Agriculture: Reduced water availability is already impacting food commodity prices, as shown by last year's sharp increase in global rice prices triggered by a drought-induced collapse of rice production in Australia. Roughly 70% of the water used globally is for agriculture, with as much as 90 percent in developing countries where populations are growing fastest.
The report also identified specific water-related risks for apparel, biotechnology/pharmaceutical, forest products and metals/mining firms.
"This report makes clear that companies and investors can no longer take water for granted," said Anne Stausboll, chief executive officer of the California Public Employees' Retirement System, the nation's largest public pension fund with approximately $170 billion in assets. "As a global investor, we must be mindful of water-related risks in many parts of the world and how climate change will likely exacerbate many of those risks. Disclosure by companies is an important first step in improving transparency around the risks and opportunities associated with water and climate change."
The report also highlights the intensifying conflict between energy use and water availability. With increasing frequency, choosing one of these resources means undermining the other-the other usually being water. For example, the billions of dollars spent to expand corn-based ethanol production in the U.S. and oil sands development in Canada has helped ensure increased fuel supplies, but at the expense of significant water impacts and greenhouse gas emissions that could ultimately limit these ventures in the future.
Despite these looming challenges, the report concludes that businesses and investors are largely unaware of water-related risks or how climate change will likely exacerbate them. Weak corporate disclosure on potential risk exposure and response strategies is especially glaring.
To evaluate and effectively address water risks, companies should take the following actions:
Measure the company's water footprint (i.e., water use and wastewater discharge) throughout its entire value chain, including suppliers and product use.
Assess physical, regulatory and reputational risks associated with its water footprint, and seek to align the evaluation with the company's energy and climate risk assessments.
Engage key stakeholders (e.g., local communities, non-governmental organizations, government bodies, suppliers, and employees) as a part of water risk assessment, long-term planning and implementation activities.
Integrate water issues into strategic business planning and governance structures.