Corporate Social Responsibility (IVOR nr. 77) 2010/11.3.6:11.3.6 Disclosures on CSR policies concerning water

Corporate Social Responsibility (IVOR nr. 77) 2010/11.3.6

11.3.6 Disclosures on CSR policies concerning water

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Despite the urgency of good water governance and the existing tools for water use management and reporting, the vast majority of leading companies in water-intensive industries still have weak management and disclosure of water-related risks and opportunities, according to a report issued by the CERES investor coalition (CERES, 2010). The report was prepared with analytical support of the investment bank UBS (SRI and Sustainability Research department) and on the basis of data provided by the financial data and analytics service company Bloomberg (Environmental, Social and Governance (ESG) department). The report evaluated the quality, depth and clarity of water risk disclosure of 100 publicly traded companies over the fiscal year 2008 and ranks their water disclosure practices. Mandatory financial disclosures,1 voluntary disclosures such as sustainability reports, and company websites were reviewed. The companies included in the study were firms with global operations, mostly the largest in their sector on the basis of their 2008 annual revenues and market capitalization. Geographic exposure was also considered. The companies were from eight key sectors that were considered to have water security concerns, i.e. beverage, chemicals, electric power, food, homebuilding, mining2, oil and gas and semiconductors. The companies were scored, based on five disclosure categories: water accounting, risk assessment, direct operations, supply chain and stakeholder engagement. The data on corporate water performance included metrics on water use, and wastewater discharge volume and contaminant load. The results of the study revealed that:

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Corporate-wide data on direct water use was disclosed by 63 per cent; data on total wastewater discharge was disclosed by 40 per cent.

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Few companies provided local-level data: only 14 per cent provided data on water withdrawals broken down to the site or regional levels. Because water risk is geographically dependent, this absence of context makes it nearly impossible for investors and analysts to assess corporate exposure to water scarcity, or to understand if corporate actions to mitigate risk are either appropriate or effective.

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As regards direct operations, i.e. where the companies have full control and can reap the benefits of water efficiency and wastewater management, most companies disclosed having environmental policies or management systems. However, only 24 per cent detailed water-specific policies, standards, plans, or management systems.

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Limited information on water policies and management systems was provided: only 21 per cent had set quantified goals to reduce water use. Of these, only three per cent had reduction targets that were differentiated by the level of water stress facing specific facilities.

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Just 15 per cent disclosed goals to reduce wastewater discharge.

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Regarding the supply chain, no companies provided comprehensive data on their suppliers' water performance, although a few did provide estimates of the water use embedded in their supply chains. For many large companies, water use embedded in the supply chain accounts for the largest portion of their total water footprint. It was noted that information on supply chain management is essential because investors increasingly seek to understand a company's full life-cycle exposure to water risk.

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For sectors where a significant portion of the corporate water footprint is found in the supply chain food, beverage, electric power, and oil and gas the report noted that there was very little discussion on working with suppliers to manage water risk. In general, very few companies, only 12 per cent, disclosed working with their suppliers to help them reduce water use or wastewater discharge.

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Of these, many anecdotally disclosed examples of partnerships or capacity building with specific suppliers, but only a few evidenced comprehensive programs to systematically improve the water performance of their supply chains.

Summarising, the outcomes of the CERES study showed that even for companies operating in sectors and regions of the world facing significant water risk, disclosure of risk and corporate water performance was surprisingly weak.

Another study on corporate environmental information disclosures stressed that emerging economies in developing countries still seem to face a formidable task for promoting such disclosures. Based on data of 871 listed manufacturing companies in China, the study explored the level and quality of environmental information disclosure, thereby considering the industrial sector, company size, and company ownership. The result revealed an inverse relationship between the level of marketisation and the corporate disclosures on environmental impacts (Zeng et al, 2010).

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