Five of the world’s largest cities under water stress are in India, with Delhi ranked second on the list. The water crisis is more alarming than imagined – 600 million people in India face high-to-extreme water stress. Since improvements in water security are essential for India’s development, investing in water merits a sound business case.
Why should companies care about water security?
In 2020, companies that experienced detrimental water-related impacts have incurred financial losses worth Rs. 158 crores. Physical risks such as inadequate infrastructure and increased water stress account for more than half of these commercial losses followed by subpar access to water, sanitation and hygiene services, and regulatory risks —failure to set mandatory water efficiency, conservation, and recycling standards.
Dwindling water supply is a major cause of concern for businesses since it poses significant direct and indirect impacts. Visible risks such as droughts have a more explicit impact as they ruin vegetation and severely undermine the agriculture sector. But subtle impacts present challenges to other sectors. Water shortages also threaten the long-term viability of businesses by leading to higher costs, eventually borne by the consumers. Without proper management, the economic repercussions of water scarcity will be felt in myriad ways.
Though 80% of Indian states have legislations on water conservation and prevention of encroachment of water bodies, poor data management, absence of water pricing, inefficient irrigation techniques and the lack of adequate sewage treatment curb the country’s ability to manage water sustainably. In recent times, companies have become more aware of the risks of increased water consumption, pollution, and unstable precipitation aggravated by climate change.
Companies in the food, textile, retail, energy, industrial, chemicals, pharmaceuticals and mining sectors account for and wield influence over 70% of the world’s water use and pollution. The decisions one takes about how to grow and expand can make or break one’s ability to tackle the global water crisis.
The CDP is an international non-profit organisation that helps companies and cities disclose their environmental impact. CDP stands for Carbon Disclosure Project. CDP’s Water Security programme requests companies to disclose critical information on water parameters which are crucial to the business. It helps companies monitor and benchmark their performance on these critical parameters to ensure adequate water availability for their businesses.
Increasing awareness among businesses
Investors and customers are increasingly keen to know how companies respond and adapt to water-related risks. The Non-Disclosure Campaign (NDC) is an annual CDP initiative, where investors can target companies that have been requested to respond but failed to do so. Globally, for water security, Indian companies achieved the highest response rate to the NDC campaign, with 50% of engaged companies submitting a response on this critical issue – 2.8 times higher than their control group.
A sector-wide analysis with regard to water security shows that significant growth in some water-intensive sectors has put pressure on the demand for industrial water. The electric utilities sector, for example reported an increased water demand of 7,71,174 megalitres in 2020, which was the highest amongst all sectors. Adani Power Ltd highlighted new acquisitions and increased power generation as major reasons for rise in water demand this year. The chemicals sector showed the second highest rise in water demand this year — 1,95,832 megalitres this year.
Corporations should thus strategically prioritise dealing with these risks to safeguard their financial bottom lines. For this, organisations have looked to secure alternate sources of water supply, adopt water efficiency and conservation practices as well as reuse and recycling of water.
Some companies have shouldered the responsibility of having audits conducted on their reported water metrics for greater transparency and credibility. Amongst the verification standards that were employed, 26% of the responding organisations used ISAE 3000. Tata Chemicals is the sole company to apply both ISAE 3000 and AA1000AS to meet assurance standards.
For a long time, corporate sustainability strategies have focused on measurable and manageable challenges such as product footprint, efficiency in supply chain, water conservation and others. Businesses have begun to take stock of water security by innovating for improved efficiency, measuring direct withdrawals, assessing risk to neighbours, and considering leakages.
Businesses are stepping up and playing a vital role in developing water initiatives that can ease the stress on crucial watersheds. Companies are also looking into water security related long-term business objectives and financial planning as a part of their overall business plans.