When we consider water crises, it’s deluges and droughts that grab our attention. Rarely does the issue of the quality of water hit the headlines, let alone the metrics we use to measure it. Water quality has been described by the World Bank as an “invisible crisis” which is threatening public health, food security, and hampering economic growth. It’s also a key driver of the crash in the planet’s freshwater biodiversity, as highlighted by WWF’s Living Planet Report.
The private sector, namely industrial and agricultural production, are significant contributors to the water quality problem, emitting plastics, pesticides, petrochemicals, pharmaceuticals and more into the environment. CDP’s water data suggests that many companies are not identifying and reporting on pollution across their value chains, despite the significant business risks.
Part of the issue is that we don’t have a set of comprehensive and comparable metrics to measure corporate pollution and the actions companies are taking to manage it. Investors are calling for this so they can better track corporate performance and make investment decisions accordingly. This issue was the focus of a recent roundtable event that CDP co-hosted with Norges Bank Investment Management (NBIM). NBIM runs Norway's sovereign wealth fund and is one of the leading investors in terms of size and its attention to water issues.
When reporting on and benchmarking water quantity, there are two simple, widely used metrics – water withdrawal and water consumption. But when looking at water quality, or more specifically pollution, it is very difficult to find a set of metrics that works across different industries and contexts.
There are a multitude of questions at play: Which chemical compounds should be measured in wastewater? What levels of these compounds would constitute “pollution”, bearing in mind the variable dilution potential of the freshwater environment? How do you measure these compounds if there is no single point of discharge, like an area of farmed land? How can pollution be managed and monitored in a company’s supply chain, and also during the use of its products?
At CDP we have been grappling with these issues over the last six months as we have been developing the questions we ask about pollution- and their associated metrics -in our water questionnaire, to which thousands of high-impact companies respond every year. Our aim is to collect comprehensive and comparable data on pollution, significantly improving corporate disclosure on the issue. This will help companies better understand the issues and monitor progress; it will also enable their investors and buyers to see where business risks linked to pollution are being addressed and differentiate the leaders from the laggards.
At our roundtable event we shared findings on the current state of corporate pollution reporting and solicited feedback on our initial proposals for pollution questions and metrics from some of the largest companies in the food & beverage, apparel and retail sectors.
Key findings from the event:
- Tracking pollution across the entire value chain is essential but still not standard practice. We have developed proposals for questions that help companies report on pollution reduction efforts across the entire value chain, from raw material production to product use and disposal. The questions are designed so that companies focus their efforts on the most polluting value-chain stages.
- Proxy metrics are needed to track pollution reduction. Because of the complexities described above we are proposing metrics which measure “level of effort” as a proxy for the absolute impact of pollution reduction.
- Companies need to demonstrate that they are transitioning away from polluting practices. We are proposing changes to existing questions on business strategy and governance to enable companies to demonstrate that accountability for pollution resides at the highest levels and that pollution elimination is part of their strategic direction. We also plan to ask more explicitly about targets for pollution reduction; targets help solidify ambition and catalyze execution of corporate strategies.
- Granularity is needed for reporting on pollutant management to allow companies to report comprehensively on managing pollutants in different product categories, geographies and value chain phases. Retailers, for example, want to differentiate between actions to address pollution for their own-brand products compared to private brands, where they have significantly less influence.
- Flexibility is needed for reporting about types of wastewater treatment. It was deemed too restrictive to ask companies solely about levels of tertiary treatment as a proxy for reporting on pollution reduction efforts in their direct operations. For some operations, tertiary treatment is not the most cost-effective approach, and for others, such as retail, wastewater ends up in municipal sewer systems over which companies have little influence. So, reporting on treatment levels needs to be more open, asking companies about different types of treatment and giving space to allow for explanation of approach.
- Reporting on reducing pollution from products is welcomed – including reporting on procedures to influence consumer & customer behavior, and initiatives to design-out pollution from products. Companies are taking significant steps to reduce plastics and packaging in their products, and this needs to be reflected in the questionnaire. We proposed tracking revenue associated with products containing hazardous substances – this works as a proxy measure of the pollution potential of products but may be difficult to quantify for some more decentralized businesses.
- Asking suppliers about outcomes as well as action is important. For reporting on pollution in the supply chain, we proposed ‘the percentage of suppliers that set minimum standards for the quality of their effluent discharges’ or for agricultural suppliers, ‘the percentage that set minimum standards for reducing pollution’. The importance of reporting outcomes for agriculture was highlighted, as well as the wider co-benefits of farmer interventions. Getting specific information from suppliers can be difficult so, again, keeping the question open and enabling companies to report about different approaches and standards was deemed helpful.
With this rich feedback we are honing our data points in the CDP water questionnaire and advancing our mission to achieve comprehensive and consistent data on water pollution. Thank you to all of those who have supported our quest so far and stay tuned for more ways to get involved.