Lin and Marie Gumb look out over their ranch in the Nebraska Sand Hills, under which lies the Ogallala aquiferNathan VanderKlippe/The Globe and Mail
From floods in Thailand to the tsunami in Japan to a sensitive aquifer in Nebraska, issues involving water are increasingly adding risk to the operations of the world's biggest corporations.
A new survey of 315 large global companies conducted by the not-for-profit Carbon Disclosure Project shows that almost 60 per cent of those who responded say water-related risks have the potential to hit their business.
The CDP, a London, England-based organization created by more than 350 global institutional investors to press companies into disclosing exposure to climate change, now surveys those same corporations about water issues.
The CDP report, released Tuesday, shows that companies are taking water risks more seriously, but they still do not get the same attention as climate issues. About 57 per cent said they have board oversight of water-related policies, while 94 per cent have board-level oversight of climate change.
The potential for water-related issues to disrupt a company's plans was underlined last week when TransCanada Corp.'s Keystone XL pipeline was faced with delays, or even cancellation, because of environmental concerns over its route across the Ogallala aquifer in Nebraska. The company is trying to keep the project alive by promising to divert the pipeline's route around the aquifer. TransCanada was one of the global companies that was sent the CDP questionnaire but did not respond.
Water can disrupt even the biggest companies' supplies. The recent floods in Thailand prompted Dell Inc. this week to warn of a possible shortage of hard drives, and forced Honda Motor Co. Ltd. to adjust car production in North America because of a lack of some electronic parts.
CDP account manager Chris Hedemann said in an interview Tuesday that many companies are coming around to the understanding that there is more to water risk than merely its cost, or whether there are adequate supplies. "It is a lot more complex than that," he said. "It can really disrupt supply chains."
Businesses ranging from shoe manufacturers to beer makers to clothing companies are exposed to water-related risks, he said. Yet the report shows that more than one-third of companies don't know whether there are water risks in their supply chains.
Still, many companies are becoming more aware of water risks and taking action, the report suggest. It cites examples such as clothing retailer Hennes & Mauritz AB (operating as H&M), which is working with cotton farmers to mitigate drought; and Cisco Systems Inc., which is working to reduce water needs in manufacturing of its printed circuit boards.
Other companies are turning water risks into new business opportunities. Philips Electronics, for example, is now producing ultraviolet lights for water purification, the report says.
Overall, the reporting of water risks is a good first step for companies, Mr. Hedemann said, because it forces them to ask internal questions and understand where they need to gather more information about the issue.
Several large Canadian companies took part in the survey, including Barrick Gold Corp., Cenovus Energy Corp., Enbridge Inc., Kinross Gold Corp., Potash Corp. of Saskatchewan and Suncor Energy Inc.