CDSB Framework

Application
guidance forwater-related
disclosures

August 2021
cdsb.net/water

About the
Climate DisclosureStandards Board

3

CDSB Framework | Application guidance for water-related disclosures

The Climate Disclosure Standards Board(CDSB) would like to thank the membersof the CDSB Technical Working Group on
Water-related disclosures and the CDP Water
Security Team for their guidance and feedbackon the content of this publication:• Adam Leaver, Ecometrica• Andrew Roby, FCDO UK• Ariane Laporte-Bisquit, WWF Germany• Junguo Liu, SUSTech• Arnout van Soesbergen, PhD, UNEP WCMC
• Kata Molnar, Sustainalytics• Ashok Chapagain, Pacific Institute• Katarina Hammar, Nordea• Atsushi Nishiwaki, Ono Pharmaceutical
Co.,Ltd• Katrin Gronemeier, GIZ• Belynda Petrie, OneWorld Sustainable
Investments• Nick Martin, Antea Group; BIER
• Dieter Rothenberger, GIZ• Nicole Dando, CDP• Donna Laviolette, Xylem Inc.
• Paul Reig, Bluerisk• Eivind Fliflet, NBIM
• Piet Klop, PGGM Investment• Eliza Roberts, WSP USA• Rafael Camargo, WWF Germany• Florence Brocard, Total S.A.
• Rami Narte, Nordic Agency for Sustainable
Impact• Fredrik Hellman, AstraZeneca• Renata De Souza Leao, PhD, CDP• Gemma James, PRI• Ria Bakshi, Olam
• Hans Buchholz, L’Oréal• Kazuhiro Teranishi, PhD, Sekisui House• Rochi Khemka, World Bank (2030 WRG)

• Bertil Abbing, Ecometrica• James Dalton, IUCN

• Lisa Beauvilain, Impax Asset Management• Scott McCready, Alliance for Water
Stewardship• Cate Lamb, CDP• Marta Antonelli, PhD, CMCC
• Catherine Moncrieff, CDP• Jayne Godfrey, PhD, Australian National
University• Michael Alexander, Diageo• Stephanie Hime, PhD, Little Blue ResearchLtd.

• Chisaki Ito, Sony Corporation• Jean Pierre Maugendre, SUEZ

• Michael Becker, Nature Invest• Taeko Suzuki, LIXIL• Chris Perry, Agricultural Water Management
journal• Jean-Christophe Bligny, PhD, Independent• Michael J. Wilson, Diageo• Colin Strong, WRI• Miriam Denis Le Seve, CDP• Daniel Crewe, CDP• Mitsuhiro Yonehara, Shionogi & Co., Ltd.
• David Greenall, VIRIDI• Monika Freyman, Mercer• David Parham, SASB
• Muriel Jaujou, Danone• Debra Tan, CWR• Nick Hepworth, Water Witness International• Diana Bach, SCS Global Services• Tatiana Fedotova, Independent• Jed Youngs, BHP• Therese Rudebeck. PhD, SIWI
• Jehanne Fabre, Danone• Theresia Trommer, SBD Inc.
• Jennifer Cogburn, BloombergNEF• Tom Williams, WBCSD• Jens Hönerhoff, DEG• William Sarni, Water Foundry• Jill Buckley, NRG Energy• Yui Kamikawa, Coca-Cola Company

4

CDSB Framework | Application guidance for water-related disclosures

The Climate Disclosure Standards Board(CDSB) is an international consortium ofbusiness and environmental NGOs. We arecommitted to advancing and aligning the
global mainstream corporate reporting model
to equate natural and social capital withfinancial capital.
We do this by offering companies aframework for reporting environmental andsocial information with the same rigour as
financial information. In turn this helps them toprovide investors with decision-usefulenvironmental information via the mainstream
corporate report, enhancing the efficient
allocation of capital. Regulators have also
benefited from CDSB’s compliance-readymaterials. Recognising that information about
natural, social and financial capital is equally
essential for an understanding of corporate
performance, our work builds trust andtransparency needed to foster resilient capital
markets. Collectively, we aim to contribute tomore sustainable economic, social andenvironmental systems.
For more information, visit cdsb.net, follow us
on Twitter, LinkedIn and YouTube and subscribe
to our newsletter. Visit the TCFD Knowledge
Hub for free e-learning online courses.
We welcome your input and discussions. If you
would like to comment on this document,
please contact us at info@cdsb.net.

Copyright © 2021 Climate Disclosure Standards Board (CDSB) and CDP Worldwide.
All rights reserved. Dissemination of the contents of this report is encouraged. Please give fullacknowledgement of the source when reproducing extracts in other published work. All
information in this report is provided without warranty of any kind, express or implied. The authors
disclaim any responsibility for the information or conclusions in this report. The authors accept noliability for any loss arising from any action taken or refrained from being taken as a result of
information contained in this report.

Contents
About the Climate Disclosure Standards Board

03

Chapter 1
About this guidance
1.

The CDSB Framework and the Application Guidance

07

1.1

CDSB Framework 

07

1.1.1

Materiality 

09

1.2

Application Guidance

09

1.2.1. Water Application Guidance

10

2.

Mainstreaming water Reporting 

113.

Structure of the Water Guidance 

12Chapter 2
Water and business1.

Key characteristics

14

2.

Water-related risks and opportunities 

16

Chapter 3
Application guidance for water-related disclosures
1.

Reporting expectations and important considerations

19

1.1

Applying materiality 

19Providing contextualised and business-specific water-related
information and clarifying methods 

19

1.3

Reporting boundaries and period 

20

1.4

Using existing disclosures and resources, and ensuring connectivity 

20

1.2
				

2.

Roadmap and checklist for water-related disclosures

21

3.

Application guidance

24

REQ-01 Governance 

24

REQ-02 Management’s environmental policies, strategy and targets 

27

REQ-03 Risks and opportunities 

32

REQ-04 Sources of environmental impact 

40

REQ-05 Performance and comparative analysis 45

REQ-06 Outlook 

47Basis for conclusions50

4.

Chapter 4
Appendices
1.

CDSB Framework – Guiding principles and reporting requirements 52

2.

Mapping of the CDSB Framework to the TCFD and water reporting standards

53

3.

Key resources

54

References

55

Chapter 1

About thisguidance

7

CDSB Framework | Application guidance for water-related disclosures

The CDSB Framework application guidance forwater-related disclosures (the Water Guidance)
has been produced by the CDSB to assist
companies in the disclosure of water-related
financial information in the mainstream report.a
It is designed to supplement the CDSB
Framework1 for reporting environmental andclimate change information (CDSB Framework)
to investors. The Water Guidance offers
companies a means of developing theirreporting practices and ensuring that investors
are receiving the material water-related
information needed for effective capital
allocation to drive the transition to asustainable, resilient, and water secure
economy. The intended users of this Guidance
are organisations, both single companies andcorporate groups, and in particular those
responsible for financial, governance andsustainability reporting.

1. The CDSB Framework and
the Application Guidance
1.1 CDSB Framework
The CDSB Framework is focused on reporting
material environmental information inmainstream reports to investors. This built
directly on the International AccountingStandard Board’s (IASB’s) Conceptual
Framework2 , applying financial reporting
principles. CDSB’s Framework has evolved
over time, with the first version, the Climate
Change Reporting Framework, released in
2010, focused on the risks and opportunities
that climate change presents to anorganisation’s strategy, financial performance,and condition. In 2013 CDSB’s Board agreed to
expand the scope of the Framework beyond
climate change and Greenhouse Gas (GHG)
emissions to encompass environmental
information and natural capital, with thisrevision published in 2015.
The CDSB Framework represented one of themain resources from which therecommendations of the Task Force on
Climate-related Disclosure (TCFD)3 , publishedin 2017, were drawn. Therefore, the CDSB
Framework and its reporting principles andrequirements are aligned with the TCFD
recommendations (Table 3). TCFD has
advanced the narrative on organisationalboard-level financial and risk management
considerations of environmental impacts to thebusiness, particularly those likely to result fromclimate change.

a Mainstream reports are the annual reporting packages in which
companies are required to deliver their audited financial results under
the corporate, compliance or securities laws of the country in which
they operate, e.g. the annual report in the UK and the 10-K in the USA

8

CDSB Framework | Application guidance for water-related disclosures

Sustainability reporting via various
materiality lenses

Data structured using taxonomies and powered by technology

Reporting on all sustainability matters that reflectsignificant positive or negative impacts on people,
the environment and the economy

Dynamic
Materiality:
sustainability
topics canmove either
gradually orvery quickly

To various users with various objectives, who wantto understand the enterprise’s positive and negative
contributions to sustainable development

Reporting on those sustainability mattersthat create or erode enterprise value
To users with specific interest inunderstanding enterprise value

Already represented in
the financial statements

X

X

Sustainability matter:e.g. water consumption

Dynamic materiality: Sustainability matters can move between boxes overtime. For example, water consumption enters the big box perspective as society
becomes aware of water scarcity, the middle box as investors start to factor inwater net positive transition into capital market pricing, and the small box asfinancial consequences are felt in net asset values

Sustainability Reporting
E.g., Water pollution including
source of the emission factor,
standards methodologies,
assumptions and tools used
to determine contribution(destruction) to sustainable
development

Enterprise value Reporting
Sustainability-related financial disclosure
E.g., Trend and scenario analysis of water consumption, including
sales-weighted water consumption of products. Companies
and investors can thus understand the business levers available
to change water consumption and the likely effect of improving
performance on the company’s enterprise value by reducing /avoiding remediation expenses or improved reputation thanks to
the reduction of impacts on water resources

Financial accounting
and disclosure
E.g., Monetary impact on thestatement of profit or loss due
to remediation expenses or fines
related to regulation on water use

Figure 1. Materiality of sustainability matters is dynamic, and the three forms of sustainability reporting are nested. The CDSB Framework andWater Guidance focus on sustainability matters that create or erode enterprise value. This figure is an adapted version from the publication
Reporting on enterprise value by CDP, CDSB, GRI, IIRC and SASB (IIRC and SASB have merged into the Value Reporting Foundation).

9

CDSB Framework | Application guidance for water-related disclosures

1.1.1 Materiality
Principle 1 of the CDSB Framework states that
information is material if:• The impacts or results it describes are, due totheir size and nature, expected to have asignificant positive or negative impact on thecompany’s financial condition and operational
results and its ability to execute its strategy; or• Omitting, misstating, or obscuring theinformation could reasonably be expected toinfluence the decisions that users of
mainstream reports make on the basis of thatmainstream report, which provides
information about a specific reporting
company.
The materiality of sustainability issues, including
water, is dynamic on account of changing
environmental conditions and their interactions
with the business, and of the societal
expectations.4 Therefore, depending on its
materiality for a specific organisation at a given
time, sustainability-related information falls
under one of the three forms of distinct, butnested, reporting: sustainability reporting,sustainability-related financial disclosure, andfinancial accounting. Dynamic materiality
means that the concerns of one stakeholder
group may quickly become material for
financial decision-makers (Figure 1). As such,the application of a range of standards andframeworks, such as the CDP questionnaire,
GRI Standards, and the Capitals Coalition’s
Natural Capital protocol are important toensure reciprocity and responsiveness in thereporting landscape (Figure 1). Given the
dynamic nature of these issues, companies
should regularly reassess the materiality ofsustainability matters to their business andreflect this selection in the sustainability-related
financial disclosures (and financial accounting)included in their mainstream report.

1.2 Application Guidance
The Water Guidance is part of a series of CDSB
Framework application guidance, which aims toextend the TCFD recommendations to natural
capital. It is designed to support the intended
users in applying the CDSB Framework to thenatural capital elements of climate change,
water, and biodiversity. Following the guidanceon climate-related disclosures,5 the Water
Guidance is the second supplementary
document that is designed to enhance thequality of disclosures for such material matters.
Working in conjunction with the reporting
principles and requirements of the CDSB
Framework, each application guidance
supports companies with developing clear,concise, consistent, and comparable
disclosures, enhancing the decision-usefulnessof their mainstream reporting on sustainability
related financial matters to investors (Figure 2).
Given the interconnected nature ofenvironmental topics, the Application Guidance
documents are complementary with someoverlapping sub-topics (Figure 2).

10

CDSB Framework | Application guidance for water-related disclosures

CDSB
Framework

CDSB Framework forreporting environmental& climate change
information

Application
guidance forwater-related
disclosures

Climate-water nexus

Water-biodiversity nexus(e.g. physical risks - water
scarcity and sea level rise,
see Table 1)(e.g. impacts on biodiversity due towater scarcity, pollution, or higher watertemperatures; see Table 2)

upcoming

Climate-biodiversity nexus(e.g. habitat loss due to deforestation and related
GHG emissions; changes in migration routes and timing
due changes in temperatures)

Application
guidance forclimate-related
disclosures

1.2.1. Water Application Guidance
The objective of the Water Guidance is tosupport organisations in (1) embarking on thenecessary process of identifying and assessing
water-related financial information for
mainstream reporting, including risks andopportunities; and (2) preparing high-quality
disclosures that enable users of mainstream
reports to assess material water-related
financial information.
By aligning with the main water-related
reporting standards and frameworks (seeTable 3), this Guidance helps organisations in:
1. Integrating water-related financial informationin mainstream reports;
2. Minimising the reporting burden and/or
avoiding the need for additional datacollection; andApplication
guidance forbiodiversity-related
disclosures

The scope of the Water Guidance covers
water-related information to be included in themainstream report with a focus on water (1)governance; (2) policies, strategies and targets
and related management; (3) risks andopportunities; (4) sources of environmental
impact; (5) performance and comparative
analysis; and (6) outlook. Additionally, this
Guidance focuses on the quantity and qualityof freshwater resources (both surface andgroundwater). Preliminary reporting elements
addressing issues regarding biodiversity andaquatic (fresh- and non-freshwater)
ecosystems loss and degradation are also
provided. For additional resources on disclosureof water-related information, such as reporting
templates, please visit www.cdsb.net/water.

3. Communicating an enhanced understanding
and awareness of water-related issues andtheir links to natural capital.

Figure 2. The relationship of the CDSB Framework for reporting environmental and climate change information, the Water Guidance
and other guidance in the series. The dashed lines between Application Guidance documents illustrate their interconnected natureand the presence of overlapping topics.

11

CDSB Framework | Application guidance for water-related disclosures

2. Mainstreaming water
reportingInternational initiatives such as the Sustainable
Development Goals (SDGs) and the Planetary
Boundaries6 highlight water resources andecosystems as essential for the sustainability ofnatural and socio-economic systems. Withinthese initiatives, direct water-related
considerations include (but are not limited to)clean water and sanitation (SDG 6), life below
water (SDG 14), and ocean acidification andfreshwater use, respectively. Additionally, water
plays a pivotal role in tackling hunger (SDG 2)
and gender equality (SDG 5), promoting
responsible consumption and production (SDG
12), climate action (SDG 13), and life on land
(SDG 15), as well as in biosphere integrity and in
the adaption to climate change (in Planetary
Boundaries).
Existing sustainability reporting organisations
and initiatives provide standards, guidelines,
and recommendations on corporate water
reporting, but none provide specific nonsectoral recommendations for mainstream
reports like the TCFD recommendations havedone on climate-related financial risks andopportunities.
With a growing understanding of the significant
risks environmental issues can pose to thestability of the financial system and to broader
society, an increasing number of regulators areprioritising environmental and climate-related
disclosuresb in an effort to drive climate action
and to mitigate environmental impacts andrelated risks.

Despite the concrete steps that have beentaken by heavily water-reliant sectors, such as
beverage18 and mining19, more work is needed
to ensure that reporting on material waterrelated financial issues in mainstream reports isof sufficient quality and detail to support
decision-making by investors and otherstakeholders, as the TCFD recommendations
encouraged for climate. Additionally, given
ongoing initiatives on the interactions between
business and natural capital and related
corporate disclosure,c it appears that there
could be a policy response that constitutes
mandatory corporate disclosure, focusing onwater as a core element.
At present, there is an information deficit forinvestors and other stakeholders on thereporting of material water-related financial
risks and opportunities in mainstream
corporate reports.20, 21, 22, 23 This shortfall in highquality, decision-useful material water-related
financial information means that investors areunable to allocate capital that can effectively
instigate change and enforce resilience acrosseconomies and societies.
This Guidance aims to fill the information gap
and to prepare companies to new regulations
by illustrating how the CDSB Framework can
be applied to water-related reporting in
mainstream reports through the integration ofelements from existing water reporting
standards and frameworks, and alignment with
the TCFD recommendations.

Businesses are already experiencing thefinancially-material impacts related to thecompetition for water resources and its
associated degradation of ecosystems,7, 8, 9, 10, 11, 12
representing a risk to greater financial andsocietal systems. Investors are reacting13, 14 bycollating corporate water-related data andincluding it in their portfolio risk assessment,15, 16
by creating investment funds dedicated towater, and developing initiatives aimed atraising awareness of water-related risks andopportunities.17

b For example, EU initiatives related to the Corporate Sustainability
Reporting Directive, to the EU Taxonomy Regulation, and to the
Sustainable Finance Disclosure Regulation, announcement of
mandatory adoption of TCFD by national regulators (e.g. New Zealand,
UK, Hong Kong, Switzerland), developments and publications by the
IFRS and FASB, in particular, the intention to establish a new board forsetting sustainability reporting standards that meet the needs of thecapital markets (the International Sustainability Standard Board).

c For example: Science-Based Target Network, Business for nature, EU
Corporate Sustainability Reporting Directive, IFRS and International
Sustainability Standards Board, and the Taskforce on Nature-related
Financial Disclosures (TNFD)12

CDSB Framework | Application guidance for water-related disclosures

3. Structure of the Water
Guidance
The Water Guidance is designed around thefirst six reporting requirements of the CDSB
Framework (Appendix 1):• REQ-01 Governance• REQ-02 Management’s environmental
policies, strategies and targets• REQ-03 Risks and opportunities• REQ-04 Sources of environmental impact• REQ-05 Performance and comparative
analysis• REQ-06 Outlook
These six reporting requirements set out the
key content elements for reporting material
environmental information in the mainstream
report. For each of the six reporting
requirements, the Water Guidance provides:• A checklist including suggestions for making
effective water-related disclosures;• Detailed reporting suggestions and guidance
to complement the CDSB reporting
requirements in relation to water-related
issues;• A selection of external resources to assist
companies in developing their mainstream
water reporting; and• Explained examples of good practice inmainstream water reporting.

In addition, the Water Guidance provides:• An overview of the significance of water tobusinesses, explaining the importance ofwater-related risks, and highlighting the key
characteristics of water resources andecosystems and their importance tocorporate reporting (see Chapter 2).
• Reporting expectations on material andcontextual water-related disclosures fromcompanies and provides further
considerations covering aspects of thereporting principles and the remaining six
requirements of the CDSB Framework(see Reporting expectations and importantconsiderations).
• A table mapping the TCFD
Recommendations and water-related
reporting frameworks and standards with thereporting requirements of the CDSB
Framework (Appendix 2).
• A list of additional resources for preparing
effective water-related disclosures(Appendix 3).

Chapter 2

Water andbusiness

14

CDSB Framework | Application guidance for water-related disclosures

Water is a key resource for our livelihood,recognised by the United Nations as a humanright. It is used for drinking, agricultural
production, and cooling processes, as well as
for natural processes such as
evapotranspiration from vegetation. But water
is a finite resource that different water users
share and compete for to fulfil their needs andpurposes. In a given area, a water basin,d thecompetition for water can be exacerbated by amultitude of natural and anthropogenic factorsthat affect water supply and/or demand,
including (but not limited to): demographics,
industrial and agricultural activities, pollution,and climate change.
These water-related characteristics anddynamics pose risks to businesses.
Water-related risks are ranked at the top of
global environmental and societal risks24, 25
and businesses are increasingly experiencing
significant financial impacts associated withthose risks.26, 27, 28, 29, 30 Water resources arefundamental for businesses, whether it be as
an input to production processes and/or adestination for wastewater, for instance. For thisreason, water-related risks entail potential
damages for organisations’ operations,
reputation, legal, and financial performance,and should be reflected in the financial
statements and notes to the financial
statements. Nevertheless, businesses can playa pivotal role in mitigating water-related risk
by directing actions through their operations
and/or supply chains, but also at the wider
water basin scale.31 Withdrawals, consumption,and discharge impact the functionality ofnatural ecosystems and the socio-economic
conditions of local communities within basins.
Therefore, corporate water strategies andpolicies should target and foster improvements
through pollution reduction and increased
efficiency for operational water use but also
incorporate a water basin approach, tacklingwater as a shared resource and considering
the local environmental, regulatory, and socioeconomic context through engaging withother stakeholderse where possible.

d Basin or catchment: the area of land that drains all the streams andprecipitation to a common outlet such as the outflow of a reservoir,
mouth of a bay, or any point along a stream channel (e.g. river). It
includes associated groundwater areas and may include portions ofwater bodies, such as lakes or rivers. Catchment areas are also referred
to as watersheds, (drainage) basins (or sub-basins).
e Those who have an interest or “stake” in water resources and in
the outcome of any water management plan or policy. These include
individuals, other organisations or interest groups, such as local
communities, and regulators. Environment and natural ecosystems arewater-related stakeholders since they require water to function andprovide the ecosystem services to our society (Loucks et al., 2017;
Alliance for Water Stewardship, 2019)

1. Key Characteristics
The interactions between water and businessare characterised by key aspects that areimportant for organisations to properly
comprehend and consider as they seek tounderstand water-related risks andopportunities, develop and implement
adequate strategies, and select material
water-related information to be included in theirmainstream reports. In particular, organisations
should consider:• Site-specificity of water issues;• Value chain in water-related assessments, i.e.
from supply chain to customers;f• Engagement and cooperation withstakeholders in water management; and• Multifaceted and interconnected nature ofwater risks and issues.
Firstly, water dependencies, impacts, risks andopportunities are site specific, whether theyoccur in an organisation’s operations or along
its value chain. The water-related context in agiven location, or more specifically in a given
water basin,g concerns not only the physicalstatus of water resources, in terms of quantity,
quality, and time patterns (e.g. seasonality), butalso (1) water-related infrastructures and their
management; (2) social conditions, including
community traditions and livelihoods; (3)economic conditions, such as water-related
productivity, employment, and income; (4)governance and regulation addressing water
management; (5) geopolitical dimensions (e.g.
in transboundary basinsh); and (6) ongoingregional cooperation initiatives.

f The Biological Diversity Protocol first recognises three major partsof the value chain: (1) Direct operations (gate-to-gate), which coveractivities over which your business holds ownership or control; (2)Upstream (cradle-to-gate), which covers the activities of suppliers;(3) Downstream (gate-to-grave), which covers activities linked to thepurchase, use, reuse, recovery, recycling, and final disposal of yourbusiness’ products and services.
g Basin or catchment area is the appropriate scale to assess andmanage water since it represents the hydrological units or/andhydrogeological units (the limits of both units could be different, due tounderground structure) within which stress conditions occur.
h Transboundary basins are basins of transboundary waters, that is,of any surface waters (notably rivers, lakes) or groundwaters whichmark, cross or are located on boundaries between by two or morestates. Available from: https://unstats.un.org/sdgs/metadata/files/
Metadata-06-05-02.pdf

15

CDSB Framework | Application guidance for water-related disclosures

Secondly, given the globalised nature of value
chains, water dependencies, impacts, risks, andopportunities are often most significant outside
the organisation’s fences. Water issues may
affect the entire lifecycle in the value chain,from water use for raw materials to waste
management. For this reason, companies
should include their value chains in theassessment of water-related dependencies,
impacts, risks, and opportunities.
Collaborative action, and engagement withvalue chain stakeholders at the basin scale isfundamental for effective water managementi
and water stewardship (see Appendix 3).
Single actions at the operational level (e.g. toincrease water efficiency) do not improve thestatus of water resources if other water users
within the same basin are degrading the water
resources and ecosystems, and/or regulators
are not implementing basin plans or regulatingwater use and discharge.
Finally, water-related issues are multi-faceted
and interconnected. Companies can rely on
different types of water resources andecosystems (e.g. freshwater, seawater) and caninteract with water in different ways, fromconsumptive (e.g. irrigation) to nonconsumptive use (e.g. hydropower), andpollution.

i Description of Integrated Water Resources Management
framework and principles-based approach and process are available
from: https://www.gwp.org/en/GWP-CEE/about/why/what-isiwrm/#:~:text=Integrated%20Water%20Resources%20Management%20(IWRM,vital%20ecosystems%20and%20the%20environment.

The main water-related issues can be classified
as follows:• Too Little Water – insufficient quantity tomeet the demand of all users, which includes
infrastructure, distribution, and access issues;• Too Much Water – excessive volumes ofwater in terms of flooding or extreme andintense weather; and• Polluted/Dirty Water – water is polluted orotherwise altered to a state that makes it
inappropriate for its intended use.
In addition to the interconnection of water
systems, availability and quality of water
resources also depends on other environmental
systems such as climate, land cover and use,
and on socio-economic factors, for example inregions where there is a significant lack ofaccess to water resources. Developing
effective and resilient water strategies
therefore requires companies to consider many
dynamic and interconnecting systems.

16

CDSB Framework | Application guidance for water-related disclosures

2. Water-related risks andopportunities
Organisations can experience different typesof financial water-related risks andopportunities, such as: physical, reputational,
policy and legal (or regulatory), technological,
and market risk. Physical risks are linked to thequantity of available water, as well as water thatis unfit for use (e.g. contaminated from
pollution) or inaccessible. This category
includes risks posed to businesses from
impacts on water resources and on otherenvironmental systems and processes, such as
climate change. Physical risks therefore
encapsulate the increased likelihood andseverity of extreme water-related weather
events, contamination of water bodies, sealevel rise, permanent changes in precipitation
patterns, expansion and exacerbation of water
stress, ecosystem change and biodiversity loss,
for instance. Additionally, corporates may facerisks linked to the transition to a water secure
future, including: the impact of regulation on
withdrawals and effluents (regulatory), shifts inmarket preferences (market) and stakeholders’perceptions of a organisation’s impact on water
resources (reputational), and the impact of
new technologies (technological). Addressing
water-related risks can turn into business
opportunities and related financial benefits
linked to, for example, improved water
efficiency, development of new products andservices, and foster the conservation andrestoration of ecosystems the organisation
relies on through the engagement of andcollaboration with stakeholders.

Finally, all these types of risks can be caused byboth (1) the organisation’s specific businessand the water dependencies and impacts of its
operations or value chain and/or (2) or by thecontext32, 33, 34, 35, 36 in which its activities arelocated, i.e. both due to mismanagement ofother water users (e.g. excessive waterpollution) and to socio-economic conditions in
the basin of operation, such as politicalinstability (Table 1).
Additionally, water-related risks are linked toother environmental issues, such as land use
and climate change. For instance, waterrelated impacts linked to climate change havebegun to materialise through more frequent
floods, droughts, and registered storms,
alongside rising sea levels,37 and will continue tomaterialise whichever climatic trajectory theworld follows.38 Considering such aggregatedrisks, including interlinkages between water andother environmental and socio-economic risks,
is critical to drive business continuity andresilience to future scenarios.

17

CDSB Framework | Application guidance for water-related disclosures

Dependencies and Impacts

Risks and Opportunities• Water availability for manufacturing,
supply chain, energy production,
considering that water is shared among
stakeholders• Physical – interruption/disruptionof supply• Legal – fines, reduced access to water• Regulatory - limiting water allocation;
increased in pollution standard• Water depletion and degradation –excessive use and polluting effluents• Reputational – loss of licence tooperate (after local community protests)• Opportunities – resource efficiency(other examples in REQ 02 and Table 2)

Operations,value chain,
sector(other examples in Table 1)

Locationand context

Business- Water basin, country- Socio-economic conditions,stakeholders, government
actions and regulations

IssuesQuantity(too little or too much)

Water

Quality(too polluted / dirty)		• Resources – surface, groundwater, rainfall etc.

		• Ecosystems, related services and biodiversity – freshwater and marine		• Cycle – precipitation, evaporation, evapotranspiration etc.

ClimateChangeLand Use andLand Use Change

Biodiversity andEcosystems• Changes in precipitation
patterns• Deforestation – impacts
on water cycle and higher
water-related erosion• Ecosystem degradation
and biodiversity loss due
to polluting emissions andchanges in water levels andtemperatures (e.g. in rivers)• Increase of water scarcity,droughts and floods• Accelerate glacier melt
affecting runoff and sea
level rise
• Increase of evaporationfrom land and oceans• Tap or pumped water may
contribute to GHG emissions• Intensive agriculture andloss of vegetation bufferzones - water pollution(higher nutrients load)• Loss of floodplains,
wetlands, mangroves andcoral reefs - reduced climatechange mitigation capacity– e.g. from flood and storms• Impact on water
purification due to lossof vegetation, wetlands,
soil and related filteringorganisms (e.g. fungi, algae,
bacteria)

Figure 3. Key water-related characteristics for businesses and examples of links between water and other environmental topics

Chapter 3

Application
guidance forwater-related
disclosures

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CDSB Framework | Application guidance for water-related disclosures

1. Reporting expectations andimportant considerations
The following section illustrates the applicationof the first six reporting requirements of the
CDSB Framework to water-related disclosures.
First, though, a number of clarifications on thereporting expectations and related outcomes,
and considerations regarding the guiding
principles and remaining reporting requirementsof the CDSB Framework are provided.
1.1 Applying materiality
The reporting practices of this Guidance should
be applied and disclosed against, like all
information for the mainstream report, only
when the information is deemed material by
the organisation (see section 1.1.1 Materiality).
This means, in practice, that not all thesuggested reporting practices offered in this
Guidance will necessarily be applicable forinclusion in the mainstream report of allcompanies that have deemed water material.
Details on the approach and factors applied indetermining materiality and in the selection of
the water-related information included in themainstream report represent useful information
for investors. If water is not deemed material abrief explanation of the reason behind thisoutcome is needed.
Additionally, REQ-11 of the CDSB Framework
encourages companies to include a statementof conformance, setting out the extent that the
principles and reporting requirements of the
CDSB Framework have been applied. In doingso, companies are expected to state theoutcome of applying the relevance andmateriality principle.
1.2. Providing contextualised and businessspecific water-related information andclarifying methods
Disclosures should provide the reader withsuccinct and concise water-related contextual
information specific to the reportingorganisation. The organisation should:• Focus on reporting those activities andoutputs that are likely to impact theavailability and quality of water for theorganisation itself and/or for others, where
the impacts from those activities and outputs
are likely to affect the reporting organisation’s
ability to operate its business model andexecute its strategy, as stated in the CDSB
Framework;• Emphasise and report details on
hotspot areasj affected by critical levels ofwater-related risksk (see Table 1) and whereorganisation’s sites, suppliers or markets arelocated to address the site-specificity ofwater-issues. When material, such reporting
details should explain how an organisation isprioritising or what it is doing differently totackle water-related issues in these hotspot
areas other than in less critical areas, and thiscan represent decision-useful information forreport users. Such details show that anorganisation has:
• Understood the geographic-specificity ofwater-related issues;• Analysed the water-related status andrisks of its operations and value chain andclassified them according to different
levels of risk (see Tools for assessing
water-related status and risks forsupport); and• Identified hotspot areas (e.g. affected by“high” or “very/extremely high” risks) andpotentially defined specific goals, targets,and established management
mechanisms.
The geographic detail of such disclosures cancover either hotspot areas (e.g. different levelsof water risk), water basin, country, or specificsite, and the choice depends on themateriality assessment of the organisation(e.g. site-specific details can be disclosed forbig mining sites that are material for theoverall organisation, for instance due to
productivity or reputation).
• Clearly describe the assessment methods
used, e.g. definition of hotspot areas,
assumptions and reasons for inclusion in themainstream report. Additionally, since several
water-related terms are not uniquely definedand evolve over time, it is good practice toprovide definitions of the water-terms used in
the mainstream report and reference toexternal resources to avoid misinterpretation.

j The term hotspot areas will be used in Water Guidance for those areasthat have been identified as priorities by the organisation.
k Water risks embed both water stress and scarcity. Water stress includes
water availability, quality, and accessibility, which are also affected by theorganisation’s and government’s water management; it does not include
factors such as floods and effects of climate change. Scarcity reflects thephysical abundance of freshwater; it is a function of the water use/demand
relative to water available in a given area. There are other physical water-relatedrisks, such as flooding and drought, as well as regulatory and reputational risks
that may affect an organisation.

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CDSB Framework | Application guidance for water-related disclosures

1.3. Reporting boundaries and period
REQ-07 of the CDSB Framework concerns thereporting boundaries employed by theorganisation for the mainstream report. Material
water-related information disclosed should be
prepared according to the reporting
boundaries used for the rest of the mainstream
report. It may be, however, that water-related
information that falls outside this reporting
boundary will be appropriate for inclusion in themainstream report, such as relating to suppliers
and outsourced activities located in hotspot
areas or where contracts expose theorganisation to water-related risks oropportunities. REQ-07 offers that informationand data from outside the reporting boundary
should be distinguished and the organisation’s
approach to boundary setting be reported.
More information on boundary setting andreporting can be found in CDSB’s Proposals forboundary setting in the mainstream report.
In addition to the reporting boundary, REQ-09
suggests that the material water-related
information included in the mainstream report
should follow the reporting period of the rest of
the report. Aligning the reporting period ofwater-related information included in themainstream report better ensures that it can beconnected with other information disclosed.
This can enhance the comparability with areas
such as financial performance and otherenvironmental data, as well as the natural
capital balance sheet — as advocated by CDSB
Framework Principles 3 and 4, respectively.

1.4. Using existing disclosures and resources,and ensuring connectivity
The CDSB Framework and its reporting
requirements intend to align with andcomplement existing mainstream financial
disclosures. It will be the case, then, thatorganisations may already have the information
to satisfy certain aspects of the CDSB reporting
requirements and the suggestions of this
Guidance. For example, companies may alreadybe disclosing material water-related informationthat would be appropriate for mainstream
disclosure in line with the CDSB Framework
through different reporting channels, such assustainability reports, CDP submissions andindex, investor questionnaires, or natural capitalbalance sheets or income statements.l
Together, with the list of Useful resourcessuggested in this Guidance (throughout the 6reporting requirements) and the table includedin Appendix 2, these reporting channels can
support report preparers (and users) inunderstanding water-related concepts such as
water stewardship, water-related risks andwater accounting methods and metrics.
Repurposing these existing disclosures to meetthe specific requirements of the mainstream
report could benefit and streamline reporting
practices. A useful resource to understand theinteroperability of existing frameworks andstandards is the paper Reporting on enterprisevalue, which also provides a practical example ofsustainability-related financial disclosure througha prototype standard focused on climate.

l The outputs from the reporting process based on the water guidance
can be also used in Natural Capital Accounts which are referred toby a number of different groups including: The UK Natural CapitalCommittee, Capitals Coalition and the British Standards Institute.

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CDSB Framework | Application guidance for water-related disclosures

Similarly, report preparers may also be able toapply the financial accounting standards used
for mainstream reporting to report on certain
aspects of water-related financial information.
Despite not being focused on water, anotheruseful resource is the CDSB’s Uncharted
waters, which explores financial accounting
standards that could aid companies in
responding to various aspects of the TCFD
recommendations. IASB (IFRS® Standards andclimate-related disclosures) and the IFRSFoundation (Effects of climate-related matterson financial statements) have both publishedpapers that discuss how the IFRS Standards
address issues that relate to climate-changerisks and other emerging risks. Similarly, FASB
has also produced an educational paper(Intersection of Environmental, Social andGovernance Matters with Financial AccountingStandards) that explains when applying
financial accounting standards, organisations
may consider the effects of certain material
ESG matters (including water and waste
management) that have a material direct orindirect effect on the financial statements andnotes. Building on the IASB and IFRSFoundation papers, CDSB has also developed
guidance (Accounting for Climate) to support
preparers on how to integrate climate-related
matters into financial reporting and could also
be applied to water-related matters, wheresuch matters are considered material.
Finally, Principle 3 of the CDSB Framework
emphasises the importance of ensuring thatmaterial environmental disclosures, including
those regarding water issues, are connectedwith other mainstream disclosures. The
principle informs report preparers that
disclosures should be formulated andpositioned in a way to allow investors to see
and understand the linkages. In developing
their mainstream reporting practices,companies should try and ensure that thelanguage and labelling used best allows forclear understanding of these interconnections
and avoids unnecessary duplication or
confusion of information.

2. Roadmap and checklist forwater-related disclosures
The reporting outcomes depends not only on
the materiality assessment but also on the levelof maturity of integration of water in thebusiness strategy, policy, and management of
the reporting organisation and of water-related
disclosures.39 Some companies have alreadyintegrated water in their business strategy
whilst others have yet to adopt substantive
measures and are only in preliminary stages ofundertaking their journey towards water
stewardship. Providing a clear roadmap
detailing actionable steps with measurable
targets would be particularly valuable to report
users. Figure 4 provides examples ofapproaches to water-related financial
disclosures according to the maturity of suchdisclosures. In combination with the checklist, it
can support the preparation of effective
disclosures, which need concrete assessment,
governance and internal communication,
coordination and cooperation among different
business departments.
The checklist (also referenced in Figure 4)
summarises the suggestions on how to include
material water-related information inmainstream reports following the CDSB
requirements. The elements of the checklist are
not to be addressed as mandatory
requirements, but as desired disclosures thatshould be included in the mainstream report ifmaterial for the organisation.

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CDSB Framework | Application guidance for water-related disclosures

N

Throughout theprocess• Inform theBoard andManagement
REQ-01• Adopt awater-basin
approachand engage
with stakeholders
REQ-02Is your organisation disclosing
water-related information(e.g. sustainability reporting)?

Prepare the materiality* assessment — StepsY
Gather the available
data and prepare
the materiality*
assessment

1. Identify and assess water dependencies and impacts
considering different business activities, the value chain, and theirrespective locations (identify hotspot areas) REQ-02, 04, 05
2. Assess company’s water stewardship capacity (expertise,stakeholder engagement capacity, monitoring systems) REQ-01
3. Assess water-related current and future risks and opportunities
and their business implications over time REQ-03, 06
4. Consider: REQ-03, Table 1• different categories of risks and opportunities​;• risks from operations, value chain & context (basin).

N

Explain why

Follow the steps

Is water material*?

*CDSB
materiality:
Information is material if impacts on thecompany’s financial
condition and operational results and its
ability to execute its
strategy (for further
details refer to CDSB
framework)

Y

Y
Use Table 3(Appendix 2) in the
Water Guidance tomap your data to
CDSB Requirements• Assess links with overall business strategy (e.g. risks, value
creation opportunities, monitoring systems) REQ-02• Prioritise areas of strategic relevance and detail resources needs
and allocation (financial and personnel) REQ-02• Define water goals, contextual targets and metrics that address
the main risks and opportunities and contribute to businessgoals REQ-02

Follow the CDSB Framework, Water Guidance and the Checklist for water-related financial disclosures
to prepare the mainstream report and then check if it:
Explains the rationale behind water-related information
Provides business-specific information and links with business strategy
Ensures the connectivity of information throughout the report
Provides a clear roadmap with actionable steps and measurable goals

Y

Are there
disclosure gaps?

Define clear steps to address the gaps and to enhance
disclosure including measurable objectives and timeline

N

Check other CDSB requirements and principles(e.g. conformance, assurance)

Figure 4. Roadmap to effective water-related financial disclosure. This flowchart illustrates a hypothetical roadmap for water-related financial
disclosures. The path depends on the organisation-specific maturity in and type of conducted water reporting (i.e. GRI, CDP Questionnaire) and there
can be additional intermediate paths besides the two shown in the figure. Materiality assessment can occur at different stages throughout the process(this figure is indicative). The Water Guidance provides additional support (e.g. suggestions and resources) for each step and references to the specificsections of the Guidance are included in the flow chart.

23

CDSB Framework | Application guidance for water-related disclosures

REQ-01 Governance
Does the disclosure:
Identify the person(s) or committee responsible
for water policies, strategy and information?
Explain how water policies, strategy andinformation are delegated to management, andif there are specific roles or mechanisms inplace in hotspot areas to tackle compliancewith water-related regulatory landscape andengagement with stakeholders?
Describe any systems for accountability andincentivisation?
Explain whether the governance mechanisms
for water policies, strategies and disclosure differ
from other material concerns and, if so, why?
REQ-02 Management’s environmental policies,
strategy and targets
Does the disclosure:
Explain the material water-related dependencies
and impacts of the organisation with additional
consideration of links to natural capital?
Summarise the water policies and strategies
and how they support or link to theorganisation’s risks and opportunities andoverall strategy?
When applicable, explain whether and how
water strategies, policies, and management are
influenced by stakeholder engagement?
Set out the contextual, science-based and timebound targets, timelines, and indicators fordelivery of water policy and strategy withmethods and baselines, as well as explain
progress and/or the development of policies?
Detail the resourcing of the delivery andmanagement of water policies and strategies?

REQ-03 Risks and opportunities
Does the disclosure:
Identify material water-related risks andopportunities by adopting a basin-scale andvalue chain approach, and by considering
different types of risks (see Table 1)?
Explain the implications of material water-relatedrisks and opportunities on business and value
chains, specifying geographic locations and time
horizons in which the risks will materialise?
Describe the systems and processes used forassessing, identifying, and monitoring waterrelated risks and opportunities, including

whether they are integrated with existing risk
management systems and processes?

REQ-04 Sources of environmental impact
Does the disclosure:
Provide metrics and indicators for sources ofmaterial water impacts (at least withdrawals,
consumption, discharge) using both absoluteand normalised metrics?
Explain the metrics used, including themethodologies, geographic details, levels of
uncertainty and provide narrative to assist inunderstanding of the results?
Categorise and disaggregate metrics, e.g.
considering areas affected by different levels ofwater risks or different water sources anddestinations, to support understanding andcomparability?
REQ-05 Performance and comparative analysis
Does the disclosure:
Provide appropriate historical data to the results
reported from REQ-04 for material water
impacts to allow for useful comparison,
including details on hotspot areas?
Contextualise the performance with baselines,
targets and other criteria used to assess progress?
Explain the major trends with reference todrivers of change under (e.g. water-related
strategies or business developments) and/or
outside (e.g. regulatory changes) the control of
the organisation?
REQ-06 Outlook
Does the disclosure:
Explain the likely effect of future water-related
impacts, risks, and opportunities as well as ofwater strategy on company performance andresilience, taking account of regulatory andmarket trends and environmental changes?
Identify and explain the time horizons used forreporting on corporate outlook?
Explain any techniques, such as scenario
analysis, used to inform the outlook including
the methods, scenarios and assumptions used,
and any shortcomings and uncertainties?

24

CDSB Framework | Application guidance for water-related disclosures

3. Application guidance
REQ-01Governance
Disclosures shall describe the governance ofenvironmental policies, strategy and information
Disclosure checklist
Does the disclosure:
Identify the person(s) or committee
responsible for water policies, strategy
and information?
Explain how water policies, strategy andinformation are delegated to management,
and if there are specific roles or mechanisms
in place in hotspot areas to tackle compliancewith water-related regulatory landscape andengagement with stakeholders?
Describe any systems for accountability
and incentivisation?
Explain whether the governancemechanisms for water policies, strategies
and disclosure differ from other material
concerns and, if so, why?
1. Governance arrangements and rationale
Governance disclosures should demonstratetransparency and accountability for theorganisation’s oversight of water-related
matters. It is essential that the responsibility forthe disclosure of water-related information is
identified, whether it be at board-level or has
been delegated to specific committees, etc.
The most innovative, far-reaching, andsuccessful water strategies and stewardshipjourneys will often require the leadership or
integral support of the highest governing
bodies of an organisation. Illustrating, whether
diagrammatically or through clear narrative,
where responsibility lies at board-level and who
is driving forward such strategies at the
management level is essential to evidence clear
accountability and provide transparency. It
could assist report users in understanding thedecision-making processes for major strategic
decisions. For instance, what processes would
allow or require governance bodies to decide toallocate capital, change strategic direction ortransform the business model in response to
identified water-related risks and opportunities?

In setting out the governance and management
arrangements for water-related policies,
strategies, and goals, companies should ideallysummarise the rationale for such arrangements.
For example, at board-level, what qualifications,skills, or experience makes the person ormembers of a committee best suited tooverseeing the organisation’s water-related
strategy? Indeed, some boards andmanagement teams will draw on external
expert advice on general or specific waterrelated issues for capacity building and steering.
For example, capacity building sessions could
be especially appropriate for companies
approaching the assessment of water-relatedrisks and opportunities or using scenario
analysis to drive strategy development. Offering
details of such external, expert advice in themainstream report could demonstrate proactive
and responsive oversight of water-related issues
as well as improve the reliability of disclosure.
If in place, the organisation may describe theresponsibilities of specific roles, capacity
building sessions, and stakeholder engagement
activities in hotspot areas.
2. Information flows and oversight
Effective reporting on governance willarticulate the connections, information flows
and oversight mechanisms that exist between
the board, management and water-related
issues. For example, report users may wish toknow by what means and how often theappropriate board members are informed bymanagement on water-related targets,
progress or relevant changes to the external
environment and through the supply chain, butalso details on the nature and reliability of thecontrol system used to prepare water-related
information to be disclosed. Additionally,
information on how and how often theemployees (and contractors) with direct
responsibilities for water resources (e.g.
operators responsible for water treatment ormonitoring activities) are consulted about thewater strategy and stewardship of theorganisation would provide further helpful
context on information flows.

25

CDSB Framework | Application guidance for water-related disclosures

To demonstrate that the appropriateorganisational and information systems are inplace to oversee water-related risks andopportunities, the reporting on the governanceof material water-related issues could answer
the following questions:• Which corporate governance codes
determine or influence the way in which theorganisation is governed?
• Where appropriate, are there means forresponsive strategic interventions or systems
in place to ensure resilience (e.g. prevention or
mitigation of incidents, such as polluting spill)?
• How often does the whole board discuss thewater strategy and consider related
developments?

4. Specificity of water governance
Companies’ water efforts sometimes form partof broader, cross-cutting environmental
strategies with governance and oversightorganised around these broader,interconnected environmental ambitions.
However, different investors can focus theirattention on different material environmental
issues when assessing companies and reading
reports, with water often of particularimportance, especially for some sectors. Whenmaterial, companies should therefore explicitly
summarise their water-related governance as
discussed in previous paragraphs but more
importantly, explain how it is integrated in amore connected environmental strategy, as wellas in wider sustainability and business strategy.

• How are water-related risks and opportunities
considered in major strategic decisions/capital allocations?
• How often is performance and progress in
hotspot areasm communicated to
management?
• Who ensures compliance with water-related
regulatory environment?
3. Incentivisation
To foster performance ownership, appropriate
members of the board and management need
to be incentivised to meet and fulfill waterrelated targets and policies. Reporting on sucharrangements in the mainstream report is ameans of communicating that commitment.
Equally important, though, is the reporting of
the metrics or criteria used in incentive
schemes. They should speak to the most
pertinent water-related risks, opportunities andimpacts that have been identified by theorganisation. Providing ongoing disclosure
about water-related performance and progress
towards long-term water targets tied toremuneration is useful to report users.

m The level of details of the reported information depends on theorganisation structure and facilities. For example, as suggested by
The Mining Association of Canada, if an organisation operates multiple
facilities within a single basin, the organisation may choose to adopt a
regional approach to water stewardship. In these cases, the division ofroles and responsibilities between facility-level personnel and regional
personnel should be clear.

Examples of good practices
1. Olam Annual Report 2019 describes theinvolvement of the Board in water-related
strategy and risks assessment. A dedicatedCommittee is responsible for water-related
matters (Governance Report - pgs. 40-1) andstakeholder engagement. The CEO is amember of this Committee (Strategy Report- pg. 64).
2. Coca-Cola HBC Integrated Annual Report2019 describes the process of stakeholder
engagement with local communities on water
conservation and with “Partners in efficiency”
to share knowledge and develop solutions for
improving water-related performancethroughout the supply chain (pg. 19). The
report also clarifies the role of the Board inthis process.
3. In its Universal Registration Document
2019, L’Oréal clearly reports the inclusion ofquantitative water-related targets on
reduction of water consumption and otherrelated qualitative criteria (e.g. CDP rating) as
part of the variable remuneration of theBoard (pg. 99)

26

CDSB Framework | Application guidance for water-related disclosures

Useful resources
1. Step 2 of the current iteration of the Alliancefor Water Stewardship’s ‘International Water
Stewardship Standard’ (AWS Standard v2.0)
aims to ensure sufficient leadership support,site authority, and allocated resources toenable the implementation of effective water
stewardship. This requires an action plan withan associated timeline detailing due diligenceand risk strategy, and the identification of
responsibility amongst management. The
standard underlines the shared nature of water
challenges within a basin and the importanceof improving both water-related organisation
performance and status of the basin, and ofpartnership, stakeholder engagement andconsensus.
2. In the report Growing Water Risk Resilience:
An Investor Guide On Agricultural Supply
Chains, PRI underlines the investors’
expectations on the board-level oversight andaccountability for water-related risks, including
the supply chain. Additionally, it emphasises
the importance of both internal, supply chain,
as well as collective actions throughstakeholder engagement, including regulators.
The document provides a useful checklist.

3. In their Water Stewardship Protocol,
the Mining Association of Canada proposes
assessment criteria for water governance. The
criteria underscores the importance of (1)involvement of relevant employees,
contractors, and facility-level stakeholders inwater stewardship, (2) of the definition of roles,
responsibilities and accountabilities for
operational water management and basinscale planning, and (3) of the integration withgovernance (e.g. budgeting and external
auditing). The protocol provides a selfassessment checklist covering governance(REQ-01), management (REQ-02) andperformance (REQ-05).
4. The WBCSD report CEO Guide to Water- Building resilient business proposes a sevenstep framework for business leaders towards
responsible water stewardship. It underlines
the importance of board level oversights,
water-related risk management strategies, andof engaging stakeholders, including
consumers. The report also outlines waterrelated risks and business opportunities (usefulfor disclosure under REQ-02 and REQ-03).

27

CDSB Framework | Application guidance for water-related disclosures

REQ-02
Management’s environmental
policies, strategy and targets• Different types of water (fresh and nonfreshwater, e.g. marine, renewable, fossil),sources and recipient water bodies (e.g.
surface, ground-, tap-, and rainwater);

Disclosures shall report management’s
environmental policies, strategy and targets,
including the indicators, plans and timelines
used to assess performance• Different business units and parts of the value
chain (from supply to consumption andend-of-life of products, when applicable) in
relation to their locations, thus consideringboth on-site and off-site dependencies andimpacts (e.g. influence of customers’ water
impacts), and both those that are under andoutside the control of the organisation (e.g.
dependencies on water networks or energy
systems managed by third parties);

Disclosure checklist
Does the disclosure:
Explain the material water-related
dependencies and impacts of theorganisation with additional considerationof links to natural capital?
Summarise the water policies and strategies
and how they support or link to theorganisation’s risks and opportunities andoverall strategy?

• Different uses of water, such as consumptive(e.g. irrigation water evaporated orincorporated in products), non-consumptive(e.g. hydropower), or for remediation (e.g.
borehole);

When applicable, explain whether and how
water strategies, policies, and management
are influenced by stakeholder engagement?

• Water degradation due to effluents from theorganisation into water bodies (e.g. nontreated wastewater released in theenvironment); andSet out the contextual, science-based andtime bound targets, timelines, and indicatorsfor delivery of water policy and strategy withmethods and baselines, as well as explain
progress and/or the development of policies?

• Aspects linked to the socio-economic context(e.g. other concurrent water users) especiallyin hotspot areas (e.g. where people have
limited access to water or where
governmental water management is poor).

Detail the resourcing of the delivery
and management of water policies
and strategies?

The UN SEEA-Water with considerations froma national perspective and sectoral guidelines(e.g. IPIECA, ICMM, SASB standards) may
benefit report preparers in understanding thewater dependencies for a specific company.

1. Providing the context for water policy,
strategy, and targets: business-specificdependencies and impacts
The report user should be able to understand
how water resources and ecosystems, which
underpin and support the organisation’s ability
to succeed, are reflected in its ambitions inmeeting water-related and wider businessgoals. The first step consists of assessing
dependencies and impacts (both positive andnegative) on water that are specific to theorganisation’s business (also in the context ofwider environmental and social issues). The
results of this analysis are to be used to provide
clear context to the disclosure of water-related
strategies, policies and targets. This assessment
should consider:

The identified subset of dependencies
constituting material risks or opportunities(REQ-03) to the company business can besummarised in a qualitative narrativedescription of the integrated business model.
Details on hotspot areas and on water
resources under pressure (e.g. surface orgroundwater) should be provided, if material.
This information provides a useful context for
the understanding of the policies and strategies
developed by the company.

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CDSB Framework | Application guidance for water-related disclosures

This Guidance acknowledges that water-relatedrisks and opportunities are inherently
interconnected with other environmental issues,
such as climate and land-use change.
Therefore, it is helpful when companies detailtheir dependencies on water in the context of
its natural capital dependencies. This natural
capital contextualisation offers a company theopportunity to:• Explore risks and opportunities emerging
from interconnections and relationships
between different environmental issues;• Explain to investors its place in the complex
web of natural systems (also through agraphical representation); and• Consider how to integrate learnings frominterconnections into risk management,
strategy and performance.
The thinking and guidance in the Natural
Capital Protocol, the Principles of Integrated
Capitals Assessments,40 and International <IR>
Framework41 can support the wider
understanding of the relationships between
natural capital and also other capitals.
2. Policies and strategies

Report users should be able to understandhow identified risks and opportunities arereflected in organisation’s strategic
development and how they affect the
impacts of and dependencies on water andnatural capital and water-related ambitions.
It may be beneficial to set out the reasoning
behind the adoption of such policies andstrategies, explaining how they respondeffectively to issues raised in risk andopportunity analysis, dependencies andambitions, and detailing how they areintegrated in the overall business strategy
and management (e.g. in assessingorganisation performance, overseeing
expenditure, costing, acquisitions anddivestures, and in assurance processes). In
particular, it is important to understand how
water strategies and policies are mitigating
risks, harnessing opportunities acrossgeographies over the short-, medium- andlong-term, and the related financial
implications. This description should beappropriately connected with risk
management processes.
If these strategies and targets have beendeveloped in connection to important
agreements or policies,n or sectoral or water
stewardship initiatives (e.g. Alliance for
Water Stewardship or the CEO Water
Mandate), then the relevance to theorganisation should be explained. As statedin the CDSB Framework, this is goodpractice because it provides a basis forcomparison.
When adopting and reporting on waterrelated policies, strategies and targets,consideration of geography and time iscentral. Water-related risks andopportunities vary greatly according tolocation and time horizon. For example,
some water-related regulations are more
likely in one country than another at any
point in time; the nature and severity ofwater issues, such as water scarcity and its
implications for the socio-economic
conditions due to competition for water, willvary significantly. As suggested in theReporting expectations, it is useful to explain
if specific goals or targets and prioritisingactions are in place in hotspot areas.
Exposure to water-related risks depends on
both operations and basin context,
therefore, effective management responses
to water issues include both internal andexternal actions. Examples of internal
actions include an increase in water
efficiency, products and services design anddevelopment, diversification of water
sources, contingency planning (e.g.
infrastructure failure or spills), addressing
emerging effluents concerns, andmeasurements, and monitoring proceduresin light of risks and opportunities describedin REQ-03.

n Examples are: the Sustainable Development Goals and Sciencebased Targets for Nature, or national and regional regulations andgoals, e.g. EU Water Framework Directive, US Safe Drinking Water Act,or the Indian National Water Mission

29

CDSB Framework | Application guidance for water-related disclosures

External actions include stakeholder
engagement activities aimed at integrated
water management influencing governancewithin a basin, and protection andrestoration of freshwater habitats or
ecosystems.
A summary of both types of responses
should be disclosed to concisely exemplify
the organisation approach to water
management, including details on practices
implemented to manage risks in the shortterm versus longer-term, and, whenapplicable, complemented with a reference
to more detailed external documents (e.g.
dedicated water policy document or
website).
Where water strategies and targets interact
with other environmental or social policies,
report preparers should draw users’attention to potential or existing synergies,
explaining the benefits and/or feedbacks(e.g. effects of climate change).
Finally, explanation would be beneficial in
the event of: (1) exclusion of geographies,
facilities or water issues from reporting
scope, (2) no stakeholder engagement, and(3) no integration of water in the overall
organisation policy and strategy.
3. Targets and timelines
Detailed and consistent disclosure isespecially important for the reporting ofcorporate targets, timelines and indicatorsfor measuring performance against water
policies and strategies. The type of target
and indicator, the baseline and timeline, andthe scope should be clearly described toinvestors and connected with the overall
strategy as well as with the addressedbusiness risks and/or opportunities.
For example, useful details on targets are:
• Are the targets contextual and science-based,
as recommended by international water
initiatives (e.g. CEO Water Mandate or
Science-based Targets)? Have baseline andtarget year been defined?
• Are specific targets set for hotspot areas orfor areas where no standards on use of waterand discharge exist (e.g. set by regulatory
mechanisms)?

• Are targets measured through the key
performance indicators (KPIs) described in
REQ 04 and used internally by management?
• Have targets been discussed withstakeholders?
• Are targets aligned with international goals,
and/or with regional, national, or local
regulations?
• How do business operations contribute to theorganisation-wide water targets?
Likewise, it may be beneficial to set timelines
according to how the organisation has defined
the short-, medium- and long-term in its risk
and outlook analysis.
Progress towards targets may be expressed interms of reducing negative impacts but also
through more proactive targets, such as thepercentage of clean water replenished in
hotspot basins in relation to the water
consumed (i.e. net positive)42 , or value orpercentage of investments and of research anddevelopment that is focused on improving
water efficiency or on preserving water
ecosystems in hotspot basins. Targets such asthese provide greater connectivity to financial
and core business performance.
As an organisation progresses with its water
strategies and policies, it is beneficial to explain
how it is advancing and what factors have been
intrinsic to achieving or surpassing the targets.
More importantly, when indicators or targets
have been or are likely to be missed, this shouldbe rationalised, detailing factors that weresignificant and explaining what could havebeen and could not be controlled or better
managed. Explaining how strategies will be
adapted to improve performance as a result
would be of particular interest to report users.
4. Resourcing
When reporting on water-related policies,
strategies and targets, companies should set out
the resourcing, both financial and personnel, formeeting the delivery of the water policies andstrategy. Such detail in a mainstream report canoffer investors reassurance of the organisation’scommitment and effort to meeting its water
ambitions. Reporting on resourcing is especially
important if the organisation’s strategy requires
significant capital investment or operation
reorganisation to meet its ambitions.
Additionally, specific resources in place inhotspot areas should be detailed.

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CDSB Framework | Application guidance for water-related disclosures

Useful resources
1. Sectoral guidelines and standards can
support companies in the identification ofwater dependencies. Useful resources are the
SASB industry-specific standards, A practicalguide to consistent water reporting by ICMM
for the mining and metal sector, the Water risk
assessment in the oil and gas sector - An
overview by IPIECA for oil and gas.
2. ENCORE tool allows to explore water related
dependencies for the direct operations of 169
sectors of the economy at the global level.
3. The System of Environmental Economic
Accounting (SEEA) - Technical Note: Water
Accounting illustrates the main links between
water and economic systems (pg. 6). These
links can be grouped into three types of flows
between the two systems: (1) physical flows ofwater and wastewater, (2) monetary flows
associated with water related products andservices, (3) assets (stocks of water and theirchanges during the accounting period).
4. The AWS Standard v2.0 presents a 5-step
approach to water stewardship. For each step,
criteria and indicators are provided to support
companies in their water stewardship journey.
Additionally, the standard aims to achieve fivemain outcomes: water governance, sustainable
water balance, water quality status, importantwater-related areas, safe WASH (Water,
Sanitation and Hygiene) for all. Together theseprovide a comprehensive overview of waterrelated issues and of their complexity.
5. The CERES Aqua Gauge tool supports
companies in developing and evaluating theirwater strategy – including risk assessment,goal-setting, accountability systems, andprocurement, siting and CapEx decisions.
Additionally, the Ceres Roadmap 2030 section
on Water provides steps to improve water
management and includes practicalsuggestions on performance (REQ 05).
6. The WWF report Putting water strategy into
context proposes a set of steps that establishesa pattern of decision-making, which will enablea corporation to build water context into key
decisions, including the allocation of scarceinternal resources, to create value for the
corporation, nature and people.

7. The integrated thinking illustrated in theInternational <IR> Framework takes into
account the connectivity andinterdependencies between the range offactors that affect an organisation’s ability tocreate value over the short-, medium- andlong-term, including the capitals that theorganisation uses or affects, and the criticalinterdependencies, including trade-offs,
between them.
8. The WWF webpage Contextual andscience-based targets for water and thereport Contextual water targets explainsdifferent types of water targets – noncontextual, contextual and science-basedtargets – clarifying the purpose and the focusof each category.
9. The CEO Water Mandate papers “Exploring
the case for corporate context-based watertargets” and “Setting Site Water Targets
Informed By Catchment Context: A Guide
For Companies” support companies indefining contextual water targets that arealigned with local and/or global public policy
objectives. Additionally, the report SettingEnterprise Water Targets: A Guide forCompanies illustrates a three-step process
to define enterprise water targets informedby the water basin context, which help
companies in addressing shared water
challenges and focusing their efforts in theright high-priority places. Finally, the Science
Based Target Network has issued an initial
guidance on science-based targets (SBTs) for
nature, as a first step toward integrated SBTs
for all aspects of nature: biodiversity, climate,
freshwater, land, and ocean (expected in2022). The Science-based targets for nature Initial Guidance for Business explains what an
SBT is, why SBTs are important, and how they
will work.

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CDSB Framework | Application guidance for water-related disclosures

Examples of good practices
1. Heineken N.V. Annual Report 2019 describes
its Every Drop 2030 Strategy (pg. 124) and
explains the importance of water for its
business, its global commitment implemented
through local actions (in water-scarce andstressed areas), and the role of stakeholder
engagement and cooperation to maintainbasin health. The report graphically illustrates
the main actions and targets.
2. BHP Annual Report 2020 clearly andconcisely summarises its water stewardship(pgs. 59-60). The report describes the main
water dependencies and company steps inmanaging water resources (at the operational
level, in engaging with stakeholders and incontributing to global initiatives on
harmonisation of water accounting like the
CEO Water Mandate). Additionally, it includes
reference to external resources on water.
3. Coca-Cola HBC Integrated Annual Report2019 describes its water dependencies (pg.
18), water stewardship and strategy for
reduction of water consumption within its
Mission 2025 strategy (pgs. 21-5). It includes
actions and goals at both operational andbasin level (e.g. securing water availability inhotspot areas and engaging with
communities), mitigation actions for waterrelated risks (pg. 59), and specific targets forwater-stressed areas (pg. 44). The report also
discloses information on investments in water
stewardship (pg. 39).

4. Diageo Annual Report 2019 describes its
water dependencies, from availability totemperature (for cooling, pg. 52) and its
approach to water stewardship (Water
Blueprint), which prioritises actions in areasthat the company assessed as water-stressed(pg. 51) and includes different actions, fromwater efficiency to management at the basin
scale (pg. 15). The report clearly states theintegration of water-related goals andmanagement into the company strategy (pgs.
8 and 15).
5. Danone Universal Registration Document
2019 presents its water stewardship journey(pgs. 166-8). The report illustrates theassessment undertaken to identify hotspot
areas and prioritising interventions, theobjectives (covering the entire value chain), themain actions and outcomes.

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CDSB Framework | Application guidance for water-related disclosures

REQ-03Risks and opportunities
Disclosures shall explain the material current
and anticipated environmental risks andopportunities affecting the organisation

Disclosure checklist
Does the disclosure:
Identify material water-related risks andopportunities by adopting a basin-scale andvalue chain approach, and by considering
different types of risks (see Table 1)?
Explain the implications of material waterrelated risks on business and value chains,
specifying geographic locations and time
horizons in which the risks will materialise?
Describe the systems and processes used
for assessing, identifying, and monitoringwater-related risks and opportunities,
including whether they are integrated withexisting risk management systems andprocesses?
Water-related risks and opportunities can becomplex and have distinctive characteristics.
They subject to spatial and temporal variations,follow non-linear pathways, are shaped byuncertain actions by different actors, and are
not always directly manageable by theorganisation. It is important to adopt a basin
approach and consider the cumulative impactof all parties that affect a water basin. Water
risks and opportunities, however, are highly
specific to the organisation, the sector, and eachof its operational sites, and the value chain.

The main causes of water risks are:
• Availability and accessibility of sufficient andadequate water supplies;• Wastewater discharges into the environment;• Socio-economic and political conditions;• Regulatory regimes in the areas of operations
or suppliers; and also
• Other environmental issues such as land use
and climate change.
Table 1 provides an overview and examples ofpotential water-related risks and opportunities
that should be considered by organisations andthe associated financial impacts. Water-related
financial risks are grouped according to thecategories used in the TCFD recommendations,
namely physical risks and risks linked to thetransition to a water secure future, including
policy and legal, market, technology, andreputational risks. The included examples canoriginate from either operations or from context(i.e. water basin conditions) and some of themcan fall under more than one risk category or
result from cascade effects (e.g. physical risks
such as reduced water accessibility can becaused by policy and legal risks, such as poortransboundary policy or lack of investments ininfrastructures). When selecting which
categories to disclose, preparers need to assess
what is material to their organisation.

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CDSB Framework | Application guidance for water-related disclosures

Table 1. Examples of water-related risks and opportunities, with the potential financial impacts that may be identified by companies, are provided
in the table below. Operational and basin43 (i.e. due to context) risks are labelled with O and B , respectively. Climate-water risks are identified with
C and those that are linked to land-use change with L .

Physical risks

Risks

Potential business and financial impacts

Acute- Impaired assets due to damages
resulting from floods or cyclones (notlimited to the organisation’s property, e.g.
water infrastructures the organisation
relies on or energy supply relying on waterfor cooling)- Increased severity and frequency of
extreme weather events such as cyclones,
droughts and flooding (coastal, fluvial,
groundwater) C L- Contamination of water bodies (bothfresh- and non-freshwater) caused by theorganisation itself or by other companies
or cities located in the same water basin
O

B

L

Chronic- Changes in precipitation patterns andextreme variability in weather patterns(affecting interannual or seasonalvariability of water resources) C- Water scarcity- Water stress

C

C

L
L

- Changes in temperatures C- Rising sea level C- Coastal erosion C- Ocean acidification C- Reduced revenue and/or increased costs
due to interruption of operations or supply
chain as a consequence of floods or
drought (e.g. low levels in water ways used
for raw materials transportation),o or
damages to the water network;- Reduced revenues due to interrupted,
reduced, or damaged production due tothe unavailability of adequate water (usedas input to production, or for industrial
cooling) also caused by other water users
in the basin and increased costs due tohigher use of water from the distribution
network (e.g. rather than rainwater)- Increased insurance premiums andpotential for reduced availability of
insurance on assets- Increased CapEx due to adaption to
future climate and environmental
scenarios (e.g. rainwater tanks, protection
against floods)- Reduced productivity due to lower water
availability and consequent rethinking ofproduction processes or timing (e.g.
agricultural production)- Write-offs, early retirement of existing
assets and relocation of operations andsuppliers, affecting the costs of raw
materials (e.g. transportation)o Happened already in German Rhine river in 2018: transportation
activities were interrupted due to low levels in the river and thisevent affected the supply of raw materials for some major chemicalcompanies.

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CDSB Framework | Application guidance for water-related disclosures

Policy and Legal

Risks

Potential business and financial impacts- Changes to legislation B- Increased costs of operations and inputs
to operations- Tighter (emerging) regulation on waterrights, permits, and allocations(restrictions in obtaining sufficient water
due to regulations designated to alleviatepressure on water resources) B C L- Increased price of water- Enhanced reporting obligations- Mandates and regulation of existingproducts and services- Exposure to sanctions and litigation(e.g. spills of polluting effluents thatdamage human and ecosystem health;or violation of water-related rights, permits
or allocations) O B- Non-compliance with legislation O- Ineffective (water) governance B- Lack of or weak transboundary water
governance and cooperation resulting in
reduction in water availability, e.g. due toincreased water use by upstream
countries B C- Increased costs of personnel (report
preparers) and monitoring activities (e.g.
new sensors for data collection) required
for reporting activities- Reduced revenue from decreased
production capacity due to limited accessto water- Increased costs and/or reduced demandfor products and services resulting fromfines and judgments- Fines due to violation of regulations- Loss of revenues or impaired asset
valuation due to loss of a permit tooperate from litigation and/or from direct
action by the regulator towards noncompliance- Disruption of operations or supply due toreduced accessibility to water caused bypoor transboundary water governance orpoor infrastructures- Water conflicts (e.g. in transboundarywater basins where no cooperation
between countries is in place) B C L- Non-existent, old and failing existing
infrastructure that is not being properly
maintained due to insufficient investments(on both grey and green infrastructures,such as nature-based solutions)p B
MarketTechnology- Shifting customer preferences to lesswater-intense products (e.g. food, textile)- Reduced demand for products andservices- Volatility of water prices- Increased production costs- Increased costs of raw materials(e.g. water-intense inputs, for which pricehas raised due to water scarcity) C- Supply disruption- Transition to water-efficient and (water-)cleaner technologies- Expenditure for research anddevelopment of new and alternativetechnologies- Substitution of existing products andservices with lower water use or cleaner
emissions options- Lack of access to data or access to poor
quality data
- Unsuccessful investment in newtechnologies- Water-related adaptation technologies
required to cope with new water-climate
conditions and futures scenarios(e.g. flood protection) C

p The IUCN’s Guidance for using the IUCN Global Standard for
Nature-based Solutions provides a framework for the verification,
design and scaling up of Nature-based Solutions. The guidance does
not exclusively focus on water, yet the imperative is that companies
start to think about an integrated approach to water management andconsider the interlink of the different ecosystems in their respective
frameworks.

- Capital investments in technology
development- Increased costs of operations and raw
materials (e.g. higher energy use) required
to achieve water-related goals (lack ofintegrated environmental assessment)

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CDSB Framework | Application guidance for water-related disclosures

Reputational

Risks

Potential business and financial impacts- Shifts in consumer sentiment toward theorganisation/brand as a result/lack ofwater stewardship activities- Reduced demand and purchase of
products and services- Stigmatisation of sector- Stakeholders’ perceptions and concerns
related to the organisation’s use of water
resources (e.g. concerns regarding newpollutants)- Reputational risks due to the violation ofwater-related rights through operations- Workers’ strike (in case of damages towater resources used by local
communities)- Loss of license to operate (e.g. after
community protests)- Social license risks may result in stranded
assets- Negative media coverage- Social license to operate44 B

Resource efficiency

Opportunities

Potential business and financial impacts- Transition to more water efficient
products- Reduced operation costs- Increased water reuse and recycling

Product and service,
and market- Reduced exposure to water pricevolatility- Reduced water usage and consumption- Reduced reliance on water and increased
resilience to potential water shortages- Development of less water-intense
products and services- Increased resilience due to businessdiversification- Development of water-climate
adaptation and insurance risk solutions C- Access to new markets due to lesswater-intense products and services- Ability to diversify business activities- Increased insurance coverage andaccess to new assets that require it- Use of public-sector incentives

Financial incentives- Access to sustainability index loans- Increased access to funds and loans- Access to climate funds C- Green bonds- Incentives for suppliers
Resilience- Diversification of water resources andbusiness activities- Increased business stability- Participation in programmes andadoption of water-efficiency, recycling
and circularity mechanisms- Reduced capital infrastructure costs- Business and supply chain continuity- Improved water-related monitoring
activities and data availability- Adopting a landscape approach to water
management and implement naturebased solutions B
Reputation andrelationship withstakeholders- Collaborative engagement withstakeholders to tackle water challenges B- Improved conditions of water resourcesand ecosystems the organisation relies on(e.g. water replenishment due to improved
operations, or ecosystem restoration) B L- Improved reputation among
stakeholders sharing the same water
resources- Improved stability of operations andworking conditions

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CDSB Framework | Application guidance for water-related disclosures

Like other risks and opportunities thatcompanies face in the modern, interconnected
era, those related to water require carefulconsideration, across all the locations ofoperations and value chain, different time
horizons and potential future pathways. For thisreason, risk management approaches, horizon
scanning, forecasting, sensitivity testing andscenario analysis, which is discussed further
below in relation to REQ-06, are amongst thepractical tools that can guide companies in theirassessment of risk and opportunities.
1. Detailing risks and opportunities
When disclosing material water-related risks
and opportunities in the mainstream report,
thoroughly describing them by specifying their
key characteristics and explaining theirrelevance to the organisation, offers useful
information to investors. In terms ofcharacteristics for high quality reporting, it isessential to properly account for when andwhere the risk or opportunity may materialise,
specifying whether it concerns a specificbusiness area, a particular region or site and thetime horizons, for instance. Causes and sourcesof water-related risks and opportunities andtheir implications for the business (onoperations, value chain, business model andfinancial results) should be described and linked
to the dependencies identified in REQ 02,
sources of impacts and related indicators in
REQ 04, and performance in REQ-05. For
instance, from a risk perspective, indicators on
water withdrawals and their quality are relevant
because an organisation’s operations rely on
this amount of water (regardless of if it is thenreturned totally or partially to the environment)
and on water availability and quality in thewater basin of operation (i.e. on the possibility
to withdraw the required amount of water).
Information on water-related risks andopportunities should include considerations ofand details on:• Assessment methods, including tools used(see Tools for assessing water-related risks)
and timeframes and risk categories
considered, as well as details on materiality
assessment, and on the integration into overallbusiness risk assessment;• Geographic specificity and influencing
context-specific elements, such as geography,
climate (i.e. precipitation patterns andseasonality), status of water resources,
regulation, and socio-economic conditions(e.g. poverty rates, employment rates, WASHrelated conditions), as well as stakeholders’water-related challenges. Classifying locationsof operations and suppliers according todifferent levels of risks is useful (e.g. breakdown of areas of operations in high, medium,or low water-risk), as well as a definition of therisk classes used (e.g. referring to existing tools– see Tools for assessing water-related risks);• Variability over short-, medium- and longterm time horizons. It is important forcompanies to explain when risks andopportunities could be expected tomaterialise and how they may develop
through the considered timeframes,
highlighting the main differences withhistorical conditions. Since the timing ofwater-related impacts on organisations will
vary, this Guidance does not define timeframes because this could hinderorganisations’ consideration of risks andopportunities specific to their businesses.
Preparers are encouraged to decide how todefine their own time frames according to thesectors and geographies in which they
operate, and the water-related risks they face.
A good practice is to consider thehydrological time boundaries in a given basin
area (seasonality, return periods ofhydrological events like floods etc.) also in
combination with projections of different
future climatic scenarios to convey
uncertainty and possible ranges of future
impacts. Climate change, indeed, challenges
the assessment of water-related risks andopportunities because future hydrologicalconditions are likely to significantly differ fromthose in the past; and• Scenarios considered in the risk assessment,
describing which drivers that may influence
the business-water interactions are included,
such as regulations, socio-economic drivers,and environmental drivers like climate change.
This information is interconnected withscenario analysis disclosed under REQ-06.
Where water-related risks intersect with otherbusiness and environmental risks in amplifying
manners (i.e. aggregate risks), it is prudent forcompanies to identify and explain suchconnections and feedbacks.

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CDSB Framework | Application guidance for water-related disclosures

2. Quantification and financial impact
Decision-useful disclosures will further set out
the business implications of material waterrelated risks and opportunities and, where
possible, quantify them over appropriate
timeframes. When valuing the risks oropportunities, the reader should be offered theassumptions and essential figures (e.g. present
value of asset or revenue stream affected) as
well as the uncertainties for the financial figures,
especially if the size of the risk or opportunity
varies largely over time. In addition, themainstream report should be designed in amanner that allows the reader to navigate fromthese risks and opportunities to the policies andstrategies developed to manage them, as it isexpected in REQ-02.
3. Connecting information
In addition, while the CDSB Framework does
not set out specific reporting requirements,
Principle 3 encourages organisations to explain
whether and to what extent water-related issues
are connected with other information andresults in the mainstream report, with REQ-03
explaining that links should be made toreporting of processes and systems for risks
and opportunities. For example, report users
should be able to understand how water-related
issues have been incorporated into existing
systems of risk identification and prioritisation
and whether the systems have been adapted toaccommodate the characteristics of waterrelated issues. When reporting material waterrelated risks and opportunities it is important to
explain how the organisation considers short-,
medium- and long-term issues in risk
management systems in linkage withdisclosures under REQ-02. Further, the systems
used to identify water-related risks andopportunities will develop in coming years withgreater understanding of the link between
water and environmental, regulatory, socioeconomic and technological pathways in the
different basins. Setting out how theorganisation is developing and adapting thesesystems (also by linking to REQ-01 and REQ02) will demonstrate responsive and effective
management.

Examples of good practices
1. BHP (Annual Report 2020) assessedwater-related risks within the basins andmarine regions in which it operates,considering environmental, community andthird party interactions according to acompany-specific framework (pg. 25). Mainwater-related principal risk factors include
physical water-climate threats (impacts on
assets, such as water-related infrastructures,and increased competition for and regulationof water), asset integrity and tailings storage
facilities, and third party performance(contractors whose operations may cause
disruptions to community access to water,e.g. contamination of potable water) (pgs.
30-40).
2. In Danone 2019 Registration Document(pg. 24) water-related risks are embedded in
the climate change category (e.g.
groundwater degradation could impact
operations, and subsidiaries’ relationships
with local stakeholders), and regulatorychanges (e.g. environmental law on wateruse). Additionally, water stewardship emerged
as a priority theme from risk analysis (pg.
143), and a dedicated water risk assessment isperformed by combining three tools (WRI
Aqueduct Water Risk Atlas, WWF Water Risk
Filter, and GEMI Local Water Tool) and audit
processes (pg. 166) and is used to inform thedevelopment of water policy.
3. The Coca Cola 2020 Business andEnvironmental, Social and Governance report(pg. 21) includes a concise description of themethodology adopted to assess waterrelated risks and the results are summarised
in a clear table showing different categories
of risk (physical, regulatory and reputational)
and related business impacts along the value
chain (split into supply chain, operations andmarkets).

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CDSB Framework | Application guidance for water-related disclosures

Tools for assessing water-related
status and risks
The using of existing tools for assessing thewater-related status and risks in the basins ofoperations, supply, and market, can inform andsupport company materiality assessment.
The main tools used by companies are
Aqueduct by the World Resources Institute(WRI), Water Risk Filter by WWF, the India
Water tool by WBCSD, the Water Footprint
Assessment Tool by the Water Footprint
Network and The Local Water Tool (for Oil andGas) by GEMI. These tools adopt different
methodologies and assumptions, provide
different levels of water stress and risks, andcover different areas of the world.
An overview and comparison of some of thesetools are provided by the WBCSD and WWF
report “Right tool for the job: Tools andApproaches for Companies and Investors toAssess Water Risks and Shared Water
Challenges” and IPIECA report “Water risk
assessment in the oil and gas sector: an
overview“ (see Appendix, pg. 5). Additionally,
accuracy of results can be improved bycoupling these tools with real time tools (e.g.
that involve real time media tracking - forreputational risks) and earth observation andremote sensing tools for water quantity andquality risks.
Additional tools allow the exploration of the link
between water-related risks and financial
implications. For example, the ENCORE tool
supports the understanding of business
dependencies on natural goods and services(including water), and the assessment of how
these dependencies might represent a risk forthe business. Other tools like the Ecolab Water
monetizer and the Water and Value Tool
(WAVE) allow to translate water-related risks
into monetary termsq.

q Check also “ISO 14008:2019 - Monetary valuation of environmental
impacts and related environmental aspects“ also available at:https://www.iso.org/standard/43243.html

Regarding coastal threats, a list of tools to assess
varying levels of climate & coastal threats (e.g.
coastal floods) is provided in the report
Waterproofing APAC To Avoid Atlantis by CWR.
Finally, the CERES’ Investor Water Toolkit
provides a list of metrics, maps, tools andresearch platforms to support the assessmentof water-related risks. The Toolkit indicates thatthree types of indicators should be disclosed toprovide investors with a comprehensive
assessment: (1) point-in-time metrics thatprovide snapshots or “red flags” of potential
water risk, (2) information on possible futurerisk exposure, and (3) geographic contextual
information related to water resource security.
This includes also a database on nearly 30
different metrics, maps, tools and researchplatforms.
These tools represent useful ready-to-use
resources, but companies should (1)understand the assumptions and themethodology behind the selected tool(s), (2)combine different tools when performing theirrisk assessment, and (3) integrate companyspecific components and information in theassessment (e.g. local water regulation or risks
due to specific pollutant).

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CDSB Framework | Application guidance for water-related disclosures

Useful resources
1. The Datasets and Tools for Context
Reporting by the CEO Water Mandate provide
a useful list of resources and terms used inwater-related risks assessment andaccounting.
2. The CDP Corporate Water Security
Questionnaires provides a comprehensive
overview of water-related risks and potential
impacts.
3. The Water Risk Filter methodology provides
a comprehensive list of water-related physical,
regulatory, and reputational risks (pgs. 3-4),
the WWF briefing Freshwater Risks &Opportunities: An Overview and Call To Action
For The Financial Sector outlines how water isboth a financially material risk and an
opportunity for investors, while the WWF and
IFC report The Value of Water: a framework
for understanding water valuation, risk andstewardship sheds light on water valuation,water risks, and the possibilities for better
water stewardship.
4. Frameworks illustrating water-related risks:- Water Risk Exposure map by CWR illustrates
the interlinkages between water, climate,clustered (i.e. urbanisation and clusteredassets) and regulatory risks.
- PRI report “Growing Water Risk Resilience:
An Investor Guide On Agricultural Supply
Chains” illustrates in Figure 2 (source: WWF)different risk factors stemming fromoperations and basin conditions, and related
financial implications and impacts on value
creation.
5. Overview of sector-specific water-relatedrisks are provided by:- For mining and metal sector, the ICMM
report “A practical guide to consistent water
reporting” (Table 9 supports the narrative on
water challenges and opportunities; Table B.2.
and B.3 provide examples of risks andopportunities);- For food and beverage sector, the CERES
report “Feed ourselves thirsty”;- For the beverage sector, the BIER report“A Practical Perspective on Managing WaterRelated Business Risks and Opportunities in
the Beverage Sector”; the report is also usefulfor understanding the general approach towater-related risk identification;- For finance sector, the natural capital(including water) risk assessment process
presented in the report Integrating natural
capital in risk assessments: A step-by-stepguide for banks supports the identification ofrisks for financial institutions resulting frombusiness water dependencies.
6. CWR report “Toward Water Risk Valuation”
presents an assessment of water-related risks
for 10 energy companies, the report Are Asia’s
Pension Funds ready for Climate Change?
illustrates key interconnected and underlying
climate-water risks, while the report, “No
Water No Growth”, presents an integrated
assessment on water and economic
development of 10 Asian water basins. Results
show the importance of considering the waterbasin context when assessing water-relatedrisks and related implications to the economic
systems.
7. The ISO standards 14007 and 14008 and
the BSI BS 8632 standard on natural capital
accounting can support the quantification (i.e.
monetisation) of financial impacts of natural
capital risks and opportunities (including
water).
8. The DWS paper A transformationalframework for Water Risk describes why
water-related risks are material and why it isimportant to disclose them to investors, and it
provides an institutional framework on
addressing water risk across asset classes. The
South Pole’s report Methodology for Water
Risk Assessments of Equity Portfolios
examines how investors can analyse andunderstand the water risks in their equity
portfolios with the aim to align portfolios toglobal water targets and goals.

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CDSB Framework | Application guidance for water-related disclosures

REQ-04
Sources of environmental
impactQuantitative and qualitative results, together
with the methodologies used to prepare them,shall be reported to reflect material sources ofenvironmental impact

Disclosure checklist
Does the disclosure:
Provide metrics and indicators for sourcesof material water impacts, such as
withdrawals, consumption and discharge,
using both absolute and normalised
metrics?
Explain the metrics used, including themethodologies, geographic details, levels of
uncertainty and provide narrative to assist inunderstanding of the results?
Categorise and disaggregate metrics, e.g.
considering areas affected by different
levels of water risks or different water
sources and destinations, to support
understanding and comparability?
1. Material sources of water impacts
The CDSB Framework (Principle 1) sets out thatcompanies should disclose identified relevant
and material environmental information,
including material sources of (water-related)
impacts in their mainstream reports. Sources ofwater-related impacts may be linked to wateruse, wastewater discharge (degradation ofwater quality due to polluting emissions), butalso degradation of natural ecosystems thatguarantee enough and adequate water to thebusiness (e.g. through land-use changes).
As explained in REQ 02, the material sources ofwater impact together with dependencies, risks
and opportunities, should drive the formation ofwater-related policies, strategies and targets.
However, report users would benefit from an
explanation of the materiality assessment of thesources of water impact to the organisation. It
might be that companies are disclosing onmaterial sources of water and otherenvironmental impacts in their sustainability
reports, CDP responses or index
questionnaires. Such disclosures can be
repurposed to be included in the mainstream
report and satisfy REQ-04 of the CDSB

Framework (Appendix 1). Table 2 offers
examples of common potential sources of water
impacts clustered into direct and indirectbusiness-water interactions.
2. Use of quantitative metrics
The use of quantitative metrics to illustrate thematerial sources of impacts is encouraged.
Ideal metrics should be consistent with industry
guidelines, recognised by existing reporting
provisions, and international initiatives, andcalculated in accordance with recognised
approaches, so as to enable comparability andbenchmarking. Metrics should also be
representative of the specific organisation, suchas metrics used in internal water management
and performance monitoring, or that illustratewater-related financial impacts to theorganisation (e.g. costs of water rights orlicences, investments in infrastructures,
revenues from water-efficient products andservices). To enrich and complement thedisclosure, quantitative metrics should beaccompanied by a narrative providing:• Connection with other information in themainstream report, including financial
performance (e.g. risks and opportunities –financial opportunities from reduced waterpollution);• Context and explanation of progress on morequalitative performance such as noncompliance to water-related regulation (e.g.
percentage of facilities with violations) or
membership of water-related initiatives (e.g.
percentage of facilities with water-related
certifications);• Considerations on the selection of relevant
metrics. Especially for water quality,
appropriate metrics depend on both sector
and site. For this reason, while sectoral
guidelines can provide support, assessmentof the main pollutants affecting the recipientwater bodies at the operations or supplierlocations would complement the information;and• Description of treated and untreatedeffluents, priority substances treated by theorganisation and related concentration limits,
especially in basins with no effluent
regulations and/or with degraded water
bodies.

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CDSB Framework | Application guidance for water-related disclosures

Sources of water
impactDescription

Metrics

Abstractions of (fresh)water for production,
products, utilities (e.g. sanitary water orgardening water), or for decontamination
purposes (e.g. polluted soil and aquifer
decontamination), reduce the availability ofwater in the environment (either
temporarily or permanently), i.e. for natural
ecosystems functioning and for other water
users within a basin.

- Total volumes of water withdrawals,
consumption and discharges (only quantity)

Modification of the physical (e.g.
temperature after cooling) and/or chemical
characteristics of water due to release ofwastewater with concentrations ofpollutants above the limits and thus leading
to degradation of water resources andimpacts on water ecosystems (also coastal)and biodiversity.

- Number of non-compliance incidents(due to violation of quantity permits,standards, and regulations such as limits topolluting emissions) that result in formal
enforcement actions, and unauthorized or
non-compliant discharges should be
disclosed

DIRECT
Water use(withdrawals andconsumption)

Water discharge- Intensity metrics of consumption and/or
withdrawals per unit of production, revenue,
employee, and/or other suitable references- Volumes of water reused, recycled,
produced or injected (e.g. in oil production),
related efficiency metrics (e.g. % on total
withdrawals) and related reduction inwithdrawals or consumption- Concentrations of key pollutants in thewastewater (e.g. hydrocarbons for the Oil andGas sector) possibly selected according tosectoral guidelines or regulations (e.g. criticalpollutants in a specific area of operation), andrelated indicators, e.g. Chemical Oxygen
Demand (COD) or eutro­phication potential(due to excess of nutrients e.g. due use offertilizers in agriculture)

INDIRECTLand use and coverchangeEcosystem
degradation andloss of biodiversity

Changes in land cover such as deforestation
or urbanization affect water-related
processes such as evapotranspiration,interception by vegetation, or infiltration into
the soil. Given a certain amount ofprecipitation, these processes determine thewater balance thus regulating the water
availability in a water basin.
Ecosystem services such as water regulation(quantity and quality), and flood and drought
protection are guaranteed by ecosystems
such as forests, grasslands, wetlands, estuaries
and coastal waters, and their biodiversity.49
Loss or degradation of these ecosystems andtheir biodiversity can significantly affect theprovision of these services.

- Water-related ecosystem services andbiodiversity metrics – check Natural Capital
Protocol (Biodiversity guidance); DEFRA
biodiversity metrics45; Streamlined
European Biodiversity Indicators46;
UNEP-WCMC Corporate biodiversity
indicators47; Value Balancing Alliance48- Land-use change indicators(e.g. hectares of forest, grassland or
wetland lost due urbanization)

Table 2. Common examples of sources of water impact, with a description of each and how they contribute or are connected to water issues.

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CDSB Framework | Application guidance for water-related disclosures

3. Contextualising water-related metrics
Water-related metrics should describe theorganisation’s relationship with the waterrelated contexts in which it operates, including
both environmental and socio-economic
conditions. For example, metrics on water use
can be contextualised with factors such as
regional water availability and demand, byadopting a water-basin approach.50 Details on
hotspot areas, where facilities, suppliers or
consumers are located, would support theunderstanding of the diversification andprioritisation of management actions. For
example, useful indicators which link thesources of impacts to risks are the percentage
of sites located in hotspot areas and thecorresponding contribution to theorganisation’s overall withdrawals andconsumption, but also production and/or
revenue.
Water withdrawals and consumption are two
common metrics disclosed by companies insustainability reports. Withdrawals represent
the water required by an organisation tooperate. If the required amount of water is notavailable or accessible for any reason, either
natural, infrastructural or regulatory, theorganisation cannot operate. Disclosing metrics
on withdrawals in hotspot areas, provides
quantitative information on the organisation
operational risks. Water consumption illustrates
the effective impact of an organisation on theamount of water resources in the basin andother water (downstream) users.s Consumption
metrics provide information (1) on
organisation’s impacts on water resources andon other stakeholders, and (2) on related
reputational risks, especially in hotspot areas.
Besides geographies, metrics on water use or
pollution occurring in seasons characterised bylower water availability would illustratecompanies’ impacts and performance inmitigating risks due to the variability of water
within a year and/or over years (e.g.
precipitation pattern and groundwater tablelevel trends over pluri-annual hydrologicalcycle). For example, consumption during thedry season can be relevant for agri-foodcompanies that are working to reduce the riskof crop failure due to water deficit.

Finally, indicators that highlight the contributionof the organisation to water-related societal
conditions, e.g. price paid for the water
consumed versus the ‘fair’ price, but also
percentage of facilities with fully functioning
WASH for employees in areas with limitedaccess to clean water, can clarify the benefits ofwater stewardship and related management,
especially in hotspot areas.
4. Decision-useful information
When reporting results on material sources ofwater impacts, it should be considered what
constitutes decision-useful information –consistency, comparability, clarity andverifiability – as set out in Principles 4, 5 and 6of the CDSB Framework (see the CDSB report
Decision-useful climate-related information forinvestors - What, Why & How?). In satisfying
these key characteristics, the applicability of themetrics and indicators chosen to report onmaterial sources of water impacts, such as
sector or industry and/or national or regional
standards for reporting, should be considered.
In addition, results should be reported inabsolute and intensity terms, with organisation
revenue and/or appropriate non-financial
output measures (e.g. a standard unit ofproduct or service) being used to normalise theresults. This supports comparability andbenchmarking of companies and allow
investors to understand the water implicationsaligned to business strategy. To this aim,
disclosing clear definitions of involved waterflows (e.g. consumption) and description of
accounting methods is fundamental.
Furthermore, companies should ensure thatthey do not conflate their results for material
sources of water impacts with possible
mitigation activities, such as water circularity
mechanisms (e.g. reuse and recycle) andrelated efficiency measures. The latter can bereported where relevant and material, but
accompanied with clear definitions of usedmetrics and accounting methods in a mannerthat is distinct from the material sources ofimpact (e.g. consumption or discharge),
otherwise it may mislead the report user (e.g.
using only the percentage of reused water canbe misleading if no accounting details areprovided).
Monetising water flows and related metrics can
support the understanding of the water-related
financial aspects.

s The consumed water does not return to the basin,
where the water was withdrawn.

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CDSB Framework | Application guidance for water-related disclosures

5. Disaggregation and categorisation
To benefit comparability and understandability,
it can be helpful to disaggregate and categorise
results to better appreciate impact and report
this alongside total results. Results can be
disaggregated according to types of water (e.g.
freshwater, seawater), water sources anddestinations (e.g. surface, groundwater,seawater, rainwater, fossil or non-renewable),
geographies (e.g. categorised by different
levels of water-related risk), business activities,
or phases of the value chain. For instance, if
significant water volumes are consumed in
hotspot areas, it would be useful to report users
to access disaggregated performance results
for those areas (e.g. water consumption in areas
affected by high or very high water risk or
scarcity), especially if linked to specific targets
and related management.
6. Rationale of selection
and methodological details
In the reporting of material sources of water
impacts results, it is useful to offer brief
explanations to the appropriateness of reporting
choices for metrics, intensity factors and meansof disaggregation. Given that it is common for
selective reporting on corporate impact, such
explanations offer further confidence in thedata disclosed. In addition, setting out clearly
the methodologies used for preparation of
disclosures will add to the validity andusefulness of the results. The description should
provide definitions and accounting details forthe different water-related terms and flows
considered in absolute, intensity and efficiency
metrics, such as withdrawal, discharge, andconsumption. Also, disaggregation categories
should be clearly defined, and any tools anddatabases used should be referenced. Finally,
where there are uncertainties and gaps in thewater data or where methods and assumptions
have been amended or applied, highlighting
and offering an explanation to report users forthese differences can alleviate confusions or
misconceptions.

Examples of good practices
1. Kering Universal Registration Document
2019 describes eight categories ofenvironmental indicators used to assess theenvironmental impacts of the group. Two
categories focus on water (consumption andpollution) and related results are presented inboth volumetric (pg. 132) and monetary units(pgs. 149-152).
2. Olam Annual Report 2019 presents links
between water and financial indicators(Strategy Report - pg. 139) used to assess thetotal economic value of water consumption
across all cocoa processing facilities locatedin eight countries (i.e. by applying contextspecific values water).
3. Heineken Annual Report 2019 provides
water consumption for water-stressed areas(pg. 125).
4. TSMC Annual Report 2020 discloses
water-related financial metrics (pgs. 134-135)
illustrating costs of pollution control,
investments for resources conservation,
training, management system andcertification expenditures, and impact
measurement and monitoring fees, andbenefits from water savings.

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CDSB Framework | Application guidance for water-related disclosures

Useful resources
1. The report “Measuring Stakeholder
Capitalism: Towards Common Metrics andConsistent Reporting of Sustainable Value
Creation” provides a list of basic water-related
metrics (use and pollution) and the definitionsof water variables considered in the metrics,
and explains the rationale behind the selectionof metrics.
2. Many of the world’s largest companies
already disclose information and data to CDP
Corporate Water Security Questionnaires onmaterial sources of water impact. CDP
submissions can provide a useful, wellstructured basis for developing mainstream
disclosures in response to REQ-04 as well asother reporting requirements of the CDSB
Framework, such as on governance, strategies
and targets, and outlook.
3 SASB materiality matrix and industry-specificstandards identify a base set of material water
issues for each industry, providing metrics forreporting on them in a consistent andcomparable manner.
4. GRI 303 disclosure standards on water andeffluents describes basic water metrics andmeans of disaggregation (e.g. different water
sources).

5. Sector-specific guidance can be provided
by documents and tools from sectoral
initiatives, such as the Sustainable Apparel
Coalition and ZDHC for the textile and apparelsector, or BIER for the beverage sector.
6. The water accounting framework for theAustralian minerals industry provides a flexible
approach that produces water metrics that canbe used to benchmark performance.
7. The Life Cycle Initiatives of the UNEP has
developed regionalised factors to conduct anassessment of impacts related to water
consumption.
8. The WBCSD and BIER tool on Water
Circularity Metric and related report shed lighton circular water management, related
indicators at the facility level and a scenariobased tool that help users measure, set targets
and monitor progress on circular water
management.
9. The report Methodology Impact Statement
Focus: Environment (Version 0.1) by the Value
Balancing Alliance provides methods forassessing impacts and for performing
monetary evaluation for water consumption
and pollution.

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CDSB Framework | Application guidance for water-related disclosures

REQ-05
Performance and comparative
analysisDisclosures shall include an analysis of theinformation disclosed in REQ-04 comparedwith any performance targets set and withresults reported in previous periods
Disclosure checklist
Does the disclosure:
Provide appropriate historical data to theresults reported from REQ-04 for material
water impacts to allow for useful comparison,
including details on hotspot areas?
Contextualise the performance withbaselines, targets and other criteria used toassess progress?
Explain the major trends with reference todrivers of change under (e.g. water-related
strategies or business developments) and/or outside (e.g. regulatory changes) thecontrol of the organisation?
To offer report users proper comparability
between past and present performance onmaterial sources of water impacts, companies
need to ensure that they are offering anappropriate number of historical datapoints.
Principle 2 of the CDSB Framework sets outthat disclosures should include “all informationthat is necessary for an understanding of thematter that it purports to represent and does
not leave out details that could cause
information to be false or misleading to users.”
Narrow dataset windows or intermittent,
longer-term datasets are unsuitable forcomparison and decision-making, for instance,
potentially obscuring the actual trends ofimpact. For some, such longer-term measuresof impact and performance will not be possible,
having not collected the data for long enough,which should be explained where it hinders
report users. In addition, consistency needs tobe applied to techniques used for data
gathering and processing to allow for propercomparability and understanding of
performance. In many circumstances, suchchanges are made to improve accuracy or meet
new standards. Where changes are made tomethods, restatements should be produced, as
in REQ-10 of the CDSB Framework, to draw
attention to these changes and an explanation
offered.

Where targets have been set for material
sources of water impacts, it is useful to restate
the overall ambition and the baseline, clarifying
for the reader as to whether the targets are partof a corporate initiative or scheme, or tied towider national or international ambitions. Suchtargets offer an effective means of providing anarrative analysis of performance to reducewater impact. It would be beneficial to provide
details on performance and progress in hotspot
areas but also in areas experiencing significant
changes including land-use (e.g. urbanisation ordeforestation), regulations, and population
growth.
In explaining trends, companies should draw thereader’s attention to the impacts ofenvironmental initiatives and management
actions, wider corporate developments (e.g.
changes in strategy, acquisitions, ordivestments), and other drivers of change thatare internal to the organisation such as
methodological modifications (e.g. changes intargets or data coverage). For example, a spikein water usage might be the result of asignificant acquisition, or a drop in withdrawals
could come as a result of increased water
efficiency. Other natural and human-induced
factors that are outside the control of theorganisation (e.g. regulatory changes) can
influence such trends. Such narratives should
try to illustrate a more holistic water impact,
while making connections across different
aspects of the corporate report.

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CDSB Framework | Application guidance for water-related disclosures

Useful resources

Examples of good practices

1. Step 4 of the AWS Standard v2.0 supports
companies in evaluating their performanceagainst the actions taken to implement thewater stewardship, and in using this data to
inform the next iterations of the water
stewardship plan.

1. Diageo Annual Report 2019 summarises thecompany water stewardship performance in atable, which includes targets, KPIs, and a brief
description of progress against the targets(pg. 56). Time series of KPIs are provided anddisaggregated by geographies (pg. 12 and 57).

2. Regarding the description of progressagainst goals and targets, GRI standards onwater and effluents (303) refers to clause
1.5 in GRI 103: Management Approach.
This clause requires information on thebaseline and context for goals and targets, theexpected timeline for achieving each goal andtarget, and whether goals and targets aremandatory (based on legislation) or voluntary.

2. BHP Annual report 2020 summarises theyearly performance with a concise narrativethat describes the main achievements
obtained towards the company water
stewardship pillars (pg. 326).

3. The ICMM practical guide to consistentwater reporting includes suggestions on
metrics, categories of water quality, and levelsof water-related risks useful for companies in
the mining and metal sector when reporting
their water-related performance.

3. Carlsberg Annual Report 2019 provides aconcise and exhaustive summary of thecompany water-related performance,
including link with related target and baseline,
and with the main management actions
contributing to the result (pg. 29).

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CDSB Framework | Application guidance for water-related disclosures

REQ-06
OutlookManagement shall summarise their conclusions
about the effect of environmental impacts, risks
and opportunities on the organisation’s future
performance and position
Disclosure checklist
Does the disclosure:
Explain the likely effect of future waterrelated impacts, risks, and opportunities aswell as of water strategy on organisation
performance and resilience, taking accountof regulatory and market trends andenvironmental changes?
Identify and explain the time horizons used
for reporting on corporate outlook?
Explain any techniques, such as scenario
analysis, used to inform the outlook
including the methods, scenarios andassumptions used, and any shortcomings
and uncertainties?
REQ-06 of the CDSB Framework encourages
companies to provide a future-oriented summarythat enables report users to understand how anorganisation’s water-related risks, opportunities
and impacts are affecting, or will affect, its ability
to execute its strategy, innovate and create value
across time horizons. According to Principle 7 of
the CDSB Framework, the information provided
in response to REQ-06 should synthesise in a
forward-looking manner and build on what has
been disclosed in line with the first five reporting
requirements of the CDSB Framework. In
practice, REQ-06 should provide a full picture forinvestors of how water-related governance,
strategy, management, and current and potential
risks and opportunities will likely influence theorganisation’s performance and position.
Taking into account the timescales over whichwater-related risks will manifest, the non-linear
and potentially abrupt nature of possible
impact, and the multiple, interconnecting
systems that drive water-related risks andopportunities for companies, scenario analysis
is a particularly useful method for companies
to better understand potential futures, andrespond to and disclose such information toinvestors. Scenario analysis is a tool to assessand build resilience within environmental,
economic and social systems that are in flux.

1. Scenario analysis
Scenario analysis can be conducted throughdifferent routes including consultation withinternal and external experts or scientificanalysis, which would support theunderstanding of the complex water-related
issues. It can be a quantitative or a morequalitative exercise. There is no special orcorrect formula by which it is to be completed.
Instead, it is a process to analyse a suite ofpotential futures, understanding theorganisation, its dependencies and strategic
resilience, within the different forces that drive
each of the futures. Assessing a range of futurewater-related states and consequences for thebusiness will elicit important information forcompanies and report users. Assessing futurewater-related scenarios is a complex andadvanced exercise because it would, ideally,
consider a set of drivers influencing both water
demand from the different human activities (e.g.
due to business operations, population,
regulatory mechanisms) and water supply in abasin, that depends on precipitation patterns
and other climatic conditions, but also on thestatus of ecosystems and on land use and cover.
Common practices focus on water-related
outcomes from climate-related scenario
analysis. In this analysis, a range of different
warming levels (e.g. 1.5, 2, 3 and greater than
4°C) and transition pathways (e.g. drastic to
1.5°C, relatively more gradual 2°C,
technologically-enabled 1.5°C) should be taken
into account, as recommended by the TCFD. In
particular, scenarios greater than 3°C should beassessed since they are critical for water-relatedrisks and impacts, such as drought and flooding
events, and related adaptation and mitigation
actions. Climate scenarios, such as thosedeveloped by the Intergovernmental Panel on
Climate Change (IPCC) and the International
Energy Agency (IEA), can be combined withsocio-economic scenarios such as the Shared
Socioeconomic Pathways (SSP) by IIASA.
The results of the scenario analysis should
provide a summary of the organisation’s future
dependencies on water resources and related
future risks and opportunities, including details
on current and future hotspot areas, to be
included in the outlook.
Considerations on resilience of the organisation
to the analysed future scenarios in light of water
strategy and management should be presented,
highlighting the main plans and actions to copewith future risks and seize future opportunities

48

CDSB Framework | Application guidance for water-related disclosuresfrom current strategy and management (e.g.
water efficiency, stakeholders’ engagement)
and potential limitations and gaps. Given the site
specificity of water issues, details on resilience inhotspot areas would be beneficial. Links,
synergies and trade-offs between water-related
management actions and those implemented totackle other environmental (but also Social andGovernance) issues should be explained (e.g.
less-energy intense production processes canimpact water use; or a desalinisation plant can
impact on GHG emissions).
The use of scenario analysis will be based on
iterative learning and development. This willallow companies to build on findings or
methods employed previously as well as
incorporate more up-to-date understanding ofwater dependencies and impacts, of otherinfluencing environmental systems and theirinteractions as well as greater comprehension ofwater and climate resilient pathways. If using
scenario analysis, then report preparers shouldbe open with these aspects of learning anddevelopment.
2. Methods, assumptions and uncertainties
In reporting on corporate outlook, report users
should be able to understand the different
methods that have been used to prepare theoutlook, including horizon scanning andscenario analysis, any assumptions made andthe timeframes over which the analysis has
been completed. These different characteristicsof the scenarios should reflect the nature of theorganisation, its assets and operations, and thescale of risks and opportunities alreadyidentified. In addition, where external advice orassistance on conducting scenario analysis isused, it is beneficial for this to be highlighted
within the methods and inputs. In reporting theeffectiveness and resilience of the organisation’s
strategies to the potential business impacts ofthe different scenarios, report preparers should
be clear about uncertainties but as precise as
possible with how the impacts of risks differ bygeography and time horizon. Clear articulationof the specific sensitivities to the different
scenarios will allow report users to better
understand the potential responses identified
by the organisation as a result of the exercise,
whether that is no response, changes tofinancial planning and investment, or
reimagining the business model.

3. Iteration and learning
Water-related risks and opportunities are highly
dynamic and dependent upon changes incomplex environmental systems and political,
economic and societal arenas as well as the
exposure of the organisation or asset and its
associated vulnerabilities. The qualities anddimensions of water-related risks andopportunities for companies are likely to changeover time, whether gradually or abruptly.
Given this, using the findings of such exercises
to assess corporate outlook is an importantmeans of updating risk and opportunity
identification systems and refine or reformulate
water-related policies, strategies and targets.
This will better prepare the organisation inlimiting and seizing water-related risks andopportunities. Including such learnings and how
they have been incorporated into systems andambitions in the mainstream report is a valuablemeans of demonstrating effective and efficientmanagement of material water-related mattersto investors.

Examples of good practices
1. Unilever, Annual Report and Accounts 2019
— Despite being focused on climate change,
scenario analysis, risks and opportunities andoutlook are described in a special section in
Unilever’s annual report (pgs. 40-3).
The disclosure sets out the methods andassumptions employed, the findings, impacts
and outlook for the organisation and key
commodities, and explains how the findings
have fed into risk management and otherprocesses. Regarding water, it is clear thatwater-related physical manifestations ofclimate change are considered as key impacts
in the 4°C scenario (i.e., water stress, floodand storms).
2. In its 2020 Annual Report, GSK
summarises the approach and results of its
climate-related scenario analysis (pg. 48).
Two scenarios have been assessed and waterrelated risks have emerged among the mostpressing. In particular, flood and water stressleading to disruption and increased
expenditure at both manufacturing sites andin supply chain.

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CDSB Framework | Application guidance for water-related disclosures

Useful resources

Initiatives

1. The TCFD Technical Supplement: The Use of
Scenario Analysis in Disclosure of Climaterelated Financial Disclosures explains theimportance of scenario analysis and offers
considerable advice on and resources fordeveloping and applying scenario analysis forclimate issues, including water-related details.

5. BIER’s future scenarios toolkit provides four
scenarios considering availability of resourcesand quality of governance, which form the basis
for The Future of Sustainability in the Beverage
Industry in 2025. The toolkit supports both theimplementation of the scenario analysis and its
effective communication.

2. The WWF report Rising to resilience How
Water Stewardship Can Help Business Build
Climate Resilience provides a practicalapplication for businesses on how to integrate
climate resilience into their water stewardshipstrategies.

6. The CEO Water Mandate launched theWater resilience coalition, an initiative focusedon corporate water resilience by 2050. It is anindustry-driven coalition that aims to elevatewater-related issues to the top of corporate
agenda through collective actions in waterstressed basins and ambitious, quantifiablecommitments. Additionally, the CEO Water
Mandate is developing the Water Resilience
Accounting Framework aimed at measuring
stakeholders’ respective resilience and theircontribution to the basin resilience to achieve
water security and sustainable development
goals. The framework will connect dynamichydrologic, economic, and social systems
using established water accounting.

Assessment Tools
As for risks, existing assessment tools can
support the assessment of future scenarios andbusiness resilience to those scenarios.
Combining different tools and integratingorganisation-specific components andinformation is good practice and would provide
a more comprehensive and robust assessment.
3. The Aqueduct tool by WRI provides future
projections of future water stress, supply, anddemand in 2030 and 2040, by combining
climate and water scenarios.
4. The Water Risk Filter by WWF includes
TCFD-aligned future scenarios that combine
climate and socioeconomic scenarios andprovided 2030 and 2050 quantitative
projections of physical risks such as scarcity,
flooding, water quality, and ecosystem services
status, as well as future regulatory andreputational risks.

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CDSB Framework | Application guidance for water-related disclosures

4. Basis for conclusions
The content of this Guidance has beendeveloped and selected according to the scope
and aim of the document (see Chapter 1) andreflecting the fact that it is subordinated to the
CDSB Framework and is complementary toother CDSB guidance documents, such as theclimate and the biodiversity guidance. This has
implications on specific content elements.
Firstly, the Guidance reflects the status of thesustainability reporting environment andregulation at the time of writing. Any related
developments such as alignment with otherinitiatives or policy developments (e.g. EU
taxonomy) and convergence to other reporting
standards and frameworks will be incorporated
in the CDSB Framework and consequently
applicable to the Water Guidance. As explained
above, materiality plays a crucial role within thisdynamic space.
Secondly, the focus of this Guidance is on
disclosures and not on corporate management
and practices. For this reason, the Guidance
mentions some good management practices toprovide examples and direction to disclosures
but does not go deeper into methodologicaldetails (e.g. steps to define water targets) andsign posts to external resources have specificfocus on such topics in order to avoid
duplicating existing information.

Thirdly, the CDSB reporting requirements
are voluntary, unless prescribed in guidanceissued by national or supranational
government or regulator, and therefore neither
are the reporting suggestions provided
in this Guidance.
Finally, as anticipated in section 1.2 Application
Guidance some overlapping topics are
addressed in more than one Application
Guidance document, and reporting elements on
ocean and marine ecosystems and biodiversity
are mentioned in this Guidance but will becovered in more depth in the Biodiversity
Guidance.

Chapter 4

Appendices

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CDSB Framework | Application guidance for water-related disclosures

Appendix 1:
CDSB Framework –Guiding principles andreporting requirements
Principles
P1 Environmental information shall be
prepared applying the principles of relevanceand materiality

CDSB
Framework

P2 Disclosures shall be faithfully represented

for reporting environmental& climate change information

P3 Disclosures shall be connected with otherinformation in the mainstream report

Advancing and aligning disclosureof environmental information inmainstream reports

P4 Disclosures shall be consistent andcomparable
P5 Disclosures shall be clear andunderstandable
P6 Disclosures shall be verifiable
P7 Disclosures shall be forward looking

December 2019www.cdsb.net/framework

Reporting requirements
REQ-01 Disclosures shall describe thegovernance of environmental policies, strategy
and information
REQ-02 Disclosures shall report management’s
environmental policies, strategy and targets,
including the indicators, plans and timelines
used to assess performance
REQ-03 Disclosures shall explain the material
current and anticipated environmental risks
and opportunities affecting the organisation
REQ-04 Quantitative and qualitative results,
together with the methodologies used toprepare them, shall be reported to reflectmaterial sources of environmental impact
REQ-05 Disclosures shall include an analysisof the information disclosed in REQ-04
compared with any performance targets set
and with results reported in a previous period

REQ-08 Disclosures shall cite the reporting
provisions used for preparing environmental
information and shall (except in the first year ofreporting) confirm that they have been usedconsistently from one reporting period to the next
REQ-09 Disclosures shall be provided on anannual basis
REQ-10 Disclosures shall report and explain any
prior year restatements
REQ-11 Disclosures shall include a statement ofconformance with the CDSB Framework
REQ-12 If assurance has been provided overwhether reported environmental information isin conformance with the CDSB Framework, thisshall be included in or cross-referenced to thestatement of conformance of REQ-11

REQ-06 Management shall summarise theirconclusions about the effect of environmental
impacts, risks and opportunities on theorganisation’s future performance and position
REQ-07 Environmental information shall be
prepared for the entities within the boundaryof the organisation or group for which themainstream report is prepared and, whereappropriate, shall distinguish information
reported for entities and activities outside thatboundaryt » Water is considered in several of the SASB sector-specificstandards. Here only the Food and Beverage and the Oil & Gas arereported as examples. SASB accounts for water related impacts acrossmultiple general issue categories (Water Management, Supply Chain
Management, Material Sourcing & Efficiency). Interested parties canreview the applicable industry standard(s) to identify relevant content
that could support effective disclosure on water-related matters.

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CDSB Framework | Application guidance for water-related disclosures

Appendix 2:
Mapping the CDSB
requirements to TCFD andwater reporting standards

Table 3. International water reporting
standards, frameworks, andguidelines and TCFD - mappingwith CDSB requirements
CDSB Framework

REQ-01

REQ-02

REQ-03

REQ-04

REQ-05

REQ-06

TCFD- Governance (a, b)- Risk Management(a, b, c)- Governance (b)- Strategy (b)- Risk Management(a, b, c)- Metrics and Targets (a, c)- Governance (b)- Strategy (a, b c)
- Risk Management(a, b, c)- Metrics and Targets(a, b)- Metrics and Targets(a, b)- Strategy (a, b, c)- Risk Management(c)- Metrics and Targets(a)

CDP Water Security
Questionnaire- W1.4;-W3.3a; W3.3e;-W6.2; W6.2a; W6.2b;
W6.2c; W6.3; W6.4;
W6.4a; W6.5; W6.5a;- W1.1; W1.2; W1.2b; W1.4a;
W1.4c; W1.4d;- module W.2;
- W3.3b; W3.3c; W3.3d;- W4.2; W4.2a; W4.2b;
W4.2c; W4.3a;- W5.1a;- W6.1; W6.1a;- W7.1; W7.4;- W8.1; W8.1a; W8.1b;
W8.1c;- module W9- W1.2d;- module W.2;
- W3.3a; W3.3b; W3.3c;
W3.3d; W3.3e;- W4.1; W4.1a; W4.1b;
W4.1c; W4.2; W4.2a;
W4.3; W4.3a;
W4.3b;- W7.2;- W1.2b; W1.2d; W1.2h;
W1.2i;- W5.1- W5.1;-W8.1a; W8.1b- W.4.3a;-W7.3; W7.3a; W7.3b

GRI 303 - water andeffluents- REQ. 303-1 (c, d)- REQ. 303-1 (a, b, c, d)- REQ. 303-2

REQ. 303-1 (a)- REQ. 303-1(a, b)- REQ. 303-3- REQ. 303-4- REQ. 303-5

REQ. 303-1 (a)REQ. 303-1 (b)SASB t(FB: Food andBeverage; EM:
Oil & Gas)

- Standard Application
Guidance - 5.0 (a, c)- Standard Application
Guidance- 5.0 (b, d)- FB-AG-140a.2- Note to EM-EP-140a.4- EM-EP-160a.1

Standard Application
Guidance - 5.0 (b, d)- FB-AG-140a.2- FB-AG-140a.1- FB-AG-140a.3- EM-EP-140a.2- EM-EP-140a.3- EM-EP-140a.4

FB-AG-140a.2

ICMM – A practicalguide to consistentwater reporting- 2.2.6c

2.2.6b; 2.1; 2.2.1; 2.2.2;
2.2.6b; 2.2.6c; Figure 1;
Table 6; Table 7; 3.2.1- 2.2.6c; Table 7; 3.2.1;
Annex B

- 1.1.3; 2.2.3; 2.2.4; 2.2.5;
Table 3; Table 4; Table
10- 2.2.1; Table 9; Annex C

IPIECA - Sustainability
reporting guidance forthe oil and gas industry(Module 4)- 4.5 | ENV-6: C4- 3.6 | CCE-1- 4.5 | ENV-1: A6, A7, A10,
A11;
- 4.5 | ENV-2: A2, A3;- 4.5 | ENV-6: C1, C3, C4- 4.5 | ENV-1: C3- 4.5| ENV-1: C1, C2, C4,
A1, A2, A3, A4, A5, A8,
A9;- 4.5| ENV-2: C1, C2, A1,
A5, A6, A7;- 4.5| ENV-6: C2, A1,
A2, A3, A4, A5, A6, A7,
A8- 4.5 | ENV-1: C5;- 4.5 | ENV-2: A4

Int. Water StewardshipStandard

STEP 2

STEP 1, STEP 2,
and STEP 3

STEP 1 and STEP 2

STEP 1 and STEP 5

STEP 3 and STEP 4
and STEP 5

STEP 1, STEP 2,
STEP 4 and STEP 5

Natural Capital Protocol

Step 02

Step 02; Step 03;
Step 04; Step 09

Step 03; Step 04;
Step 07

Step 04; Step 05; Step
06; Step 07

Step 06; Step 08

Step 08

Australian Water
Accounting Standard 1- Contextual
statement- Contextual statement- Contextual statement-Statement of Water
Assets & Water Liabilities;-Note Disclosures- Contextual statement-Note Disclosures- Stat. of water assets& water liabilities;- Stat. of changes inwater assets & water
liabilities;- Stat. of water fows

- Note Disclosures

The CEO Water
Mandate - Corporate
Water Disclosure
Guidelines

Response- Policies, governance,
and targets- Company water profile- Interactions with water;
commitment & response- Response: Policies,
governance, and targets;Internal actions;
External engagement- Company water profile- Challenges
and opportunities;
Hotspot basins;- Defining what to report- Business risks,
opportunities, andimpacts- Current state- Context- Implications- Company water
profile- Profile metrics- Current state- Performance;
Compliance- Implications- External impacts- Company water profile- Metrics on water
performance- Current state- Performance- Defining what toreport3.2.1

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CDSB Framework | Application guidance for water-related disclosures

Appendix 3:
Key resources

3 Pacific Institute: Multi-Benefit Resource
Library - https://pacinst.org/multi-benefitresource-library/

CDSB

4. Natural Capital Toolkit - https://shift.tools/co
ntributors/551?&price=free&issue_id=4

1. CDSB (2019). CDSB Framework for reporting
environmental and climate change information.
Available from: https://www.cdsb.net/
framework

Water Stewardship - definition:

2. CDSB and CDP (2020). The building blocks:
Connecting CDP data with the CDSB
Framework to successfully fulfil the TCFD
Recommendations. Available from:https://www.cdsb.net/buildingblocks
3. CDSB (2020). Application guidance forclimate-related disclosures. Available from:https://www.cdsb.net/climateguidance
4. CDSB (2012). Proposals for boundary setting
in mainstream reports. Available from:https://www.cdsb.net/what-we-do/reportingguidance/boundary-setting-mainstreamreports
5. CDSB (2018). Uncharted waters: How cancompanies use financial accounting standards
to deliver on the Task Force on Climate-related
Financial Disclosures’ recommendations?
Available from: https://www.cdsb.net/taskforce/692/uncharted-waters-how-cancompanies-use-financial-accountingstandards-deliver-tcfd%E2%80%99s
6. CDSB (2020). Accounting for climate.
Available from: https://www.cdsb.net/
climateaccounting

1. Alliance for Water stewardship. Available
from: http://a4ws.org/about/impacts-of-aws/(also used by Water Footprint Network;
Available from: https://waterfootprint.org/en/
water-footprint/corporate-water-stewardship/)
2. CEO Water mandate https://ceowatermandate.org/toolbox/
3. WWF - https://wwf.panda.org/our_work/
our_focus/freshwater_practice/water_
management/
4. European Water Stewardship http://www.ewp.eu/copia-de-activities
5. UNIDO - https://www.unido.org/our-focus/
safeguarding-environment/resource-efficientand-low-carbon-industrial-production/industry-and-adaptation/water-stewardship
Risk and status assessment for theidentification of hotspot areas:
1. CEO Water Mandate. Interactive Database of
the World’s River Basins. Available from:http://riverbasins.wateractionhub.org/
2. WWF. HydroSHEDS. Available from:http://www.hydrosheds.org/

7. CDSB (2021). Decision-useful climate-related
information for investors - What, Why & How?.
Available from: https://www.cdsb.net/
decision-useful

3. World Resources Institute - Aqueduct Global
Maps 3.0 Data. Available from:https://www.wri.org/resources/data-sets/
aqueduct-global-maps-30-data

Resources database and repositories
and glossaries:

4. World Resources Institute. Aqueduct Water
Risk Atlas. Available from: www.wri.org/
our-work/project/aqueduct/

1. CEO Water Mandate: Water Action Hub.
Available from: https://wateractionhub.org/;
Toolbox - https://ceowatermandate.org/
toolbox/library/; Corporate Disclosure
Guidelines - https://ceowatermandate.org/
disclosure/resources/datasets/
2. Alliance for Water Stewardship https://a4ws.org/download/glossary-of-terms/

5. WWF. Water Risk Filter. Available at:https://waterriskfilter.panda.org/
6. Water Footprint Network. Using Water
Footprint Assessment to prioritise strategic
action. Available from: https://waterfootprint.
org/en/standard/practitioners-corner/

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CDSB Framework | Application guidance for water-related disclosures

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CDSB Framework | Application guidance for water-related disclosures

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With the contribution of the
LIFE Programme of theEuropean Union.

This publication was fundedin part by the Gordon andBetty Moore Foundation.

Project hosted by
CDP Europe.
Contact
CDSB Secretariat
www.cdsb.net
info@cdsb.net@CDSBGlobal