Water, the Emerging Risk for Business
The tasks involved with the quantification of data is a compelling challenge for corporate social responsibility advocates. In the US, where we may not have a royal family but numbers are king, among CSR’s biggest challenge is the case to the CFO and his or her minions in the surrounding cubicles that such efforts have a positive effect on the bottom line. Nevertheless, attitudes are changing, and more C-level executives are “getting it.” The focus on CSR initiatives includes transparency, workers’ rights, energy, and waste diversion. Another issue, however, must be addressed: water. We all know the stats we learned back in grammar school—only a one percent of the world’s water is fresh, and lakes and rivers are 0.3% of that supply. The rest is unavailable for use, unless atmospheric water generators become as commonplace as, say, cars, trucks, and factories. Some companies have realized that the success of their operations around the globe depend on access to clean water. Coca-Cola, for example, has paired with the World Wildlife Fund to work on improving water quality in China and the Mekong Delta. Some environmentalists are not happy with the arrangement, but short of Coke crawling under a rock and disappearing, projects like these could make a difference. One problem with water use is that the total cost of water, and polluted water, is masked by its price, which to most customers is relatively free compared to other resources. If water does not go through the same price fluctuations as energy and commodities, little incentive exists to develop more effective use of water. More businesses, however, are aware that a change in how water is used must change. Estimates suggest that by 2030 the global demand for water could exceed available supplies by 40%. Some companies have already experienced the physical risks from poor or lacking quality of water, as Anheuser-Busch did in 2001. Kyra Choucroun of the UK’s Guardian has articulated this and other risks that companies must acknowledge in the future. As governments become more conscious of the delicate nature of their local water supply, multinationals can face risks from sudden regulatory changes. A volatile change in water supplies or price can smack a company’s finances, too. Add the harm to a reputation’s reputation and therefore, risk, and such disclosures will have prominent space in firms’ CSR and financial statements. In the end, companies that rely intensively on water for their operations or throughout their supply chains will have to start evaluating what they can do mitigate risks now.