New tools help companies with water risks

A global online tool launched by WWF and German development finance institution DEG (Deutsche Investitions-und Entwicklungsgesellschaft mbH) enables companies and investors to address their water-related risks. WWF and DEG have created a practical online questionnaire that not only identifies water risk in supply chains and investment portfolios, but also provides practical steps to mitigate risk.

Roughly 40 per cent of the world’s population lives in river basins that experience severe water scarcity during at least one month of the year; more than 900 million people lack access to safe drinking water and 2.7 billion lack access to basic sanitation services. Population growth and climate change are set to increase pressure on vital freshwater resources, with serious consequences for nature, people and economies.

“Water scarcity is a concern for conservationists, communities and companies alike. But simply competing for every last drop will do no good to anyone. If water users become aware of their water risks – and work together to find solutions – we can ensure that people, nature and businesses have the water they need,” said Jim Leape, WWF International Director General.

A risk that cannot be ignored

Virtually every business sector relies on water. Yet many executives remain unaware of how water flows through their supply chains, or how the health of the environment where their facilities are located could affect long-term profitability.

WWF and DEG’s message to companies is simple: Why take the risk? DEG has established water as a critical field for its client companies, and has used the Water Risk Filter to help them identify and mitigate water risk in business operations.

“Water availability is the most underestimated critical issue for the companies we are financing, but we believe that financial institutions can help make the companies more sustainable in their performance. Our work with WWF looks beyond the risks and shows practical ways how to change them into business opportunities,” said Bruno Wenn, Chairman of DEG.

What makes the tool unique?

The Water Risk Filter incorporates WWF’s science-based approach to water stewardship. It has a number of unique features:

  • It is easy to use. Geared specifically for non-experts, it guides users through a simple questionnaire and a pre-assessment survey that uses industry and geographic information to evaluate in less than 5 minutes if additional evaluation is necessary.
  • It is global and draws on data sheets for 235 countries and territories, providing interactive maps and case studies.
  • The tool uses the best available data as well as company specific information to analyse all relevant indicators of water risk.
  • The tool goes beyond an assessment and provides a mitigation toolbox for the user.

“The Water Risk Filter will undoubtedly identify water ‘red zones’ – those places where scarcity creates investment risk. The answer is not to abandon those places; from a practical standpoint this won’t be possible. Instead we must turn red to green and manage resources within scarcity,” said Stuart Orr, WWF Freshwater Manager.

Global fashion retailer H&M was among the companies to test the online tool.

“The outcomes from the Water Risk Filter are important inputs for our new, holistic water strategy that we are developing together with WWF. It shows us where and how we can have the biggest impact, and helps improve our understanding of how sustainable our supply chain is, given the often difficult local water situations,” said Mikael Blomme, Environmental Sustainability Manager at H&M.

Ivo Mulder, Programme Officer, Biodiversity and Ecosystems/ Water and Finance of UNEP welcomed the water risk filter and stressed the important role of risk assessment for companies in terms of competitiveness, reputation and investor confidence.

“For a long time, financial institutions have focused on climate change as the factor with the most material impact on loans, investments and insurance products. That landscape is changing quickly, with water emerging beyond reputational risk. It now holds the potential of affecting debt-servicing and the creditworthiness of clients. The Water Risk Filter helps financial institutions better understand and structure the different components of water risks, and assess these risks throughout the due diligence processes,” Mulder said.

Richard Matthews is a consultant, eco-entrepreneur, green investor and owner of THE GREEN MARKET, a leading sustainable business blog.

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