Deloitte signs on to Water Disclosure Report project
Deloitte, the international management consulting company, on Monday announced a partnership with the Carbon Disclosure Project, based in London, to develop the second edition of the CDP's Water Disclosure Report. The first report, issued in 2010, was prepared on the behalf of 137 institutional investors, for the purpose of assessing corporate water risk for targeted companies and directing investment in firms with sustainable water practices.
The CDP was, at first, simply a corporate carbon disclosure project. Companies were asked to provide information related to their carbon emissions, planning, and management. The findings were used by institutional investors to assess risk associated with carbon and direct investments accordingly. Questionnaires were sent to targeted companies, who responded voluntarily. The results of the questionnaires were developed into reports.
Due to demand, the CDP developed the WDR in 2010. The methodology and purpose is similar to the CDP. Questionnaires were sent to 302 companies, each of whom were identified as having potential water risk built into their business models. The results, once tallied, are published as a report.
The project has been a success. Demand for the WDR has grown considerably. The number of investors backing the report has grown nearly 300%, from 137 to 354. The investors signed onto this year's effort represent $43t in assets, up from $16t last year. The number of targeted companies to be sent questionnaires has grown from 302 to 500. And Deloitte has been brought in to help manage the rapidly expanding effort.
The 2010 report included some interesting results. First, about half of the targeted companies responded and the response rate varied considerably across business sectors.
The Oil and Gas and Construction/Infrastructure/Real Estate sectors had the lowest response rates: 29%. Though the report does not go so far as to hypothesize the reasons for these poor numbers, it does state that "given the important of water to these sectors, and their potential impacts on water supplies, a greater commitment to reporting would be desirable." The Chemicals and Pharmaceutical/Biotech sectors had the highest response rates: 100% and 81%, respectively.
More importantly, it was found that only one of the twelve responding companies in the Oil and Gas sector has set any kind of water related management target. On the other hand, all twelve of the companies in the Food and Beverage sector reported having some kind of water target established.
The questionnaires for the 2011 report were due to CDP by June 30, and the final report is scheduled to be published in December. The industry will be waiting anxiously for the results. The report could have significant investment implications. The growing demand for this type of reporting may lead to future mandates which require it. Companies targeted for voluntary disclosure by the CDP could therefore look at this as an opportunity to square away their water matters before they become required reading for investors.
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