The first step is risk assessment. While the nature of the risks varies from business to business depending on the sector and location of its operations, the WWF identified three types of risk common to all: physical, regulatory and reputational.
As far as UK businesses were concerned, one of the biggest physical risks was the dependency on imports from countries whose river catchments had high risk hot-spots. The most significant source countries in terms of import value were China, the USA, Italy and Spain.
Regulatory risks came from countries such as Chile which has inadequate basin-level platforms, or reputational risks from Australia due to close media scrutiny regarding water issues.
WWF-UK’s Water Stewardship manager Lucy Lee said: “Businesses must wake up to their exposure to water related risks, and also realise the potential benefits of assessing and responding to them."
Five steps for better risk management
1. Awareness: Understand what competitors are doing, how the company is perceived by others and what investors expect on water, as well as gaining a thorough understanding of the whole supply chain
2. Knowledge of impact and risk: Identify locations of risk hot-spots
3. Internal and supply chain action: Implement best practice, comply with legislation, implement a corporate water stewardship policy and monitor results
4. Collective action: Collaborate with other businesses, government, NGOs and communities
5. Influence government: Lock in these improvements through policy, legislation and governance - not to skew a country's water policy but to establish a stable regulatory landscape
The report highlighted some examples of best practice in terms of water stewardship, including multinational brewing and beverage company SABMiller.
The company found that high levels of sediment in the water used by its Bogota brewery was resulting in higher treatment costs for the water authority, which were being passed on as higher water prices to the brewery itself.
SABMiller partnered with other stakeholders to change the poor land management practices, such as overgrazing, that were causing soil erosion.
According to the report, this kind of direct engagement with the supply chain is vital as often most of a company’s water footprint comes not from its direct operations but from its supply chain– 10% for SABMiller used for processing, brewing and bottling as opposed to 90% used for supply crop cultivation.
Water risk and partnerships manager for SABMiller David Grant said: “Once we understood our risks in detail, we moved to engage with others across a number of river basins where we operate. We were able to make a much stronger business case for action within SABMiller using detailed local assessments, and quantifying the risk exposure to our facilities.
“I imagine that many other businesses would find the same once they have the right information in front of them. I’d encourage businesses to understand the risks, and then move to minimise them, and their impact on the freshwater environment."
According to the World Economic Forum, managing water is the biggest challenge of the 21st century. Its 2015 Global Risk Report ranked water crises as the top risk to the global economy, up from third position in 2014.
The full WWF report can be read here.