Global demand for water is doubling every two decades, according to research by Goldman Sachs. Indeed, the bank predicts that by 2025, a third of the world's population will suffer from a lack of access to sufficient drinking water. On top of this, climate change threatens to make droughts less predictable and potentially longer and harsher during the years ahead.
As a result of these trends, water use is growing in importance as a business reporting metric – with a number of European companies taking the lead in communicating this metric to investors, analysts and other stakeholders.
Of course, water utilities are on the sharp end of growing demand for information about water conservation policies. "For our sector, water conservation, and the broader issue of using a scarce resource as efficiently as we can, is an area where CR and SRI move into the mainstream," says John Crosse, head of investor relations at UK-based Severn Trent Water, the UK and international water services company. "CR water issues are fundamental to generalist fund managers – because they are central to our industry's long-term business strategies.
"For example, as a result of climate change, we face an increase in droughts in some areas, but there will be more rain in other areas," Crosse continues. "This raises issues such as: how do we manage catchment areas, reservoirs, groundwater and so on if there is going to be a different pattern of rainfall?" Communicating Severn Trent's leakage reduction strategy, as well as its plan for managing supply and demand over the next 25 years, are also key investor needs, he adds.
Crosse and his colleagues have recently conducted a survey of the CR information requirements of investors and analysts, in order to ensure that Severn Trent provides exactly what they want. "We've gone out to funds like Jupiter and Henderson and had a meeting with them to ask: what do you want from our report? What do we currently do badly and how could we improve?" Crosse says.
Communicating your water footprint
In the not-too-distant future, companies are likely to face new rules that oblige them to report how much water it takes to produce and distribute goods and services, just as firms are increasingly reporting the 'carbon footprint' of products today.
For example, it can take approximately 40,000 litres of water to build a car and around 29 litres to make a cappuccino. Here are the 'water footprints' of a range of food and drink products.
- 300 grammes chicken:1,170 litres water
- 300 grammes beef:4,500 litres water
- 300 grammes pork:1,440 litres water
- 1 litre milk:1,000 litres water
- 500 grammes cheese:2,500 litres water
- 500 grammes wheat:500 litres water
- 500 grammes corn:450 litres water
- 750 millilitres tea:90 litres water
Source: Water footprints of nations: Water use by people as a function of their consumption pattern, AY Hoekstra and AK Chapagain, 2005.
Nestlé http://tinyurl.com/3k8o5ms
The world's largest food and nutrition company's palm oil policies may have hogged the headlines in recent times, but Nestlé is also a heavy user of water supplies around the world. So the firm makes a major effort to communicate its water conservation policies. Indeed, the firm has a website dedicated to water and environmental sustainability. The site clearly explains how water conservation fits into a global socioeconomic context and includes data on the company's water use as well as case study examples of the firm's support for water-related research projects. Nestlé also works hard to explain the links between its work on water conservation and its other CR activities.
- Do you explain the methodologies behind your risk management programme?
- How does your risk management fit with your strategy?
- Is it linked to wider risk management issues within the company?
Ford http://tinyurl.com/8a4ex97
Water utilities and beverage producers are not the only businesses working hard to communicate their water conservation activities. Ford, the US automotive giant, is another pioneer in communicating its global water use and the steps the business is taking to reduce it. Visitors to Ford's global sustainability microsite can view information on global water use per vehicle produced; water use by source; and water use by region. Users can view this information in both chart and table form, read accompanying analysis and click on a series of logically organised and related links for further information. The company also goes out of its way to explain why water conservation is an important factor for securing socioeconomic sustainability as well as for securing environmental sustainability.
- Provide a range of ways for your audiences to access data.
- Some readers prefer a narrative discussion, others want to access a range of tables and charts.
Coca-Cola http://tinyurl.com/766v6ry
Like Nestlé, Coca-Cola is a massive user of water, often in developing economies with poor infrastructures. And also like Nestlé, the company has an extensive online information resource dedicated to communicating its water conservation efforts. The company succeeds in getting its key message across to even the briefest visitor.
The firm also provides hard facts and figures on its progress under three water-related headings: 'reduce', 'recycle', 'replenish'. Expect the company's H2O- focused communications activity to expand further during the years ahead.
- Use a hierarchy of information aimed at different levels of reader.
- Flick readers, investors, and risk management professionals will all have different needs – and different ways of accessing the information.
Beyond sustainability: The cutting edge of environmental reporting