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The business of sustainability

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ERM Webinar: Tackling Water Risks - the Importance of Looking Beyond Water Use EfficiencyPart of ERM's 2019 Sustainability Means Business Webinar Series

June 20, 2019

www.erm.com

Welcome

ERM Webinar: Tackling Water Risks 3

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www.erm.com ERM Webinar: Tackling Water Risks 4

Sustainability Performance

To disclose, or not to disclose, that is

the question (November)

Disclosure Trends

A Look at Sustainability

Reporting in 2019 (September)

Tackling Water Risks

The Importance of Looking Beyond

Water Use Efficiency

(June)

CDP Reporting Strategies for

Improving Scores as the Bar is Being Raised

(April)

2019 ERM Webinar Series

SUSTAINABILITY

MEANS BUSINESS

Learn more about the series here

https://www.erm.com/2019-sustainability-means-business-webinar-series/

www.erm.com

Today’s Speakers


Kate BrownProcter & GambleGlobal Product Supply Water Sustainability Leader

Sarah WadeAlliance for Water Stewardship (AWS)Outreach and Engagement Coordinator

Greg KochERMTechnical [email protected]+1 (678) 486-2774

Dylan WaldhuetterAlliance for Water Stewardship (AWS)Program Manager, AWS North America

www.erm.com

Maturing your water stewardship strategy

Water stress overview

Presentation Overview


Mitigating your risks and why efficiency alone is often not enough

Identifying and quantifying business risks

03 Q&A

02

01 Procter & Gamble case study

Alliance for Water Stewardship overview

06

05

04

07

Water stress overviewPresented by Greg Koch

www.erm.com

Water scarcity


Source: Center for Environmental Systems Research, University of Kassel, www.usf.uni-kassel.de

3.3billion people, or almost half of the world's population, live in areas of physical scarcity and/or face economic watershortage

$17 trillion22% of Global GDP is currently generated in water-scarce areas. By 2050 it will be 45%

www.erm.com

Not just quantity issue, but also a quality issue


North America

Caribbean

West and Central Africa

Mediterranean

Western Europe

Baltic Sea

Central and East Europe

Caspian Sea

East Asia

Southern Asia

Untreated

Treated

Ratio of treated to untreated wastewater reaching water bodies for 10 regions

Source: Adapted from a map by Ahlenius, H., http://maps.grida.no/go/graphic/ratio -of-wastewater-treatment Sources: UNEP-GPA, 2004.

Greater than 80% of water is untreated

Chart1

Untreated

Treated

Caribbean

9

1

Sheet1

Caribbean

Untreated9

Treated1

Chart1

Untreated

Treated

Caribbean

1

9

Sheet1

Caribbean

Untreated1

Treated9

Chart1

Untreated

Treated

Caribbean

1

9

Sheet1

Caribbean

Untreated1

Treated9

Chart1

Untreated

Treated

Caribbean

1.5

8.5

Sheet1

Caribbean

Untreated1.5

Treated8.5

Chart1

Untreated

Treated

Caribbean

5.2

4.8

Sheet1

Caribbean

Untreated5.2

Treated4.8

Chart1

Untreated

Treated

Caribbean

9

1

Sheet1

Caribbean

Untreated9

Treated1

Chart1

Untreated

Treated

Caribbean

6

4

Sheet1

Caribbean

Untreated6

Treated4

Chart1

Untreated

Treated

Caribbean

8.5

1.5

Sheet1

Caribbean

Untreated8.5

Treated1.5

Chart1

Untreated

Treated

Caribbean

8

2

Sheet1

Caribbean

Untreated8

Treated2

Chart1

Untreated

Treated

Caribbean

8.5

1.5

Sheet1

Caribbean

Untreated8.5

Treated1.5

Chart1

Untreated

Treated

Caribbean

3

7

Sheet1

Caribbean

Untreated3

Treated7

www.erm.com

Price ≠ Cost ≠ Value


Source: Fortune 2014

www.erm.com

Who uses water? Not really industry, right?


3200

2800

2400

2000

1600

1200

800

400

0

1900 1925 1950 1975 2000 2025 1900 1925 1950 1975 2000 2025 1900 1925 1950 1975 2000 2025

Identifying and quantifying business risksPresented by Greg Koch

www.erm.com

How to quantify water as a business risk?

Supply Chain Operations Product Use

Physical

Water scarcity drives up input prices (~2%-20%)

Increased capital expenditure on water treatment, extraction or alternative technologies raises costs

Non-availability or scarcity of water required for using product or service limits growth

Regulatory

Suspension or withdrawal of supplier's water license or discharge permits disrupts supply chain

Reallocation to more urgent needs during drought disrupts operations

Restrictions on use of particular products or services due to water intensity raises costs or checks growth

Reputational

Responsibility "by association" for suppliers' water pollution damages brand or reputation, hinders growth

Competition with household demands, or pollution incidents, damages brand or reputation, hinders growth

Public outcry regarding water intensity of product damages brand, reputation, hinders growth


Financial Impact

• Lost revenue• Higher costs from:‒ Supply chain‒ Changes in production‒ Capital expenditure ‒ Regulatory compliance‒ Increasing price of

consuming or discharging water

• Delayed or suppressed growth

• Potential higher cost of capital

1 – “Watching Water,” JP Morgan Chase Global Equity Research, April 2008.

http://pdf.wri.org/jpmorgan_watching_water.pdf

www.erm.com

Risks


RISK = Probability x Loss

PROBABILITY = Likelihood x Frequency

LOSS = Consequences + Their Resultant Impact

www.erm.com

Risks to business…an example


Probability = Likelihood x Frequency = 0.20 x 1 = 0.2 (or 20%)

20%

Water stress research reveals that a plant could have its water supply cut by 20%

The plant thinks this has a 20% chance of occurring and, if it happens, it would happen only once within the next 10 years

www.erm.com

Risks to your business…an example


Mitigate3Insure against it (if possible)2Live with it1

What can you do with risk?

The plant determines that a 20% reduction in water supply would prevent any future production growth and cut current production by 15% (consequence) costing $980,000 in lost net revenue (impact)

Situation

Results in a risk of $196,000

Result

www.erm.com

Risks to your business…an example


Water efficiency/reuse measures (with ROI measured against avoided risk and not just cost of water)

Shift production to another plant Build a new plant in a low-stress area

Engage water utility to negotiate water supply increase Partner with peer industry to reduce collective water use, freeing

up water for growth Advocate for policy change/investments in more water storage Work with government on water system leak management Advocate for/join public awareness campaign of water efficiency

Mitigation options:

Typical corporate responses

Comprehensive risk-informed

responses

Mitigating your risks and why efficiency alone is often not enoughPresented by Greg Koch

www.erm.com

How to mitigate such business risks?


Incorporate water risk into ‘traditional’ corporate risk management processes

Quantify the “real” value of water to the business

Understand the energy-water nexus and its potential business implications, set targets across the value chain

Increase focus on engagement and innovation

Look for opportunities in the overlaps

Make a public commitment to water stewardship

Practice “radical transparency” about water and seek opportunities to collaborate – or clear the (internal) path for collaboration

www.erm.com

Plant water efficiency measures are not enough


Local and global communities, sustainability ratings (Oxfam, CDP, FTSE4Good, DJSI), and NGOs

Types of risks to consider:

Due to climate change and lack of infrastructure investment (e.g. flooding)

Limits on water use, more stringent wastewater discharge requirements

Business continuity, extended responsibility for total water footprint

Supply Chain

Municipal infrastructure vulnerabilities, overexploitation, water quality

Water SupplySupply ChainPhysical RegulatoryReputational

Alliance for Water Stewardship overviewPresented by Sarah Wade & Dylan Waldhuetter, Alliance for Water Stewardship (AWS)

THE ALLIANCE FOR WATER STEWARDSHIP AND THE AWS STANDARD

Sarah Wade, AWS International [email protected]

Dylan Waldhuetter, AWS North [email protected]

mailto:[email protected]:[email protected]

THE ALLIANCE FOR WATER STEWARDSHIP (AWS)

- AWS is a global membership alliance of business, civil society and public sector

- We unite behind a shared definition and a common approach to robust, independently verifiable water stewardship: the AWS Standard

- The AWS Standard is already being implemented at hundreds of sites around the world

“Water stewardship is the use of water that is socially and culturally equitable, environmentally sustainable and economically beneficial, achieved through a stakeholder inclusive process that involves site

and catchment based actions”AWS definition of Water Stewardship

AWS: A GLOBAL ORGANISATION

AWS International acts as the Secretariat for the global system, and is the custodian of the AWS Standard and its related processes.

There are AWS Regional Partners and Regional Coordinators in: • Africa: supported by Water Witness International• Asia Pacific: offices in Australia, China and Indonesia• North America: office in Wisconsin, USA• South Asia: offices in India and Pakistan • Coming soon: offices in Europe and Latin America

We also have AWS Service Providers who support AWS implementation globally by providing training, consultancy advice and auditing services.

AWS: A MULTI-STAKEHOLDER MEMBERSHIP ALLIANCE

- Our membership is made up of business, civil society and the public sector- AWS is governed by our members through:

- Member nomination to and voting on representation on the AWS Board and Technical Committee

- Member input on the future direction of AWS- Opportunity to input on new topics for consideration by AWS and its members

THE AWS STANDARD

- First launched in 2014 - Is responsive to site and catchment context- Takes users on a journey to understand site and catchment water risks, and then act - Is supported by third party verification to enable certified sites to make credible claims

Since the AWS Standard 1.0 was launched:- Hundreds of sites around the world are implementing the Standard (over 35 certified) - Membership was introduced in 2016, and there are now over 120 members globally- There have been corporate commitments to the AWS Standard from:

Coca-Cola Hellenic, EDEKA, Nestlé Waters and PMI- The Standard is being used by stakeholders from agriculture, food and beverage

production, manufacturing, microelectronics, textiles and many more sectors

AWS STANDARD V2.0

IMPLEMENTERS SAY THE BENEFITS OF USING THE AWS STANDARD ARE:

Site:- Increase efficiencies- Enable risk mitigation- Grow staff capacity &

motivation- Strengthen stakeholder

relationships- Build and grow

community trust

Catchment:- Improve local water quality

and availability- Protects socially and

culturally important water-related areas

- Drives local collaboration - Supports knowledge

sharing- Strengthens multi-

stakeholder governance

Corporate: - Understand sites’ risks- Common approach

across whole business- Credible independently

verifiable claims - Contribute to CDP &

other disclosures - Support CSR activities- Reinforces brand

credentials

KEEN TO FIND OUT MORE?

There are five actions you can take to start your water stewardship journey: 1. Download the AWS Standard at www.a4ws.org2. Ask us a question at the end or get in touch to be connected with your local

team: [email protected] or [email protected]. Join AWS as a Member to be part of the conversation 4. Attend an AWS Training5. Connect with an AWS Service Provider

You can find out more on our website, and make sure you sign up for the AWS newsletter to stay up to date with news and opportunities

http://www.a4ws.org/mailto:[email protected]:[email protected]

Procter & Gamble case studyPresented by Kate Brown, Procter & Gamble

We are a global company, with operations in approximately 70 countries and products sold in more than 180 countries and territories around the world.

P&G at a Glance

SOME OF THE WORLD’S MOST TRUSTED BRANDS

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70%of P&G products

require water during their use

100%of P&G and supplier operations require water for making ingredients and

products

P&G sites will deliver 35% increase in water efficiency vs. 2010.

We will protect water for people and nature in priority basins.

2030 Water Goals

Ambition 2030: Enabling and Inspiring Positive Impact in the World

Use the power of innovation and our brands to delight

consumers and drive positive impact.

BRANDS

Reduce our footprint and strive for circular

solutions.

SUPPLYCHAIN

Create transformative partnerships that

enable people, the planet and our

business to thrive.

SOCIETY

Engage and equip P&G employees to build sustainability

thinking and practices into their work and their communities.

EMPLOYEES

Source at least 5 billion liters from circular sources.

Facility Water Risk Assessment Process

• Value of risk assessment process• Importance of cross functional engagement• Ensure site leadership participation from beginning• Communication

Lessons Learned

Tier 3 AWS Standard

Oxnard, California AWS Pilot

• Approved as the first in the world Alliance for Water Stewardship Self-Verified Site

• Completed a water management practices case study with World Wildlife Fund, Limnotech, and a key supplier

Maturing your water stewardship strategyPresented by Greg Koch, ERM

www.erm.com

Increase your level of maturity based on risk


No Strategy

Efficiency Strategy

Risk Strategy

License-to-Grow Strategy

Water scarcity not acknowledged as an issue

All resources treated equally

Cash flows heavily weighted

Market price of water governs decisions

Water scarcity as a driver of cost

Consider cost of acquisition and use of water

Heavily weight profitability risk

Focus on water conservation

Set internal water efficiency goals

Manage water scarcity risk at the facility or business-unit level

Pursue stakeholder engagement to improve water access

May calculate full cost of water

May participate in public policy formulation

Ad hoc investment in technology innovation

“Social license-to-operate” risks heavily weighted

Quantify value of water Proactively drive business

“ecosystems and “aligned action”

Innovation - develop product/service offerings that address water scarcity

Manage water scarcity as a platform for growth

Participate in water-related policy development

Fueling Growth: You Can’t Always Buy What You Need. W. Sarni. Deloitte University Press. 2014

Increasing Value & Collective Action

Questions

www.erm.com

ERM Sustainability Report 2019: from the WHAT to the HOW: operationalizing sustainability

There is a growing sense of urgency about the sustainability challenges facing the world - and a recognition that while many of the solutions are within reach, there is a need to increase the pace and scale of change. This has led to a shift in the conversation from “what” needs to be done to “how” we can deliver the change that is required.

ERM’s 2019 Sustainability Report sets out clear examples of how we are helping clients respond to these challenges, in ways that create business value.

ERM Sustainability Report 2019 39

Climate change and energy transition Tech-enabled innovation Circular economy https://www.erm.com/en/sustainability-report-2019/

https://www.erm.com/en/sustainability-report-2019/

The business of sustainability

Thank you Kate BrownProcter & GambleGlobal Product Supply Water Sustainability Leader

Sarah WadeAlliance for Water Stewardship (AWS)Outreach and Engagement Coordinator

Greg KochERMTechnical [email protected]+1 (678) 486-2774

Dylan WaldhuetterAlliance for Water Stewardship (AWS)Program Manager, AWS North America

Thank you for joining usERM Webinar: Tackling Water Risks - the Importance of Looking Beyond Water Use EfficiencyWelcomeSlide Number 4Today’s SpeakersPresentation OverviewWater stress overviewWater scarcityNot just quantity issue, but also a quality issuePrice ≠ Cost ≠ Value �Who uses water? Not really industry, right?�Identifying and quantifying business risksHow to quantify water as a business risk?RisksRisks to business…an exampleRisks to your business…an exampleRisks to your business…an exampleMitigating your risks and why efficiency alone is often not enoughHow to mitigate such business risks?�Plant water efficiency measures are not enough�Alliance for Water Stewardship overviewTHE ALLIANCE FOR WATER STEWARDSHIP AND �THE AWS STANDARDTHE ALLIANCE FOR WATER STEWARDSHIP (AWS)AWS: A GLOBAL ORGANISATIONAWS: A MULTI-STAKEHOLDER MEMBERSHIP ALLIANCETHE AWS STANDARDSlide Number 27IMPLEMENTERS SAY THE BENEFITS OF USING THE AWS STANDARD ARE:KEEN TO FIND OUT MORE?Procter & Gamble case studySlide Number 31Slide Number 32Slide Number 33Facility Water Risk Assessment ProcessSlide Number 35Maturing your water stewardship strategyIncrease your level of maturity based on risk�QuestionsERM Sustainability Report 2019: from the WHAT to the HOW: operationalizing sustainabilityThank you

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