The Carbon Disclosure Project (CDP) has reported that 68 per cent of FTSE 500 companies face exposure to water security risks which could have the potential to limit growth.
The issue is explored in the CDP’s annual Global Water Report, published last week, which analysed water-related disclosures from 174 FTSE 500 companies from different sectors.
Importantly, almost half of the risks reported by companies are expected to affect operations within the next three years, meaning that firms are increasingly likely to look at near-term water efficiency and intensity measures throughout their operations and supply chains.
Nearly 22 per cent of reported risks are related to supply chains.
Currently, 60 per cent of the companies analysed do not require suppliers to disclose their water risks, but this is likely to change radically over the coming years due to a growing consensus around corporate water stewardship, with 42 per cent having made a public commitment to tackle water usage.
Three quarters of the companies also reported that water represents operational, strategic or market opportunities, with many already realising substantial benefits from tackling water-related risks.
For example, the report highlights that UK drinks company Diageo Plc has reduced the volume of its water withdrawals by one million cubic metres in 2014, saving approximately $3.2 million (£2 million), while chemicals multinational BASF estimates that new markets in water saving and treatment products offer $1 billion (£630 million) in potential sales up to 2020.
Paul Simpson, chief executive of CDP, said: “Water is an essential resource for any business. The potential for water-related problems to damage brand value or limit corporate growth is increasingly understood.
“We live in a time of unprecedented demand for water and have seen the number of investors seeking accountability for companies on this issue through CDP rise more than fourfold in just four years.
The full report can be downloaded here.