Water management trails climate change on the boardroom agenda

The CDP Water Disclosure Australia Report, launched yesterday by the Carbon Disclosure Project (CDP), finds that only 55% of the ASX 100 companies that responded to the CDP Water questionnaire report board-level oversight of water-related policies, strategies or plans.

By contrast, recent climate change reports released by CDP show that 80% of ASX 100 companies and 93% of Global 500 companies report board-level oversight of climate change. This suggests that corporate oversight of water as a business issue trails that of climate change, which the CDP says is surprising, as these water-related risks and opportunities have the potential to generate a substantive change in business operation, revenue or expenditure and the majority are recognised as near-term.

The report, entitled ‘Shining the light on corporate water performance’, analysed disclosures from 22 water-sensitive companies in the ASX 100. In 2011, a questionnaire on corporate water management was sent to 54 companies in the ASX 100 index that were identified as having the greatest potential to impact or be impacted by water resources and 41% responded.

The key findings from the CDP Water Disclosure Australia Report include:

• More than two-thirds of responding companies from the ASX 100 identify water as a substantial risk to their business.
• Almost all (91%) of the ASX 100 companies that responded to the questionnaire have a good overall awareness of water risks within their direct operations, but far fewer (68%) were able to do so for their supply chains.
• The majority (59%) of respondents identify water-related business opportunities, 90% of which are near-term.
• Target setting is becoming a standard response to managing water risks.
• Companies are starting to identify linkages between water and carbon management.

Marcus Norton, co-author of the report and Head of CDP Water Disclosure, said, “Water is a current, not a future issue for Australian companies. More than two-thirds of the ASX 100 companies that responded to CDP Water Disclosure identify water as a substantial risk to their business and half have already suffered water-related business impacts. The CDP Water Disclosure Australia report finds both challenges and opportunities for Australian companies, which they would be wise to start acting on now.”

Nathan Fabian, CEO of the Investor Group on Climate Change, said, “I welcome the launch of the CDP Water Disclosure Australia Report. Systematic global reporting of water information allows investors, companies, policymakers and other stakeholders to understand how companies are building water into their core business strategies, and encourages the sharing of leading practices. CDP Water Disclosure also helps facilitate comparisons between the water management practices of Australian companies with their Australian and international counterparts, which is in itself no small achievement.”

In 2011, CDP Water Disclosure collected data on water use, strategies, and risks and opportunities from companies on behalf of 354 investors representing US$43 trillion in assets. The questionnaire was sent to ASX 100 companies for the first time in 2011, and was also sent to:

• 315 of the 500 largest companies from the FTSE Global Equity Index Series (the Global 500) for the second time in 2011. 190 (60%) of these companies responded, a 10% increase over 2010.
• 56 companies from the JSE 100 - the Johannesburg Stock Exchange’s 100 largest companies (also for the first time) - of which 46% responded.

The CDP Water Disclosure Australia Report can be downloaded here.