Cate has over 15 years of experience in all aspects of sustainable development, corporate water risk management, and climate change resilience. As head of water at CDP, Cate is leading significant strides to address the global water challenge. Evidence and insight is vital to driving real change–we use the power of measurement and information disclosure in order to improve the management of water risk. By leveraging market forces such as shareholders, customers, and governments, CDP has incentivized thousands of companies and cities across the world’s largest economies to measure and disclose water-related information. CDP works to put this information at the heart of business, investment, and policy decision making. CDP now holds the largest global collection of self-reported water data. Companies, investors, and cities are able to better mitigate risk through Cate’s global system, capitalizing on opportunities and making investment decisions that drive action towards a more sustainable world.
Christopher Skroupa: Why is acting on water security such a business imperative for companies?
Cate Lamb: Over the past year, water challenges have made headlines. In January, the World Economic Forum ranked water as the biggest threat facing the world over the next decade. California, the world’s 8th largest economy, is now in its fourth year of crippling drought. In June, US $23 billion was wiped off the Indian stock exchange in less than 48 hours after the government issued a warning about the outlook for this year’s monsoon. Water risks threaten business growth and profitability for the world’s largest companies. Almost two-thirds of companies responding to CDP in 2015 report exposure to substantive business risk from water, and almost half (44%) expect water to impact business within the next three years. A quarter of these responses have reported already seeing water detrimentally impact their business in the last 12 months, with financial impacts totalling more than US $2.5 billion in costs. For example, Canadian energy company Enbridge Inc. reports an estimated total cleanup cost of US $725 million (approximately 2% of total revenue in 2014) following a leak of crude oil into the Kalamazoo River and Talmadge Creek from one of its pipelines. In 2014 alone, the company invested US $1.2 billion in system integrity and leak detection programs in the US and Canada. Due to worsening water security, it is no longer valid to assume that a stable supply of good quality water will always be available in many regions. The business imperative on water is not just something we see with traditional corporates. Last year, 18 multinational organizations with a combined procurement spend of U.S $214 billion requested water data from over 1,400 companies through CDP’s supply chain program to better understand how their suppliers are addressing their water impacts as well as the associated risks and opportunities.
Skroupa: How might these risks affect investor interest?
Lamb: Investor interest is rising and they are taking action — 617 investors with US $63 trillion in assets requested corporate water data through CDP this year. This is four times the number of investors who backed the request in 2010. In the US, water has been the subject of 110 shareholder resolutions filed by investors since 2011 at corporate annual general meetings. Additionally, the UK’s Association of Member Nominated Trustees launched its Red Lines Guidelines for FTSE 350 companies last May, the most significant guideline being that if a company fails to disclose to CDP, investors are advised to vote against reelection of the chair of the Environmental Sustainability Committee. In the absence of such a committee, investors should vote against the reelection of the Chairperson. Water investment funds as a macro theme are expanding outside of the traditional group of water utilities and companies with water as a principal business. US fund manager Calvert just launched a Global Water Research Index comprising companies dedicated to the responsible stewardship, sustainability, and accessibility of water which will include leaders in water efficiency and companies that provide innovation in the sector.
Skroupa: CDP scored companies on their water disclosure for the first time this year; what makes a leading company?
Lamb: A business as usual approach to water management is no longer fit for purpose. A CDP leading company is one that has recognized this and is on the path to truly sustainable water management. It is a company that has evolved its approach from looking solely at its own operations, to accounting for and collectively acting on the wider context of water challenges in the river basins the company operates in or buys from. The water scoring methodology developed by CDP provides a blueprint for leadership on water issues; it can help all companies work towards corporate water stewardship. Leading companies are managing their water risks because it makes business sense to do so. Colgate Palmolive and Ford Motor Company are the two US companies (of eight) to join the Water A List. They achieve an A because of their approach to water management, successfully showing that strategic water stewardship can reduce risk, enhance strategic preparedness, improve investor appeal, and make businesses more resilient. These companies recognize that a healthy river basin means a healthy business.