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More companies reporting water risks as freshwater withdrawals climb

A growing number of companies around the world are reporting they have facilities exposed to water-related risks as freshwater withdrawals are increasing, particularly in industries that are expanding production, the CDP, formerly the Climate Disclosure Project, reported March 22.

Between 2015 and 2018, the number of companies reporting higher water withdrawals increased by almost 50%, CDP said. The increase in withdrawals is most pronounced in Asia and Latin America and in the food, beverage, agriculture, manufacturing and mineral extraction sectors.

Water-related risks to companies and their assets can include water availability and quality, flooding, conflicts with stakeholders, regulatory risks, and harm to ecosystems and human health. Scientists have found that the risks are likely to increase if global warming is not contained in line with the goals of the Paris Agreement on climate change.

The U.S. National Oceanic and Atmospheric Administration forecast March 21 that vast areas of the country are at serious risk of flooding this spring, such as that now occurring in Nebraska and other Midwestern states.

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"Evidence is mounting that a failure to achieve our global goals poses a serious threat to financial stability by 2030," CDP wrote.

In 2018, companies reported to CDP that in the prior year, they had experienced a total of US$38.5 billion in water-related financial losses. The lion's share of those impacts was at two companies: Brazil-based iron ore producer Vale SA and Tokyo Electric Power Co. Holdings Inc., the latter of which is in the process of shutting down the Fukushima Daiichi nuclear power station.

For the 2018 reporting cycle, 2,114 companies worth more than $18 trillion in market capitalization disclosed water information to their investors and customers through CDP. The report looks at the nearly 300 largest companies that have been reporting to CDP on water issues over the past four years.

The group found that "corporate action is not reaching the pace and scale needed to truly address water insecurity." Citing a 2018 U.N. report on progress being made to achieve the United Nations' member states' sustainable development goals, CDP said the world is not on track to meet the goal of ensuring the global availability and sustainable management of water and sanitation by 2030.

For the first time since 2009, the retail sector performed worse than the fossil fuels sector on both transparency and action, CDP said. Just 24% of retail companies responded to requests from their investors to report to CDP on water issues, and fewer than 25% of retail companies have water-related targets or goals.

Companies in the food, textile, energy, industrial, chemicals, pharmaceuticals and mining sectors account for and wield influence over 70% of the world'’s freshwater use and pollution. "In almost all cases, their business models, practices and products do not align with a water secure future," CDP said.

However, CDP said some companies are leading the way on managing water risks, including global beverage company Diageo, French beauty giant L'Oréal SA, and Brazilian petrochemical company Braskem SA.

The issue of water risk and the need for adaptation practices came up during a March 22 session of the Climate Leadership Conference in Baltimore. The conference is hosted by the Center for Climate and Energy Solutions, Bloomberg Philanthropies and The Climate Registry.

Julia Rockwell, who heads the climate change adaptation program for the Philadelphia Water Department, said the department spent years adapting global water projections to align with the municipality's management decisions. The department needed to have a fundamental understanding of the risks it faces.

"What we've been doing for 200 years is not going to work for what's going to happen" down the road, she said.