water strategy for aiag csr apr 2013

The world’s leading sustainability consultancy

Water and Automotive Excellence 2013 AIAG Corporate Sustainability Summit



Why does water matter?

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A recent review of global

business water risk found:

63% identify water as a

substantial business risk to

direct operations or supply

chain

45% have experienced water-

related detrimental impacts in

the past five years

68% materials and mining

sector reported exposure

71% energy sector reported

exposure to water risk

Carbon Disclosure Project

Global Water Report 2012,

www.cdproject.net

http://www.cdproject.net/


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Business risk Example

Water scarcity • Anglo American Platinum 90% of operations in water stressed region • BHPBilliton’s Escondida costs for desalinated water • Water shortages in Brazil and India resulted in huge increases in world sugar

prices in 2009

Water surplus • NSW and Qld coal mines $2b lost production from 2009 flooding • Alcoa US business interruption from flooding cost US$130m • Anglo American and Gold Fields lost production from flooding

Water quality • SABMiller has faced threats from saltwater intrusion into its 20 strong borehole supply network in Tanzania risking major interruptions to business

Reputation • Perrier suffered a major and irreversible decline in its global reputation as a result of trace concentrations of benzene being detected in its bottled water which prompted a US-wide product recall (February 1990)

Regulation • Lenders imposed stringent commitments for Rio Tinto’s Oyu Tolgoi mine in water scarce region in Mongolia

Business case: financial risk related to water


Expected state water shortages over the next decade under average water conditions

Water risk varies with geography


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Water scarcity: sites, supply chain, current issues


Practical approaches to managing water risk

The solution for managing water

risk is to link the technical and

operational aspects of water

management - with the longer

term strategic and social license

aspects

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Strategy for managing business

critical water risk

Strategic Water Risk

Technical Water Risk


Increasing complexity of water risk

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Site Water Plan - Local Risk - Technical focus - Short term - Internal focus

Business Water Strategy - Business unit/

Regional risk - Technical, social &

economic - Longer term - Cross functional - External

stakeholders

Collaborative Water Solutions - External

collaboration - Regional

development - National/

international - Human rights - Water/ energy/ food

links

Integrating Water Management with Corporate Responsibility

Risk to Opportunity


Strengths, weaknesses, threats & opportunities

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1. Land Allocation Core Strategy, Flood Risk, Water Accessibility and

Quality Assessment

4. Operation Business / Process Risk

Assessment, Operational Asset Protection & Business Continuity

Support

3. Detailed Design & Construction

Engineering / Construction Flood Risk and Water

Support

2. Planning Planning Advice, Strategic

Environmental Assessments, Flood Risk and

Consequences Assessments

7. Due Diligence

Transactions Support

8. Climate Change Risk

Assessment & Adaptation

Support

6. Expansion / Decommissioning

Re-Working / Creating Assets, Planning Advice, Vulnerability /

Suitability Assessment, Mitigation

5. Existing / Future Asset Assessment

Global Asset / Industry / Business Portfolio

Assessment, Hydrology, Hydrogeology, Flood Risk,

Water Availability

The Project Life Cycle: Water Strategy and Tactics


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Develop strategy

Stag

e Implement strategy

Sustain Strategy

Pro

cess

O

utp

uts

• Diagnosis water risk Stakeholder interviews Benchmarking Water risk assessment Focus workshops

• Develop water goal • Identify key programs and

actions via workshops

• Establish water governance • Accountabilities and

resources • Communication and

change planning • Prioritize programs and

actions

• Review progress of implementation of water strategy to mitigate water risk

• Identify barriers • Provide assurance

• Evaluation of water risk and exposure

• Defined strategic objective • High level plan as a

roadmap for implementation

• Water governance structure

• Implementation plan including communication and change plans

• Detailed scope for key programs

• Report on progress with implementation of water strategy

• Senior management assurance report

ERM’s role

Facilitate development of water strategy

Coach, guide and support implementation

Monitor and review progress and provide assurance

Water Management Strategy


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• Increased Financial Value

• Improved Market Access and Growth

• Improved Risk Management

• Improved Organizational Capabilities

This integrated product sustainability services framework results in:

Product sustainability framework


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Corporate

Product

A single product across its unique life cycle

Partial or entire value

chain across all

product

categories/company

activities

Primarily for investors, stakeholders,

NGOs and media

Primarily for customers and consumers

Used at corporate

level to identify

hotspots

Used for R&D, marketing and

customer footprinting programmes Used to manage

performance

across company,

engage partners

and publically

report

Used to differentiate/ label the product, manage

performance, & assist supply chain engagement

Supply Chain

Secure raw

materials supply

Risk

management

Emerging best

practice

Overlap with

other footprints

Footprints: supply chain – corporate - product


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• The first steps to reducing the negative impacts of climate change are measuring your footprint and identifying where you can make changes

Mitigate climate change (eg floods,

scarcity)

• Having systems in place ahead of emerging legislation allows time to prepare and realize any potential financial implications

Prepare for impending legislation

• Water reductions are often linked to energy efficiency too, which can save resources and money

Reduce costs and resource use

• Understanding what parts of the business may be exposed to water risks and where it can be reduced

Manage risks

• Awareness and involvement of staff in the development of ideas and the implementation of reduction initiatives benefits them and the business

Improve staff motivation and

retention

Advantages to knowing your water footprint


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■ Client wants to double growth in India in next five years

■ Either need to increase water supply or improve efficiency

■ High level footprint used to identify improvement hotspots

■ Detailed footprinting being used to assess sustainability of improvement options for more wide scale implementation

Case Study

http://www.google.co.uk/url?sa=i&rct=j&q=india+map+blue&source=images&cd=&cad=rja&docid=kKvUrv4gPeaGwM&tbnid=s3igaWeijnX7xM:&ved=0CAUQjRw&url=http://www.123rf.com/photo_5730675_india-map-isolated-on-a-white-background.html&ei=2GIZUa_nMuuS0QXX84HIDA&bvm=bv.42080656,d.d2k&psig=AFQjCNGazrkyGxWR-9eseAiyslXqshFZTg&ust=1360704598274495


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emphasise topics ■ Confidential Manufacturing Client, 2012

■ Assessed current and future water resource risks across the portfolio using the WBCSD Global Water Tool

■ Generated a baseline understanding of water consumption across the business

■ Identified potential risks with respect to future development of production capacity

■ Produced a prioritized list of sites for future action on water efficiency and optimization

Water sustainability assessment

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=tNAdhhtjql0ZaM&tbnid=Xs8Y-ynyZ-AJJM:&ved=0CAUQjRw&url=http://www.averydennison.com/en/home/sustainability/environmental-sustainability/water-conservation.html&ei=HTp3UYDbNce32wXxiICgCA&bvm=bv.45580626,d.b2I&psig=AFQjCNH1XY0D94lB0nFrm0EfE_qgoOvSkw&ust=1366854206935575


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emphasise topics Confidential Client:

■ Strategic Water Principles:

• Principle 1: Manage water impacts of operations based on a robust understanding

of key water risks and emerging trends

• Principle 2: Identify innovative tools and technologies to address water risks

• Principle 3: Optimize water use at each site to minimize the impact on local

catchment water resources

• Principle 4: Engage openly with stakeholders to address local water issues,

contribute to regional water policy and international approaches to sustaining global

water resources

• Principle 5: Manage the impacts of operations at a catchment level; be a steward of

these water resources

• Principle 6: Plan for changing climate and the additional water risks that may result

Integrating Strategies: Example


State the case: communication opportunities

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Environmentally preferred supplier to customers with ‘green’ needs or criteria

Transparently respond to customer, NGO & industry queries & reporting initiatives

Enable proactive engagement with customers

B2B Enhance brand image

Respond to customer queries and competitors’ initiatives quickly and easily

B2C Identify water impacts; promote efficiency and drive sustainable behaviour

Benchmarking for internal and external; potential resource and/or cost savings

Attract and retain top talent/staff

Internal


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Discussion & Questions

Skelly Holmbeck

610.524.3578 [o]

561.707.3186 [c]

[email protected]


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Source: World Economic Forum, Global Risks 2011

Global risk overview