December 27, 2016

Companies have come a long way in their ability to manage supply chain risk, but they urgently need to step up their efforts in one key area: the threats posed by water scarcity.

The Carbon Disclosure Project’s (CDP) 2016 Annual Report of Corporate Water Disclosure, published in November 2016, provides a wake-up call. A total of 607 of the world’s largest global companies submitted data about their efforts to manage and govern freshwater resources — the largest response in the report’s seven-year history.

Disclosing companies reported $14 billion in water-related impacts this year, a fivefold increase from 2015. Impacts include financial obligations to address groundwater pollution, capital costs to build power plants to replace declining sources of hydropower, and water conservation efforts in the face of drought. More than one-fourth of the companies have experienced detrimental impacts from water this year, and they expect more than half of the 4,416 water risks identified to materialize over the next six years.

Yet the report’s year-on-year disclosures show that companies are not moving fast enough to responsibly manage water, says the CDP. Performance has not improved since last year on key metrics such as tracking water usage and assessing related risks. These failings will surely become more glaring as climate change and increasing demand for this precious resource create more shortages and quality issues.

Read More at MIT Sloan Management Review