In a recent report outlining how firms can manage key water-related threats, researchers at AXA XL suggested that understanding water risks is essential for almost all businesses, regardless of the sector.

Citing the international non-profit CDP, AXA XL states that the cost to businesses of inaction on water risks is 5x higher than the cost of action, yet still, water security remains under-represented in the public debate on climate change.

Suzanne Scatliffe, Global Sustainability Director, AXA XL, said, “Creating a water-secure world requires water resources to be protected and properly managed, which is why it’s more essential than ever that water is at the forefront of corporate climate strategies.”

AXA XL’s report focuses on a range of high-risk sectors within its client base and presents how those sectors may be impacted by three types of water risks.

The first of these the firm highlights are physical risks, such as water scarcity, climate change and threats, poor water quality and pollution of water resources, flooding, and poor management of water resources.

Regulatory risks are the second example and include higher water prices, regulation of effluent quantity and quality, statutory water withdrawal limits, and regulatory uncertainty.

The last type is reputational risk, which encompasses negative media coverage and public scrutiny, changes in consumer loyalty and loss of market share due to litigation and damage to brand.

AXA XL states that using water footprinting and accounting can help organisations see hidden water consumption and assist in managing the impact on water resources.

Further, to build a strong case for investing in water-saving technologies and strategies, the researchers note that companies need to accurately evaluate the full costs of water.

This includes reflecting the true costs of consumption, treatment, abstraction, and supply.

AXA XL explains that there is already significant reporting of water-related risks, though more can be done.

The firm suggests that it is vital that companies consistently monitor progress and communicate risks.

It writes, “Companies can manage business risks by developing a future scenario analysis to consider the impact water risks could have on environmental and socioeconomic changes.

“Businesses can learn from water stewardship procedures by utilising available data and developing best practices.

“AXA XL is committed to helping organisations to improve their understanding of water-related risks and how they impact business operations. This new report aims to support businesses of all sizes to understand different types of sector-specific water risks and catalyse action with a series of recommended solutions and tools.”