More and more companies cite water scarcity as an economic risk in their dealings with regulators
As climate change causes extreme weather events such as droughts, floods and forest fires, another concern has arisen for businesses and their investors...
More and more companies cite water safety and scarcity as risk factors for regulatory submissions and investor appeal. Globally, companies cited 43% more water in 2020 than in 2019. A June report from investment bank Barclays was found citing comments gathered from thousands of transcripts.
“This is a concern of concern to many clients,” said Michael Littenberg, partner at Ropes & Gray law firm, which advises companies on environmental, social and governance issues known as ESG.
“Of course, a lot of them are trying to monitor and reduce water consumption, but focusing on water scarcity is a new goal for many companies,” said Rittenberg. Declared.
Water scarcity and risks are more difficult to track than other climate related issues such as:.. In the United States, local laws govern use and access rights, which can extend to the city, county, and city levels. According to experts, it is often even more difficult to know who is pumping how much water from water sources such as lakes and aquifers.
Often the “real cost” of water is higher than stated
“Businesses regularly disclose utility bills, but they are likely to underestimate the total cost of using water,” Barclays said.
Barclays analysts say most companies underestimate water use by three to five times the “true cost.” They often overlook insurance costs, costs after droughts and floods, damage to public relations due to perceived “irresponsible” use of water, and the need to relocate or build new facilities near water. ‘pure water.
A review of the U.S. Securities and Exchange Commission annual report on a company known as the 10-K filing found that 58 companies mentioned “water risk” in their 2020 filing, up from 41 the previous year. said sir.
Which companies face the greatest number of water-related risks? Barclays discovered people in the basic food industry, including consumer goods such as food, tobacco, beverages, and shampoos. Barclays sets the cost if these companies don’t take action for around $ 200 billion. Changes such as reducing water use and risks to suppliers will reduce that figure to $ 11 billion.
Drink beer. Molson Coors said in the Risks section of the SEC’s 2020 Annual Report that clean water is “a finite resource in many parts of the world, and climate change is increasing water scarcity and supporting brewing.” It can worsen the water quality of the area in which it is located. “Operation.” The record also mentions increased competition for water-related resources where Molson Coors or its suppliers manufacture other products.
Water everywhere – but not enough purification
“Even though water is widely available, limited water purification and waste treatment infrastructure can increase costs and restrict our business,” the brewing company said. No problem of access to water is expected in the “short term”.
The smaller part of the economy also depends on water. Power and power companies use water for cooling. Clothing manufacturers use water to make clothing. Other companies fear that rising sea levels could cut off water supplies to offices and manufacturing plants.
Clothing maker Lululemon mentions “water scarcity and poor water quality” in its 2020 SEC annual report, among other series of climate change risks. There was no such mention in the 2019 records.
“Headquarters in San Francisco, California are expected to be vulnerable to future water shortages and sea level rise due to climate change,” rideshare operator Lyft said in a 2020 filing. There is no such mention in the 2019 report.
Medical device maker Medtronic said in a fiscal year ending April 2021 that “the impact of climate change on global water resources could lead to water shortages and that in the future there are will have enough water. This may affect your ability to access. “More places and more costs. The medical device maker did not make such a reference in statements from the previous year.
Supply chain threat
Indirect costs due to water scarcity, such as dry river beds and low water levels, can sustain the supply chain, a network of barges and trains that move raw materials and parts. to manufacturers and distributors.
Beth Burkes, credit analyst at S&P Global, told CBS MoneyWatch that the chain disruption could come at a cost to everyone involved, including transportation and logistics companies. Water scarcity rarely has a “significant” impact on credit scores in non-farm industries, but it can be a hidden cost, she said.
Disclosure systems implemented by nonprofit CDPs and tools such as those found in the World Resources Institute’s Tap Water Risk Atlas help shed light on the risks associated with water from some companies.
CDP tracks climate, water and forest information for about 9,600 investors worldwide, but not all companies disclose information in all three categories. The CDP assigns marks from “A” to “F” for each category. In 2020, 106 companies received an A for water information, up from 79 the year before.
For water, the CDP provides information on the amount of water withdrawn from water sources such as aquifers and lakes, the recycling rate, the “strength” of the water, the amount of water. needed to manufacture products such as auto parts and shirts, and business behavior. . I am looking for a company. Taken to reduce water consumption.
The US-based companies that have achieved an A in the water category are Colgate-Palmolive, General Mills, Microsoft, and HP.
Simon Fischweicher of CDP, who oversees North American companies and supply chains, said the idea is to compare water use by companies of different sizes in different industries.
“Companies and their suppliers, as well as the investors funding these entities, have the opportunity to solve the problems by reducing water consumption, reducing pollution and ensuring the fresh water we still have. There are even more, ”said Fish Investor.
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