Companies around the world depend on nature and access to water. At the same time, nature is in peril and tops the list of global issues worrying leaders in both business and politics. For the first time ever, the most pressing risks in the World Economic Forum Global Risk Report are all linked to climate change and water.
Managing water and reducing climate risk should be in every CEO's interest. And for good reason: 90% of all natural hazards are related to water, such as flooding and droughts. All in all, natural hazards accounted for around $133 billion in economic losses in 2019. As the climate changes, companies and investors are exposed to risks such as drowned assets, production stops, and disruptions in the supply chain.
A key risk to a functioning business is water: either too much of it, too little, poor quality as well as reputational or regulatory risks. The answer involves channelling the formidable power of nature to build more sustainable infrastructure for business and safer homes and ecosystems for local communities: nature-based solutions (NBS).
Nature-based solutions are "actions to protect, sustainably manage and restore natural and modified ecosystems in ways that address societal challenges effectively to provide both human well-being and biodiversity benefits." They are underpinned by benefits that flow from healthy ecosystems and target major challenges like climate change, disaster risk reduction, food and water security, health and are critical to economic development.
For example, re-planting trees and mangroves along coastal areas and rewetting peatlands slows down climate change and builds resilience in value chains. Taking an NBS approach also helps companies to achieve water security not only for their own business but for all users in the catchment as required by respected standards and frameworks, such as the Alliance for Water Stewardship (AWS) Standard, and to build their corporate credentials.
So what does all this mean in practice?
Careful water stewardship, an approach that leverages nature-based solutions, is about understanding corporate water use and working collaboratively with other users of a catchment. It requires collective action beyond the sites of direct operations or supply chains to address existing challenges and solve causes of water risks.
COOP Switzerland, an international supermarket chain, has worked with nature-based solutions in the Lake Naivasha catchment in Kenya where it buys its cut flowers. Its activities include planting and conserving native plants and trees to boost biodiversity, lessen soil erosion, and improve the water quality, which is key to helping business. Water resources are better managed, together with local small holder farmers, the WWF, and community water user associations. By supporting agroforestry systems, the project also helps diversify farmers' incomes by helping them sell fruits from the agroforestry trees or other non-wood products like honey.
The implementation of holistic, nature-based solutions often require high upfront capital, but they are less costly to maintain in the long term. As opposed to engineered fixes, such as water treatment plants, the wealth of positive outcomes generated by nature-based solutions – from improved soil, healthy communities in sourcing areas, and carbon sequestration – make them an attractive investment for companies.
The examples are many. An international cosmetics company combines climate change adaptation with water stewardship by restoring peatlands in Indonesia. This helps water tables rise and improves irrigation of fields for farmers, reduces the risk of fires in El Niño and flooding in La Niña cycles. Peatland restoration also helps mitigate climate change by reviving local biodiversity and creating carbon sinks – sequestering carbon in the soil. Local communities are engaged through fire prevention, water management, education programmes around ecology and sustainable farming practices.
This type of "insetting" project, where emission reductions happen along the supply chain, can attract climate finance through the sale of carbon credits, creating new sources of financing to then allow for reinvestment and growing projects
Nature-based solutions offer companies a way to slow down biodiversity loss, restore the ecosystems they rely on, improve local water security, and, ultimately, work towards achieving net-zero emissions as soon as possible.
To achieve scale and attract funding, South Pole helps companies to set up innovative financing. An example is South Pole's work with Mars on creating a landscape climate fund in Indonesia. As part of the Coalition for Sustainable Livelihoods' (CSL) efforts to unlock the financing needed to drive progress at scale, the fund would cover climate related finance, investments that would help small-holders farmers and local communities; scale up initiatives for enhanced conservation, forest and land restoration; and help companies operating in, or sourcing from, Indonesia to meet their targets towards low carbon and resilient commodity supply chains.
Investors have also acknowledged the true value at risk – and increased their expectations on corporate water management and climate-resilience. Investors such as the Norwegian pension fund, Norges Bank Investment Management, with assets valued at over $800 billion, are expecting companies to demonstrate clear strategies for water and active climate change management.
Steps are being taken into the right direction. Businesses and investors increasingly understand that a water-secure, climate-resilient world is not a given – but one needs to be actively prioritised, today. By working with nature instead of against it, smart companies can secure their operations, grow their 'positive handprint', and reduce global emissions.
At South Pole, we help companies turn their low-carbon vision into action and support our clients on their journey to water and climate leadership. We've been working extensively with our clients for instance through investing in nature-based solutions (NBS) and transforming landscapes. This leads to multiple benefits for a company, including minimising water risks, improving agricultural productivity, adapting to climate change, decarbonisation, sequestering emissions for a net-zero claim and creating positive co-benefits.
We are excited to showcase some examples where we turned theory into practice and used nature-based solutions to address key elements of our client's water-stewardship strategies.