Current And Future Water Risks Ahead For Corporations

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Posted by Heidi Schwartz

A recent survey of major U.S. corporations released by the Pacific Institute and VOX Global, titled “Bridging Concern and Action: Are US Companies Prepared for Looming Water Challenges?,” reveals that most companies believe water challenges will significantly worsen in the next five years. However, the majority of companies surveyed do not appear to be planning corollary increases in the breadth and scale of their water risk management practices. In fact, nearly 70% of responding companies said their current level of investment in water management is sufficient.

WaterIn an attempt to gain insight on corporate perceptions of risks associated with water issues and plans to address these challenges, the Pacific Institute and VOX Global surveyed over 50 companies, the majority Fortune 500 and publically traded, representing virtually every industry sector. In addition to an online survey, in-depth interviews were conducted with senior officials who have direct responsibility for water issues from companies including: AT&T, Cummins, Inc., The Hershey Company, MillerCoors, and Union Pacific Railroad.

Nearly 60% of responding companies indicated that water is negatively poised to affect business growth and profitability within five years, while more than 80% said it will affect their decision on where to locate facilities. This is a stark increase from only five years ago, when water issues affected business growth and profitability for less than 20% of responding companies.

“Water challenges are not just for developing countries; they are happening here in the United States,” said Jason Morrison, Program Director of the Pacific Institute. “While the current California drought gets considerable attention, many regions face a chronic imbalance between water supply and demand.”

The acknowledgement among major U.S. corporations that water is becoming major business issue is a significant finding. There is growing recognition that in addition to being a considerable societal problem, water also creates critical challenges for businesses specifically. Insufficient or contaminated water supply, or a lack of infrastructure to reliably deliver that supply, can mean companies may not be able to maintain the volume and quality of their production.

“As more and more corporate boards discuss the impact of social and environmental issues on their profitability and growth, topics such as water risk will emerge as central to company strategy,” said Tony Calandro, Senior Partner and leader of the VOX Corporate Sustainability and Social Responsibility Practice Group. “This new economic reality necessitates that companies better understand the many ways that water affects their reputation and bottom line and the multitude of communication and management strategies they may need to adequately address these business challenges.”

While survey respondents indicated that water challenges are worsening and will affect their business more significantly in years to come, most did not indicate any plans to expand their water risk mitigation measures in the future. “It is for this reason that we question whether many companies are adequately prepared for the growing number of water risks and challenges they face,” Morrison said.

Calandro noted that internal obstacles are often to blame for slow action. “Business leaders we surveyed pointed to two significant internal obstacles that hinder companywide buy-in to water: lack of time to raise awareness and buy-in and other risks ranking as a higher, more immediate priority.”

The study found that companies use a variety of ways to build internal support in order to fully understand the impact water has throughout the business. “Since we were not necessarily seeing water stress or scarcity issues within our primary manufacturing footprint, we didn’t have the focus that was expected of the food processing industry sector,” said Todd Camp, Senior Director, Corporate Social Responsibility & Community Relations for The Hershey Company. “Participation in the reporting initiatives and an evaluation of our peer group’s efforts provided the incentive to be proactive.”

Additionally, some companies find that relatively small investments can produce a significant return on investment in mitigating water risks. John Schulz, Assistant Vice President, Sustainability Operations, AT&T, said, “We’re beginning to see that relatively small capital investments can bring about nearly 10 times the amount of savings in annual water and energy costs.”

To download the survey, click here.

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