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Case Studies | Thursday January 18, 2024

Defining Ambition and a Pathway toward a Nature-Positive Future

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Introduction

BSR worked with Hafslund, a Norwegian hydropower-focused renewable energy company, to 1) help provide a better understanding of the current nature landscape, including key regulations, initiatives, frameworks, and standards, and 2) define the company’s stated goal of, and pathway to, contributing to a nature-positive future. BSR conducted a nature landscape assessment of external global standards and initiatives, as well as those specific to the Nordics, around nature and renewable industries, benchmarking Hafslund against its peers and market leaders. Subsequently, BSR developed a high-level action plan to guide implementation and action on nature.  ​

Background

Hafslund is a Norwegian renewable energy company that owns and operates hydropower plants throughout Norway. The group supports half of Norwegian households’ electricity needs and is one of the largest producers of renewable energy and district heating in the Nordic region, promoting responsibility toward nature within and beyond its operations.

Hafslund's work in supporting positive contributions to nature relies on protecting the environment and the biodiversity around its old and new facilities, reducing its encroachments on nature and efficiently using its materials and resources by promoting circular economy principles.

Striving to be a sustainability leader, Hafslund’s strategy focuses on key issues impacting the planet, including transitioning its business and operations to climate and nature positivity.

The Challenge

As a producer of renewable energy, Hafslund is dependent on natural resources. However, the development of renewable energy facilities has direct and indirect nature impacts and dependencies that the company needs to properly understand.

Although Hafslund was already quite advanced in its sustainability journey, as well as in its nature journey, the rising support of governments (e.g., REPowerEU), the nature momentum since COP15, and the current and future uptake of key frameworks such as the Science Based Targets for Nature (SBTN) and the Taskforce on Nature-related Financial Disclosures (TNFD) facilitated the company's decision to better define and advance its nature-positive commitment.

In working with BSR, Hafslund looked to leverage a combination of nature, strategy, and reporting expertise to gain a clearer understanding on how to strengthen its nature engagement while responding to current and emerging regulatory (e.g., the Corporate Sustainability Reporting Directive, or CSRD; EU Taxonomy; EU Strategy on Offshore Wind Renewable Energy; Norway Climate Action Plan 2021-2030; etc.) and investor expectations in the evolving nature landscape.

BSR’s Approach

Utilizing its nature and strategy expertise, BSR worked closely with Hafslund to develop a strategic vision and action plan for protecting nature, aligned with best practices and leading standards and frameworks, such as the Global Biodiversity Framework (GBF).

BSR's approach constructed a foundation based on three strands of research and analysis. First, the project focused on understanding and analyzing Hafslund's existing nature-related work and projects, future goals and commitments, and reporting. Second, this was followed by a landscape assessment, which provided insights into the standards, regulations, and initiatives at both a global scale as well as those most relevant to the renewable energy sector and the Nordic market. Finally, to better understand leading practices in the market and evaluate Hafslund's positioning, BSR benchmarked three market peers and one leader to analyze their approaches and best practices and assess their maturity on nature across various dimensions, such as governance, policies, and operations.  

By bringing together an understanding of the landscape and trends in the external environment alongside a rigorous, topic-focused benchmark, BSR was able to analyze Hafslund's current performance alongside existing and future expectations in nature. To do this, BSR identified gaps as well as areas of relative strength in Hafslund's current nature work and developed tailored recommendations on how to define and advance its nature commitments.

To help turn the recommendations into reality, BSR developed a nature action plan for Hafslund, specifying the goals and suggested actions to take in the short, medium, and long term. These were accompanied by high-level timelines for implementation, identification of governance and management needs at each stage, and the partnerships and initiatives recommended to support each activity. The action plan aims to advance the development and the implementation of Hafslund's comprehensive nature strategy.

Impact

By analyzing the external landscape and leading peers alongside Hafslund's existing and envisioned performance in nature, BSR was able to develop a clear and tangible action plan focused on achieving its nature-positive goal.

By providing clear actions tied to overarching objectives and timeline, Hafslund has been well-positioned to advance quickly on its nature journey, taking the following steps:

• After BSR’s analysis, the Hafslund sustainability team conducted workshops with more than 20 stakeholders throughout the company to seek their input and buy-in on the long-term plan, with actions and priorities recommended by BSR aligning well with those of their internal stakeholders.
• The company has begun conducting a nature assessment of its direct operations and collecting data in line with both applicable regulations as well as prevailing frameworks.
• The focus on nature has led to important conversations across teams, as well as an upcoming conversation with the board, about how Hafslund staff can “lift” nature in every aspect that they work on and how the company can engage and inspire its employees in supporting its nature-positive goals in their day-to-day activities.
• As of writing, Hafslund was currently mapping out a short-term implementation roadmap—including key tasks, allocation, and KPIs—for review by its board.

Overall, Hafslund evolved from having a high-level ambition to reach a nature-positive future to taking steps to actually achieve it, thanks to its new robust action plan and clear path forward.

"Looking back, BSR’s work was critical for Hafslund to get ahead of all standards on the horizon, in what is a fast-paced and complex area of corporate sustainability."

- Otto Vik Mathisen, Strategic Advisor at Hafslund

Conclusion

Companies are adapting to an increasingly complex landscape, where key emerging frameworks are guiding corporate commitments and actions. Within this context, and with evolving stakeholder expectations, it is increasingly important for companies to understand and engage on nature. Organizations like Hafslund that have taken critical steps on their nature journey will be better prepared to navigate the shifting landscape while promoting long-term business resilience.

Get in Touch

This case study was written by Erin Leitheiser, Juliette Pugliesi, and Sarah Cornelles. If your team is also interested in nature support, from better understanding regulatory landscape and peer positioning to defining nature goals and strategy, please reach out to us to learn more.

Reports | Wednesday January 17, 2024

Co-creating Climate Justice Interventions between Business and Communities

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While businesses are starting to consider the ways in which climate change and climate solutions disproportionately affect people and communities, there are few examples of how the private sector is working with affected stakeholders and little guidance on how to co-create climate justice interventions with affected communities. Co-creation, in the context of climate justice, centers affected communities in identifying challenges and developing solutions to address systemic injustices and advance equitable social, environmental, and climate outcomes.  

The issue brief shows business practitioners how to implement climate justice interventions by using a process of co-creation with affected stakeholders. By incorporating a co-creation process in business activities related to climate action, businesses can enable more effective and efficient climate solutions that holistically address interconnected, systemic issues. ​​This issue brief builds a foundational understanding of co-creation with communities in the context of climate justice, specifically what it is, why it is important, and how companies can integrate co-creation into their approach to address climate change. Insights and discussions fostered during BSR-facilitated workshops and collaborative initiatives informed this report. BSR acknowledges 7-Eleven International for their generous support to create this issue brief.

Reports | Monday January 15, 2024

Action for Sustainable Derivatives: Annual Update on Progress, 2023

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The latest update from Action for Sustainable Derivatives (ASD), an industry-led collaboration aimed at achieving sustainable production and sourcing of palm oil derivatives, discusses its progress in 2023. This includes strengthening ASD’s approach to action through more proactive grievance monitoring and management, deepening engagement with supply chain players, and scaling impact on-the-ground.

Highlights include:

• Collective transparency for 1,100,000 tons of palm-based materials, representing 11% of the global palm-based oleochemicals market, including 47.5% transparency to plantation level.
• Proactive monitoring of deforestation grievances through a year-long pilot of Nusantara Atlas satellite monitoring tool, and working towards an understanding of % deforestation-free volumes.
• Trader engagement to discuss possibilities for stronger supply chain control mechanisms
• Demonstrated positive impact on-the-ground after a full year of collective support to the Kaleka Mosaik Initiative and continued progress with the ASD Respect in Palm pilot program.

Learn more about ASD's impact.

Blog | Wednesday January 10, 2024

CEO Outlook: Seven Pivotal Questions Shaping Sustainable Business in 2024

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The multiple shocks and surprises affecting our world in the 2020s can easily lead us to think that we don’t know what’s coming next. It would be folly—and senseless—to diminish the impacts of a global pandemic, geopolitical conflict, and social upheaval.

And yet, as world-shaking as these disruptions are, the underlying questions at the heart of the role of business in society remain very clear. Our collective challenge is focused on three fundamental goals: accelerating the shift to an inclusive clean energy economy, ensuring that revolutionary new technologies are designed and deployed in service of society, and creating more equitable societies and economies.

These were all core questions in 2023 and they will continue to be for the foreseeable future. And they will be BSR’s focus in 2024. As we work with our 300+ member companies globally to support their ability to transform in service of these goals, we will be focusing our insights, advice, and collaborations on these areas.

While 2024 is in many ways a continuation of underlying changes that continue to reshape our world, the new year does present some unique questions. How we respond to them will shape not only how this year plays out, but also our lives for many years to come. 

Here are the seven questions that will define how much progress is made in the year ahead.

1. What impact could the 2024 global elections have on just and sustainable business, and what can companies do about it?

Nearly two-thirds of the world’s population is living in countries with elections in 2024: more than any other year in human history. These elections are, in one way, a triumph for democracies that emerged and proved resilient in the 20^th century. But many people are fearful of change, facing dislocation, and are on the receiving end of misinformation. This fertile ground for populist backlash risks undermining progress on climate action, diverse and equitable societies, and the international cooperation needed for truly shared prosperity. So, while this year will understandably have a significant focus on politics, the spate of elections is very much a business issue. The outcomes of these elections will help determine not only traditional policy questions, but also the degree to which the rule of law is respected, whether international cooperation on climate and other shared challenges is possible, and the degree of support for global trade. Companies therefore should stand up for free and fair elections, and the protection of democratic processes. This role is not natural or comfortable for many business leaders. The stakes, however, are too great for businesses to stand aside.

2. Will the COP28 agreement mark a real transition?

The fierce debate over whether the COP 28 agreement was sufficient is, to some degree, beside the point. The more salient question today is: will nations, businesses, and investors breathe life into the agreement, or render it a dead letter? Investments, innovation, and collaboration are continuing, but not at the pace that’s needed to achieve the rapid transformation required to limit global warming. The just transition is now firmly on the agenda, but too few companies have comprehensive approaches needed to ensure the transition is equitable and fair for all people. The legal considerations that come along with new reporting and disclosure requirements threaten to focus attention on delivering the data rather than delivering clean energy at scale. As we enter 2024, it is not so much a course correction we need, but rather redoubling efforts, without which the emissions reductions needed by 2030 won’t materialize.

3. Are DEI commitments flagging?

There is substantial evidence that the post-2020 efforts to strengthen diversity, particularly in the US, are fading. Data suggest that companies have pulled back on DEI staffing, and the backlash against such efforts, including legal challenges in the US, is accelerating a pullback. But the need for continued progress in the effort to achieve more inclusive companies, workplaces, and communities, remains as compelling as ever. Representation on Boards and in senior management continues to lag behind the overall workforce. Income inequality continues and is partly to blame for the populist movements that have limited public commitments to progress on other key issues like climate and nature. In fact, the business case for DEI remains as strong as ever, not least given the changing nature of the workforce and consumer base. History also teaches us that there will be more moments of reckoning when companies will face pressure to explain their follow-through on prior commitments. Boards and senior management need to send clear signals that they embrace and are ready to develop the diverse workforces of the future, and this remains crucial despite legal challenges.

4. Can we ensure that emerging technology is developed responsibly and sustainably?

The arrival of generative AI was bookended by the emergence of ChatGPT at the beginning of the year and the OpenAI drama at its close. As Winston Churchill said in a very different context, this is only “the end of the beginning” of complicated debates over new technologies and their social impacts. My advice is to believe neither the techno-utopians nor the doomsayers: AI will deliver both great opportunities while presenting us with profound questions and dilemmas, and they will both deepen as the technology advances. And more questions, on other technological innovations, are coming fast: the first approved treatment based on CRISPR gene editing technology also arrived, albeit with less fanfare, in 2023, and biotech will present new and complicated dilemmas. The existing mishmash of efforts to set guidelines will only confuse matters. Setting the rules of the road for the key actors involved will require both smart and flexible regulation, ideally synchronized between jurisdictions, as well as self-restraint on the part of business. Here again, business is going to need to get engaged—appropriately—in promoting regulatory frameworks with sufficient flexibility to enable innovation to flourish.

5. Will new regulations turn sustainability into a compliance exercise?

As we have written over the past year, the rise of regulatory requirements is a game changer for every business. This is undeniably a beneficial development. There are many reasons to believe that performance and transparency will increase on a wide range of topics: climate and nature, reporting and disclosure, human rights, and corporate governance primary among them. We also see a number of unintended consequences that deserve ongoing attention. We hear from many companies that resources are being dedicated to compliance rather than performance. Businesses are busy preparing for the EU’s Corporate Sustainability Reporting Directive (CSRD); that makes sense currently but should not crowd out ongoing ambition and innovation. The valuable caution in avoiding greenwashing claims is also being applied to tamp down ambition, both in communication and goal setting. There is also a growing focus on what can be quantified and verified, which applies well in some cases (measuring emissions) and misses the point on others (positive social impact). Compliance is of course non-negotiable, but no company ever complied to innovation, ambition, and excellence, and sustainability has to find a way to achieve all of the above.

6. How is the role of the Chief Sustainability Officer (CSO) changing?

In our discussions with Chief Sustainability Officers, it is also clear that the role of CSOs and their teams is at a crossroads. There is no doubt that the increased boardroom presence of the CSO is a major step forward. This advance should not come at the expense of the change agent role that CSOs can uniquely play. They should look to the future, and not focus too much on quantifying past performance. CSOs must also learn to see across interconnected issues, not serve merely as technical engineers in specific domains. And, finally, they must understand and deliver qualitative benefits, and not focus only on things that can be measured and verified with precision: the best and highest role the CSO can play is not as a compliance officer. Maintaining the essence—and even the soul—of the role is crucial in 2024.

7. How will business juggle so much interlocking change?

The final question could be dismissed as a process question, but it is crucial. The reality is that business leaders are juggling an immense number of profound questions. Business models, the very nature of work, technologies, environmental challenges, and societal expectations continue to intensify and change. That will only accelerate this year and in the years ahead. This is why principled leadership, strong governance, and clear vision have never been more important. The to-do list for business is replete with items that present both transformative opportunities and so-called “wicked questions.” The impulse to say “not my problem” won’t work. Today’s leaders will be judged by how well they embrace change, make sense of it for their colleagues and stakeholders, and stay true to principle, while continuing to focus on long-term value creation that brings shared societal benefits and respects natural resource boundaries.

These questions are interesting to debate. But more than that, they represent a priority list for every business. In the year ahead, we will be advocating and acting to achieve real progress on each of these questions, and tracking how well business, business leaders, investors, and the entire enabling community meets these challenges. So, while 2024 will undoubtedly deliver unexpected questions and challenges, we know in advance what the ultimate test of our actions will be at year end.

For more from Aron and Sustainable Business in 2024, check out the episode in our BSR Insights Audio Series:

Audio Transcription

People

Aimey Maggie Augustine

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Aimey works closely with several of BSR’s industry teams - Consumer Sectors, EETI and Financial Services.

She provides administrative and research support, while also securing cross-functional team collaboration opportunities. Before becoming a part of BSR, Aimey contributed to various roles, including work with the United Nations World Food Programme, the International Chamber of Commerce, Center for Entrepreneurship, Sciences Po and private banking sector in India.

Aimey holds a master’s degree in Public Policy and Politics from Sciences Po, Paris, along with a Bachelor's in Economics Honors from Christ University, India.

People

Manuela Corredor Vasquez

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Manuela advices BSR’s member companies on embedding human rights through corporate governance, products, and services. She works across industries with a focus on energy, extractives, transport, and industrials.

Prior to joining BSR, Manuela worked at the Office of the General Counsel of the World Bank advising on legal, policy and operational matters, as an associate attorney at global law firms working on sustainable investment and international arbitration and at the non-profit Rights CoLab where she worked at the intersection of sustainable business and finance. She was an Adjunct Professor of Public International Law at Universidad Javeriana and has taught human rights courses in different programs, including at American University. In 2017, she was Finance and Development Fellow at the International Development Law Organization.

Manuela is a licensed lawyer since 2013, holds an LL.M in International Law from NYU, and is pursuing an Executive MPA with emphasis in sustainability at SIPA.

Blog | Thursday December 21, 2023

Three Business Initiatives That Advance Climate Justice

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Climate justice acknowledges that climate change has disproportionate impacts on communities and exacerbates underlying existing systemic inequities. While climate injustices exist worldwide, they often are more acute in less economically developed countries. 

While the term may be new, businesses are starting to proactively advance climate justice efforts. Business action includes building community resilience to physical climate impacts such as severe flooding or wildfires; ensuring workers, suppliers, and communities have access to affordable low-carbon, climate-resilient products and services; safeguarding human rights in the clean energy value chain as economies transition to net zero; and enabling a just transition for workers and communities that have been dependent on fossil fuel development for decades.  

In India and the Philippines, climate injustices disproportionately impact women and children, and major issues can range from extreme weather and flooding to land rights and land conflicts to lack of access and opportunities in the “green” transition. In addition, India and the Philippines are coastal countries with significant levels of income disparity and inequality. Businesses in these two countries are addressing climate justice via resilience building, community education initiatives, and climate adaptation.  

The following are noteworthy climate justice interventions by businesses that include efforts to improve access to healthcare in remote communities at risk from climate change, reskill workers in the energy transition toward a net-zero future, and build resilience among local communities to adapt to climate risk. 

1) Improving access to healthcare in remote communities at risk from climate change 

In the pursuit of a climate-resilient future, it is vital that vulnerable communities have equitable access to products and services. To address this, Metro Pacific Investment Corporation (MPIC), an investment management and holding company, improved critical access to healthcare for under-served and remote communities. As the Philippines continues to confront increased climate impacts from more frequent and extreme weather events, this digital health access can prove crucial as an increasing number of remote communities face additional barriers to reaching health professionals.  

2) Reskilling workers in the energy transition toward a net-zero future 

A just transition to a net-zero economy aims to ensure that workers in industries that have been heavily dependent on fossil fuels have access to reskilling, upskilling, and other green jobs as economies transition to clean energy. As businesses create and execute their climate transition plans, it is imperative to provide support for historically underrepresented groups, like women, youth, and other marginalized communities. 

To support workers in the Indian green jobs movement, Mahindra Susten, the clean-tech subsidiary of the Mahindra Group, narrowed in on knowledge and skills development as a foundational component to ensure rural and economically disadvantaged communities can participate more fairly in India’s growing green economy.  

3) Building resilience among local communities to adapt to climate risk

The physical impacts of climate change, such as floods, heatwaves, and droughts, disproportionately affect communities that have limited resources to prepare and rebound. The lack of proper infrastructure and financing for disaster preparedness and response expose communities to higher climate risk. Farming communities and the agriculture supply chain are particularly vulnerable to physical climate impacts as both are heavily reliant on favorable weather conditions and climate for quality crop yields; this ties their livelihoods closely to external factors often outside of their control.

To support rural farming communities in India, ITC Limited’s Agri Business division, India’s second largest exporter of agri-products, supports local communities in building resilience to the increasing severity and frequency of droughts and flash floods. Improved watershed management practices have led to the improved quality and quantity of crops, which allow local farmers to have more stable and resilient livelihoods.

The examples explored three key areas in which companies can advance climate justice. Businesses can begin to act on climate justice by ensuring human rights, equity, inclusion, and justice are integrated into climate strategies and transition plans. Businesses need to work closely with communities to identify the communities’ needs and collaboratively determine interventions that address climate injustices. Sharing examples of business action is essential for collective learning and to scale efforts to advance climate justice.

People

Akram Bara

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Akram works with RISE on the financial and operational aspects of the implementation of initiatives supporting collaborative industry action at scale to advance gender equality in global garment, footwear and home textiles supply chains.

Prior to BSR, Akram worked in operations, managing a program to finance the Agricultural sector’s climate transition. Previously, he worked in the development and management of international sustainability projects in Italy.

Akram holds a MSc in Sustainable Development from three esteemed universities—Padova in Italy, Leuven in Belgium, and Paris 1 in France, and a BA in Accounting from the American University in Cairo, with a semester at American University, Washington DC.

Blog | Thursday December 14, 2023

COP28 Marks Important Steps Forward: Now the Real Work Begins

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After lengthy and spirited negotiations, COP28 closed with an important signal: an agreement by all the world’s nations to, amongst other things, “transition away from fossil fuels in energy systems, in a just, orderly and equitable manner, accelerating action in this critical decade, to achieve net zero by 2050 in keeping with the science.”

This is an important, albeit imperfect, step forward, but the question remains: is it enough? In a world awash with hot takes, we don’t—and can’t—yet know. The ultimate success of this COP depends entirely on what happens next, and whether these words, which are not binding, are embraced fully by governments, businesses, investors, and all of us.

This COP produced the first response to the Global Stocktake as required under the Paris Agreement, and it is summarized this way: “Despite progress, global greenhouse gas emissions trajectories are not yet in line with the temperature goal of the Paris Agreement, and there is a rapidly narrowing window for raising ambition and implementing existing commitments in order to achieve it.”

There are certainly important steps forward in the outcome. First and foremost, this is the first time a COP has agreed to a shift—however worded—away from fossil fuels. The science tells us that this comes too late. In the context of the COP process, however, this marks a meaningful step forward, even if it is not as definitive as many called for, which is imperative in the face of rising temperatures.

There are four other significant steps put forward in the final statement:

• Just transition is firmly on the agenda: Both in the final text and in the Loss and Damage fund that was made operational, the question of equity is no longer on the sidelines. The question is now how to implement and fund the just transition.
• Tripling renewable energy capacity and doubling energy efficiency by the end of the decade: twin objectives that should unleash innovation and investment to build a resilient, inclusive, clean energy economy.
• Methane reduction commitments from the oil and gas sector, which included national oil companies for the first time, as well as food and agriculture companies. These steps have the potential to reduce warming by 0.2°C.
• Adaptation is now more firmly on the agenda. While large gaps in implementation and financing adaptation remain, it is now clear that governments, and businesses, should step up their work on building climate resilience.

What does this all add up to? The agreement is not a mandate: the COP system is not set up to create binding outcomes. But the words on the pages of COP decisions carry weight, and it has achieved several things that will catalyze change. 

To start, this COP, for the first time, sends a clear signal that the shift to a clean energy economy must and will come. For businesses and investors, this is an unequivocal message to transition energy systems away from fossil fuels, and the need to plan to make it happen. Second, this also raises the stakes for governments, who are due to submit a new round of Nationally Determined Contributions (NDCs) by COP30 in 2025. Any NDC that fails to take account of the transition away from fossil fuels in a timely way aligned with science will not be deemed credible. Third, this agreement demonstrates positive momentum. On almost all the key items, there is higher ambition than what we saw in Glasgow at COP26. It is hard to agree that this is sufficient, but it indicates that there is a global commitment to make progress further and faster.

That is the glass half-full assessment. There is also much to be desired in the agreement.

The language on tackling fossil fuel subsidies remains notably weak and offers governments that don’t want to reduce or eliminate them a pretty wide-open door. We haven’t seen funds needed to achieve the stated objectives on Loss and Damage or Adaptation, and the world has already shown that it is not ready to honor past commitments on climate finance. The language on coal does not appear to be a meaningful improvement commensurate with the harmful impact of coal-generated power, which continues to increase in some countries. The text also leaves the door wide open on “transition fuels.” Many of the other elements of the final agreement will need to be pushed further: not only at COPs, but even more importantly, in the “real economy” the rest of the year.

Aside from the negotiations, the immense set of activities at COP provides room for cautious optimism. The business community continues to show up in greater numbers, and while that alone does not achieve impact, we see  a seriousness of purpose, commitments to invest and innovate, and a focus on turning commitments into action that continues to increase every year. Coming out of COP28, our key message for business is to plan the energy transition for your company in line with science, gear up adaptation and nature efforts, and ensure justice and equity are central to your approach. The private sector also needs to wrestle with the fact that climate goals and business models that depend on endless growth are likely incompatible.

For BSR, we were proud to work at this COP to advance business action on core questions including Just Transition, Climate and Health Equity, Scope 3 emissions, Beyond Growth, Nature, Corporate Governance and Climate, Reporting and Disclosure, and other matters. Many of our 300+ member companies showed up at COP and showed up well.

Ultimately, this may be the most positive outcome that was realistic in a process that demands consensus amongst nearly 200 nation-states, who have wildly different circumstances, resources, and interests. While the agreement does not represent the ambition many had hoped for, there is something for everyone. The real question is whether it will be enough for all of us collectively. That depends not on the text, but on what we do with it.

Blog | Thursday December 14, 2023

How Businesses Can Address the Water Scarcity Crisis

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New guidance from the Taskforce for Nature-related Financial Disclosure and the Science Based Targets Network (SBTN) is bringing an increased focus on the materiality of freshwater. Interventions to make water use sustainable bring difficult trade-offs for businesses and communities. Will economies need to reach a crisis point to galvanize support for interventions? Or can ambitious solutions and collaborations redress the balance in time?

BSR’s Anna Iles talks to Tim Smedley, who traveled the world researching water scarcity, for his new book The Last Drop: Solving the World’s Water Crisis. Additionally, the Nature team provides key actions businesses can take to identify and address their impacts and dependencies on water and to understand their water-related risks.

Currently, 17 companies are piloting a methodology by the SBTN to set science-based freshwater targets. Why should businesses pay attention?

Water scarcity is knocking on the door of a lot of countries that aren’t expecting it. The World Resources Institute published a list of 25 countries facing extremely high water stress, and Belgium came higher than Syria. It’s not that Belgium doesn’t get enough rain: it doesn’t capture it when it falls. Like The Netherlands, it was designed on the drainage principle of sending all the water out to sea as fast as possible to avoid flooding, and that worked very well for a time. But now, as rainfall patterns change, they need to hold on to some of it.
 
Then there’s groundwater depletion. Unsustainable water use means aquifers dry out. In the US, aquifers supplying 90% of the nation’s water are being depleted. Meanwhile, one of its largest reservoirs, Lake Powell, is losing a cubic kilometer of water a year to evaporation, while its inflow is decreasing, due to less reliable snow caps. Mega dams and reservoirs will soon be stranded assets. 

Are you saying the main driver of water risk is mismanagement—particularly in light of our changing weather patterns?

That’s right. A warmer climate causes more water to evaporate, from water bodies (including major reservoirs) and the soil. The air holds more moisture, and so the rain falls more heavily—and causes floods because it hits dry earth. Droughts have increased, which makes water management harder everywhere.
 
But much of the problem was man-made already. Many mega dams have past their 50 year intended timeframes. While pollution makes all these things harder, from soil run-off and microplastics to forever chemicals and human sewage. Polluted water is just as bad as no water. 

The US Federal Government has stepped in to restrict water usage. Is more stringent legislation needed?

Legislation works for sustainability, but it doesn't necessarily work for people.

In Australia, the Government has been buying water back from farmers for the past decade to keep the River Murray flowing. In 2010 it no longer reached the sea due to over-abstraction: now it does. It’s a very successful policy but also hugely unpopular because it’s taking water from farmers. So we need to start having more honest conversations politically about the true value of water. 

This raises the question of trade-offs between the private sector’s water demand and that of natural systems and communities. Analysts say tech giants’ water use is growing by 20-35% due to AI research and development. What is the way forward? 

Water use for technology is set to increase and should certainly factor into business plans. You need water to cool servers and energy plants alike: French energy supplier EDF is forced to shut or scale down nuclear plants almost every summer due to water shortage. We need to invest in alternatives, like air cooling. 

More sustainably, we need to harvest rainwater, and recycle greywater, from toilet to tap. There are off-grid solutions too: a company in Arizona is making ‘hydropanels’ that use solar thermal to draw water from moisture in the air. If it works in the desert air of Arizona, it can work anywhere.

Another way forward is public-private partnerships around watersheds, such as the Nature Conservancy’s Water Funds. It’s not currently the private sector's legal responsibility to maintain water, even if they depend upon it. Partnerships like these bring in private sector funding to update common infrastructure, and then public authorities maintain it afterward. 

I also see impacts from sustainability standards like the Better Cotton Initiative and the Alliance for Water Stewardship, plus the leadership of big buyers. For instance, a major clothing brand recently announced it’s targeting a 40% reduction in water use among its suppliers. If you can’t deliver on that, you’re out. Buyers have huge influence. 

Such policies have big implications for suppliers and their livelihoods. 

Yes, there are clear Just Transition implications here. But current practices affect livelihoods too. The global crop system is currently based on moving from one region to the next. As one dries out, you start growing in another. There are huge Saudi-owned or invested farms in Arizona now, but Arizona also has dwindling groundwater reserves. The water will run out, and the investors will move on. The question is, how do you plan for a future without agribusiness dollars?

Are there solutions that work both for people and for natural systems? 

Yes, there are—including indigenous practices. Peru—which currently grows the majority of the world’s out-of-season asparagus in the arid Ica region—is reviving a traditional irrigation method, part of a water-centric worldview called “Poza”. They flood fields such that it trickles into the aquifer below in a kind of closed-loop model. 

In mainstream agriculture, no-till (effectively not ploughing) works on a similar principle. This mimics a natural system by enabling water to seep down into the ground and work its way back into streams and rivers. No-till approaches are much less costly and more effective than building reservoirs—and benefit farmers by decreasing fuel and labor costs.

A similar approach is Managed Aquifer Recharge, where you pump water back down into aquifers. 

What’s the most important solution in your view?

Without a doubt, nature-based restoration and, where appropriate, rewilding. We are 100% reliant on our natural water cycle. One clear example is our approach to flood control. By moving away from grey infrastructure and restoring floodplains and wetlands, we get co-benefits from flood mitigation to carbon in the soil, groundwater recharge and water purification. Where I live, in the UK, they’re reintroducing beavers after 400 years: it turns out they’ll restore water courses for us. 

We need to remember where water comes from. We thought we could decouple ourselves from natural systems. That was always hubris. We are fully reliant on natural systems. 

Actions for Business 

BSR supports businesses to develop positive relationships with land, freshwater, and marine systems in both their operations and value chains. We help companies to identify and address their impacts and dependencies on water and to understand their water-related risks, and how these intersect with climate change. Here are some key recommendations:

1) Understand your impacts and dependencies

• Using a double materiality approach, assess your nature impacts and dependencies, including freshwater, and understand your reliance and impacts on freshwater quality and quantity. This should be done in alignment with the Taskforce for Nature-related Financial Disclosure and the Science-Based Targets for Nature, and consider all significant pollutants, from microplastics to chemicals.

• Conduct a water risk analysis for the company and its supply chain, collecting quantitative primary and secondary data and appropriately including impacts for communities and ecosystems in the analysis.

• Prioritize locations in your supply chain based on gathered data, incorporating stakeholder perspectives to ensure an equitable lens is applied to location identification. 

• Ensure you consider freshwater ecosystems as an important landscape in nature-related work. 

• Apply foresight techniques to understand how a changing water cycle might impact supply chains. 

• Monitor emerging policy and recommendations, such as the EU’s proposed Blue Deal.

2) Invest in shared nature-based solutions

• Map identified risks to science-based interventions to employ the correct solutions in the right landscapes (e.g., do not try a ‘one size fits all’ approach).

• Explore and invest in nature-based solutions (NbS) for long-term supply chain resilience, taking advantage of win-wins towards net-zero goals.

• Explore the ramifications of proposed solutions for all stakeholders.

• Develop and engage in watershed and watercourse-based collaborations to find shared solutions for restoration and conservation. 

• Adopt a human rights, environmental justice and community co-creation approach to water management.

3) Reduce water use across your value chain.

• Build awareness of embedded water, through water consumption labels and price restructuring.

• Consider water sources, differentiating between groundwater reserves and recycled greywater.

• Invest in waterless technologies and reduce water use within your value chain. This includes developing products and manufacturing systems with minimal to no water dependency. 

• Develop and utilize circular water systems within production and manufacturing facilities throughout the value chain. 

• Consider divesting from business lines or activities that are overly reliant or disproportionately utilizing freshwater and freshwater ecosystems. 

For more information on how to develop ambitious nature-based strategies and solutions toward your sustainability objectives, contact BSR’s Nature team.