Water risks may hinder corporate growth

Researchers with the Markets and Enterprise Program of the World Resources Institute, a respected Washington, DC, based ngo, have reported that water risks may already be affecting corporate bottom lines and that some major investors are clamouring for comparable data about water risks that may affect their investments. For example, Calvert Investments found that Hanes Brands, a manufacturer of clothing, lost $5.2 billion as a result of cotton supply shortages triggered by the 2011 US drought. Moody’s Investor Service has released warnings about risk to credit ratings in the mining industry, as companies spend more on infrastructure in response to growing water risks. Deutsche Bank Securities estimates that the recent US drought, which affected nearly two-thirds of the country’s lower 48 states, will reduce GDP growth by approximately one percentage point.

WRI states that, at the World Economic Forum in Davos this year, experts named water risk as one of the top four risks facing business in the twenty-first century. Similarly, 53% of companies surveyed by the Carbon Disclosure Project reported that water risks are already taking a toll, owing to property damage, higher prices, poor water quality, business interruptions, and supply-chain disruptions.  According to WRI, more and more investors are clamoring for sustainability reports and disclosure initiatives to identify corporate water risks, but the process of actually evaluating water supply risks, particularly on a comparable basis, is challenging. For WRI, as well as for many international agencies, water risks include floods, drought, and pollution.

WRI is one of the members of a Global Compact team working to reconcile the differences between various terms and reporting methodologies. The results will be published in 2014 as new Corporate Water Disclosure Guidelines under the UN Global Compact. For those interested in getting a head start on compliance, a public exposure draft is available at http://ceowatermandate.org/

WRI commentaries on corporate water risks are available at http://insights.wri.org/topic/water-risk

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