Water: the elephant in the room


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The Marsh Center for Risk Insights found that 40% of Fortune 1000 companies recognised the potential impact of water shortages, yet only 17% felt prepared for it. Water is clearly the elephant in the room. We thought for the first edition of Directions in 2010 we’d pay it some attention.

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Water: the elephant in the room

  1. 1. DIRECTIONS SUPPLEMENT FEbRUaRy/ MaRCh 10 Water: the elephant in the room Why water is the big issue getting ready to charge
  2. 2. Directions Supplement February/March 10 Welcome to Directions Sustainability team The Marsh Center for Risk Insights found that 40% of Fortune 1000 salterbaxter companies recognised the potential impact of water shortages, yet only 17% felt prepared for it. Water is clearly the elephant in the room. We thought for the first edition of Directions in 2010 we’d pay it some attention. So we’ve invited Dave Tickner of WWF-UK, to give us an overview of the challenge water scarcity presents. Marcus Norton, Head of Water Disclosure at CDP, explains why business does not have the luxury of time. And to provide an insight into who’s saying what, salterbaxter provide a snapshot review of some notable water babies, and some noticeable by their absence from the debate. The Intergovernmental Panel on Climate Business forums like the CEO Water Mandate Change has stated that a 2-3°C rise in global have helped to distil the debate further. But temperatures could result in water scarcity is all this working to improve how businesses for over 3 billion people – almost half of the approach the issue? With 40% of Fortune world’s population. The ACCA identified water 1000 companies* agreeing that the impact as the next big issue after climate change; of a water shortage on their business would issues of supply and fair use are becoming be ‘severe’ or ‘catastrophic’, we would expect an increasing challenge for business in many a large number to be prepared for the crisis. parts of the world; and there is a compelling But only 17% said they actually were. argument that the water challenge is inextricably linked to climate change. Water The Polaris Institute, amongst others, have plays an essential role for many industries voiced concerns over initiatives such as the so surely it should be high on corporate CEO Water Mandate, stating they are more of agendas, but is it? We’ve noted an air of a corporate PR effort to gain greater control complacency amongst business – many are over water resources and services. We felt it aware of the water issue but few are currently would be worth taking a look at a selection of responding to it or indeed prepared to deal businesses to see who is talking about water, with it head on. what they are saying and what is being done. It’s fair to say that we are all increasingly *The Marsh Center for Risk Insights. aware of the scale of the water issue. Initiatives from institutes such as the World Economic Forum (WEF) and the Pacific Institute have increased awareness of the water challenge and businesses’ recognition of its importance. Less than 1%: business’ contribution to online dialogue on water Salterbaxter has recently set up an online 07/01/10, almost a third of posts were issues tracker, powered by FindAgent*. from bloggers and opinion formers (1,449). It is a tool which enables you to chart online Another third were press or news sites, conversations on any number of issues, and only 33 posts (which is under 1%) providing insight into stakeholder debate were businesses. It looks like businesses and opinion. We did a search for online are noticeably absent from the debate debate and dialogue around water post and are not thinking about how to COP15. Top line findings show that of the effectively engage with stakeholders 4,452 online postings from 19/12/09 to on this issue. * Salterbaxter and FindAgent are working together on issues tracking and analysis services for corporate responsibility. If you would like more information please get in touch.
  3. 3. Tackling the elephant in the room We’ve picked ten of the CEO Water Mandate H&M: signatory companies and looked at their public H&M does not own any production facilities disclosures. We found a range of approaches, so aim to find solutions for impacts within the some detailed, some not and we’ve grouped supply chain – not only with its direct suppliers them into those tackling the elephant in the but deeper in the supply chain with indirect room, and those only just getting started. suppliers. H&M see’s this as essential to 3bn establishing an accurate water footprint. The Bayer: aim is to broaden initiatives on the issue to Water is identified as one of the three key focus on water consumption in addition to issues that Bayer face. Bayer communicate wastewater, particularly in fabric production an understanding of the business benefits, and dyeing. H&M realises the influence it have a vested interest in good water can have on suppliers to help resolve management because it needs to cool indirect impacts and bring about positive People who will suffer and operate production facilities, and use change, a good example of meeting the water shortages as a technology to come up with solutions to the supply chain and collective action elements result of a 2–3°C rise in issue. Bayer focus on innovative solutions to of the Water Mandate. global temperatures. areas such as effective wastewater cleaning, energy efficiency through nanotechnology Nestlé: and solutions for agriculture. Nestlé is probably the most advanced of the batch in terms of the time it has dedicated Carlsberg: to the subject. Water is one of its three key 17% Carlsberg uses 3.7 hectolitres of water to issues and being the world’s leading bottled make 1 hectolitre of beer (2008) making it water company so it should be. In 2008 it the most efficient global brewing company achieved its water targets and reduced in terms of water use. And it plans to cut water withdrawal per tonne of production use by a further 11% by 2012, taking water by 6%. Nestlé’s combined long-term and use down to 3.3hl per hl of beer. It aims short-term approach has resulted in a total to establish partnerships with local and reduction in water withdrawals per tonne international organisations to further improve of products by a massive 58% since 1999. Of Fortune 1000 companies* water efficiency. Carlsberg Poland’s Bosman said they actually were prepared Brewery is operating one of Europe’s most Reed Elsevier: for the crisis. compact and efficient waste water treatment Reed Elsevier’s strength lies in robust plants – one of less than ten in the world at the measurement of progress against targets moment. We look forward to reading more and clear presentation of data: “Absolute about progress against promises soon. water usage decreased 9% from 485,951 m3 in 2007 to 441,905 m3 in 2008, allowing us to Coca-Cola: exceed our five year 10% reduction target. On With 1.6 billion servings consumed each day, a normalised basis, we achieved an equivalent Coca-Cola uses a lot of water to make it’s 24% reduction between 2007 and 2008 and drinks. Globally it uses 2.43 litres of water for a 35% reduction between 2003 and 2008”. each litre of drinks produced, in the UK Good performance on reducing water impacts this drops to an impressive 1.5 litres. It is and communicating year-on-year data in a targeting a 20% improvement in water comparable and transparent manner. efficiency by 2012 based on 2004 figures. Global action includes water-risk surveys for each of their 79 production facilities and Coca-Cola is looking to benefit from collective action: “to magnify our efforts, we work with peer industries, sharing best practices and benchmarking our progress”. A good example of a company tackling the issue head on and in a collective way – but it is one of it’s biggest issues. 40% Of Fortune 1000 companies* agree that the impact of a water shortage on their business would be ‘severe’ or ‘catastrophic’.
  4. 4. Directions Supplement February/March 10 Just getting started… Arup: Shell: For Arup, leaders in building design and Royal Dutch Shell seems to understand the construction, water should be a material scale of the water issue stating that by 2025 issue. The current efforts seem to fall short of two-thirds of the world’s population could be the mark. Yes, it supports Water for the World living with water stress. This doesn’t translate (WftW), an initiative to educate and engage 11 to its own operations however, as it goes on to to 18-year-olds on water, but we were state that its industry is “not a big water user”. disappointed not to find more. Due to This is followed by data showing Shell used the nature of the business we’d expect approximately 224 million m3 of fresh water in to see Arup promoting sustainable water 2008, significantly more than many of the management and best practices through CEO Water Mandate peer companies covered all aspects of its work. Perhaps this is here. Shell is a big organisation and given the happening behind the scenes and is scale of this water use we feel it should be simply not reported. In brief, Arup would doing more to address the issue or at least 58% definitely benefit from more structured matching impacts more closely with the wider communication on progress in tackling water issue. sustainability issues. Cadbury: Cadbury is an innovative communicator Reduction in Nestlé’s water on sustainability. For the layperson, video 224 withdrawals per tonne of snapshots introduce issues followed by links products since 1999. to Cadbury’s targets and more detail in the ‘I know my stuff’ section. Unfortunately the coverage on water doesn’t match the communications approach. Unlike carbon and packaging there is no reduction target for water, only a goal to have water reduction million m3 plans at all sites by 2010. And the more detailed section doesn’t give much more. Performance is good (a 10% reduction Of fresh water used by Shell in between 2006 and 2007) but reported 2008. confusingly: the text gives data in tonnes and the chart shows cubic metres! By Cadbury’s own admission “our water strategy is in the early stage of development” and we’d expect to see more coming soon. GSK: So of the ten companies we’ve looked at, six Unfortunately it is difficult to find anything are making headway and four need to be more 3.3 in GSK’s site on water as it’s hidden deep transparent in their approach and realise the within a hierarchy of subjects. The approach impact water scarcity can have on them. is mainly housekeeping – aiming to reduce Although many businesses are aware of the water use, reuse it when feasible and treat elephant in the room, many don’t seem wastewater to minimise adverse prepared for the challenge, don’t realise the environmental impacts. Snore. It does set potential direct and indirect supply chain a target to reduce water consumption by impacts and don’t have plans in place to deal Carlsberg’s target amount of 2% per annum per unit of sales which with the growing issue. Overall we’d like to see hectolitres of water used to make equates to an 8% saving by the end of 2010. more disclosure and engagement. There’s just one hectolitre of beer (versus But without demonstrating a real knowledge not enough conversation and debate on this current figure of 3.7). of where the impact of its water usage falls, issue from the corporate world. So going back this doesn’t appear to be a strategic approach. to the original question, is there an air of Rather surprising for a company that tackles complacency? Yes. Many businesses are not sustainability issues so well in other areas. acknowledging the scale of the water issue.
  5. 5. A river should run through it Dave Tickner Ensuring water security will be a defining challenge for the Head of Freshwater Programmes 21st Century. Whether your concern is food or energy security, WWF-UK poverty reduction or business risk, climate change, conflict or biodiversity, managing water sustainably is a critical foundation. The litmus test of water security is the continued flow of the rivers, lakes and aquifers from which we take our water. “It’s not like the stuff falls from the sky”. It was WWF’s Living Planet Report has concluded 1996, and I was chatting in the pub with Alison, that declines in freshwater biodiversity are a drily humorous colleague of mine. She was probably sharper than those in the rainforests. complaining about her rising water bill. Her But water scarcity affects people as much as ironic observation has stayed with me. wildlife. Women and girls have to travel further to get water for domestic use, preventing Those of us living in the UK are accustomed them from working or attending school. to water falling from the sky. But it’s different Farmers struggle to grow crops when for Hammad, my counterpart in WWF Pakistan. irrigation is impossible. Hydropower dams His is a country with a largely agricultural can’t generate electricity (a recent problem economy and low rainfall. Without the glacier- across Latin America). Reports of deadly fed flow of the Indus River, which feeds one conflict between water users trickle in from of the world’s largest irrigation systems, East Africa with depressing regularity. Pakistan’s rapidly growing population would Uncertainty over rainfall and river flows can be in trouble. Already demand for water and be harder to deal with than simple lack of its inefficient use means that the Indus often water and will probably increase as climate dries up before it reaches users downstream. change takes hold. Water scarcity in far-flung nations can affect It’s not like the stuff us here in the UK too. When drought reduces farm output, as in Australia recently, world falls from the sky grain prices are hiked which affects everyone and in some areas so-called tortilla riots can follow. WWF’s UK Water Footprint report showed that the average citizen in this country soaks up 4,645 litres of the world’s water Compare world maps of population and every day. But only 150 litres flows through hydrology and you’ll be alarmed at how our taps. The rest is “virtual water” used many people live in places where water mostly during the cultivation and processing resources are similarly stretched. Around of the food and fibres we use. Although the two billion people live in water stressed size of these numbers is startling, the key is to regions now and this is a number that’s actually understand and reduce our impacts likely to grow in coming decades. on water-scarce regions, rather than obsessing about the total size of our footprint. This is a crucial difference between carbon and water. But there’s good news. To quote the journalist Fred Pearce, almost everywhere in the world we manage water “spectacularly badly”.
  6. 6. Directions Supplement February/March 10 You might ask why this is good news? Well it Encouragingly, new initiatives such as the implies that in most places there is, in theory, UN Global Compact’s CEO Water Mandate enough water. There’s no need yet to seek out are helping to stimulate this approach. WWF new supplies on another planet. We just need has helped to establish the Alliance for Water to manage the stuff more wisely. Stewardship and the Water Footprint Network which are developing tools and standards to There’s another reason to be cautiously guide private sector efforts; we have published optimistic. The last decade has seen a wave Investigating Shared Risk in Water; and we of progressive water legislation across the work in partnership with SABMiller, Marks & world. Starting in South Africa and Mexico Spencer and others to address shared risks and extending through the European Union, in key business locations. Brazil and China, governments have passed laws that prescribe integrated water But a few progressive companies and management across entire catchments. The voluntary initiatives is only the tip of the emphasis is on meeting people’s basic needs iceberg. Many more companies do not look first and then allocating remaining water at water as a priority issue than do. Fewer equitably. Importantly, these laws emphasise still look at water impacts beyond their the importance of protecting sources of water factory gates, up and down the supply chain. 4,645 – our rivers, lakes and aquifers, not just being Somewhat overshadowed by the wildfire fair with who uses the resources. debate on climate change of recent years, water is certainly an elephant in many a Implementing these laws is challenging. boardroom. But it is certain that growing Capacity in water management institutions populations and increasing climate change is limited, hydrological data is sparse and impacts will only serve to intensify the awareness is low among politicians of the pressure on water resources around the world WWF’s UK Water Footprint report return on investment from better water and make all water users begin to take notice. showed that the average citizen in management or the risks of doing nothing. this country soaks up 4,645 litres As I write winter snow is falling outside my of the world’s water every day. This is where businesses, motivated by window and although we face challenges I am enlightened self-interest, can contribute. optimistic. This is because sustainable water Pioneering companies are realising that their management, including better use of the supply chains and operations rely on water water we have, is increasingly regarded as stewardship beyond the factory walls. Put a necessity by governments and businesses simply, the business case goes something alike. Admittedly I am based in the UK and like this: perhaps my outlook would be different if I was, like my colleague Hammad in Pakistan, My business uses water and so has an impact one of the 2 billion living at this moment in on other water users and the environment. areas of water stress. If I use too much water, other users complain and I lose my social license to operate. If they use too much water, my business suffers from shortages. If we all use too much water, the government imposes stricter regulation. If the environment and local communities suffer from our over-use of water, my business may be blamed. So I should work with other users, governments and NGOs to manage water 2bn resources better to reduce our shared risk. The amount of people currently living in water-stressed regions.
  7. 7. Rising to the looming water challenge Marcus Norton If climate change is the shark, water is The first step for business in tackling the Head of CDP Water Disclosure its teeth – it is through water that climate rising challenge of water is to become aware Carbon Disclosure Project change will bite. Changing patterns of of their water usage, risks and opportunities. precipitation and shrinking glaciers, both CDP Water Disclosure raises businesses’ of which are already reported in the IPCC’s awareness and understanding of water-related Fourth Assessment report, are affecting issues by requesting that they measure and the supply of this critical resource. Pollution disclose high quality information on these adds an additional layer of complication. issues. This puts them in a position to take Meanwhile demand for freshwater is growing action and improve performance. Importantly, inexorably due to a rapidly rising world the information collected by CDP Water population, urbanization and rising per capita Disclosure is made available to investors and consumption. The result, according to an other stakeholders for integration into their OECD forecast, is that 47% of the world’s investment decision making, thus replicating population will be living in areas of high the tried-and-tested approach that CDP has 92% water stress by 2030 unless new policies pioneered for carbon and climate change. are introduced and leading to changes to how water is used. In 2010 CDP Water Disclosure will send a questionnaire on behalf of institutional Here at the Carbon Disclosure Project (CDP) investors to approximately 300 of the we repeatedly hear from investors that water world’s largest corporations in water Of FTSE 100 and FTSE 350 is an increasingly important issue to them. intensive sectors including chemicals, companies agree that a water In its 2008 report “Watching water: A guide FMCGs, food and beverage, mining, paper crisis is looming. to evaluating corporate risks in a thirsty and forest products, pharmaceuticals, power world”, JP Morgan Global Equity Research generation and semiconductor manufacturing. recommended that investors assess the The questionnaire will ask companies for reliance of their portfolios on water resources information on their water usage, the risks and their vulnerability to water availability and opportunities in their own operations and pollution. While a recent survey by WSP and their supply chains, and their water Environment & Energy of 100 companies from management and improvement plans. the FTSE 100 and FTSE 350 found that 92% agree that a water crisis is looming and 70% There are challenges to be overcome. believe that the risks of water scarcity are Whereas it does not matter whether a tonne equal to those of carbon emissions. of CO2 is emitted in Sydney or Stockholm in terms of environmental impact, the impact With a looming Companies’ water risks take a number of of extracting a cubic metre of water varies water crisis forms, including disruptions to supply within their own operations or their supply chains; enormously with geography. The ‘type’ of water used – ‘blue’ water from rivers, lakes business does regulation that increases the price of water or underground aquifers, or ‘green’ rainwater not have the or restricts its availability to particular businesses or sectors; and reputational stored in the soil as soil moisture – also matters, as does the quality of the water luxury of time issues around the use of this shared, both before and after it is used. life-sustaining resource. As businesses increasingly tackle the issue In the face of a looming crisis, what can be of water, accepted standards will need to be done by companies simply trying to carry adopted for measuring and reporting water out their normal operations? The answer to use. While CDP Water Disclosure will not seek this is ‘a huge amount’. By considering water to develop these standards, we will work with as a strategic issue, companies will not only the leading global organisations (such as GRI, be able to take action to mitigate these risks WBCSD, CEO Water Mandate, WWF and the 70% in a cost-effective way, but also seize Water Footprint Network) to facilitate opportunities such as reducing their operating the adoption of emerging best practice in costs through efficiency measures, helping these areas. shape the regulatory framework they operate in, or capturing market share by offering With a looming water crisis business does water-efficient products that meet their not have the luxury of time. Raising awareness customers’ needs. So having a positive effect of water usage, risk and opportunity is a vital on the community and improving their social first step in tackling this issue. There is no licence to operate. time to lose in starting on this journey. Believe that the risks of water scarcity are equal to those of carbon emissions.
  8. 8. About us Contact: Emily Measor Salterbaxter advise companies emeasor@salterbaxter.com Tel +44 (0)20 7229 5720 on strategy, branding, corporate communications and design – providing creative communications The Directions Supplements support our main Directions report. The main report is published each year and is now regarded as the UK’s for big business issues. most comprehensive analysis of the trends and issues in We work on a wide variety of corporate communications assignments CR communications. If you for our clients including brand strategy and implementation, annual want a copy, call us on the reports, digital communications and employee engagement. But we are number below or email increasingly being seen as one of Europe’s leading sustainability directions@salterbaxter.com communications consultancies, with an unrivalled breadth and depth of experience across multiple sectors and multiple countries. We offer a full range of corporate responsibility and sustainability communications services – from board level strategy consulting to the design, writing and delivery of printed and online communications. And everything in between. Our team of sustainability consultants is basically designed to be able to help major corporations tackle every aspect of the sustainability agenda: – Development of corporate and – Social media strategy brand sustainability strategies and programmes – Stakeholder engagement – Writing – Reporting – Workshops and training – Single issue campaigns – Gap analysis 202 Kensington Church Street – Internal communications/ – Research London W8 4DP employee engagement Tel +44 (0)20 7229 5720 – Events Fax +44 (0)20 7229 5721 www.salterbaxter.com Clients Our sustainability clients are the leading corporations in multiple sectors across the whole of Europe. Latest ones include: UK EUROPE The carbon impact of this paper ArcelorMittal adidas Group has been measured and balanced through the World Land Trust, an AXA UK Carlsberg Group ecological charity Bacardi E.ON Group BAE Systems Fortum Camelot H&M Coca-Cola GB & CCE ING Group E.ON UK LEGO Friends Provident Marine Harvest This supplement is printed on Land Securities Millicom International Think Bright and is supplied by Morrisons Nokia Howard Smith. It is an FSC (Forest Stewardship Council) certified 02 UK Orkla material and is 100% recyclable. Rolls-Royce Telefónica 02 Europe www.hspg.com Tullow Oil Printed by Granite, an ISO 14001 Vodafone certified and FSC accredited company. TT-COC-002238 www.granitecolour.com