WATER SCARCITY AND YOUR BUSINESS HOW TO ASSESS THE IMPACT AND MAKE - PowerPoint PPT Presentation

WATER SCARCITY AND YOUR BUSINESS HOW TO ASSESS THE IMPACT AND MAKE INFORMED DECISIONS

Emilio Tenuta Josh Henretig Vice President of Corporate Sustainability Senior Director of Environmental Sustainability

A Pathway to Business Resilience Context • Water challenges impact growth and brand reputation • Market pricing does not reflect water’s full value • Effective corporate water strategies needed to drive growth Relevant Insights & Practical Application • The business case: need to account for water risk • Taking action: creating & activating a corporate water strategy • Informing decisions: Water Risk Monetizer for smarter water management (demo) • Q&A

Global Business Water Risk Trends and Challenges  Stricter water policies in developed and emerging economies Increasing  Financial implications to industry Regulations  Tighter ground water and quality requirements Growing Public  New UN Sustainable Development Goals have defined water targets Pressures  Reputational risk exposure and license to operate issues  Water scarcity risk mitigation plans and performance Rising Investor Disclosure  81% of S&P 500 index companies issued corporate sustainability reports in 2015, more than ever before Shift to Supply  Lack of road map and tools to understand risk exposure Chain Water Risks

Unprecedented demand on the world’s limited fresh water supply Population growth, 50% more people by 2050 urbanization, growing middle class 4 billion more Increased demand consumers in for goods and services cities by 2025 47% of the Requiring 2.5 global population Unprecedented demand times more water on world’s water supply per capita than will be living in areas of rural areas high water stress by 2030 40% Demand exceeding within supply by two decades

Companies need to understand the full value of water to their operations Water Bill Sewer Bill Water Basin  Perception that water is Availability cheap and accessible Regulatory Operational  Full value of water generally Risk Water Costs much higher than users realize Water Basin Effluent Water  Limited awareness of water as a material business asset Quality Quality Reputational Risk

Water is undervalued: Prices inverse to risk ($ per m 3 ) Chengdu $0.34 $0.15 Amsterdam $2.78 $2.02 Chicago Beijing $1.01 $0.59 $1.01 Barcelona $0.22 $2.50 $0.20 Istanbul Seoul $1.82 Los Angeles $0.55 $0.84 $1.77 $0.27 $1.50 Addis Ababa Shanghai Dallas $0.14 $0.31 $0.80 $0.03 Phnom Penh $0.25 $1.60 $0.16 Mumbai $0.02 $0.18 Rio de Janeiro $0.05 $0.89 Monterrey $0.89 $0.77 n/a Johannesburg Sao Paulo Sydney $0.52 $0.80 $2.21 $0.85 $0.80 $3.00 Incoming water price per m 3 Outgoing wastewater price per m 3 Sources: WRI Aqueduct, GWI 2015

The world’s largest, fastest growing economies face increasing water risk Top 10 Largest Populations Cities experiencing Top 10 Fastest Growing Economies water scarcity or current drought Top 10 Biggest Economies Paris London Delhi Chicago Beijing New York Tokyo Los Angeles Osaka Seoul Moscow Shanghai Rio de Janeiro Mumbai Lagos Manila Sao Paulo Shenzhen Karachi • 45% of total GDP ($63 trillion) will be at risk due to Guangzhou Dhaka water stress by 2050, which is 1.5 times the size of Bangkok Jakarta today’s entire global economy* • Water scarcity could lower the GDP of some Sources: Aqueduct, WRI, GWI, Trucost countries by 6% by 2050** *International Food Policy Research Institute **World Bank Updated 2017

Scarcity is a function of quantity + quality Decreasing supplies of fresh Diminishing water quality is water in the world’s largest impacting available fresh and fastest growing regions water supplies Quantity + Quality = Scarcity = Business Risk

More companies are reporting potential impacts of water scarcity on revenue 202 companies publically disclosed to investors that CDP Disclosed water scarcity (declining availability and incoming Revenue at Risk (2016) water quality) threatens 1 – 6% of their annual revenue. The number of companies that disclosed revenue at risk in 2016 is over six times more than the number of companies 32% that disclosed revenue at risk in 2015 (33 companies). 17% 11% 9% 9% 8% 5% 4% 3% 2% 2% 2% 1% Travel & Personal & Food & Beverage Industrial Automobiles Leisure Household Goods Chemicals Goods & & Parts Services Telecom Basic Services Construction & Utilities Resources Healthcare Oil & Gas Materials Technology Source: Trucost; CDP Water Disclosure Data, 2016

Companies need to adopt a “License to Grow” approach to water management ASSESS & IDENTIFY VALUE & ACTION PLAN MONETIZE Execute water OPPORTUNITIES PRIORTIZE reduction strategies RISKS Assess operational Leverage data to opportunities for water make the business Develop a site-level conservation case, measure or enterprise risk impact and profile determine eROI

First-of- it’s -kind, publicly available financial modeling tool helps businesses incorporate water risks into business decisions and planning Businesses increasingly face global sustainability and water challenges that impact growth and brand reputation The Water Risk Monetizer can help businesses: • Assess water related risks at a site and enterprise level • Make the case for proactive water management strategies • Prioritize locations for investment based on water scarcity risk • Understand the full value of water to an www.WaterRiskMonetizer.com operation

global leader in water, global leader in leading platform and hygiene and energy environmental data and productivity company for the technologies and services risk analysis, part of S&P mobile-first, cloud-first world Dow Jones Indices

Leveraging data to inform business decisions Informing Application Business and Analytics Decisions Incorporate a risk-adjusted cost of water and potential revenue loss into analysis Incoming water risks: monetary Make the case for proactive water value of the impacts of incoming management strategies water use on human health and Actionable ecosystems and the future costs information Identify operations/locations at of incoming water treatment greatest risk Outgoing water risk: monetary Monetize rate of return for water value of the impacts of outgoing management improvement projects water pollution on human health and ecosystems and the future Select where and how to costs of water treatment increase production or meet Potential revenue at risk: demand in new regions monetary value of the impacts of water availability based on water required to do business

Demo

Microsoft’s Water Stewardship Focus 1 3 Understand Drive local water-related risks 2 4 engagement and business impact and in the places where stewardship we operate Advance Increase innovative accountability solutions to and improve water our water use challenges

Microsoft’s global datacenter footprint 1 million+ servers • 100+ Datacenters in over 40 countries

Cooling Operations Chillers · Air handling Provisioning · Monitoring · Security

Reducing Fresh Water Use in San Antonio, TX • Risk adjusted price = 11x • $140,000 in water cost savings • Avoided 60 million gallons of potable water

The need to understand water-related risks and rethink operations to be less water-reliant has never been more important. The Water Risk Monetizer can help. Visit www.WaterRiskMonetizer.com Use the Water Risk Monetizer to inform your corporate water strategy Contact us for more information or assistance 20

www.WaterRiskMonetizer.com www.WaterRiskMonetizer.com