AP7 Demands Engagement from Water Management Laggards

    Share post:

    Stockholm (NordSIP) – AP7 in collaboration with Sustainalytics published a new report titled “Water Management and Stewardship: Benchmarking Corporate Practices“. The report provides an update on the 2017 review of the state of disclosures about water risk exposure and stewardship in the food and beverage, garment and mining sectors.

    For this edition of the report, the analysis focused on the same 299 companies as in 2017. The survey reviewed companies across the sectors of food and beverage (F&B) (161 companies), garment (45 companies), mining (74 companies) and industrial conglomerates (ICs) (19 companies).

    - Partner Message -

    The report evaluated the disclosures of individual companies and whole industries according to eight key issues: board-level responsibility for water, water policy, water use intensity, water use goals, water pollution goals, local community impacts, supply chain water management and manufacturing water management.

    Although the 2017 study also evaluated the exposure of these companies to water-stressed countries, the latest iteration did not. The report argued that this was “in part because we do not expect that there will have been significant changes in this regard for most companies over the last two years.”

    Sectoral Intra-Sectoral Performance

    The report found that despite the high profile of water on the agenda, not nearly enough progress has happened as regards public disclosures. In aggregate terms, the mining sector is the best performer (with an average total score of 11.1), followed by the garment sector (12.3), and F&B (12.8) and ICs (15).

    However, the sectoral averages hide substantial intra-sector variation, particularly within the F&B sector, where we find the best- (soft drinks and brewers) and worst-performing (food retail and food distributors) subsectors.

    There was also some variation across the different KPIs. Mining is only outdone on the disclosure of water pollution goals and water use goals. Otherwise, it ranks as the top performer in all other KPIs. Although F&B performed worse on aggregate, it was the best sector for the disclosures of water use goals. Meanwhile, the garment industry did worst in terms of its disclosure of water use intensity.

    Across countries, the UK, France and India were the top three performers, while Hong Kong, China and the Philippines ranked at the bottom. Across broader regions, Europe and Oceania did best, while China and Central and South America did worst.

    Little progress

    While water continues to be high on the agenda, not nearly enough action and impact can be seen on the ground.

    Little progress seems to have taken place since the first report was published. Comparatively speaking, about 30% of the companies performed better, approximately 31% had the same score as in 2017, and about 39% scored worse.

    However, the report shows that progress on disclosures was particularly encouraging the mining with regards to local community impact, supply chain water management and manufacturing water management. The garment industry made the most progress on the disclosure of water use goals and water pollution goals. The F&B industry’s main areas of improvement came from board-level responsibility and water policy.

    According to the report, there are some glimmers of hope. Most progress took place within the garment sector. Water policy seemed to attract most efforts to improve disclosure, followed by board-level responsibility for water management and sustainability.

    A role for engagement

    The report warned that there may be more to the performance of these sectors than meets the eye, suggesting that engagement plays an important role. “While disclosure remains poor, this may be masking substantial efforts underway behind the scenes,” noted the report. “In the two interim years between the studies, Sustainalytics carried out focused engagement with a selection of companies from the first benchmarking, and we found there to be much more happening in relation to these companies’ water risk management than their corresponding disclosure would indicate.”

    Most improvement on disclosures seems to have come from companies that investors engaged with during the two years between the first and second report. Engagement is also a  way for investors to motivate, discuss and obtain crucial information from companies beyond public disclosure.

    Picture from Pixabay

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.
    - Partner Message -

    Nordsip Insights

    From the Author

    Related articles