South African companies seem to be particularly exposed to water-related risks with 71% of respondents in the Carbon Disclosure Project’s (CDP’s) Water Disclosure Report 2012 indicating that they have experienced financially material water-related impacts.

The National Business Initiative, which released the report on Monday, indicated that the findings highlighted the importance for local businesses of recognising the strategic value of water, not only for their own operations, but also in their value chains.

The report incorporated responses from 30 companies that were among the 61 companies in the JSE’s Top 100 identified as operational in water-intensive sectors, or sensitive to water issues through their value chains.

However, the report revealed greater awareness of and an improved governance response to water-related risks. It showed an increase in the number of companies that have a water policy or strategy in place, from 69% in 2011 to 75% in 2012, as well as an increase in the number of companies that have board-level oversight over water-related issues and those that are starting to measure and manage their supply chain risks.

Incite Sustainability director and co-author of the report Jonathon Hanks stated that, despite the improvements, the governance response by local companies appeared disconnected from the reported risks.

The much higher reported risk-exposure of South African respondents, compared with their CDP Global 500 Water Report counterparts was not matched by a similarly higher disclosure on management and response measures.

Although 93% of South African respondents reported material water-related risks, only 75% had a water policy or strategy in place and a mere 57% had set quantitative targets or goals to manage water risk.

“Recognising that water is a shared resource, we think there remains significant potential for greater collective action,” Hanks urged.

Water Research Commission CEO Dhesigen Naidoo emphasised the importance of South Africa reviewing its foreign policy on economic development, which currently resulted in most companies' water-intensive processing of products (or raw products) being undertaken locally.

He added that the country’s water challenge was being compounded by its growing population and water-intensive economic growth path, which was boosting demand, while climate change was adding to the problem.

“If we want to compete with countries such as the United Arab Emirates and Israel, that are more water scarce than us, but manage their water more successfully, we need more skilled people and informed decision-making and water needs to become a key development consideration,” Naidoo urged.

He further stated that South Africa would also require investment in science and technology, while infrastructure development would also have to be prioritised to tackle the country’s growing water shortage problem.

South Africa is currently defined as a water-stressed country by the United Nations Environment Programme and projections were that it would be a water-scarce country by 2020, “...if we continue with the ‘business-as-usual’ scenario,” Naidoo warned.

However, he further pointed out that, although South Africa had a small water research community, it was ranked nineteenth in the world in terms of research productivity. Naidoo cited South Africa’s acid-mine drainage problem, for which the country had already developed world-leading science and innovation projects.