Deloitte and the CDP Collaborate to Help Companies Address Water Challenges

Yesterday my colleague Phil Covington discussed UPS' 2010 sustainability report. One of the company’s achievements is the first completion of a map of water risk to UPS facilities worldwide, using the WBCD Global Water Tool. Why did UPS do it? Steve Leffin, Director of Global Sustainability at UPS explains: “[in terms of priority]…after carbon comes water and other natural resources. On a planet with certain finite physical limits and a growing population, you can never understand too well where you stand and how to get where you want to go.”

UPS is not alone. A growing number of companies understand the growing importance of water issues and are trying to figure out how address them effectively.  They may find help in a new partnership that was announced on Monday between Deloitte and the Carbon Disclosure Project (CDP) to drive CDP water disclosure and help companies to better cope with water challenges.

Both parties bring a unique expertise in water issues to the collaboration. The CDP, which is mostly known for its remarkable success in getting companies worldwide to measure and later on reduce their carbon footprint decided in 2009 to ask companies to measure and report their water footprint as well. Last year, the CDP sent a questionnaire to 302 companies (out of the world’s 500 largest companies in the FTSE Global Equity Index Series), focusing on sectors that are water intensive or are particularly exposed to water-related risks.

Just like the carbon emissions questionnaire, the water questionnaire wasn’t sent just on behalf of the CDP, but was also backed by 137 institutional investors representing $16 trillion in assets. The response rate to the water questionnaire was relatively high (50%), which according to the CDP is an indication of the high level of importance being placed on water by global companies. This year the water questionnaire will be sent to 500 companies, backed by even a larger number of investors - 354 in total with assets of $43 trillion.

Why did CDP decide to add water to their agenda? In a way, it is because they see water as the "new carbon." Just think about the estimates that demand for water is projected to outstrip supply by 40 percent by 2030 and an estimated half the world’s population is likely to live in areas of high water stress by the same year. These predictions, explains Paul Dickinson, CDP’s executive director, mean that water presents an equally pressing challenge to the long term sustainability of business, which makes the need for greater transparency and access to high quality information even more pressing. As companies have repeatedly demonstrated with carbon, he adds, what they measure they manage.

Deloitte also identified the impacts of the growing global demand for water and the fact that increased global competition for water represents both risks and opportunities for businesses. The company is already using its experience and wide range of capabilities in various aspects of water stewardship to assist companies in their efforts to identify risks and help create new business opportunities.

As Deloitte mentions on their website, there are many key issues for business related to water use, including direct and indirect water use footprint, water embedded in products, license to operate, business continuity, brand value and reputation and stakeholder engagement. Now, these are not new issues, but challenges that companies already need to deal with. The growing number of floods, droughts and other extreme weather events (remember the floods in China and Pakistan last year that together resulted in almost $100 billion in damage?), as well as man-made disasters (for example, the Ajka aluminum waste spill in Hungary) remind companies again and again that water is an immediate issue they can no longer ignore.

The collaboration between CDP and Deloitte is meant to create an effective and appealing platform that will provide companies with a more comprehensive solution to their water issues – from measuring their water footprint and identifying risks and opportunities to developing a sustainable water management strategy.

There are also other opportunities here on the broader level. As Nick Main, Global Leader, Sustainability at Deloitte, mentioned in the press release announcing the collaboration, “this initiative provides a tremendous opportunity for Deloitte and CDP to catalyze broad action toward sustainable water management by accelerating the development of standard measures and performance benchmarks around water use."

Eventually it looks like a win-win partnership that companies should take advantage of. After all, whether they like it or not, water is becoming a key business issue and those companies that will take it seriously will be in a far stronger position to navigate a water-constrained world.

Image credit: Maheash Nelanka, Flickr Creative Commons

Raz Godelnik is the co-founder of Eco-Libris, a green company working to green up the book industry in the digital age. He is also an adjunct professor in the University of Delaware’s Alfred Lerner College of Business and Economics.