Big Business Urged To Ax Risk By Cutting Water Use
Date: 27-Feb-09
Country: US
Author: Timothy Gardner
Big Business Urged To Ax Risk By Cutting Water Use Photo: Toby Melville
Water drips from a tap in London November 14, 2007.
Photo: Toby Melville
NEW YORK - Institutional investors are urging companies to measure, disclose
and reduce their use of water to reduce long-term financial risks as
supplies dry up from overuse and as higher temperatures melt glaciers away.
"Companies need to be analyzing their water risk ... and to find ways to
conserve water and minimize the opportunities for literally having their
business shut down," Mindy Lubber, the president of Ceres, a Boston-based
coalition of investors. said in an interview.
Ceres directs the Investor Network on Climate Risk, a group of nearly 80
U.S. and European investors, such as retirement funds, that manages more
than $7 trillion.
As shares in many companies reel from the economic crisis, a few are
beginning to reassess their entire set of risks to regain the trust of
investors.
Water waste has risen as a concern amid the 2007 drought in the U.S.
Southeast, the current California water crisis and concerns that rising
temperatures will eliminate mountain glaciers in China, India and other
countries, leading to greatly reduced summer river flows.
"Where will the water come from if not from these glaciers?" said Jason
Morrison, an expert at the Pacific Institute and lead author of "Water
Scarcity and Climate Change," a report commissioned by Ceres released
Thursday.
"Climate experts understand that water will become one of the most
significantly affected resources as the result of climate change, but most
in the private sector haven't appreciated that," he said.
The investors want companies to measure not only their direct use of water,
like that used directly to make products, but also water used deeper down
the supply chain.
WATER FOOTPRINTS
Some companies have started to drill down the supply chain to measure their
water footprints, much like a wave of companies before them have measured
their carbon emissions.
Late last year, companies such as PepsiCo, Coca-Cola Co, SABMiller Plc and
Unilever partnered with environmental and governmental groups to form the
Dutch-based Water Footprint Network which helps companies measure their
thirst.
The network estimates, for example, that producing 2.2 pounds of beef (1 kg)
takes an average of 4,230 gallons of water (16,000 liters) for the
irrigation of feed crops and other inputs. A cup of coffee takes about 37
gallons of water.
Much water is replaced through natural cycles, but as water is siphoned off
for agriculture, businesses and home use, aquifers are drained faster than
they are being recharged.
Companies face risk not only from losing immediate supply but also from
toughening regulations, Morrison said. The sectors most at risk are
agriculture, high-tech components such as semiconductors, and beverages.
In 2004 a Coca-Cola plant was forced to shut in India after locals said the
company was depleting water supplies. Potential shutdowns across the range
of businesses could damage corporate reputations, Morrison said.
Companies that have been polluting water supplies with factories in
developing countries like China could face the risk of rising regulatory
costs as governments adopt tougher environmental laws.
To be sure, the sheer volume of water a company uses is not always a good
indicator of its impact on supplies. Water used in a dry region is different
than that used in a wet one. For that reason the Water Footprint Network is
also starting to measure the impacts of heavy use in the most water-stressed
regions.
Derk Kuiper, the director of the network, said the group should make
progress on that issue before the year ends.
Once companies measure and understand their water intake they can begin to
cut their use or invest in offsets like efficient irrigation projects.
Still, not many are taking part.
"A preponderance of companies are not looking at the risks," said Lubber.
(Editing by Christian Wiessner)
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