Business awareness of water risk is growing but firms remain exposed

CDP, the world’s largest independent environmental disclosure platform, has warned that businesses are leaving themselves exposed to major water risk.

While its latest data showed a 100% increase in water disclosures in 2024, demonstrating that awareness is building rapidly, CPD found that only 5% (426) of the 8,500 firms disclosing on water used an internal water price – where businesses assign a financial value to water to support decision-making. Only 3% (290) went beyond simply applying the external tariff. This is in stark contrast to carbon, where 2,097 firms used an internal carbon price.

According to CPD, this shortfall in valuing water comes at a significant cost. Water related risk was priced at $339bn, but could be mitigated with $58.7bn in expenditures – a six-to-one return on investment.

Gaps in supply chain visibility were also exposed by the data. While 70% of companies disclosing on water were taking steps to map their value chain, 73% of these only map Tier 1 or direct suppliers. CPD said that leaves substantial vulnerabilities hidden in global value chains, particularly in water-intensive industries such as food and agriculture, textiles, and semiconductors, where water is a fundamental input but often embedded deep in supply chains. Closing these gaps would unlock enormous benefits.

Moreover, CPD warned that supply chain blind spots could pose significant challenges as demand for water accelerates. For instance, it said the rapid expansion of AI-driven data centres alone could consume up to 1,200bn litres of water annually by 2030. Already 27% of companies disclosing on water reported withdrawing from water-stressed areas, showing how scarcity is shaping corporate strategy.

Elsewhere the data showed that just 21% of businesses engage with their suppliers on water issues. But these early movers are setting the benchmark, including through setting water-related KPIs in contracts, building capacity, and introducing financial incentives for strong performance.

The sectors found to be most exposed to water-related risks and with the greatest potential upside from action included manufacturing, materials, and food, beverage and agriculture. These industries reported $204bn in combined opportunities, tied to water efficiency, reuse technologies  and resilient supply chains.