The water crisis is posing a significant risk to major retailers, worth billions of pounds, new research has shown.

New data published by CDP found 28% of large companies aren't actively engaging with their supply chain on water issues and have no plans to do so in the next two years.

This is despite 79 businesses stating that around £6 billion is deemed to be at immediate risk due to urgent water scarcity, food, regulatory and reputational issues.

One in five companies state that these risks would have a substansive financial or strategic impact on their business and are estimated to be worth over £60 billion across 623 responding companies.

CDP's research focused on 3,163 large companies with an annual revenue of more than £200 million. These companies disclosed to CDP's annual water security questionnaire in response a request from investors in 2023.

A total of 1,542 companies (50%) said they are engaging their supply chain on water risks. This includes inserting water requirements into supplier contracts, collecting water data, raising awareness of water issues, or collaborating on innovation.

Yet 894 companies do not engage with their supply chain, while a fifth of these companies felt the issue was 'unimportant', despite their activities having high water impacts.

CDP global head of water, Dr Patricia Calderon said: “Supply chains are the knots which tie our global economy together. But they are coming apart rapidly due to climate change and the reckless abandon with which we treat the world’s finite resources.

"The data is telling us our water supplies are becoming ever more fragile and the financial toll is mounting up. It’s down to large companies with the biggest water impacts to take immediate action, working with their suppliers to stem the tide of water risk.”

Global Commission on the Economics of Water executive director, Henk Ovink added: “We need a paradigm shift in the way our economic metrics, and the politics behind them, value and govern water.

"Mitigating climate change while adapting for the ever more extreme impacts, ensuring a just energy transition and securing food for all, restoring our ecosystems, reversing biodiversity loss and building inclusive, green and resilient systems. The key to make all this happen is to view water as a global common good.”

The research found around 443 businesses are working on the problem by offering their senior leaders, including the board, incentives to improve water management across the supply chain.

Around 4% of these companies provide direct financial incentives to their chief procurement or purchasing officers, including Coca Cola, L’Oréal, and Japanese chemicals giant Kao Corporation.

“The bar needs to be raised much higher if we want to build strong and effective supply chains, free from serious water risks," Dr Calderon added.

"Companies should shift their outlook to recognizing the significant opportunities from becoming more water resilient."

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