Rio+20 Business Focus: Deloitte experts on why we should put a value on water

Politicians make the policy. But it’s often left to business to implement it. For this reason RTCC is featuring submissions from business across the globe in the lead up to Rio+20.

The aim is to demonstrate how Sustainable Development is becoming a reality on every continent, country and city.

In this article Deloitte’s David Pearson and Will Sarni explain why adopting a value chain orientation to water stewardship can beginning to help protect valuable water resources.

Water security poses a threat to businesses across the world (© Fox Kiyo/Creative Commons)

Water scarcity currently poses serious threats to business in many regions of the world, and these risks are increasing.

These challenges are closely interlinked with the threats that water scarcity presents to a range of stakeholders, including the private sector, local communities, countries, and regions.

The United Nations (UN) World Water Assessment Programme has advanced the proposition that clean water contributes fundamentally to improvements in human health, poverty alleviation, and economic development.

In 2010, the UN General Assembly adopted a resolution “recognizing the right to safe and clean drinking water and sanitation as a human right that is essential for the full enjoyment of life and all human rights.”

Companies’ continued ability to make and supply goods depends on the availability of freshwater, and often their water requirements compete with those of other local water users.

Competition for water can create tension between businesses and the communities where they operate.

Moreover, in a world of burgeoning information availability and transparency, investors, regulators, local communities, and other stakeholders are holding companies accountable for how their activities and decisions affect the quantity and quality of water supplies.

Developments such as these have led many companies to pay close attention to how their own operations affect water supplies.

Far fewer companies, though, are paying attention to the water intensity of their value chains.

It can take more than 20,000 litres of water to produce 1kg of cotton - that's the same as one t-shirt and a pair of jeans (© Kimberlykv/Creative Commons)

In the survey conducted for the Carbon Disclosure Project’s CDP Water Disclosure Report 2011, 55 percent of respondents identified water risks in their direct operations, whereas 27 percent identified water risks in their supply chains.

Only 26 percent of respondents require key suppliers to report water use, risks, and management plans.

These findings suggest a problematic blind spot, since a company’s supply chain often accounts for the largest fraction of its water use and water risks.

Indifference to water scarcity, whether real or perceived, can create immediate and significant risks for business.

Instances abound of companies having their operations interrupted or suspended because they were unable to secure adequate supplies of clean water.

In some jurisdictions, local authorities and stakeholders have revoked companies’ licenses to operate because of excessive water use or pollution.These actions may be taken formally through regulatory or judicial mechanisms or informally as protests and campaigns.

Less visible, but no less troublesome, are the occasions on which companies have lost brand value and credibility with customers.

As a first step toward water stewardship, companies should quantify the water required to make and use their products over their value chain. Full value chain water footprints look at suppliers and other non-managed operations, as well as the water needs associated with everyday use of goods and services by households and business buyers.

They enable decision makers to determine precisely which steps in production, distribution, and consumption have the most intense water uses.

The resulting data can be analyzed in search of water-related cost savings, as well as opportunities for creating offerings that benefit the water supply and for building brand value.

Companies should also proactively engage governments, local stakeholders, and nongovernmental organizations in dialogue about water in order to understand and address the interests of all those who depend on specific watersheds.

Forums such as the Water Futures Partnership and mechanisms like the Water Action Hub of the UN Global Compact’s CEO Water Mandate are being set up to facilitate collaborative efforts to manage scarce water resources, in ways designed to fulfill the needs of those concerned.

Stakeholder engagement is a crucial element, and arguably the most important, of resolving increased competition for water while promoting economic growth and providing clean water and sanitation to the world’s population.

David Pearson is Global Leader, Sustainability and Climate Change Services for Deloitte Touche Tohmatsu Limited. William Sarni is Director, Deloitte Consulting LLP in the United States, and Practice Leader for Enterprise Water Strategy.

This article is part of a series commissioned by the Rio Conventions for their RioPlus Business project.

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