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Companies tackle 'weird water' risks head-on

On a Mongolian potato farm that supplies crops for Frito-Lay chips, parent company PepsiCo has reached water savings of 30 percent by installing pivot water systems, a transition from the flood watering that formerly hydrated the fields. The firm, which nets $65 billion annually, expects to convert again, this time to drip irrigation, using 50 percent less water than traditional farming methods.

Nestle, the world's largest food company, installed solar-powered soil moisture monitors in tomato fields in Italy. By saving water and fertilizer, the company will see a return on its investment in one to two years, according to the global public affairs manager for the company.

And Statkraft, the state-owned Norwegian power company, is looking to build a hydropower station in Albania that will also serve as a water storage tank for agriculture for use in dry years.

In the midst of some of the worst droughts in recent history, some of the world's biggest corporations are becoming more serious about the risks, but also the opportunities, climate change will bring to business.

Adapting operations to deal with too much, too little or too erratic rainfall will be expensive but will also create a chance for investment in innovation and infrastructure, said attendees at the annual World Water Week in Stockholm last week.

"Even if all of this costs money," said Thierry Berthoud, managing director of energy and climate at the World Business Council for Sustainable Development, "people should recall that once you spend money as an investment to overcome a change, this money is, if well-placed, entering in the economic cycle and is creating a benefit." Berthoud spoke at a session at World Water Week on seeking profits in a world of changing water landscapes.

'A man-bites-dog story'

Global and municipal governments have long acknowledged that water scarcity, floods and "weirdness" -- when rains fall but not when they're supposed to -- will worsen the public health and quality of life of much of the world.

They also pose enormous costs for businesses. According to a recent report by Ceres, an organization that encourages sustainability measures in corporate practice, last year's drought in Texas caused more than $7 billion in crop and livestock losses. In Thailand, devastating floods caused $42 billion in damage, injuring the nation's semiconductor industry and affecting the supply chain for automakers Honda and Toyota. With agriculture sucking up approximately 70 percent of the world's water resources, food and beverage companies are acting especially carefully.

These losses have spurred action from the private sector where governments have been ineffective, said Juan Jose Daboub, founding CEO of the Global Adaptation Institute.

"Governments are becoming more of an obstacle rather than a pathway to solve problems," said Daboub, who called on municipalities to "leave politics aside and work on practical solutions."

Betsy Otto, director of the Aqueduct project in the Markets and Enterprise Program at the World Resources Institute, also sees the roles reversing on sustainability efforts.

"I'm hearing a consistent theme where companies are calling on government to get engaged in water security," Otto said. "It's a little bit of a man-bites-dog story."

Concerns not 'greenwashing' anymore

Lately, companies have been more vigilant in assessing the risks that climate change brings to their goods. The report from Ceres found that the number of surveyed companies that are disclosing water risks to investors increased by 11 percent in two years, according to filings with the Securities and Exchange Commission (SEC), the federal body responsible for protecting investors and maintaining fairness in markets.

The report also found the number of companies that linked water problems to climate change more than doubled -- eight out of 82 in 2009 to 22 out of 82 in 2011. Ceres surveyed companies in heavily water-intensive sectors like oil and gas, food and beverage, mining, homebuilding, and semiconductor manufacturing.

The fact that these findings come from the SEC lend credibility to the importance of climate risks to companies, said Berkley Adrio, the author of the report and a senior associate in water programs at Ceres.

"There is nothing to be gained from greenwashing," she said at a session at World Water Week. "These are just risks."

Nevertheless, data on water use and the financial impacts of climate change-related risks are uncommon in SEC filings, as the numbers are hard to come by.

"There is very little work in terms of metrics," said Daboub, making it difficult for countries, both water-safe and water-vulnerable, to know exactly how careful they must be.

Tools to measure global weirding

Despite a weakness in measurements, financial advisers, major lenders and companies themselves have developed a bevy of tools to help assess how risky an investment -- a new factory in a water-stressed region, for example -- could be.

Bloomberg carries a Water Insight product to advise portfolio managers. Standard and Poor's is deepening its research on water in reports, and major banks such as HSBC, Deutsche Bank and Morgan Stanley now perform their own research on water, Adrio said.

Environmental and sustainability groups, including the World Resources Institute, the World Wildlife Fund, Ceres and the World Business Council on Sustainability, have their own versions. The World Resources Institute's Aqueduct tool is an interactive world atlas that denotes three possible scenarios for water stress in 2025, 2050 and 2095.

The number of water risk tools has expanded, said Otto, who attended a session at World Water Week specifically for water toolmakers. But with the proliferation of tools come varying methods on how to define water scarcity and arrive at a business conclusion.

"There's a need and effort afoot to unify some of the metrics and measures," said Otto. Each of the tools has a slightly different measure for water stress.

The recent events have solidified actions and investments from companies more than ever, she added, as executives realize the damage that scarcity will impose.

"I've definitely heard a lot more discussion of 'Here's what we're saying to take action,'" she said. "Global weirding from climate change is going to continue."

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