Companies Are Making Progress on Water Management, but New Report Calls for Greater Action To Ensure Sustainable Water Supplies

• Companies have made progress in managing their water use and ensuring their boards and senior executives oversee water management efforts.
• Significant work remains to address water quality impacts, align public policy engagement and lobbying activities with sustainable water management approaches, protect freshwater ecosystems, and improve clean water access.

October 25, 2023 /3BL/ - A new benchmark analysis of 72 companies from four water-intensive industries—apparel, beverage, food, and high-tech—shows encouraging progress on corporate water management, but underscores collectively, the companies have a long way to go in meeting the necessary ambition to reduce their demands and impacts on freshwater resources.

"As the global water crisis escalates, so do the financial risks facing businesses and their investors,” said Kirsten James, senior program director of water at Ceres and co-author of the report. “While some companies are demonstrating a variety of leading practices, we need to see more companies excelling on all aspects of water stewardship in order to ensure sustainable water supplies for businesses, communities and the environment.”

Ceres’ report evaluates how companies of focus identified by the Valuing Water Finance Initiative are performing against the six Corporate Expectations for Valuing Water, which serve as the ambition around the full range of water issues that large companies should meet by 2030. This timeline is critical to slowing the pace of deteriorating water resources threatening communities, ecosystems, and economies across the globe and meeting the United Nations 2030 Sustainable Development Goal for Water (SDG6). More than 30% of global GDP will be exposed to high water stress by 2050, according to data released by the World Resources Institute in August. Already, 50% of stocks in each of four major U.S. stock indexes are in industries with medium-to-high water risk.

The report, developed using publicly available company disclosures, provides a unique and comprehensive view of companies’ vulnerabilities, opportunities, and strengths when it comes to managing water. While results vary by company and industry, broadly, notable findings have emerged, including:

• Both water availability and water quality are material financial issues to the assessed companies. While 75% of the 72 assessed companies have set time-bound targets aimed at reducing the amount of water they use, only 17% of companies have done so to reduce their impacts to water quality.
• Local considerations are necessary to properly manage water resources. Only 35% of the companies consider contextual factors—such as local watershed conditions, regulatory dynamics, and community water needs—when assessing water use risks, and even fewer—14%—consider contextual factors when assessing water quality risks.
• Healthy ecosystems are critical for maintaining water supplies that businesses rely on. Yet, only 13% of the companies have time-bound targets to protect or restore ecosystems with specific consideration of outcomes related to freshwater supplies and aquatic biodiversity.
• Companies’ efforts to ensure communities in areas where they operate and source from have equitable access to clean water and sanitation (WASH) are largely lacking. Only 28% of the assessed companies have taken the first step by establishing a corporate policy explicitly acknowledging water and sanitation as a fundamental human right.
• About half of the companies have board and senior management oversight of water management strategies and also link incentives for executives to water targets and goals. However, only 36% of the companies integrate water risks and opportunities into strategic business planning for both direct operations and supply chains.
• An internal price on water—a monetary value placed on water beyond a price or tariff paid to a water utility—can help companies make more informed decisions on water usage and overall water risk. Only 11% of assessed companies are utilizing this approach.
• Aligning public policy engagements with sustainable water resource management can strengthen and scale companies’ water stewardship efforts and impacts, yet only 32% of the companies advocate explicitly around water-related issues with governments, businesses, civil societies, or other stakeholders.

“Companies must adapt their approach to water management to the changing state of water resources. Our benchmark provides a much-needed line of sight into where companies are on their water journey and what they need to do to accelerate and broaden their efforts to protect water supplies their operations and supply chains depend on,” said Shama Perveen, director of water research at Ceres and report co-author. “We highlight opportunities for all companies to learn from their peers within and across the four industries to raise their ambitions and reduce their water risk by implementing impactful solutions and collaborating with others to scale impact. For example, we found that more companies are engaging in water strategies that bring together a diverse array of stakeholders including businesses, communities, tribes, governments, and organizations to tackle urgent and shared challenges within specific basins. These collective water efforts can yield significant financial advantages and maximize impact benefiting all stakeholders.”

The report adds to Ceres’ extensive research base supporting investors in the Valuing Water Finance Initiative who are making the business case for and encouraging scaled corporate action on water risk. Currently, 94 investors, who collectively represent more than $17 trillion in assets, have committed to engage with the 72 focus companies through the initiative. Benchmark results will inform these engagements, providing investors insights into financial risk and opportunities, such as where companies’ efforts are leading or lacking, and showcasing opportunities for companies to learn from and collaborate with peers and stakeholders to accelerate or broaden their water stewardship efforts.

In highlighting key findings and leading practices, the report can be a resource for all companies working to develop or evolve holistic water stewardship strategies addressing water impacts and dependencies throughout their value chains.

“Ceres’ report is a critical resource for investors who are working with companies on how to address the increasing material financial risks posed by the water crisis unfolding across the globe,” said Sophia Cheng, chief investment officer, Cathay Financial Holdings. “It will help us meet companies where they are in their water stewardship efforts, allowing for meaningful engagements more likely to result in companies making progress on sustainable water management.”

“From record-setting droughts and shrinking groundwater aquifers to polluted drinking water supplies and deteriorating wetlands, our future when it comes to water is increasingly uncertain," said Brian Rice, a portfolio manager for the California State Teachers’ Retirement System. “Insights into how companies are responding helps build the context we need to effectively engage with them on water risk while also making decisions to optimize portfolio investments.”

"It’s difficult to find data sets with contextual information on water that give us as investors insights on water scarcity, quality, and access. The Ceres benchmark will help with that,” said Greta Fearman, stewardship lead, Cardano Asset Management. “With a focus on high water footprint companies, the report looks at freshwater use for agricultural and industrial processes in water scarce areas, water pollution, and progress towards water neutrality throughout their value chains. Cardano will be using this benchmark as a source of information to encourage companies to address the associated systemic risks and get us back where we need to be - in the safe zone of freshwater use."

“We believe Cargill has an important leadership role to play in working across our operations, supply chains and in our communities to develop and accelerate solutions that protect and enhance water resources. But we can’t do this work alone and need others to help elevate the challenge of global water stress to the top of the corporate agenda,” said Heather Tansey, VP environmental sustainability at Cargill. “This benchmark report provides valuable insights and context around corporate water stewardship, aiding our efforts to strengthen and improve strategies that protect and preserve water resources while contributing to global water goals.”

“General Mills and the food sector at large are inherently dependent on the earth and its natural resources, especially water,” said Mary Jane Melendez, chief sustainability and global impact officer at General Mills. “With increased risks on the quality and availability of water, and with the majority of General Mills’ water impact upstream in agriculture, General Mills is focused on championing the regeneration of water resources in key areas where we source ingredients and manufacture our products. Continuing to invest in water stewardship resilience remains a top priority for us to ensure a thriving future for people, planet, and our business.”

Editor’s note: Ceres will host a webinar Nov. 7 at 11:00 a.m. ET reviewing key findings from the benchmark report and featuring perspectives from the report authors, companies and investors. It is open to the media. Register here.

About Ceres 
Ceres is a nonprofit organization working with the most influential capital market leaders to solve the world’s greatest sustainability challenges. Through our powerful networks and global collaborations of investors, companies and nonprofits, we drive action and inspire equitable market-based and policy solutions throughout the economy to build a just and sustainable future. For more information, visit ceres.org and follow @CeresNews.

Media contact: Tamera Manzanares, tmanzanares@ceres.org