For Diageo plc, regulation of its water use is considered to represent a major source of potential water-related risk – necessitating regulatory horizon scanning.
“Water use and consumption are significant cost drivers within our business,” the company says in its disclosure to CDP. “Any regulatory activity likely to increase water costs is an important element of water-related risk assessment.”
Specifically, it is concerned that local governance of water resources is lacking in some of the jurisdictions in which it operates, and is mindful that regulation is likely to increase in the future. It notes, for example, that water prices have increased significantly over the last year in Nairobi, Kenya, where the company operates a large brewery.
To manage these risks, the company relies upon internal company knowledge in the form of survey responses from site personnel, specific to water-related regulatory risks, as well as Diageo’s custom-developed True Cost of Water calculator. This estimates the full cost of water to each plant, allowing plant managers to anticipate and plan for the financial impact of any price or tariff increases.