Friday, February 12, 2010

Large Companies are not Adequately Reporting Water Risks to Investors

A recent report by Ceres (Pronounced series) finds that many large companies fail to report vulnerabilities of water scarcity to investors. The report ranked 100 publicly traded companies on their disclosure of water risks to investors. As local water issues in the U.S. and abroad intensify, there is a serious threat to companies that their supply-chain could be adversely effected in water-stressed areas. These realities are not being addressed in reports to investors. Many companies are operating as if water is an infinite resource.

The report took companies from eight sectors: beverage, chemicals, electric power, food, homebuilding, mining, oil, and gas. These are all industries that are heavy water users. The selection of the 100 companies from these eight sectors were selected based on their 2008 revenues. The companies were systematically ranked based on voluntary and mandatory reporting.

The findings were based on a 100 point scale and the results are surprisingly low. The highest score of 43 was for the UK based beverage company Diageo. The highest average score by industry was the mining industry, while the lowest average scores went to companies in the homebuilding sectors.

This report shows how undervalued our natural resources are. It shows the old way of valuing our natural resources as a limitless bounty for the taking. This report shows a growing trend of viewing natural resources in a finite and more realistic sense. This was mainly an issue for environmentalists for years, but as water issues become more transparent and in the mainstream, investors have been the one sounding the alarm. Recently, shareholders for Shell oil showed their dismay against the energy intensive tar sands in Alberta Canada. Despite denials by Shell that this investor unrest led to them scaling back tar sands operations, the company curiously announced a week later that it was indeed scaling back expansion of the tar sands.

While it is easy for large corporations to dismiss environmentalists, investor revolts and demands over eco-accountability cannot be ignored.

Ceres Report summary

Ceres Water Report:
Murky Waters? Corporate Reporting on Water Risk

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