Almost two-thirds of companies are exposed to water risk and as a result they have experienced financial impacts so far in 2015 totalling more than $2.5 billion (£1.6 billion), according to a report.
The report, by sustainability organisation CDP, said water security is “almost certain to be one of the defining environmental challenges of the 21st century” and it is a “business imperative for many companies”.
CDP said more than a quarter of 405 respondents to a survey reported “detrimental impacts related to water”, and “reliance on this precious resource is increasing at a time when water security around the world is worsening”.
The non-profit group, which collects risk reports from publicly-listed firms on behalf of investors, said a total of 2,413 individual water risks were reported in direct operations and 788 in supply chains, with almost half of risks falling within the next three years.
The report said only 24 per cent of companies include key suppliers in water risk assessments and just 11 per cent of responding companies had “water policies that can be considered robust and comprehensive”.
However, CDP has picked out eight firms that it has given an A rating for improving water security in 2015, and these are: Asahi Group Holdings (Japan), Colgate Palmolive (US), Ford (US), Harmony Gold Mining Company (South Africa), Kumba Iron Ore (South Africa), Metsä Board (Finland), Rohm Co (Japan) and Toyota (Japan).
“A growing number of companies are recognising that they may need to transform their approaches if they are to meet the challenge of water security and remain competitive,” said the report.
“Supply chain risks, incomplete water risk assessments, a lack of meaningful water policies, and far from universal disclosure, all needs to be addressed as a matter of urgency.”