Companies need to undertake ongoing and more robust analysis of potential water-related risks and provide more quantitative data on overall water use and financially material risks as part of their disclosures in Securities and Exchange Commission (SEC) filings, according to a new report from Ceres.
Ceres maintains that while overall corporate disclosures of water-related risks have increased since the SEC issued its climate change guidance in 2010, most reporting remains weak and inconsistent.
In its analysis of changes in water risk disclosures by more than 80 companies between 2009 and 2011, Ceres says that reporting is lacking especially in regard to data on financial impacts, quantitative water metrics and potential supply chain risks.
Ceres notes that drought and flood cycles have led to billions of dollars in losses for corporations worldwide. Drought in China in the spring of 2012 left 3.5 million people with limited or no access to drinking water and cost the affected provinces an estimated $2.3 billion. Flooding in Thailand in November 2011 cost the semiconductor industry an estimated $15-20 billion.
Here in the U.S. in early June rain inundated the Florida panhandle and coastal Alabama, resulting in more than two feet of precipitation and at least $20 million in flood damage. The region had previously been classified as in severe or extreme drought. This has led Florida officials to call for increased disclosure of risks.
A key takeaway from the report is that significantly more companies are disclosing exposure to water risk, with a focus on physical risk. Some 87 percent of companies now report physical exposure to water risk versus 76 percent in 2009, with the biggest increases coming from the oil and gas sector, according to Ceres.
The report also finds that more companies are making the connection to climate change. In 2009, only eight of the 82 companies assessed (10 percent) disclosed that climate change posed growing physical risks in the form of water scarcity, flooding or quality issues to their operations and supply chains. In 2011, that number jumped to 22 (27 percent).
Hat tip to Business Insurance for flagging this story.
The I.I.I. has information on climate change and insurance issues.