WAVE Fills Gap in Evaluating Water Risk
(Above image – the Milwaukee skyline and Lake Michigan. Photo credit: Peter Zuzga, courtesy of The Water Council)
Water risk hasn’t received the same attention as carbon emissions in sustainable investing, but if you’re not paying attention to water, you’re already behind. Droughts, floods, deteriorating infrastructure, poor water quality and more are materially impacting companies’ direct operations and supply chains across the globe. The changing climate will only accelerate the manifestation of these water risks.
“Besides climate change, I don’t think there’s a more important issue in terms of investing,” said Julie Gorte, senior vice president for sustainable investing at Impax Asset Management. “We’ve all seen companies take material hits because of drought. There’s hardly any place now where water is immaterial to an investment decision.”
Companies are good at monitoring, quantifying, and reporting on withdrawals and usage, but exposure and response to water risks and opportunities is trickier to measure. Businesses deal with a variety of risks related to water quality and quantity depending on how they use water and where their facilities and supply chains are located. While many companies have pledged their commitment to water and frameworks exist to adopt water stewardship practices at the site level, there is a critical execution gap between the two.
The Water Council, an internationally acclaimed nonprofit dedicated to freshwater innovation, created WAVE to fill that gap. WAVE – Water Stewardship Verified – provides a methodology to develop thoughtful strategies, set meaningful goals and take impactful action on water across the enterprise, concluding with independent verification that the company has built a credible foundation of knowledge on which to base its water stewardship work. Based on global best practices, it sends a strong message to investors, customers and employees that the company is methodically defining its exposure to water risks and taking a strategic approach to mitigating them across the enterprise. Ultimately, the company is better able to translate credible water action into verified external reporting.
The Water Council has helped companies from large multinational corporations to small family-owned businesses mitigate water-related risk and improve water stewardship outcomes. From 2015 to 2021, The Water Council served as the North American Regional Partner for the Alliance for Water Stewardship, helping build the business case for water and creating the world’s first credentialing program for water professionals.
The WAVE program, launched earlier this year, follows a six-step process for a company to understand its water uses, impacts and risks; approve a corporate water stewardship policy; prioritize sites to mitigate water-related risk; and communicate plans and goals.
“WAVE helps cut through the complexity and gives companies a good entry point into water stewardship by demystifying key concepts and best practices,” said Matt Howard, vice president of water stewardship at The Water Council. “We want to lower the barrier to entry for companies starting a water stewardship plan.”
While the program evaluates water-related risk, it also addresses opportunity by engaging with stakeholders in watersheds where the company operates.
“When you get into true water stewardship, then you’re proactively looking for ways to address those common challenges and common opportunities that people share within the same watershed,” Howard said. “The upside is long-term security and sustainability of the water resource.”
All of this demonstrates the need for investors to improve their evaluation of company water performance. If companies and investors don’t recognize water risk and opportunity, they’re opening themselves up to surprise and uncertainty in the future, Gorte said. “You want every company to be aware of its dependence on and vulnerability to water throughout the supply chain,” she said. “But you also want companies to be aware that there are opportunities.”
Independent verification is key to the WAVE program, said Rae Mindock, manager for responsible water practices at SCS Global Services. Since 1984, SCS Global Services has been a leader in the field of sustainability standards and third-party certification. Many companies are trying to capture the Environmental, Social and Governance (ESG) investment dollars flooding the market, but often they aren’t verifying their sustainability work, leading to a component of greenwashing, Mindock said.
“With WAVE, that component is gone,” she said. “When you work with people who are knowledgeable about stewardship combined with people who are knowledgeable about verification, that’s a program we can get behind and be proud of.”
Upon verification, WAVE participants are entitled to use a seal and claim indicating the company has assessed water-related risk across the enterprise, identified the highest water-related impacts using credible water-related data, and implemented best practice in improving water stewardship performance.
The Water Council pilot tested the program with public companies A. O. Smith Corporation, Badger Meter, Nutrien and Watts Water Technologies.
The WAVE process helped Nutrien, a fertilizer producer and the world’s largest provider of crop inputs, services and solutions, think about the watersheds it operates in, not just water use at its own sites, said Mike Nemeth, senior advisor for agricultural and environmental sustainability. It also helped the company develop a corporate water stewardship position and pathway for Nutrien to participate in water stewardship more broadly in the agriculture sector.
“From the very top of our organization all the way down, we knew exactly what we were saying about water and how we were going to act to be good water stewards in our sector,” Nemeth said.
As a result of the program, Nutrien created a cross-functional water targets team committed to developing context-based water targets and identified watersheds with higher water-related risk that they can prioritize for action.
Watts, a global water solutions provider, got connected to WAVE through Impax, one of its investors, as it sought to continue improving its water stewardship. Through the program, the company chose eight sites to prioritize for water stewardship action based on water withdrawals, wastewater discharges and local watershed risks.
Robert J. Pagano Jr., president and CEO of Watts, said that his company’s participation in the WAVE “allowed us to better understand how we affect water resources, both upstream and downstream, at eight of our worldwide facilities.”
Water is a unique and vital resource that all businesses and communities depend upon, with diverse challenges depending on how you use water and where you operate. Companies must move beyond a narrow-minded, non-contextual focus on water use and efficiency. It’s time for companies to embrace water stewardship and implement a strategic approach to water risk mitigation across the enterprise – and it’s time for investors to start asking for it.
Article by Dylan Waldhuetter, Director of Water Stewardship Solutions at The Water Council, where he is responsible for program development and support related to the council’s water stewardship initiative.