South African companies call for risk governance on water scarcity

Concerns on water scarcity is no longer exclusive to water suppling companies but has extended to most business operator in South Africa.

Seventy percent of South African companies believe water shortage could affect their businesses. A water disclosure report on South Africa just pointed out the significance of water scarcity in South Africa. The so call “assessing the value of water” report covers 354 investors with assets of $54trillion. ”

“The reported exposure to water related risks by South African respondents is significantly greater than that reported by the Global 500 sample. The overwhelming majority of companies (85%) identified at least one water risk at the direct operational level, compared to just 55% for the Global 500 sample.”

The top three risks identified by respondents for direct operations were: physical water scarcity (85%), higher water prices and declining water quality (42% each); while the top supply chain risks were: physical water scarcity (35%), declining water quality (15%) and inadequate infrastructure and reputational damage (8% each).

The survey also discovered that water concerns were not receiving the same consideration as climate change at board level. One-third of companies surveyed did not have water issues on their agenda, compared to 90 percent of companies that addressed climate change issues.

But 77% of South African respondents report that water management may also present substantive opportunities to their business, with the vast majority of both risks and opportunities being expected to manifest themselves in the near term  (within the next 5 years).”

Despite the level of substantive risks and opportunities reported, only 65% of South African respondents report having board oversight of the risks and opportunities. While this is comparable to the Global 500 response, it should be seen in the context of the greater level of risk reported by South African firms. Furthermore, only 69% in the South African sample report having a water management policy, strategy, or plan in place as compared to the Global 500 (93%) and Australia 100 samples (86%).

The report also stated that “due to the near-term nature of water risks, the number of stakeholders involved, the technological and capital requirements for solutions and this immediacy, companies must start to act now in support of a consistent and stable supply of water”.



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