Company executives and investors have no choice but to boost their scrutiny of water-related business risks, especially in regions where water supplies are already under stress or where governments do not have the capacity to manage water-related problems. This process is often start by understanding and examining the three different types/categories of water-related business risks:

Physical risk
Physical risks entail having too little water, too much water, or water that is unfit for use.
Scarcity can halt industrial production simply because there is not enough water for production, irrigation, material processing, cooling, washing, or cleaning. Flooding can disrupt the flow of operations because workers have to tend to the effects of the flood rather than work. Contaminated water supply may require additional investment and operational costs for pre-treatment. Availability and affordability of clean water may affect the interest or ability of customers to purchase or use certain water-intensive products and services.
Water scarcity can also affect businesses indirectly by affecting energy and food production. For instance, in 2001, energy production in São Paulo, Brazil was highly constrained as a result of both severe drought and government energy tariff policies. In order to prevent blackouts, the government imposed quotas aimed at reducing energy consumption by 10-35 percent. Many industries based in Brazil’s southeast were plagued by reductions in operational capacity, production delays, or increased production costs.

Reputational risk
Expectations about corporate responsibility continue to increase all around the world. Because of these, many water-related business risks stem from stakeholder perceptions that company does not conduct business in a sustainable or responsible fashion.
Affected communities, civil society, investors, consumers, and the general public are increasingly engaged in issues of water sustainability. Inefficient water use or excessive pollution by a company in a sensitive watershed, whether real or perceived, can be incredibly damaging to a global brand’s reputation, share price, and ability to conduct business.
As public interest in water sustainability grows, companies’ water practices are facing greater scrutiny. Water-related controversies often gain the attention of major media outlets and investors are taking into account how companies control their water use and plan for water-related business risks.
When a company is, or is percieved to be, inefficient, unsustainable, or otherwise irresponsible, the following reputational damage can occur:
Decreased brand value and consumer loyalty
Reduced investor confidence
Adverse regulatory responses
Loss of social and legal license to operate

Regulatory risk
Regulatory risk stems from changing, ineffective, poorly implemented, and inconsistent water policy and regulations.
Global water challenges, unsustainable industrial water practices, and increased concern among local communities about water scarcity and pollution, are all putting pressure on local authorities and policymakers to consider water reallocations, regulations, and development of water. In many countries, water service providers are considering pricing policies that promote greater efficiency in order to curb water scarcity. In others, governments are regulating industrial effluent to clean up their rivers, lakes, and streams.
However, regulatory risk is also present when governments are not able to effectively manage their water resources or create effective policies and regulations. In many areas of the world, crumbling infrastructure leads to incredible water losses thereby exacerbating water scarcity. In others, a lack of water quality regulations causes rampant pollution to the extent that local industries must pay high costs to treat their incoming water before it is suitable for use.

Risks In The Value Chain
Water-related business risks can occur throughout a company’s value chain, including in their:

Raw Material Production
For most industry sectors, the largest portion of their water footprint is embedded in the production of raw materials such as food crops, fibers, and metals. Many companies’ raw material production lies far upstream from direct operations; as a result they typically fail to assess water-related risks in this segment of their value chains. Nevertheless, water scarcity, pollution, climate change, and other challenges can decrease agricultural yields and quality thereby limiting production or increasing costs for companies purchasing those goods.

Suppliers
In some sectors (e.g., high-tech/electronics and apparel), the bulk of the water footprint is associated with the manufacturing activities of suppliers. This can lead to a false sense of security about water risk exposure, with companies dismissing water issues as not being material to their business.

Direct Operations
Water risk has a tremendous effect on direct operations. A water shortage or a polluted supply will affect production output and costs. Changing, ineffective, poorly implemented, or inconsistent water policies can also disrupt a company’s access to water, potentially limiting their ability to consistently produce their goods.

End Product
Companies may also be exposed to water-related business risks if their products are water-intensive (e.g., washing machines) or contribute to water pollution (e.g., certain detergents). These risks are further exacerbated when a large proportion of a company’s consumer base is located in areas of high water stress.

Remember
Unlike many other sustainability and corporate social responsibility issues, water-related business risks are highly local in nature. For example, a certain amount of carbon emissions will have a nearly identical impact on climate change regardless of where on Earth they are emitted. In contrast, a certain amount of water used in an area where water supplies are scarce will have significantly more impact on the environment and communities than the same amount in an area where water supplies are plentiful.

These descriptions of water-related business risks are drawn primarily from a WWF/DEG report found here.

Water : Analysis of philanthropic & business process initiatives

CSR Consulting has done a secondary research on what various companies are doing in the area of Water (Philanthropic initiatives as well as Business Process Initiatives). We plan to extend this analysis to Global Fortune 500 by 15th July 2011.
To get sample of our India Analysis, send a mail to Whitepapers@CSRidentity.com

Hindustan Unilever launches ‘India Water Body’
16-05-2011 : Hindustan Unilever Limited (HUL), India’s largest FMCG company has announced the launch of India Water Body, an initiative aimed to address the challenge of water scarcity in India.

The India Water Body will be conducting a nation-wide study to assess the demand-supply gap for water in India. The study will build on the available body of knowledge and engage multiple stakeholders to evolve an India water roadmap enumerating clear priorities and solutions for implementation
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Learn how local water supplies affect your business. Leading companies are investing in water use efficiency and ensuring that their wastewater is properly treated. Failing to do likewise could haunt a brand for years.