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Water - The next carbon

ACCA (the Association of Chartered Certified Accountants) is calling on businesses to not only account for their carbon emissions, but their water usage too in a report called 'Water - The next carbon?'

ACCA's report outlines how sustainable sources of water underpin economic growth and security and can help combat the effects of climate change. It also discusses the effects water scarcity could have on business, from a financial and operational perspective.


Water has become a fast disappearing resource

Issues discussed include, water as a key business risk, water footprinting guidelines for companies, public-private partnerships, corporate water management best practice; and mainstream investor interest in water.

ACCA hopes to encourage accountancy practices and the finance function in businesses to incorporate water risks and usage in its company reporting. ACCA is calling on the profession to also start working on methodologies for measuring water footprints and their accountancy departments to better track water use and water risks.

Over recent years ,the issue of climate change has steadily risen up in company, Government and civil society's agendas. It is now recognized as a significant business issue and one that must be managed.

In the report, three key risks were identified arising from water scarcity and management issues.

Physical risks - arising through flooding, pollution and scarcity of water in regions where an organization operates .

Financial risks - arising from competition, increase in water tarrifs and other pricing mechanisms and cost inflation of water and energy as a result of increasing water stress across regions. Higher costs, plant closure, and reputational damage are other risks as resulting from water scarcity.

Reputational risk - those businesses that fail to understand the impacts that their operations, supply chains and business responsibilities have on water resources, aquatic ecosystems and local communities are leaving themselves open to reputational risks and potential loss of customers and investors.

So what can businesses do to start managing this issue? ACCA offers practical advice in the report.

One action is the determination and calculation of the water footprint to find out where material water impacts originate and how they can be managed. Calculation of this footprint then leads to comprehensive disclosure on the issue within annual and sustainability reports. An organization's footprint can be thought of as its "direct "and "indirect "or "virtual "water impacts.

Doing this in isolation from Government regulation is ineffective. Therefore private organizations need to engage with the Government and other stakeholders on public policy of water - the extent to which and how water use can be regulated, monitored and managed.

Recommendations as to how to address water risks are relatively straightforward and somewhat similar to how multinationals are developing and implementing carbon strategies:

* Determine your enterprise-wide water footprint and, if appropriate, evaluate the embedded water in key products,

* Identify ways to reduce water use (direct and indirect),

* Consider local water "offset projects" in collaboration with local and global NGOs,

* "Re-value" water beyond the current cost of water,

* Determine physical, regulatory and perception risks with direct and indirect water use,

* Be transparent in communicating your goals and performance and

* Finally, develop a corporate-wide sustainability strategy that takes a systems-wide approach to energy, carbon, water and material use. All of these resources are interrelated, and any corporate strategy requires an integrated solution.

ACCA Sri Lanka Country Manager Aruni Rajakarier, welcomed the new report and urged more firms to embrace water-reporting methodologies.

"Businesses should be addressing and reporting on the importance of water resources and management in their operations as well as upstream and downstream activities, one element of which is calculating the water footprint," she said.

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