Environmental, social, and governance risks and opportunities

Water is the Most Important ESG Factor

Potable water use reduction may be the most important ESG factor.
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Potable water use reduction may be the most important ESG factor.

It is widely accepted that a person can only survive without water for 3 days. But more than a Billion people lack daily access to water. And more than 2.7 Billion people across the globe find water scarce for at least 30 days a year.

Freshwater scarcity is only getting worse; fighting for access to potable water is not new.

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In the Old Testament when Isaac attempts to dig anew his father’s wells the shepherds of the wadi Gerar, claim, “the water is ours” forcing the patriarch to move on to dig a well elsewhere.

And while the right to water is today a momentous global problem, it is also a serious dilemma in the United States. Just last week a unanimous U.S. Supreme Court squarely rejected Mississippi’s claim that Tennessee’s wells are stealing Mississippi’s ground water. The November 22 opinion in Mississippi v. Tennessee by Chief Justice Roberts determined that the water in the massive Middle Claiborne Aquifer, lying beneath 6 states, is subject to equitable apportionment, in the way the court controls surface water and water in rivers. Appreciate that the City of Memphis’ wells pump 120 Million gallons of groundwater from that aquifer each day, which Mississippi articulated as, “pumping has taken hundreds of billions of gallons of water that were once located beneath Mississippi.” As weather induced droughts in the U.S. make interstate groundwater disputes increasingly likely in the coming years there are real implications for our future.

And just last Wednesday the California Department of Water Resources announced for the first time it is not going to allocate any water next year to local water districts. The most the state had previously cut back its water allocations was by 5%. This looming water curb and excessively severe public policy (.. in a state where the majority of rain in cities and towns flows into storm drains dumping into the Pacific Ocean), including a draft emergency regulation that among other things makes washing a car without a shut-off nozzle punishable by a fine.

Historically water was free many places for households in the U.S.  New York City only began installing water meters in the 1980s. Today the average residential water bill in New York is $994 a year. And across the country when people cannot pay their water bills, water utilities shut off their water. Even more draconian, in some jurisdictions liens are placed against resident’s homes and then that home is sold at tax sale (for failure to pay a water bill).

But there is a growing chorus across the U.S. to mimic the U.N. resolution explicitly recognizing that clean drinking water is essential to the realization of all human rights. “The human right to water is indispensable for leading a life in human dignity. It is a prerequisite for the realization of other human rights.” The U.N. General Assembly went on to define the right to water as the right of everyone to sufficient, safe, acceptable and physically accessible and affordable water for personal and domestic uses.

It is necessary to appreciate the context. People living in the slums of Jakarta, Manila and Nairobi pay 10 times more for water than consumers in New York.

A company’s ESG role starts with its value system and a principles based approach to doing business. This means operating in ways that, at a minimum, meet fundamental responsibilities in the areas of human rights and the environment. By incorporating good practices into strategies, policies and procedures, and establishing a culture of integrity, companies are not only upholding their basic ESG  responsibilities, but also setting the stage for long-term success.

Business can in nearly all instances reduce indoor and outdoor potable water consumption (by more than 10% at very little or no cost, it is a requirement of green building systems) preserving no and low cost potable water resources and upholding their basic (“E”) environmental responsibilities to people and planet. Potable water use reduction may be the most important ESG factor.

About the Author

Nancy Hudes and Stuart Kaplow, two Maryland attorneys who are among the principals at ESG Legal Solutions have combined forces, joining together to publish this blog leveraging their focused experience and legal knowledge for business interests in the ESG space.

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