A looming crisis in the supply of water on earth threatens global supply chains as never before, according to new research from CDP, the global non-profit that runs the world’s environmental disclosure system. On March 22, CDP presented its most extensive-ever analysis on how companies are responding to issues of water security, based on record-high disclosure numbers.

The report, titled “Stewardship at the Source: Global Water Report 2023,” focuses on 3,163 large companies with an annual revenue of more than $250 million or €250 million. 

A total of 1,542 companies —  50% — responded that they are engaging their supply chain on water risks. This includes inserting water requirements into supplier contracts, collecting water data, raising awareness of water issues, or collaborating on innovation. 

“Supply chains are the knots which tie our global economy together. But they are coming apart rapidly due to climate change and the reckless abandon with which we treat the world’s finite resources,” said Dr Patricia Calderon, CDP’s global head of water. “It’s down to large companies with the biggest water impacts to take immediate action, working with their suppliers to stem the tide of water risk.”
 
According to the United Nations, global water demand is predicted to rise by up to 30% by 2050. This has a direct impact on the world’s complex and interwoven supply chains as they struggle to keep up, CDP said. One in five companies are facing supply chain risks which could have a substantive financial or strategic impact on their business. These risks were estimated by CDP to total $77 billion across 623 responding companies.

According to 79 businesses, a total of $7 billion was deemed to be at immediate risk due to urgent water scarcity, food, regulatory and reputational issues.

CDP says a group of forward-thinking businesses are already working on the problem, with 443 of the businesses surveyed (14%) offering their senior leaders, including the board, incentives to improve water management across the supply chain.

A small proportion (4%) of these companies provide direct financial incentives to their chief procurement or purchasing officers – including Coca Cola, L’Oréal, and Japanese chemicals giant Kao Corporation.

The report makes a strong case for companies to take immediate action on water issues in their supply chain and offers six key steps for companies to take, in sequence. Companies should assess supply chain risks and impacts, set global supply chain targets, and incentivize executives to act. Next, they should include water issues in their supplier requirements, engage with suppliers on water issues, and incentivize and support suppliers who mitigate them.

The CDP is an international non-profit organization based in the U.K., Japan, India, China, Germany, Brazil and the U.S. that helps companies, cities, states, regions and public authorities disclose their environmental impact.