A recent report confirms that disclosure on water risks lags far behind information available to investors on greenhouse gas emissions

A recent report from the Boston-based industry coalition Ceres confirms that reporting of water risk is generally inadequate. The report – Murky Waters? Corporate Reporting on Water Risk – finds that while many companies face exposure to water-related risks, there is “limited disclosure” in financial filings, with most couched in “vague, boilerplate language”, without reference to specific at-risk operations or supply chains.

Regional context is hugely important in water disclosure, as Marcus Norton, who heads the recently launched water programme at the Carbon Disclosure Project, points out. “With water, context tends to be everything and a global figure can carry relatively little meaning in many cases.”

Breaking down water usage between stressed and non-stressed areas and providing differentiated reduction targets was a key strength of Diageo’s disclosure policy, according to Brooke Barton, the Ceres report’s author.

The UK-based drinks giant achieved the highest score out of the 100 companies examined across eight sectors: beverages, chemicals, electric power, food, homebuilding, mining, oil and gas, and semiconductors. The mining sector scored highest overall, followed by beverages, with homebuilding coming in last.

Roberta Barbieri, Diageo’s global environment project manager, says the company has set “more aggressive” targets for its owned production sites in water-stressed areas, where it aims to reduce water use by 50% by 2015 with a 30% target for all other Diageo sites.
While she is pleased the report recognises Diageo as the company with the best water risk disclosure across all business sectors, Barbieri concedes there is still much to do. For instance, including water risk data in financial filings was something the company is “working on now”.

Along with regionally differentiated water accounting and reduction targets and the need for better evaluation of water impacts in supply chains, Barton identifies the disclosure of water risks within financial disclosure as a key recommendation of the report.

However, while she was surprised to see how low-scoring many sectors were, she remains positive. “This is the first time a quantitative evaluation of disclosure in this area has been conducted and we expect that it will improve a lot over the coming years.”

Norton shares that optimism. He would like to see companies look at carbon and water issues together, and notes parallels between water reporting now and the early days of carbon reporting. “I think we are with water now where we were with carbon five or so years ago. We’re at the raising-of-awareness phase,” he says.

New guidance

Factors driving change include pressure from both investors and regulators, such as the new guidance on water risks issued by the US Securities and Exchange Commission in January.

But pressure from investors could be running ahead of regulatory change. “The investors in our coalition are asking for this information,” Barton says. “They will be using the guidance from the report for their discussions with companies. We can expect a growing number of shareholder resolutions in the US around this issue.”

And this is not confined to the US investors. Last year Norges Bank Investment Management, which runs the $415bn Norwegian Government Pension Fund, announced it would be evaluating water risk provisions at the 1,100 companies in which it holds shares.

If this article was of interest, you might want to take a look at an event we're doing on water and business on 8-9th December in London. Details here: http://bit.ly/waterarticle

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