Water is set to become a more serious risk for companies and investors. It’s already recognised.
World Economic Forum attendees named H2O a top-three risk two years running. And two-thirds of the world’s largest companies worry about how constraints may affect their business, according to environmental research firm CDP.
Few, though, are well prepared for problems. That is set to change. A few high-profile droughts have helped shake off some complacency.
Taps in Brazil’s Sao Paulo may run dry as early as March. California’s supply is low after three years of scarce precipitation.
Some firms have taken action. SABMiller has a goal of reducing water used in its breweries by a quarter. Coca-Cola used 2.08 litres of water for every litre of its own drinks in 2013, down 23% since 2004, and wants to be water neutral by 2020.
That’s not always enough. Often, a company’s idea of water risk is very narrow, CDP points out in a 2014 survey of big companies.
Only two-fifths include other local users in their assessments.
There’s a similar myopia among those investigating what hazards companies in their supply chain might face — whether shortages, floods or pollution.
Shareholders are cottoning on. Almost 600 investors representing $60 trillion of assets under management now want CDP’s data on corporate water use, for example — a more than threefold increase since 2010.
The financial hit from actual shortages may be what makes companies change. And if they don’t, activist investors may force the issue.