Businesses increasingly face water risks in the context of climate change. According to the Intergovernmental Panel on Climate Change (IPCC), India will face changes in rainfall patterns, increase in frequency and severity of extreme weather events along with droughts and flood. This will make water security and distribution even more difficult to achieve.
According to the 2030 Water Resources Group, water demand in India is set to outstrip supply by 50% by 2030. This water crisis is likely to threaten the drinking water and livelihood needs of people in the face of massive industrialization and urbanization that is expected. This, in turn, could stifle economic growth.
No water means no business
Nearly every business sector is water-dependant in some way or the other. How companies demonstrate their resilience to water risks has important implications for their reputation. Investors increasingly want water to be managed strategically so that the company performs better financially. This pressure is driving them to implement a strategy that drives water stewardship and encourages efficient water use. Yet, a gap exists between investor expectations and company actions as not many companies disclose water data. It continues to be a closely guarded secret.
It is for these reasons that 573 investors representing US$ 60 trillion of assets requested that the 1400 largest listed companies’ measure and report their water-related risks. The CDP, a nonprofit organization earlier known as Carbon Disclosure Project, has put these results together in a report titled ‘The Business Case for Water Disclosure in India’. The report was recently released at New Delhi. Speaking on the occasion, N. K. Ranganath, Managing Director, Grundfos India, hoped that “through this report, we are able to help fuel the acceptance of water auditing and annual water reporting within corporate India”.
Two thirds of the Global 500 respondents to CDP’s water questionnaire reported exposure to water-related risks, of which 64% have the potential to impact business now or within the next 5 years. Companies commonly report three categories of water risks: (a) Physical – reconfiguring supply chains due to disruptions from drought; (b) Regulatory – delaying or suspending operational permits; and (c) Reputational – mishandling water-related issues alienating customers, suppliers or investors.
What does the report say on disclosures by Indian Companies?
29 Indian companies comprising of large, medium and small-scale industries reported their water stewardship efforts to their investors and customers. CDP sought qualitative and quantitative information around governance, risks and opportunities and accounting of water-related parameters from these companies. Most Indian businesses were aware of the immediate water risks; CDP felt that they underestimated the risks. A third of the companies had operations in water-stressed regions, yet actions to deal with water issues at a corporate level were inadequate, CDP reports.
More than half of Indian companies (55%) have a water policy, strategy or management plan in place. Only half of these policies include concrete quantitative goals or targets for water resource management. Most of the companies are focusing only on direct operations, while serious water-related risks might lie in the supply-chain: Around 60% of the companies analyzing water-related risks are doing that only at facility or business unit level. Similarly, 56% of all the water-related goals and targets are focused on direct operations.
The majority of companies have data on water withdrawal (79%) and water recycled/reused (59%) within their operations. Most of the companies (72%) are also able to identify their water discharge by standard effluent parameters and none of them reported to have paid any penalty/fine for breach of discharge regulations. Reemphasizing the importance of corporate water disclosure, Damandeep Singh, Director, CDP India, said “The introduction of CDP’s water program in India in 2015 will address this information gap by driving companies to measure, monitor and ultimately manage water-related risks.”
Companies engage with local communities on water initiatives
Companies like ITC reported a decline in water quality and stated that this posed substantive risk to it is to its agri-business in terms of the quality of raw materials available for conversion into finished product. Tata Chemicals on the other hand, assessed that competing water demand may generate conflict amongst shared water users. It felt the need to focus more on water-related issues outside its organizational boundaries. The company’s strategy is therefore to engage with the local community on various watershed initiatives.
The report concludes, "water is a critical business issue that deserves serious attention”. Like bigger businesses, smaller businesses must also be encouraged to understand and address their own challenges and opportunities relating to water before they are impacted severely.