Co., Ltd VCH Vermögensverwaltung AG Siemens Kapitalanlagegesellschaft mbH Veris Wealth Partners Signet Capital Management Ltd Vermont State Treasurer Skandinaviska Enskilda Banken AB (SEB AB) Vexiom Capital, L.P. Smith Pierce, LLC VicSuper SNS Asset Management Victorian Funds Management Corporation Social(k) VIETNAM HOLDING ASSET MANAGEMENT Socrates Fund Management LTD. Solaris Investment Management Vinva Investment Management Sompo Japan Insurance Inc. Voigt & Collegen Sonen Capital LLC Waikato Community Trust Sopher Investment Management Walden Asset Management, a division of Soprise! LLP Boston Trust & Investment Management SouthPeak Investment Management Company SPF Beheer bv WARBURG - HENDERSON Spring Water Asset Management, LLC Kapitalanlagegesellschaft für Immobilien mbH Sprucegrove Investment Management Ltd WARBURG INVEST Standard Chartered KAPITALANLAGEGESELLSCHAFT MBH Standard Chartered Korea Limited Water Asset Management, LLC Standard Life Investments West Yorkshire Pension Fund State Street Corporation WestLB Mellon Asset Management (WMAM) StatewideSuper Westpac Banking Corporation Stockland WHEB Asset Management Strathclyde Pension Fund White Owl Capital AG Stratus Group Woori Bank Superfund Asset Management GmbH York University Pension Fund Sustainable Capital Youville Provident Fund Inc. Sustainable Development Capital LLP Zegora Investment Management Sustainable Insight Capital Management Zevin Asset Management Svenska Kyrkan, Church of Sweden Zurich Cantonal Bank Svenska Kyrkans Pensionskassa Swedbank Swift Foundation Swisscanto Holding AG Sycomore Asset Management Syntrus Achmea Asset Management T.SINAİ KALKINMA BANKASI A.Ş. TD Asset Management Telluride Association TerraVerde Capital Management LLC TfL Pension Fund The Brainerd Foundation The Bullitt Foundation The Central Church Fund of Finland The Children’s Investment Fund Foundation The Clean Yield Group The Daly Foundation The Environmental Investment Partnership LLP The Joseph Rowntree Charitable Trust The Korea Teachers Pension The New School The Pension Plan For Employees of the Public Service Alliance of Canada The Pinch Group The Presbyterian Church in Canada The Russell Family Foundation The Sandy River Charitable Foundation The Sisters of St. Ann The Sustainability Group The United Church of Canada - General Council 53 54
CDP Contacts Deloitte Contacts CDP Board of Trustees
Paul Simpson Will Sarni Chairman: Alan Brown Chief Executive Officer Director and Practice Schroders Leader, Enterprise Water Frances Way Strategy Ben Goldsmith Co-Chief Operating Officer – WHEB Group Programs Therese Karkowski Senior Consultant Chris Page Sue Howells Rockefeller Philanthropy Advisors Co-Chief Operating Officer – Ben Dukes Global Operations Senior Consultant Dr. Christoph Schroeder
Cate Lamb Deloitte Consulting LLP James Cameron Head of Water 555 17th Street, Suite 3600 Climate Change Capital & ODI Denver, Colorado Sarah Robertson 80202-3942 Jeremy Smith Senior Program Officer – Water United States of America Tel: +1 303 294 4217 Takejiro Sueyoshi CDP Fax: +1 866 344 1562 40 Bowling Green Lane [email protected] Tessa Tennant London, EC1R 0NE United Kingdom Martin Wise Tel: +44 (0) 20 7970 5660 Relationship Capital Partners www.cdp.net [email protected]
Lead Sponsor Lead Sponsor and Report Writer Our sincere thanks are extended to the following
Individuals Isabelle Juillard Thompsen, Jason Morrison, Magdalena Kettis, Marc-Olivier Buffle, Martin Ginster, Piet Klop, Stuart Orr, Will Sarni.
Organisations Bloomberg, Alliance for Water Stewardship, Defra, Global Reporting Initiative, Investor Group on Climate Change, National Business Initiative (South Africa), United Nations Global Compact, United Nations Principles for Responsible Investing, World Resources Institute, WWF.