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CEOs must prioritize water risks in boardroom meets: Report
As the world stares at 40 per cent water supply gap by 2030, managing water must be a priority in the boardroom of every company in the world including in India -- to create and develop competitive advantages, while reducing financial losses and ensuring continuity of operations, a new report has suggested.
Businesses often fail to understand the full value of water, and to incorporate water-related risks in their planning, said the report titled "CEO Guide to Water: Building resilient business," released by the World Business Council for Sustainable Development (WBCSD).
A 2017 "Trucost" study showed that if the full costs of water availability and water quality impairment had to be absorbed, this would equate to an average decline in profits of 44 per cent for utilities and 116 per cent for food and beverage companies.
At the CEO level, said the WBCSD report, 11 companies lead the development and implementation of business solutions and engage with government to address key priorities related to water across India.
In their drive towards conserving water, companies also face physical and non-physical risks driven by competition for water, pollution, regulation and climate change.
For example, "the Coca-Cola Company was forced to abandon plans to build a $81 million new bottling plant in Tamil Nadu, India after fierce resistance from local farmers, who feared the company would cause a fall in the water table".
It resulted in brand damage, loss in market share and loss of social license to operate for Coca-Cola.
"When there is no water available for operations, businesses must either significantly invest into or abandon certain sites," cautioned the report.
Water risks directly affect bottom lines.
"To better plan for future shocks and become resilient, there needs to be a fundamental shift in the way that companies value water," it added.
In the roll-out of the Zero Liquid Discharge (ZLD) policy in India, businesses are advocating for realistic time frames given significant investments and manpower skill required to implement
PepsiCo replaced flood irrigation with drip irrigation with farmers on more than 2,600 acres, provided training on efficient practices, and invested in new technologies to save water in India in 2016.
"The impact was annual water savings of over 800 million litres in Maharashtra and greater reliability of supply of potatoes for the growers and PepsiCo," the report informed.
As a CEO, one needs to understand the level of the company's exposure to and sharing of water risks in direct operations and across supply chains, and strive to integrate water in decision-making, disclosure and make smart investment decisions.
"The planet is screaming at us, and the language it uses is water," said Peter Bakker, President and CEO, WBCSD.
Water is a material business issue and risk and as competition for water increases, regulation will tighten.
"Business will come under closer scrutiny and water-related expenditures will rise. An increasing number of investors are recognizing the value of water and striving to better account for it in investment decisions," noted the report.