Managing and reporting on water-related risks and opportunities helps companies compete in a business environment characterized by finite natural resources, a changing climate, regulatory developments and heightened public expectations of corporate behaviour.
The World Economic Forum Global Risk Report consistently names water as a top risk to the global economy. Unpredictable weather patterns and increasing agricultural and industrial demands are expected to exacerbate regional water security. A recent study warns that Canada’s watersheds are facing serious threats from pollution and climate change.1 The United Nations Sustainable Development Goals, adopted in 2015, call for substantial increases in water use efficiency across all sectors to ensure sufficient supplies of clean water. Water increasingly poses risks to long-term shareholder value, and without proper disclosure, investors cannot ascertain whether a company is managing its exposure to these risks.
As one of the largest integrated oil companies in Canada, Imperial Oil could face exposure to physical, regulatory and reputational water-related risks across its business segments. Risks could include, for example, drought that limits access to freshwater and results in operational delays or tailing pond failures that contaminate nearby water bodies and result in significant clean up costs.
CDP Water provides a comprehensive framework for companies to analyze and report on water risks in their business operations. CDP’s water information request is backed by 643 investors with over US$67 trillion in assets. In 2017, many of the company’s peers responded to the CDP water questionnaire, including Cenovus Energy and Husky Energy. Imperial lags behind, having declined to answer the CDP water questionnaire since 2010. The company currently provides very limited information to investors describing the company’s water risks and water risk management. The process of risk assessment and disclosure to investors will help the company to identify and take action against emerging risks and opportunities and gain strategic value from its existing efforts.
That Imperial Oil Limited (“Imperial”) respond to the CDP Water information request in 2018 or issue a stand-alone report to shareholders (at a reasonable cost and omitting proprietary information) detailing the company’s assessment of its water related-risks and its mitigation plan related to those risks.
The report should include the following elements:
o Facility level data on water withdrawals, discharges and sources of water;
o The company’s water-related risk assessment procedure, coverage, scale, frequency, and timeframe considered;
o The company’s exposure to water risks that could generate a substantive change in its business, operations, revenue or expenditure and the proportion this represents of total operations company-wide;
o The highest level of direct responsibility for water within the company;
o How the company has integrated water into its business strategy;
o The company’s water policy that sets out clear goals and guidelines for action;
1 WWF Canada. (2017). Watershed Reports: A national assessment of Canada’s freshwater.
o Company-wide targets (quantitative) or goals (qualitative) related to water.