This article first appeared in the March 2022 edition of Food & Drink Business.
Sustainability professionals are switching gears in the face of overwhelming demand for net zero emissions targets. Cress Consulting CEO Julia Seddon looks at the benefits for business in implementing effective ESG and water stewardship programs.
Sustainability professionals are having their own pivot moment as they find themselves no longer having to explain what sustainability is or why it makes good business sense.
Instead, their services are in greater demand than ever following broad acceptance of the latest ‘code red’ IPCC climate report; the 1.5-degree goals out of COP26; big shifts in investments; a global push to address key issues around energy and emissions; and ever more frequent and serious climate disasters.
It seems as if the world recognises that perhaps we aren’t as in control of the planet and nature as we once thought.
The world now demands reduced pollution and a rapid transition to renewables to replace traditional fossil fuels. This is driving industries and businesses to put comprehensive environmental, social and governance (ESG) policies and programs in place.
Time to take stock
The race to net zero emissions is the ideal time for businesses to look at the physical and transitional risks of climate change on their operations, supply chains, clients, and customers. As the climate gets warmer and more erratic, the impacts escalate.
A hotter, drier, more extreme, and less predictable climate is a physical risk to people, assets, economies, and ecosystems.
Understanding and assessing the risks and developing strategies is crucial.
In the rush to net zero we can forget that climate impacts are far more wide-ranging than higher temperatures or rising sea levels. For example, the recent flooding in many parts of the country that seriously impacted food production areas and supply chains.
Meanwhile, less water is making its way into rivers and storages. Records of inflows to the Murray River over 125 years show median annual inflows over the past 20 years have been about half the level of the preceding century.
Inflows into Sydney’s dams also dropped over the past 30 years. From 1991 to 2020, inflows averaged 770 million litres a year, 45 per cent less than the long-term average.
The ESG investment
Clearly alternative water management strategies and different approaches are necessary to deal with reduced water availability but increased demands, particularly in food production regions.
Other knock-on effects significantly impacting food and beverage businesses include workplace health and safety, supply chain disruption, and raw material supply risk.
Together with impacts on food production and human health, adaptation and building resilience are especially important for economic, social, and environmental sustainability.
Attention and pressure from investors, customers, employees, and the community on ESG issues also continues to rise as organisations reassess the way they operate and communicate with stakeholders.
The benefits of developing a strong basis for ESG reporting include boosted customer and employee engagement, attraction and retention of talent, improved social licence, reduced operational risk and, increasingly, enhanced investment return.
Done properly, good ESG performance can mitigate a variety of risks and is likely to be materially beneficial in two ways. Firstly, positive share price performance; investors are now more than ever focused on investment that leaves a positive mark.
Secondly, opportunities for efficiency, innovation and shared value creation can be uncovered though a sound ESG process.
Crucially though, companies can’t just report the good. They need to talk about the ‘not so good’ ESG issues they have – such as high levels of water risk – and provide solutions that address shortfalls and give customers, employees, and shareholders confidence things are heading in the right direction.
Being a steward
While climate change and carbon emissions remain in focus, water is also becoming increasingly important to investors. If you have an interest or involvement with ESG or sustainability, you have probably heard or used the term ‘water stewardship’.
Dylan Waldhuetter from The Water Council says, “The importance of stewardship has been growing as the general public and large corporations alike realise the urgency of solving global water crises such as scarcity, flooding and poor quality.”
But do we really know what ‘water stewardship’ means?
Water stewardship is not water conservation, it isn’t water efficiency, and it isn’t traditional water management or even water quality. It is all these things and more.
Water stewardship is essentially sustainable management of the water catchment in collaboration with stakeholders.
The most widely used definition is enshrined in the International Water Stewardship standard, developed here in Australia, which says it is, “the use of water that is socially and culturally equitable, environmentally sustainable and economically beneficial, achieved through a stakeholder-inclusive process that includes both site and catchment-based actions”.
Why stewardship is important
Water is local. Water risk to business and communities can be centred around too much, too little, poor quality, deteriorating infrastructure, changing regulations or bad management.
It doesn’t make sense to adopt the same response across all catchments and water stewardship promotes local, appropriate responses to local issues. It compels the water steward to identify water issues that are most critical to them AND other stakeholders within the local context; so, it is meaningful.
Secondly, water is a bit like air, it is a shared resource and as such a plethora of diverse, sometimes conflicting stakeholders have a role to play. One entity cannot “fix” the issues alone and will need a framework to enable constructive collaboration. From there, a workable set of objectives and actions across sites and throughout the catchment can be developed.
This has been proven to be one of the best ways to gain a better understanding of local water risks and identify the opportunities to act collectively toward solutions.
How to avoid greenwashing risks
ESG is facing the risks associated with greenwashing, and the misuse of the term water stewardship is also right up there.
If a water intensive business operating in a water scarce or high-water risk catchment uses ‘water stewardship’ to describe business as usual to shield attention from the real issues and risks, they are doing themselves and their shareholders a serious disservice.
The water stewardship standard provides investors with a better way to assess the processes and systems that companies have in place to ensure priority water risks are addressed across the value chain.
Like anything worth doing, ESG and water stewardship is worth doing properly. Sound ESG reporting systems require short-, medium-, and long-term goals with reportable timeframes that address material ESG issues.
Similarly, robust water stewardship frameworks and tools enable business to provide the data necessary for investors and other interested stakeholders to make direct comparisons regarding a company’s water stewardship performance and properly assess their water related risk.
These are necessary to avoid stakeholders inadvertently conflating statements of intent or water conservation targets with good ESG or water related performance.
Using robust, proven, and credible reporting frameworks such as the Global Reporting Initiative and internationally recognised standards like the Alliance for Water Stewardship Standard is critical if the pitfalls of greenwashing are to be avoided and the value of ESG and water stewardship done well recognised.
Julia Seddon is CEO of Cress Consulting, specialists in ESG, sustainability, climate and water risk. She is also chair of Water Stewardship Australia.
