Water risks present a complex and escalating challenge for businesses, but there are best practices for supporting SDG6 and its vision of clean and sustainable water supplies for all
Developing a coherent SDG6 strategy can be difficult because, unlike efforts to tackle climate change, it is not a global issue. Each watershed is different and must be treated accordingly.
Sustainable investment group Ceres has developed a tool for investors to understand and act on their water risks and it stresses that investors first need to understand their specific risks, then set their priorities, and then engage with companies on the issue.
There are a number of other tools to help companies identify and tackle key water issues and support the targets contained within SDG 6. They include the World Resources Institute's Aqueduct Water Risk Atlas, the Alliance for Water Stewardship's International Water Stewardship Standard, the Global Reporting Initiative's Water Performance Indicators, and the World Business Council for Sustainable Development's Global Water Tool.
The drivers of water-related risks are physical, regulatory and social, Ceres says, with companies having to deal with "growing competition for water between communities, industry and agriculture; lack of climate-ready infrastructure for managing water; linkages between water and power generation; cumulative impacts on water resources from agriculture, land degradation and industrial activities; social license risks and weak government oversight of water in many regions".
How then can businesses respond to such complex and multi-faceted risks and help deliver on an SDG that is so wide-ranging in its nature?
Thankfully a number of best practices have been shown to be effective and feature as a recurring theme in all the various guides for proving corporate water management.
Map your risks
First up Ceres suggests that investors map the risks companies face so they understand which are most immediate and most serious. There are three core areas to consider - water dependency, security of supplies, and a company's response. Companies should be looking at where in their value chain risks are located - is it to do with sourcing water, wastewater management, the company's own operations, the use of products by customers or end of life? For electric utilities, for example, water risks can disrupt their own operations by compromising power station cooling processes. IN contrast, food and beverage companies face risks deep in their supply chains as farmers and suppliers of key commodities are impacted by droughts or floods.
Once the risks have been identified, companies need to then assess how well-equipped they are to cope with them. Investors need to be aware additionally if specific sectors or geographic regions in which they are invested are particularly at risk.
Once companies have a better understanding of the risks they face, investors want firms to show that they are aware of their water risks and managing them by improving their disclosure. They can support improved disclosure by signing up to international norms such as SDG6 or the Human Right to Water and Sanitation, and outlining their plans to manage risks not just at an operational level but also by taking steps to promote positive water impact, for example by targeting investments toward improving watershed and infrastructure resilience.
Companies should also establish and track key performance indicators (KPIs) related to their performance in managing water risks, says Ceres. "KPIs set in motion a cycle of continual improvement and thus can help showcase commitment to sustainability or water issues," it says.
SImilarly, the CEO Water Mandate says companies should:
- Conduct a comprehensive water-use assessment to understand the extent to which the company uses water in the direct production of goods and services.
- Set targets for our operations related to water conservation and waste-water treatment, framed in a corporate cleaner production and consumption strategy.
- Seek to invest in and use new technologies to achieve these goals.
- Raise awareness of water sustainability within corporate culture.
- Include water sustainability considerations in business decision-making - e.g., facility-siting, due diligence, and production processes.
Focus on Watersheds - and Supply Chains
Companies are also advised to consider the extent to which water risks exist in the supply chain, particularly if they are involved in agriculture, which is responsible for 70 per cent of fresh water consumption. As such firms should encourage suppliers to improve their water conservation, quality monitoring, waste-water treatment, and recycling practices.
Companies also need to take a watershed approach to analysing risk, engage with other stakeholders in the local community, both public and private, and share best practices with suppliers, their peers and local authorities. "Just focusing on improving your water efficiency is not enough," says Rylan Dobson, manager for water stewardship at WWF. "You can adversely affect the whole watershed if you don't take a systems approach. You need to understand the context in which you are operating."
You can't do it alone - so collaboration is key
Collaboration should also extend beyond the supply chain and take in other stakeholders and even competitors, experts advise. Co-operation will be key in addressing water challenges, so companies need to build closer ties with civil society groups, governments at all levels and relevant international institutions. Ceres recommends firms should also support existing private sector water initiatives such as the Global Water Challenge; UNICEF's Water, Environment and Sanitation Programme; IFRC Water and Sanitation Programme and the World Economic Forum Water Initiative.
"More and more companies - both multinationals operating abroad and local enterprise - see that supporting or actively engaging with communities and grass-roots organisations and initiatives is in their enlightened self-interest," the CEO Water Mandate adds, so companies should work to understand the water and sanitation challenges in the communities where they operate, and how their operations affect those challenges.
Water risks present a complex, unique, and escalating challenge for all businesses, even if some sectors are more exposed than others. But leading investor groups, businesses, and campaigners have pioneered a series of best practices that demonstrate how water-related risks can be identified and managed. The challenge now is ensuring many more businesses embrace those best practices and play a more proactive role in support of SDG6's vision of clean water and sanitation for all.