CEO & Founder of DOMANI
Imagine H2O Guest Blogger
November 15, 2010
Investors not only drive innovation through direct investment in new technologies but also (and more importantly) by casting a light on risk and driving reporting and disclosure within the business community. For example, when companies have to assess risk from climate change and report on these risks it fosters the development and deployment of new technologies and new business opportunities.
I believe we are on the verge of water risk reporting and disclosure accelerating innovation in the water industry.
Let me explain why.
Last week the first Carbon Disclosure Project (CDP) Water Disclosure report was released. This comes on the heels of recent reports published by Ceres (Murky Waters? Corporate Reporting on Water Risk, February 2010 and The Ripple Effect: Water Risk in the Municipal Bond Market, October 2010) highlighting the role of investors in assessing water risk and business opportunities.
The CDP has been extremely successful in compelling companies to assess their carbon footprint, develop carbon strategies, set carbon reduction targets and reduce their carbon emissions. The CDP was launched in 2000 with the first questionnaire responses in 2003. Currently the CDP represents 534 institutional investors holding about $63 trillion in assets under management. In 2009, 2,456 businesses responded to the CDP questionnaire.
I am confidant CDP will have even greater success with the WD project as water is more readily understood as being a critical resource issue for businesses. Water scarcity is a showstopper for businesses – as a result this will drive technology development and new business and policy solutions.
The results of the first CDP WD report will highlight my rationale.
- This year the CDP WD questionnaire went to 302 of the world’s largest companies asking for information on their water use and other water-related business issues – an additional 25 companies responded on a voluntary basis. There was about a 50 percent response rate – 122 of the 302 companies responding publicly.
- Ninety six percent of responding companies were able to identify whether or not they are exposed to water risk with more than 50 percent classifying this risk as near-term (1-5 years). Thirty nine percent of the companies are currently experiencing impacts such as disruption to operations from drought or flooding, declining water quality, increases in water prices and fines and litigation relating to pollution incidents.
- Sixty seven percent of the companies report on water related issues to the board or executive committee level. Eighty nine percent of the companies have developed specific water policies, strategies and plans, and 60 percent have set water-related performance targets.
- Business engagement on water issues differs across industry sectors: 100 percent of companies in the chemicals sector responded compared with 29 percent in the oil & gas, and construction, infrastructure & real estate sectors.
- Fifty three percent of companies could identify whether they are exposed to water risks in their supply chains, as opposed to 96 percent of awareness of water risks in their direct operations.
- As expected, sectors reporting the greatest exposure to water risks were in the food, beverage & tobacco and metals & mining, with chemicals and technology and communications the least.
Where are the opportunities for entrepreneurs? All industry sectors with technologies ranging from data collection and analytics, water supply development, water efficiency, water reuse and treatment, low energy/carbon water treatment/reuse and new business models to highlight just a few.
Let the innovation begin.