Businesses, Investors Must Give Water Risks Greater Attention

Businesses, Investors Must Give Water Risks Greater Attention

Companies need to think about water beyond just how much they use directly, and consider their water needs all the way from raw material extraction up to product use and disposal, according to a new report.

"Water Scarcity & Climate Change," by Ceres and the Pacific Institute, makes the case for businesses and investors to better understand water use, explaining the many risks involved with water, the ways companies can be hurt by poor water management and the opportunities from changing water policies.

"Climate change is exacerbating water scarcity around the world," said Mindy Lubber, president of Ceres. Areas around the world that historically are water-poor are experiencing worse water shortages and droughts, and areas that used to have more secure water sources are now also feeling the pinch.

Such shortages, real and possible, have already harmed businesses or entirely industries, and pose even greater threats for some of the most essential sectors. And it's not just water quantity that is an issue, but also the quality and cost of water.

Water is essential for cooling in power plants, and as water availability drops and water prices go up, power plant production is cut back. France, Germany and Spain have all had to shut down nuclear plants due to heat waves and low water levels. And new power plants proposed in the U.S. are facing scrutiny over how much water they will draw.

The semiconductor industry consumes huge quantities of water, with Intel and Texas Instruments along using 11 billion gallon in 2007 for making silicon chips. Eleven of the world's 14 largest semiconductor factories, though, are in the Asia-Pacific region, which faces a number of water risks.

Beverage companies are experience more pressure, too, as some Coca-Cola and PepsiCo bottlers in India have lost their operating licenses due to water shortages, and Nestle Waters has fought for five years to build the largest water bottling plant in California, a state that is entering its worst drought yet.

What is needed in those, and other industries, the report argues, is a better understanding of how companies use water and what they can do to lower their water use, emit less wastewater, use materials that require less water and make products that need less water throughout their lives,

"Companies need to do a much better job evaluating how much water they use and where they use it," said the Pacific Institute's Peter Gleick, the lead author of the study.

Of 120 companies that the Pacific Institute has reviewed, more than 90 percent report somewhat on water, but only 20 percent look at real risks, and only 10 percent examine supply chain water risks. None take climate change into account when talking about water.

The report recommends companies measure their water footprint, assess all risks (physical, reputational, regulatory), engage key stakeholders, integrate water into business planning and corporate governance, and disclose water performance and risks.

In addition, it lays out everything investors should be asking of companies to understand the risks and opportunities those companies face when it comes to water. Specific sectors covered include electric power/energy, apparel, biotechnology/pharmaceutical, forest products and metals/mining.

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