Recent Evolution of Corporate Water Stewardship Before diving into a review of how a company can orient its stewardship activities in specific watersheds and aquifers, we briefly review the recent history and evolution of thinking in corporate water stewardship that has led us to produce this discussion paper. Many companies begin engaging on water issues by first developing an understanding of their own corporate water footprint, i.e., by determining how much water the company requires, or how much wastewater or runoff it produces, across its operations and supply chains (Figure 3). This water footprinting exercise helps companies to pinpoint the geographic locations where the company depends on water resources, and also helps companies to better understand the nature and magnitude of their influence on water. Figure 3: A typical progression of stewardship activity resulting in local collective action A water footprint assessment provides a foundation for subsequent examination of water-related risks associated with the company’s operations and supply chains. During the past decade, a number of reports or papers were prepared in an effort to articulate the nature of water-related risk for companies, and to offer initial guidelines for risk management, including: Understanding Water Risks and Investigating Shared Risk in Water by WWF Watching Water: A Guide to Evaluating Corporate Risks in a Thirsty World by JP Morgan and WRI Water Scarcity & Climate Change: Growing Risks for Businesses & Investors by Ceres and Pacific Institute At the Crest of a Wave: A Proactive Approach to Corporate Water Strategy by Pacific Institute and BSR There are also a variety of online tools that help companies assess water risks based on watershed or aquifer conditions, such as WWF’s Water Risk Filter, WRI’s Aqueduct, WFN’s Water Footprint Assessment Tool, and WBCSD’s Global Water Tool. From Assessment to Action In recent years, much of the corporate dialogue around water-related risk has decidedly shifted into discussions about managing the shared water challenges faced by companies themselves, as well as the communities and ecosystems in which they operate. Early efforts focused almost exclusively on improving operational efficiencies within factories or on farms, but as understanding of the fuller nature of water-related risk has matured, stewardship activities have moved far beyond a company’s factory walls or farm fences to address issues such as water scarcity, pollution, water access, inadequate governance, and other concerns in the basins in which companies operate. A growing number of companies are recognising that the drivers for action include ensuring business continuity, securing a license to operate, and protecting or enhancing brand value. With research from CDP indicating that water is already posing serious risk for more than half of the world’s largest companies, coupled with the World Economic Forum announcement that water supply crises present one of the world’s greatest risks, the business case for action is clear and compelling. Corporate management of water risk is also being spurred into action by growing expectations of corporate sustainability among consumers, civil society, and communities. Investors and purchasers are also seeking to understand how water challenges will affect a company’s ability to generate returns or provide goods and services. For example, 573 investors with $63 trillion in assets as well as 14 purchasing organisations with a combined annual procurement spend of $216 billion now use CDP’s water program to improve their understanding, drive action and reduce water risk. Encouragingly, these key stakeholders understand that the root causes of corporate water risk usually reside in the way that water resources are managed or governed, both at the local watershed or aquifer level and at a broader governance level such as a federal or state agency. Smart investors know, for example, that while focusing on water use in a company’s own operations may be a sensible first step for many, it will likely do little to materially reduce the risks the company is facing in the watersheds or aquifers they affect through their water use or wastewater discharge. As a result these stakeholders now realize that a company’s ability to operate over the long term rests increasingly on good water stewardship being pursued at both the watershed or aquifer scale and the appropriate level of formal governance. This increased interest in water from business is welcomed by organizations and individuals focused on improving the conditions of watersheds and aquifers. Yet there remains significant confusion about the issues, particularly how to respond in a meaningful manner, which is leading to a mixed response from many companies. As increasing numbers of investors ask companies “what are you doing about your water risk?, companies are now facing decisions regarding how to mitigate material water risk. In 2010, the CEO Water Mandate responded to growing corporate and stakeholder anxieties over water risk by preparing a “Guide to Responsible Business Engagement with Water Policy.” The guide offers strategies for how companies can effectively and responsibly leverage change beyond company fence lines. Case studies of corporate responses are now becoming available, such as the Striving for Positive Water Impact report prepared in 2011 by PepsiCo and The Nature Conservancy, which explores how water impacts can be mitigated at the basin level. Two CDP reports – The Case For Corporate Water Disclosure and Collective Responses to Rising Water Challenges provideadditional guidance and examples. Collective action efforts that leverage the skills and resources of a wide range of partners have played a pivotal role in corporate water strategies, as evidenced by the Mandate’s Water Action Hub. In the discussion below we offer further thoughts that can help shape water stewardship collective action at the local level. Again, the particular role that any one company will play in a local water community’s water stewardship efforts will need to be decided within the company’s internal decision-making processes. We hope that the discussion that follows will help companies to better understand the work that will need to be undertaken in collective action with local water communities to realize sufficiency of water stewardship.