Environmental Research Digest – July 2012
The report analyzes changes in water risk disclosure by more than 80 companies between 2009 and 2011. The report covers water use in eight water intensive sectors: beverage, chemicals, electric power, food, homebuilding, mining, oil & gas and semiconductors.
- Overall corporate disclosures of water-related risks have increased since 2009, but most reporting remains weak and inconsistent.
- Significantly more companies are disclosing exposure to water risk, with a focus on physical risk.
- 87 percent of companies now report physical risk exposure versus 76 percent in 2009, with the biggest increases coming from the oil and gas sector.
- More companies are making the connection to climate change.
- In 2009, only eight of the 82 companies assessed (10 percent) disclosed that climate change posed growing physical risks in the form of water scarcity, flooding or quality issues to their operations and supply chains. In 2011, that number jumped to 22 (27 percent).
- There is a continued lack of quantitative data and performance targets.
- Despite improvements in overall disclosure, data on company water use and the financial impacts of water-related risks remain infrequent in financial filings.
- There is growing, but still limited, disclosure on water management systems and performance.
- In light of these risks, the report recommends that companies:
- undertake ongoing and more robust analysis of potential water-related risks;
- augment qualitative disclosure with more quantitative data in SEC filings;
- ensure compliance with the SEC’s guidance on climate change disclosure;
- provide investors with information on how they are mitigating water risks.