June 23. 2024. 8:50

The Daily

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European companies must ride the wave and lead on water security


Companies are increasingly recognising the value of reporting on water-related topics, but many of them are still refusing transparency efforts, writes Mirjam Wolfrum.

More companies than ever are recognising the risks and opportunities of the water crisis.

A new report by CDP launched ahead of the UN Water Conference has highlighted how companies are already riding the wave of water-related opportunities and creating innovative water-smart products.

Our report could not be timelier: with EU sustainability disclosure rules expected to come into play this year, clear reporting on water-related topics will be mandatory for businesses in the EU.

The value of water is clear. Tackling water security offers companies vast unexplored commercial opportunities worth at least US$436 billion.

In contrast, the financial impact of water risks, such as shortages or pollution, lies at US$392 billion – according to the over 3,000 companies analysed on water-related data this year.​

The upcoming EU sustainability disclosure rules will require companies to disclose clear and comparable information on a range of ESG topics, including water use and marine pollution and resources.

Applying to approximately 50,000 companies in Europe as soon as 2024 (including large non-EU businesses), this strengthening of EU disclosure rules will bring more accountability and a better understanding of impacts, risks and opportunities, on top of enabling the tracking of progress against EU and global goals and raising the bar on what is expected from companies.

Equally important is the introduction of mandatory water reporting for financial institutions. With indicators related to emissions to water, the Sustainable Finance Disclosure Regulation (SFDR) represents a vital opportunity to trigger a cascade of pollution-related action right across the real economy.

This all takes real work, so water risks need to be integrated now to be ready for regulation.

Despite this being the time to turn the tide on water, many major companies still refuse transparency efforts, with 55% of CDP respondents not disclosing a single water-related opportunity, despite its relevance to every sector.

This starkly contrasts the 3,909 companies providing water data to investors and customers in 2022 – the highest number of businesses disclosing on water security since our water security request began in 2009.

The window to act is closing fast. With the commitments made at the 2023 UN Water Conference in New York being voluntary, world leaders should raise the bar and make water disclosure mandatory once and for all.

This is the silver bullet to value water security as central to our food, energy, climate, and economic security.

Companies disclosing through CDP are well prepared for regulations mandating disclosure.

However, more action and collaboration will be needed to address the complex and interconnected challenges posed by water-related risks and opportunities – especially as more companies will be required to report their water policies, targets, strategies and plans under the Corporate Sustainability Reporting Directive (CSRD) from 2024 onwards.

By taking a more holistic approach to water management, companies can not only comply with the new regulations but also create value and build resilience in the face of growing water-related risks.

With just seven years to meet, and ideally, exceed the Sustainable Development Goals and the objectives of the Paris Agreement, the urgency to tackle the water crisis builds, but so does the momentum to act.

In Europe, while 70% of companies disclosing to CDP state they have a water risk assessment in place, we need the whole world rowing in the same direction.

Companies not recognising and realising the opportunities this brings will be left behind, as competitors reap the rewards of a water-tight business model.

Disclosure is a critical first step to action. Now the world needs stronger policies to protect our valuable fresh water, unlock further capital and economic potential and ensure a water secure future for us all.