Guide CEOto BuildingWater resilient business CONTENTS 4 FOREWORD 6 KEY WATER CHALLENGES 8 THE FOR WATER BUSINESS CASE 8 WATER IMPACTS YOUR BOTTOM LINE 10 WATER PRESENTS RISKS 12 WATER OFFERS OPPORTUNITIES 14 OPPORTUNITY IN ACTION – THE SUSTAINABLE DEVELOPMENT GOALS 16 A FOR BUSINESS WATER TOOLBOX 22 IN ACTION BUSINESS 24 WATER @ WBCSD TO WATER - BUILDING RESILIENT BUSINESS 2 CEO GUIDE TO WATER - BUILDING RESILIENT BUSINESS 3 CEO GUIDE FOREWORD represents a significant portion of the Business depends on water. The materiality of water risks is Water demands energy mix. You share it with people, clear and urgent. cities, other businesses already exceed supply in many places. Without action, there will be no water and nature. The impacts of climate change available to meet future societal and are primarily channeled through environmental needs. , with This competition will get worse. changes in the water cycle According to the World Bank, within uneven consequences across the globe. Major natural disasters such the next three decades the global Water is central to the delivery as droughts are increasing, which food system will require between of a low-carbon world, stability, Carbon influence migration, impact food 40 - 50% more water; municipal and prosperity and peace. industrial water demand will increase capture and storage are notably highly prices and can by 50 - 70% and water demand for water intensive and biofuel crops pose lead energy will increase by 85%.1 significant demands on water supply. to social Water is Water scarcity can induce a security unrest. central to the risk in countries where hydroelectricity achievement of the Paris Agreement and Sunny Verghese Peter Bakker Ivan Menezes the Sustainable Chair of WBCSD, Co-founder President & CEO, WBCSD CEO, Diageo and Group CEO, Olam Development Goals TO WATER - BUILDING RESILIENT BUSINESS 4 CEO GUIDE water in decision- Business is paying the price too. Water should be a priority in the • Integrate When there is no water available for making, disclosure, and make smart boardroom of every company in operations, businesses must either Managing water better is a investment decisions; the world. significantly invest into or abandon key opportunity for business to create with other water users certain sites. and develop competitive advantages, • Collaborate while securing their license to and stakeholders to address shared risks and seize opportunities. Water risks directly a ect bottom operate, reducing financial losses and To better plan for future shocks lines. altogether ensuring continuity We encourage you to and become resilient, there needs to show of operations. and become a sound be a fundamental shift in the way that leadership water steward by companies value water. As a decision maker, you need to: stepping up to one the level of your of the most pressing sustainability • Understand company’s exposure to and sharing challenges we face. of water risks in direct operations and across supply chains; Gilbert Ghostine Magdi Batato Indra K. Nooyi Antoine Frérot CEO, Firmenich Executive Vice President & Head Chairman and CEO, PepsiCo CEO, Veolia of Operations, Nestlé SA TO WATER - BUILDING RESILIENT BUSINESS 5 CEO GUIDE KEY WATER CHALLENGES The world will face a • Inadequate access to water 40% water 2 by 2030 if the following and sanitation costs the global supply gap challenges are not urgently addressed: economy US$323 billion every 4 • Local water scarcity has global year. Over two billion people financial effects. Today, local don’t have access to safe drinking freshwater crises are one of the main water, and over four billion don’t threats to the global economy. For have access to safe sanitation.5 example, a drought in Brazil directly This has severe consequences for affects food prices in Europe. productivity as well as health and gender equality. • Water is a precious but undervalued resource. In many • Deteriorating water quality is a countries, water is underpriced major factor in increasing global or subsidized, failing to reflect water scarcity as it reduces its true costs the quantity of water that is and values. safe to use. Globally, 80% of municipal wastewater is discharged 1 in 4 of the untreated.6 Run-off from industry world’s cities and agriculture puts water bodies faces water under significant threat. insecurity3 TO WATER - BUILDING RESILIENT BUSINESS 6 CEO GUIDE Credits: Nestlé Côte d’Ivoire Nestlé Côte Credits: • Groundwater levels are declining. Nearly two thirds of the largest aquifers in the world are already being depleted, putting businesses Water is essential to and communities at risk.7 public health. That’s • Globally, agriculture uses 70% why we're leveraging of available water.8 If agricultural our science to water efficiency is not improved, improve hygiene other water management efforts by government and industry won’t and sanitation, while suffice. reducing our water • Water users are interdependent. footprint by 25% Local water scarcity is not just by 2020. a threat to your company but to everyone in the same catchment. Gilbert Ghostine One water user's actions can put at CEO, Firmenich risk operations of another. TO WATER - BUILDING RESILIENT BUSINESS 7 CEO GUIDE THE FOR WATER BUSINESS CASE Water is underpriced across the world. Businesses Supply chains often fail to understand the full value of water, and to Insurance premiums incorporate water-related risks in their planning. Operating/ production costs Water risks affect business Water profitability Capital costs impacts Water risks can lead to growth your constraints by increasing your bottom business’ risk profile and ultimately Revenues its cost of capital. A 2017 Trucost line study showed that if the full costs of water availability and water quality Credit worthiness impairment had to be absorbed, this would equate to an average Production capacity decline in profits of 44% for utilities and 116% for food and beverage companies.9 TO WATER - BUILDING RESILIENT BUSINESS 8 CEO GUIDE Water is a material business Investors are paying closer will drive disclosures on water as issue and risk attention to water demand from investors for improved As competition for water increases, An increasing number of investors climate-related financial disclosures regulation will tighten. Business will are recognizing the value of water increase. come under closer scrutiny and water- and striving to better account for it in As part of the recommendations, related expenditures will rise. investment decisions. For example, water is identified among potential the recently-launched Drought Stress disclosure metrics, targets, and Testing Tool11 reveals that even when climate-related opportunities.12 exposed to drought scenarios of only medium severity, most companies see their credit ratings downgraded. Fund and asset We integrate water manager ACTIAM management into our aims to make The Task Force on Climate- voting decisions for our related Financial Disclosures investee companies. its investments (TCFD) water neutral The recommendations recently Carine Smith Ihenacho 10 by 2030 developed by the TCFD and Chief Corporate Governance Officer, Norges Bank Investment implemented by leading businesses Management (Source CPD, 2017) TO WATER - BUILDING RESILIENT BUSINESS 9 CEO GUIDE THE FOR WATER BUSINESS CASE Companies face physical Continuity and and non-physical risks growth constraints Increased regulation driven by competition for water, pollution, regulation, and climate change. Brand damage Increased price Operational risks Business disruption due to water Water scarcity or flooding presents • In Brazil, drought pushed up Threat to license to operate risks water costs by over US$2 Exposure to litigation million in 2015 while increasing electricity costs by close to US$6 million due to reduced availability of hydropower. General Motors Company Community conflicts Stakeholder concerns responded by increasing water conservation efforts and energy efficiency measures.13 TO WATER - BUILDING RESILIENT BUSINESS 10 CEO GUIDE Legal and regulatory risks Financial risks More stringent legislation or Increased cost of capital and reduced allocations; fines or reduced financing options penalties for water pollution • Morgan Stanley Capital Index incidents Research shows that the total value • Water prices charged to The of sales or reserves at risk from Kellogg Company manufacturing water scarcity amounts to US$221 facilities in Mexico have risen 300% billion for All Country World Index since 2012, which directly impacted (ACWI) goldminers, close to US$21 operating costs in these locations.14 billion for MSCI US Investable Market Index (IMI) electric utilities and over Reputational risks US$17 billion for MSCI Brand damage; loss in market share; 14% of green ACWI steel producers.16 loss of social license to operate bonds issued • The Coca-Cola Company was forced to abandon plans to build in 2016 were a US$81 million new bottling plant for water- in Tamil Nadu, India after fierce resistance from local farmers, who related 17 feared the company would cause a projects fall in the water table.15 TO WATER - BUILDING RESILIENT BUSINESS 11 CEO GUIDE THE FOR WATER BUSINESS CASE Investing in sustainable water management offersopportunities Cost savings to gain a competitive advantage. For example, to transition to a circular economy, businesses can implement and offer products and solutions to Competitive advantage reuse water and recover resources out of used water. This is one of the largest Enhanced reputation