Indian companies must adopt prudent water management policies: CRISIL
The shrinking per capita availability of water in India necessitates that corporates have a formal plan for water management including disclosures and reporting mechanisms. The per capita water availability in India, which is currently at 1544 cubic meters in 2011 vis-à-vis the international benchmark 1,700 cubic meters, is projected to further shrink to 1,140 cubic meters by 2050.
Statistics indicate that India has already acquired the status of a water-stressed nation.
CRISIL Research conducted a comprehensive assessment of water disclosure practices of 500 publicly held companies in India. The study revealed that in 2010, only 30% of companies reported that they have company level water policy for prudent management of water usage. Similarly, 22% of companies reported that they have policies to manage waste water discharge. Only 3.3% of companies disclosed information on total quantity of water used and merely 1.5% reported the source from where water used is drawn. The study pointed out that sectors such as energy, materials and utilities are more proactive in disclosing information on waste water discharge.
Mr. Mukesh Agarwal, Senior Director, CRISIL Research said, “Most companies continue to have a cavalier approach towards use of water /waste water discharge and consequently, have been forced to face physical, regulatory and reputational damages. This has often led to significant impact on the financial performance, and in select cases, companies have even had to shift or shut down their business operations. Indian companies must therefore manage their water usage/ discharge in a responsible and sustainable manner.”
So far only 39 Indian companies have released sustainability reports in adherence to the Global Reporting Initiative (GRI). Increasing awareness about this issue has been prompting investors to seek water-related disclosures from companies. CRISIL Research believes that disclosure/reporting standards on water usage by corporates need to be improved on an urgent basis, to protect interests of investors and stakeholders.
“Every company must adopt a comprehensive strategy to reduce water-related business risks as part of its overall risk management practices. Monitoring of water usage/waste water discharge, through proper accounting and reporting to the stakeholders/general public, must form the core of such a strategy and would be central to sustainable growth.” noted Mr. Sunil Sinha, Head and Senior Economist, CRISIL.
Going forward, growing scarcity and pollution of water, coupled with challenges arising out of climate change could pose serious risks to industrial and business operations in India. Given the likely impact of these risks on companies’ financial performance, recently SEBI has made it mandatory for top 100 listed companies in terms of market capitalisation to submit Business Responsibility Reports, as a part of their Annual Reports, describing measures taken by them along the key principles enunciated in the 'National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business’ framed by the Ministry of Corporate Affairs (MCA).
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