KPMG International’s latest Sustainable Insight report reveals that the majority of the world’s largest companies lack a long term water strategy. The report suggests that while most companies are at least discussing the issue in their reports, far fewer are presenting a robust response. The report offers ways to help executives develop and communicate strategic responses to the global water scarcity challenge.
According to the Water Resources Group, global demand for freshwater will exceed supply by 40 percent by 2030, with obvious implications for business, society and the environment. In the context of sustainability megaforces, which include climate change, urbanization and population growth, which will bring greater levels of uncertainty and risk to global water supplies – businesses that respond strategically and collaboratively now may be able to reduce future costs of mitigation and adaption to changes in water availability and quality.
Sustainable Insight – Business Responses to Water Scarcity provides analysis of the corporate responsibility (CR) reports of the largest companies across 34 countries, including the world’s top 250 companies. The report finds that the majority of the world’s largest companies (60 percent) do not yet demonstrate a long-term strategy to deal with water scarcity in their CR reporting.
Wim Bartels, KPMG’s Global Head of Sustainability Assurance, said while the issue of water scarcity is rising in the public consciousness, many leading companies are not yet taking steps to reduce their water consumption and will likely experience increasing public or investor pressure to do so.
The results vary by country. Of those that produce a CR report, 95 percent of Indian companies, 69 percent of Spanish companies and 66 percent of UK companies include specific plans to reduce water usage. This contrasts with just 24 percent of Chinese companies and 27 percent of Japan-based companies.
“Many companies have not yet fully grasped the importance of strategic planning or communication in relation to long term water supply mitigation and use. Investors are becoming more aware of the risks and opportunities that water scarcity represents within their portfolios and are increasingly looking for companies to build responses into their longer-term strategies,” said Mr Bartels.
The report found that while three quarters of the world’s largest 250 companies address water issues in CR reports in some way, only a few currently report on the water footprint of any part of their supply chain, and none has reported on the water footprint of its entire supply chain.
Lagging in the list of industries which report on water is the transportation sector – where only half of the largest companies address water issues in their CR reports. The utilities sector also demonstrates comparatively low rates of reporting (the second lowest at 62 percent), which is somewhat surprising given the water intensity of power generation.
Mr Bartels outlined the top key questions any company should consider before compiling their next CR report in order to adequately convince investors of future growth and profitability:
- How fully does your organization understand its exposure to the risks of water scarcity?
- Where do your biggest water risks lie?
- To what extent are your investors looking at your response to water challenges?
- Does your organization have a long-term strategy to deal with or eliminate risks associated with water scarcity?
- What resources have been allocated to lead and maintain water strategies?
- How much water is used within your extended supply chain?
- Which water-related metrics are most important to your business?
- What processes are in place to verify both internal and external water usage data?
- What plans are in place for integrating CR or sustainability data into your organization’s overall reporting framework?
- How is your organization communicating its water strategy to key stakeholders?
“Companies that have yet to develop a long-term strategy are almost certainly increasing their organization’s overall risk profile and exposing their businesses to potential disruption. The first and most immediate step must be to develop a clear understanding of the organization’s water footprint and identify which areas of the business are at risk,” advised Mr Bartels.