CINCS White Paper. Data Management for Water Risks

Transcription

1 CINCS White Paper Data Management for Water Risks 22nd November, 2012

2 CINCS WHITE PAPER #3 THE CINCS NATURAL RESOURCE INTELLIGENCE SYSTEM FOR CORPORATE WATER RISK DATA MANAGEMENT Mike Schwartz EXECUTIVE SUMMARY Water is a major source of corporate risk that is often overlooked or insufficiently understood throughout the business world. Since late 2007 approximately 53% of the world s largest companies have been adversely impacted vis-à-vis water through flooding, drought, and quality issues. 1 In 2011, as a result of flooding in Thailand, the semiconductor industry alone faced US$15-20 billion in losses. 2 Beverage giant Coca-Cola faced fierce local opposition to water management practices in 2004 that led to the close of its bottling plant in Kerala state, India; the closure was accompanied by reputational damage for Coca-Cola despite evidence that their operations did not jeopardize water availability, as claimed by detractors. 3 Droughts in Texas in 2011 led to reduced profit projections and increased prices for Levi Strauss & Co and other apparel companies. 4 Companies large and small, across diverse product and service sectors, are exposed to a variety of risks and challenges associated with water. Compounding this problem is the lack of best practice for data collection and management efforts for water risk management. The process of acquiring data is cumbersome and, without adequate prioritization, exceedingly costly. The CINCS Water Intelligence Solution is designed to quantify and organize these risks and the data required to address them so that companies are properly informed to manage interactions with water resources and communicate these successes to consumers and regulators.. 1 Most Big Companies Hurt by Water Risk, CDP Survey Finds. Environmental Leader. 23 Oct Clearing the Waters. CERES. 18 Jun Corporate Water Risk Tools. The Guardian. 22 Mar Clark, Michael. Corporate Water Risk Management: A Double Edged Sword. Green It All. 18 Feb 2012.

3 Data Management is a Stumbling Block to Confronting Water Risk Companies are developing a growing awareness of their potential liabilities arising from water use. However as they begin to investigate their concerns, these companies are also discovering how difficult water issues can be to fully characterize and address. The hydrodynamic complexity of water systems has left companies unable to prioritize their need for reliable, high resolution data, nor to gather this data in formats that are consistent across the globe. 5 These data gaps apply to historical records of impacts and of supply and demand for current and projected use of both ground and surface water. Companies lack ample knowledge of the relative costs of required data. Without an ability to prioritize data needs, companies are unable to perform a clear cost-benefit analysis to target high-impact areas for data collection. Additionally, firms have faced difficulty when prioritizing between various environmental impacts. It has been noted that risks associated with water cannot be properly managed in isolation from other areas of environmental concern. 6 A common approach has been to calculate a distinct footprint for one environmental impact area (e.g. carbon, land-use, energy, etc.); however significant interplay between these areas substantially limits the stand-alone value of an individual footprint. For example, energy demand is especially relevant to understanding water risk, therefore carbon emissions must also be monitored. 7 Further, in the absence of regulations pressing companies to confront their water risk, there has been a lack of strategic leadership regarding these issues in the corporate world. With few actors willing to take the lead, innovation has been slow and there is no agreed-upon best practice for accounting, disclosing, and analyzing water risk. Even with respect to carbon, which is recognized to be a more pressing issue for companies throughout the world, 8 there are limited corporate attempts to counteract the associated risks. One last reason that data management has been a stumbling block to adequately tackle water risk is that companies lack access to robust data management tools. In order to avoid sizeable investments in customized tools, many companies that do focus on water risk, simply employ conventional data management systems (e.g. spreadsheets, relational databases, etc.) to track and monitor their risk. These prevailing methods, while versatile, are not designed with water risk data in mind and lack visual interfaces that would make the results accessible to nontechnical personnel. Current systems typically store data on local servers which complicates coordination between facilities and is generally more costly, less flexible, less efficient than a remotely accessible platform, and leaves a company exposed to server damage from on-site catastrophes. 5 Corporate Water Risk Management Seeking Solutions. World Water Week. 23 Aug Ibid. 7 Ibid. 8 Preparing for Water Scarcity: Raising Business Awareness on Water Issues. Ernst & Young

4 Limitations of Existing Tools and Standards for Water Several initiatives have realized the need for dedicated tools and methodologies to help companies begin to monitor and manage their water risks. These can be broken down into standards, methodologies, and interactive tools. Standards here refer to emerging footprinting, reporting, and disclosure initiatives relating to corporate water-use, while methodologies constitute measuring and monitoring techniques. The tools seek to equip users with support in creating internal processes for managing risk. The Carbon Disclosure Project is moving forward with CDP-Water Disclosure, its annual questionnaire collecting data on corporate water-use, qualitative information on company policies surrounding water governance, and perceived internal risks. 9 The Global Reporting Initiative (GRI) a broader sustainability focused organization, includes a similar section on water-use metrics. 10 While laudable for their attempts to standardize water reporting, these initiatives have been stymied by the lack of agreement on a central set of water metrics to be tracked and disclosed. The Alliance for Water Stewardship is also working on a draft standard for water stewardship which takes a similar view, but is focused primarily on governance and management issues. 11 Also of note are the evolving requirements for corporate filings on the US Securities and Exchange Commission s 10-k form. 12 Companies are now required to disclose material risks to their operations posed by climate change, related to physical and policy factors. To date, however, there are few definitive requirements for this section from the SEC. The concept of water footprinting, alongside other water accounting techniques, has reached a relatively mature stage. These methodologies attempt to rigorously quantify water consumption from different stages of a product s lifecycle, or an organization s water-use. The Water Footprint Assessment Manual 13, in addition to the emerging Life Cycle Assessment (LCA) and ISO methodologies for accounting water-use, provides a framework to understand how a company interacts with the water cycle. However they suffer by requiring complex underlying analyses at every watershed of concern in order for users to complete them. The suite of recent, free water risk tools aim to support companies and entities that are concerned about these risks but lack the capacity or resources to dedicate to an entity-wide assessment. WRI s Aqueduct tool provides access to watershed and country level data on different water risks, and allows companies to input their facility locations to contrast with these maps. 14 Unfortunately it does not include tools to perform any water accounting. GEMI s Local Water Tool provides a good framework for water accounting, though data on risks is left for user companies to compile with their own subjective lens. 15 The World Business Council for 9 CDP Water Disclosure Carbon Disclosure Project Indicator Protocols Set: Environment. Global Reporting Initiative Water stewardship Standard. Alliance for Water Stewardship How to Read a 10 K. Securities and Exchange Commission Water Footprint Assessment Manual. Water Footprint Network Aqueduct: Measuring and Mapping Water Risk. World Resources Institute Local Water Tool. GEMI

5 Sustainable Development s Global Water Tool 16 and the WWF-DEG Water Risk Filter 17 are perhaps the most comprehensive tools, providing utilities to aggregate corporate usage information and contrast this with a series of regional risk scores. Unfortunately none of these tools are intended to provide a company the ability to monitor risks on a continual basis, nor do they provide the capacity to assess the impact of different management scenarios. With the exception of the WWF-DEG Water Risk Filter, none of the free options provide cloud accessibility, making data collection from various facilities difficult and time-consuming. Emerging Breakthrough: CINCS Water Intelligence Solution Of the few organizations that provide a more expansive response to water risks than the free tools highlighted above, CINCS is a thought-leader in processes that manage and monitor these risks. A growing number of businesses realize their need to minimize risk from water and CINCS is working to provide a highly developed system to fill the void left by existing options. As a pioneer in this new field, CINCS has taken the time to understand corporate needs and to design a solution that is versatile enough to be used across a wide range of sectors, but sufficiently adaptable that users are all able to maximize their benefit from it. The CINCS Water Intelligence Solution rises above the freely available options by combining an innovative user interface with robust data management that can bridge a company s operations across many sites. Companies utilizing this system will be able to monitor their operations in a way that is tailored to meet their needs. The Water Intelligence Solution is a comprehensive system that facilitates access, viewing and interpretation of data from a variety of sources. These sources include NASA, the US Geological Survey, the UN Food and Agriculture Organization, Oak Ridge National Laboratories to name a few. Companies will also be able to upload their own specialized data and utilize the CINCS team of experts to obtain additional required data. Data management is even simpler for users since the CINCS system will lay out standardized workflows that, in conjunction with web accessibility, facilitate comparison between different sites. Moreover, with uniform accounting, it will be easier for managers and investors to understand differences between companies and industries. Users will also be able to explore the impact of a variety of scenarios, including variations in climate, growth, valuation of risk, and more. The Water Intelligence Solution software will bring unparalleled performance and usability to CINCS clients. Visually, a graphic user interface will give managers a respite from vast spreadsheets filled with numbers. This interface is built around Geographic Information Systems (GIS) technology that will allow users to see maps with layers detailing a range of parameters affecting water risk, including the locations of their facilities and relevant water basins. Rather than hosting this GIS software and data locally, the CINCS system will make use of a cutting edge cloud based GIS server. By leveraging the flexibility of the cloud, clients will bypass the challenges of circulating a spreadsheet to collect data from various parties (E.g. excessive time lags in file synchronization, asymmetrical formatting between different managers 16 The WBCSD Global Water Tool. World Business Council for Sustainable Development The Water Risk Filter. WWF in collaboration with DEG

6 within differing departments of a typical organizational corporate structure). Therefore companies will be in a position to meet their disclosure demands and to efficiently incorporate key information into risk analyses. Furthermore, using the cloud offers cost-savings since the customer does not need to invest in expensive and risky IT and GIS infrastructure. As a streamlined platform, the CINCS system sidesteps much of the inefficiency of current approaches. Managers are able to better familiarize themselves with accounting techniques through standardized data collection processes. Better corporate understanding allows for clearer and more consistent analysis and more straightforward disclosure to investors. Another advantage of the cloud is that managers at different facilities can harness common knowledge and resources since they are all working within the same system and must respond to identical data request surveys. Since each user has a unique system ID to log in, meta-data on what users are viewing and editing can easily be tracked and audited. Finally, the CINCS Solution allows users to import, export, and convert data in a variety of different formats and use a central data base that in-turn can be shared with other users of a given water basin, allowing for lower costs. Conclusion Water risk is a developing issue among corporations worldwide; companies who choose to proactively manage this risk will have a competitive advantage in the long run. Data management is a core difficulty of confronting water risk. Many free frameworks and tools have been developed to aid companies in this task, however none are all-inclusive nor are any developed around a comprehensive or universal standard. The CINCS Water Intelligence Solution is a developing tool that will help companies to protect themselves from water related risks from the basins and other bodies of water that affect their facilities. CINCS offers clients a ground-breaking system to manage and share water risk data on the cloud using an intuitive GIS-based interface. Companies who adopt the CINCS Water Intelligence Solution will find themselves better able to provide the salient information and data that investors increasingly demand. For a company to design and implement such a system themselves would require several million dollars of capital investment, for an unclear payoff. CINCS plans to provide the full system on a subscription basis at only a fraction of the production and maintenance costs. If companies and other entities adopt CINCS Water Intelligence Solution that reduces their exposure to potential excessive costs, they will fortify their position as an industry leader. For further information or to request a meeting, please contact SShonts@cincs.com