Elizabeth Hendry, Graduate Intern at the ESG Foundation

Down the plug hole: CEOs must act now to avert our global water crisis

By May 3, 2021May 6th, 2021No Comments

A global water crisis is looming, and wherever you work we must act now. California is approaching drought yet again – only four years after the state’s last drought ended in 2017. The situation is no better in India, which according to NITI Aayog, an Indian think tank, is facing “the worst water crisis in its history” with major tributaries of the Ganges reported to be drying up.

Only 1,500 miles away, Bangladesh, one of the most flood prone nations in the world, is also in crisis, with over 2 million people lacking access to safe drinking water due to regular flooding, and 48 million without access to proper sanitation.

Today water shortages are estimated to affect more than 3 billion people globally, with 450 million children living in areas of high or extremely high-water vulnerability, and 829,000 people dying each year due to diarrhoea caused by unsafe drinking water. With water essential to life, disputes over its dwindling availability are, understandably, a regular occurrence. In fact, according to the Pacific Institute, conflict over water use between 2009 and 2019 was double that of previous decades.

This will only get worse.

Future population growth will diminish water availability further, as will continued climate change, with higher temperatures expected to boost water loss through evaporation, reduced precipitation, and the disappearance of large glacial water stores. In fact, recent research predicts that even if humanity reaches the targets of the 2015 Paris Agreement, the world will lose 10% of the current glacier area, equivalent to over 13,200 cubic kilometres of water by the mid century .

On the other side of the coin, perhaps ironically, floods caused by climate change are also expected to lead to more water scarcity with dirty flood waters often responsible for the contamination of drinking water supplies and sanitation stations. The frequency of water wars will continue to rise, where water could become more valuable than oil in the near future.

Quite scarily, the World Health Organisation predicts that by 2025 half of the world’s population will be living in an area of water scarcity. In Cape Town ‘normal’ rainfall levels have come… none.

With water the focus of Sustainable Development Goal six – Ensure availability and sustainable management of water and sanitation for all – the world’s water crisis is bound to be an important topic of conversation at the 26th UN Climate Change Conference of the parties (COP 26) in November.

So what are you doing about it at work?

Did you know that companies are responsible for 70% of global water use? Yes, that is correct. The corporate world guzzles water, with CDP reporting industries such as energy, food, apparel, pharmaceuticals, and mining the largest culprits.

Companies must be called to act at the COP 26 summit. If we want to even think about combatting the world’s water crisis and achieving SDG six, companies must cooperate, join the conversation, and begin to disclose their water use and management strategies to organisations such as CDP or in their Environmental Social Governance reports. Movement towards investment in water efficient technology, reduction in wastewater, and prevention of water pollution is also essential by the corporate world.

So, appealing to all Managing Directors and Chief Executives, what can you gain from reducing your organisations water footprint and disclosing your water management through ESG reporting, aside from the moral bonus of decreasing your role in the global water crisis? One of the main benefits is a reduction in financial costs. Recent CDP research found maximum financial costs associated with water risk to total $301 billion, an amount five times greater than that of mitigating water risks ($55 billion). Disclosure of water use is also beneficial in terms of reputation management and investment – it was recently reported that investors with over $110 trillion in assets are requesting companies disclose their water footprint to CDP, with Dutch asset manager Actiam aiming to be water neutral by 2030.

Admittedly, recent progress has been made with CDP reporting that company disclosure on water impacts increased by 20% between 2019 and 2020. In fact, more than two-thirds of companies are reported to currently be making efforts to reduce or maintain their water use, with brands such as L’Oréal and Unilever praised for their innovative approaches to water management.

Despite this, there is still a way to go – only 4.4% of companies disclosed their water pollution contributions to CDP in 2020. What a disappointing statistic. General disclosure of water use in ESG reports is also limited, with ESG reporting too likely to ignore water use, focusing more heavily on a company’s carbon emissions when considering environmental impacts, despite the fact that water availability is not only an important environmental concern but is also an important social impact issue. In fact, according to Russell Investments 32% of companies in regions of high-water risk fail to disclose their water use. ESG reporting is also hindered by lack of a standardised metric for water reporting meaning that different companies often use different metrics to report their progress, preventing comparison and reducing the overall value of disclosure.  

It is essential that employers play a greater role in addressing our water use, and that a standardised metric is developed to allow companies to effectively disclose their water use in their ESG reports. This will be vital in tackling the global water crisis. What are you going to do about it?