CDP water scores: The next wave in reporting

Over the past several years, companies are increasingly taking into account environmental issues, such as water and ecosystems; quantifying their sustainability performance; and reporting that performance to external stakeholders.

Starting next year, reporting water risks and opportunities through the CDP will move to a new level of expectations. In 2014, scoring will be applied on a private basis to Fortune Global 500 companies, and from 2015 onwards to other respondents.

The CDP (formerly Carbon Disclosure Project)  played an important role in driving companies to report on carbon and climate-change risks and opportunities. Companies voluntarily responded to the CDP's questionnaire, and built carbon and climate change mitigation and energy strategies.

In a similar fashion, CDP Water Disclosure (WD), on behalf of several hundred institutional investors, for several years has asked companies to report on water-related risks and opportunities. This reflects the rising expectation by investors, civil society and non-governmental organizations for transparency and quantitative measurement of progress.

What might the 2014 CDP WD look like with regards to scoring?

Cate Lamb, head of the CDP's water program, explains that more corporations and investors are demanding scoring that “will provide insights into the characteristics and common trends among leading companies on water stewardship; highlight good practice, leaders and laggards; provide objective feedback to each responding company; provide useful metrics for investors; and catalyze changes in corporate behavior.”

And as with the CDP’s climate-change scoring, the water score will be key toward “driving better disclosure and performance among responding companies. The score is meant to help investors and others better understand a company’s resiliency amid water challenges."

“A good score will communicate to all stakeholders that good water stewards are superior, forward-looking companies with a sound understanding of their risk profile," Lamb added. "A company that can demonstrate long-term resilience in the face of water challenges through proactive and collaborative engagement at the watershed level is therefore a sound investment prospect.”

“CDP WD has come a long way in the past few years and has contributed to an increased awareness of water risks and water stewardship,” Lamb said. “Not to be ignored in the process of increased reporting and transparency are the business opportunities to address water risks through new technologies and services.”

To set the stage, here is a brief recap of the CDP WD's 2012 report, released last October.

More than half of Fortune 500 respondents (53 percent) experienced business interruption or other detrimental water-related business impacts, up from 38 percent in 2011. An awareness of supply chain risks rose, with 71 percent of respondents in 2012 able to state whether they are exposed to such risk, up from 62 percent. Similarly, more respondents (39 percent) were requiring key suppliers to report on water-related risks than the previous year (up from 26 percent).

Water represents a strategic opportunity to improve financial and brand performance. Seventy-one percent of respondents reported 319 water-related opportunities, such as the sale of new products or services. And 79 percent of opportunities reported with an associated timeframe are expected to materialize now or within the next five years.

The CDP's 2013 water report will be released in October.

Editor's note: To learn more about water and the convergence of sustainability and technology, be sure to check out VERGE SF October 14-17.

Measuring cup image by Mattia Menestrina via Shutterstock.