When we talk about sustainability and environmental conservation, topics like climate change and waste management often come to mind first. Maybe your organization has spent a lot of time and effort reducing hazardous chemicals in your products.
The sustainability topic that doesn’t always get a lot of thought – aside from very resource-intensive industries – is water conservation. Most of us, in both our personal and professional lives, are used to turning on a tap, taking the water we need, and moving on with our day.
But water scarcity is a real concern. On our blue planet, less than 3% of all water is fresh, and more than 68% of that is locked up in ice and glaciers. In fact, just 0.3% of all freshwater is available in lakes and rivers, with the rest in groundwater.
For companies implementing Environmental, Social and Governance (ESG) as well as other sustainability programs, future-focused water stewardship is increasingly becoming a material concern.
What Is Water Stewardship?
Water is a shared resource. We often hear how it’s important not to “waste” water, but in fact this isn’t possible, because ultimately water always goes back into a watershed.
What we’re referring to when we say not to waste water is not to waste the resources required to treat water so it can safely go back to the watershed, or to remove so much water that it negatively impacts downstream ecosystems, organizations, and communities.
Water stewardship is about the responsible and equitable use and treatment of water resources. This can be either water taken directly from the environment, like water pulled from groundwater at your facility, or treated water taken from municipalities. Ultimately, it all comes from the watershed.
Companies assessing and reporting their water impacts need to consider their direct use within their own operations, like water added to products or used to clean machinery, as well as their indirect uses within the supply chain.
How Is Water Stewardship Reported?
If you’re taking water directly from the watershed, either through groundwater or pumping it out of a lake or a river directly to your facility, you probably have legal requirements you’re already meeting.
Most jurisdictions require permits to take water if you’re not connected to municipal sources. This is important so they and you can track the available water for downstream users, whether that is other industries, cities, or for agricultural purposes.
You probably also have legal reporting to do if you’re discharging process water either to local sewers or back to the natural environment either through direct discharge or if you have onsite treatment or retention ponds.
Beyond mandatory legal reporting though, many companies are coming to the understanding of how water stewardship and protecting water resources into the future poses a material risk to their value creation. For this reason, we’re seeing an increase in water reporting as part of ESG programs.
Water stewardship for ESG reporting goes beyond legal compliance to discuss potential business risks and opportunities related to how water is used, treated, and disposed of.
Reports are typically prepared following a selection of ESG and other sustainability frameworks and the information provided is used by company leadership, community stakeholders, investors and financial institutions to verify the equitable protection of water resources and identify areas of future risk.
Which ESG Frameworks Should I Use for Water Stewardship Reporting?
If you’ve already started looking into ESG reporting for your organization, you’re aware of the wide variety of standards and frameworks available to guide your program development.
These standards can be developed to apply to reporting companies from a particular industry, or so that the data in the reports is provided in a way that will be most useful to readers with a particular focus, like investors, insurance underwriters, or banks.
Common frameworks that include water stewardship reporting include:
- Water Footprint Network
- United Nations CEO Water Mandate
- The Global Reporting Initiative (GRI)
- Climate Disclosure Standards Board (CDSB)
- International Integrated Reporting Council (IIRC)
- Carbon Disclosure Project (CDP)
Choosing the right standard will depend on the scope of your ESG program, your industry, and who the end user of your reports is intended to be.
Let’s take a closer look at the last framework in this list – the CDP.
What Is the CDP?
The CDP, formerly known as the Carbon Disclosure Project, is an environmentally-focused sustainability reporting program and non-profit organization. Their reporting requirements don’t strictly speaking include the Social and Governance elements of ESG reporting, though questions around equity and leadership are covered in their sustainability standards.
The organizations that work with the CDP include:
- Supply Chains
- States and regions
- Public authorities
- Private markets
Along with water reporting, the CDP also includes standards for reporting on climate and forests. The CDP questionnaires are tailored for your industry and the size of your operations so that you’re not wasting time and resources reporting on aspects that aren’t material to your company’s sustainability risks and opportunities.
How Is Water Stewardship Reported to the CDP?
The CDP water security questionnaire is customizable for 18 different industries. These are:
- Agricultural commodities
- Capital goods
- Electric utilities
- Financial services
- Food, beverage & tobacco
- Metals & mining
- Oil & gas
- Paper & forestry
- Real estate
- Transport OEMS
- Transport OEMS-EPM
- Transport services
- All other sectors
For companies completing the water questionnaire, you can choose one primary industry as well as three additional industries to tailor the questions to answer.
You have the option to complete a minimum number of answers or the full questionnaire. The minimum questionnaire is available to companies reporting for the first year and those with less than $250 million in annual revenue. There are additional modules available for your supply chain, responding to a bank request, as well as members of the RE100 and Net Zero initiatives.
The questionnaire is answered online through the CDP disclosure platform, which is open for a 4-month period from April to July each year. Companies who want to receive their CDP Score need to report by the July deadline.
What Is in the CDP Water Stewardship Questionnaire?
There are 12 modules in the questionnaire. These cover the following topics:
- Corporate water accounting metrics
- Value chain engagement activities
- Business impacts
- Risk assessment procedures
- Risks, opportunities, and responses to them
- Facility water accounting metrics
- Water governance and business strategy
The level of detail required to report to each of the modules depends on your sector, and some reporting companies may notice questions have been skipped if they’re deemed to be not material to your industry.
In total there are 85 questions. Companies considered the most high impact are:
- Agricultural commodities
- Food, beverage & tobacco
- Electric utilities
- Oil & gas
Other industries may still complete the water stewardship questionnaire, but will find their requirements to be significantly reduced or streamlined.
Example: Completing the Water Questionnaire for the Food, Beverage & Tobacco Industry
Below is an example of the headings and questions to be answered for businesses in the food, beverage & tobacco industry. This example is a summary and companies in this industry should refer to the most current water questionnaire for the full list of reporting requirements.
This is a standard section across all sectors where companies can provide basic information on their business operations and reporting period. It includes open text fields to enter a general description and introduction of the organization, as well as drop down menus for details like the reporting year, location of operations, and the currency used for financial information in the report.
The introduction section is also where the boundaries of the report are described and any exclusions identified, along with a rationale for these exclusions.
In this section, companies begin to describe the importance of and their dependency on water resources for their business. This includes highlighting which water-intensive agricultural commodities make up a significant portion of revenue.
These commodities include:
- Maize and corn
- Palm oil
- Other oilseeds
- Cattle products
- Dairy & egg products
- Fish and seafood from aquaculture
- Poultry & hog
For each of the above, the report needs to indicate what percentage of revenue depends on each commodity, as well as whether they are produced or sourced (or both).
This section is also where companies document what types of water metrics are regularly measured, including the total volume of water withdrawn and discharged, the quality of water withdrawals and discharges, as well as the amount of water consumed or recycled. Companies must also acknowledge withdrawals and discharges to areas of water stress.
Now that the current state of operations have been documented, in this section the business will disclose any detrimental water-related impacts in the reporting year. This disclosure includes not only a description of the event or events, but also the business’s response and total financial impact.
Business impacts include not only environmental emergencies like unauthorized discharges, but other concerns like severe weather that impacts water quality and availability, litigation or negative media coverage, and transition stress as businesses move to a less water-stressed area or change processes to require less water.
If the business experienced any compliance-related water incidents or had to pay any water-related fines, these are also included in this disclosure.
For the food, beverage, and tobacco industries, this section starts with documenting pollutant management procedures. Companies should describe how they identify and classify potential water pollutants, as well as efforts to minimize adverse impacts from these pollutants.
The pollutants include, but are not limited to:
- Inorganic pollutants
- Other nutrients and oxygen demanding pollutants
- Microplastics and plastic particles
Other procedures to document are risk assessment procedures. Companies will describe how they identify and assess potential and known risks but from within their direct operations and in their value chain.
Risks & Opportunities
Here, companies will identify water risks and opportunities that may have a substantive financial or strategic risk to their operations. They need to clarify what percentage of company facilities could be affected by these risks and opportunities.
As well as identifying risks and opportunities, reports need to show the company’s response, both in direct operations and in the value chain. If no risks or opportunities have been identified, the rationale for this should be included.
This section is for quantitative disclosures where companies will document facility-level measurements for water withdrawals and discharges, as well as details of any third-party verifications.
The governance section is where organizations can report on how policies are developed and reviewed. This includes who has management responsibility for developing and approving these policies. Specific board member positions who oversee water policies are to be identified, though names don’t have to be disclosed.
These disclosures should also include details on the competencies of managers and board members responsible for water policies, and how C-suite employees and board members are incentivized to incorporate water policies into business operations.
The governance disclosures also include how the organization is positioned to influence water-related public policy. For example, this might include direct engagement with policy makers, through trade associations, or by funding research organizations.
This section begins the forward-looking portion of the report. Companies disclose how water-related issues are integrated into long-term strategic business planning. They indicate trends in water-related capital and operating expenditures.
If companies currently classify any products or services as having low-water impact, this is also the section where this can be documented.
Now that accounting, policies, and strategies have been documented, targets are disclosed in this section of the report. These targets could be related to water pollution, water withdrawals, or water, sanitation and hygiene services.
For companies reporting after their first year, along with targets, details on progress made should be included in this section.
A key purpose of ESG and sustainability reporting is to provide high-quality and comparable data to investors and financial institutions. If your company has used any third-party standards or organizations to verify data points in your CDP water report, they are identified here.
Plastics pose a specific risk to water resources, so this section goes beyond details of water withdrawals and discharges and looks instead at how organizations manage the use and production of plastics up and down the value chain, even when this use or production may not directly involve water.
Companies will disclose identified environmental and human health impacts of their plastic usage as well as plastics-related risks that might have a substantive financial or strategic impact on business. Organizations will also report plastics-related targets and their progress in meeting them.
This section also includes an accounting portion where companies will report the total weight of packaging sold and used.
Ready To Meet Your Reporting Deadlines?
The CDP Water Security questionnaire is detailed and asks companies to consider their impacts on local watersheds, as well as risks and opportunities to their business as we strive to protect water resources.
Whether you’re completing the questionnaire at the request of a lender or other business partner, or if you’re doing it as part of a larger ESG initiative, pulling together all the information you need to complete the questionnaire can be time consuming. You want to know you’re working from the most current version possible.
A software partner like FigBytes takes out a lot of the guesswork. FigBytes is a CDP-accredited platform, which means you can use it while being confident the final report will meet the CDP’s requirements.
If you already have an eye on upcoming CDP reporting deadlines or are looking to start ESG reporting, speak with a FigBytes expert today.