There’s no doubt water is a vital piece of the Environmental, Social and Governance equation. Clean, abundant freshwater is just as necessary to business — and life — as clean air. Yet many companies suffer from carbon “tunnel vision,” with most of the action so far on the “E” part of ESG focused on carbon reduction. This isn’t particularly surprising, as water risks are more complicated and harder to define and measure than carbon emissions.
But companies ignore water at their peril. Problems with water quantity and quality disrupt operations and supply chains, cripple profit margins and hurt brand value. CDP reports the cost of business inaction in the face of water risk is five times greater than the cost of acting to address those risks. Companies that hesitate to take their first steps in water stewardship miss opportunities to address shared challenges and enhance brand value. Don’t wait for the next water crisis to start addressing water-related risks, challenges and opportunities in your business operations or as an investor in water-intensive businesses.
Despite their shared importance, water cannot be addressed in the same manner as carbon. A ton of carbon mitigated in Miami has the same benefit long term as a ton of carbon mitigated in Mumbai. That’s not the case with water; a gallon of water saved in water-abundant Milwaukee doesn’t help water-scarce Phoenix. Yet Milwaukee faces its own water quality and stormwater management problems. In fact, every watershed comes with its own unique brew of water quality and quantity issues. For companies with multiple facilities spread across regions or countries, the local yet diverse nature of water issues complicates nascent forays into water stewardship.
That’s why it’s critical to demystify concepts such as “contextual targets” and accelerate sincere corporate efforts at addressing water-related risks. While water management and conservation are the foundation for building a more sophisticated water strategy, companies need to move beyond simple water management and arbitrary efficiency metrics to true water stewardship that recognizes the diverse and local nature of water issues.
Yet many companies suffer from carbon ‘tunnel vision,’ with most of the action so far on the ‘E’ part of ESG focused on carbon reduction.
Water stewardship starts with understanding how water is used in operations and the conditions of the watersheds where companies operate and/or source. Food and beverage companies such as General Mills pioneered this approach years ago as they moved away from across-the-board efficiency targets to a more strategic and nuanced approach. General Mills’ pragmatic yet contextual approach started with four basic steps, according to its published water policy:
- Global assessment of water stress to identify priority watersheds.
- Deep-dive analysis of priority watersheds to understand challenges and opportunities, including positive and negative impact of General Mills operations.
- Establishment of a multi-stakeholder science-based water stewardship action plan, including consultation with local stakeholders from relevant sectors (industry, agriculture, government, NGO and communities).
- Implementation of water stewardship plan and monitoring for outcomes.
As businesses learn more about the watersheds in which they operate and source, they can enhance brand value by seizing the opportunity to collaborate with neighboring businesses and other local water users to address shared challenges, helping improve long-term water security for all. Engaging stakeholders on shared water-related issues is central to good water stewardship performance, while communicating with key stakeholders such as ESG investors and customers is critical to boosting brand value.
For companies such as Nutrien, the world’s largest provider of crop inputs, services and solutions, the concept of engaging key stakeholders across a large, diverse value chain could be intimidating enough to halt water stewardship efforts before they even start. But through its work with The Water Council, a nonprofit dedicated to freshwater innovation and stewardship, Nutrien is leading a new wave of companies helping to define good corporate water stewardship.
Water is critical to producing Nutrien’s products of potash, nitrogen and phosphate. The company works closely with farmers, who need access to sufficient clean water to sustainably grow crops. Thus, water is a material ESG topic for Nutrien. The company already was actively managing water for efficiency and permit compliance, but it wasn’t holistically evaluating water risks and opportunities and didn’t have a cohesive corporate water stewardship strategy.
A watershed risk assessment helped Nutrien think about water in a different way.
“We started looking at the watersheds that we operate in, not just our sites and the water that they need,” said Mike Nemeth, senior advisor for agricultural and environmental sustainability.
Company leaders learned that water must be addressed locally as all watersheds face different challenges.
Business that proactively ensure the sustainability of local water resources build stability in their own business operations and brand. Now more than ever, consumers want to buy products and services from companies that do good, and nothing is more personal and emotional to consumers than water. Investors are also increasingly noting the importance of water stewardship.
To quote an old song, “You don’t miss your water ‘til your well runs dry.” Industry has an important role to play in protecting water resources for its own benefit and the benefit of the community. With the same energy dedicated to reducing carbon, businesses must urgently steward water resources by widening their “tunnel vision” of sustainability issues.
Stacy Vogel Davis contributed to this report.