With worsening water security across the globe, companies and investors are increasingly concerned about the water risks faced in their operations, supply chains, and investments. According to the latest CDP Global Water Report, the combined business value at risk reported in 2019 topped out at US$425 billion with about 40% of the water risks anticipated to hit within the next 1–3 years.
Undertaking a robust assessment of the water risks is a critical first step in order to identify priority risks and take strategic and targeted actions to address these risks. Over the past decade, many water tools have emerged and are increasingly being used by companies and investors to assess their water risks. However, the proliferation of tools has created confusion amongst users around both the concept of water risk assessment and the differences/similarities between these water tools.
And the reality is that the three leading water tools have evolved dramatically over recent years and now provide a complementary set of functions and approaches that can help transform corporate water stewardship for the benefit of the bottom line and the rivers basins in which corporates operate.
For this reason, WWF and the World Business Council for Sustainable Development (WBCSD) co-published today a new report in consultation with WRI aimed at providing guidance to companies and financial institutions on the specifics of the world’s three leading water tools and recommendations on what constitutes a robust water risk assessment and understanding of water challenges, so that in turn they can take appropriate actions to mitigate identified risks and ensure resilience.
The report provides a detailed overview of the three leading water tools — WBCSD India Water Tool, WRI Aqueduct, and WWF Water Risk Filter — which are high quality, freely available, and well-recognized online water tools that share a degree of overlap in their core functionality: to enable users to assess basin water status and risks at given facility/asset locations. Despite these similarities, the tools differ considerably from the data sources they draw from, to their spatial resolution, and in particular their unique functionalities, as illustrated in the table below.
The report also outlines a number of key recommendations for companies and investors:
- Understand whether you are assessing shared water challenges or water risks;
- Do not treat water risk assessment as a one-off prescriptive exercise: it should be part of a regularly updated decision-making process;
- Use a diversity of reliable, peer-reviewed data to inform understanding of water challenges and risks;
- Engage in a deeper understanding of water risks for the most material and exposed parts of your value chain;
- Consider both basin context and operational risk;
- Risk exposure is only half of the story — companies and financial institutions must consider response as well to account for residual water risk; and
- Prioritizing responses can be done through several means that account for value
One of the largest differences between as well as the combined strength of the three water tools lies in their respective underlying data sets. As the three leading water tools draw from different, credible (peer-reviewed) water data aggregated at different geographic scales, it helps users to access a diverse range of best available data sets, strengthening their understanding of the nuances of water challenges and risk exposure. Not unlike the use of multiple IPCC climate models, we believe that companies and financial institutions should explore multiple water models and data layers offered by different water tools to understand the multi-dimensional aspects of water challenges and water risks.
Beyond the different underlying data sets, the three leading water tools differ considerably with respect to their functions. For example, while WRI Aqueduct offers a food and flood risk analyzer, the WWF Water Risk Filter has sections that allow users to explore recommended mitigation response actions and conduct a valuation exercise, and the WBCSD India Water Tool unpacks detailed groundwater data for India.
As a result, it is our shared belief that having more than one tool ultimately helps companies and investors to better understand nuances and diverse perspectives when it comes to water. Our shared learning and independent innovation have helped strengthen our platforms and ultimately, provided a better set of tools offering users different benefits.
As our tools move forward, they continue to expand in different directions, thereby helping companies and investors make the best decisions on how to respond to their risks but also seize opportunities to grow and profit, while simultaneously serving people and the planet.