By Cherine Fok, Director, Sustainability Services and KPMG IMPACT, KPMG in Singapore
Climate discourse has largely been about greenhouse gas (GHG) emissions. In contrast, far less attention has been given to water-related climate risks, except during the occasional special events such as the Singapore International Water Week or the World Economic Forum. This can be observed from our interactions with corporates, with water disclosures often lacking in environmental, social and governance (ESG) reports, compared to disclosures on emissions.
Yet, water is a key input for many industries that power the global economy - from agriculture, to manufacturing, and even just to keep offices running. Any interruptions to regular water supply could result in widespread disruptions such as higher production costs, reduced output, poor quality of service and supply chain delays. As the world’s population grows, as many as two in three people could be living in water-stressed areas by 2025, the United Nations has stated repeatedly.
In Singapore, we consume about 430 million gallons of water each day, with the non-domestic sector accounting for more than half of this demand. Prime Minister Lee Hsien Loong also previously noted as well that overall water demand is expected to almost double in the next 30 years. However, there are currently no firm targets to reduce non-domestic sector water consumption. This would be a crucial challenge in a water-stressed era.
Enterprises are crucial in achieving net-zero water - which will become a national priority sooner rather than later. Hence, they would do well to proactively consider the role they wish to play in water conservation, including addressing climate risks of water in their sustainability disclosures. This can be tackled through a three-step approach: Discover, Manage and Report.
This can be tackled through a three-step approach: Discover, Manage and Report.
Businesses should be clear on how water directly impacts their business operations and supply chain. Without this, businesses will have trouble identifying the role they wish to play in a water-stressed world. Companies could face reputational challenges if they underestimate the climate impact of water on their business and communities.
Investors are also becoming more vocal in urging companies to directly act on water-related risks and not just emissions; shareholders also want to know that sustainable growth strategies have been carefully thought through and put in place.
Mapping out water use across the supply chain, including sources and vulnerable areas can help companies calculate more accurately the value of water to the business, giving them a keener gauge of their water risk exposure. This will enhance discussions the company has with stakeholders on the business case to address water risks.
Following the discovery process, businesses will need to think of how they can tackle water sustainability in practical terms. This means managing their water in a way that meets the economic, social and environmental needs of the present, without compromising on the ability of future generations to meet their own needs.
Achieving a balance between both supply and demand of water resources is key, but often easier said than done. However, businesses can focus on taking incremental steps, such as reducing water usage or improving the health of a water shed with water-saving methods. These may include analysing water consumption patterns across short intervals to drive improvements. They can also set targets to reuse water within their businesses and implement a process to put this into action.
Increasingly, some businesses are also relying on green technologies to save water, lower energy usage and improve operational sustainability. For example, hygienic product recovery or pigging, is a way to recover any usable water in a company’s operations to minimise waste. Going forward, technology will become a key part in the move towards water sustainability.
Technology is not only useful for water management, but it can also facilitate accurate and timely water risk reporting for businesses. New technologies for climate risk analysis are coming on the market, which can deliver insights at scale, assess climate impacts on businesses and help support effective board-level decision making.
Such granular details will become important as stakeholder expectations continue to rise. Data insights can empower businesses to produce clear, consistent and complete reports that can demonstrate that they are not engaging in greenwashing. Independent assurances of these climate reports on water can further bring home this understanding.
We are observing climate tools, such as KPMG’s Climate IQ, being adopted by companies keen on automating their water reporting process and wanting to assess their current performance based on historical trend analyses and global industry benchmarking criteria. While the upfront costs for these solutions may be high, the long-term benefits of adopting them early should be recognised. Businesses can, with such climate risk data, gain a holistic assessment of their water targets. This enables them to story-tell their ESG story more vividly, which will in turn capture the confidence of stakeholders.
As climate change strains global water supply in the coming decades, businesses will face growing water risks. If left unchecked, these risks will most certainly multiply and impact business survival. Taking these proactive steps – Discover, Manage, Report - to prepare for a water-constrained world will ensure that businesses are in a good position to not only to tackle the potential risks but also enjoy the rewards.