Integrating Water & Biodiversity Risks into ESG Strategy
Sustainability & ESG / December 10, 2025
By Grayson Murphy, Sustainability Specialist
While carbon reduction dominates corporate environmental, social, and governance (ESG) efforts, it is not the only risk facing our climate and businesses today. The truth is, many companies are leaving themselves vulnerable by maintaining a narrow focus.
Water resources and biodiversity have been heavily impacted by human activities, representing escalating crises that demand executive attention. In just the last decade, hotspots in North America, the Mediterranean, and South Africa have become well-acquainted with the danger of ‘day-zero droughts’– periods of extreme and unprecedented water scarcity.
Lack of rainfall, low river and reservoir levels, and skyrocketing demand have combined in areas like Chennai, India (2019) and Cape Town, South Africa (2017 and 2018) leading to near total water depletion and water rationing. Both towns were saved at the last minute by extreme water saving measures as well as above average rainfall. In the United States, the city of Los Angeles is working desperately to avoid this fate since being saved by rainfall is something that cannot be counted on.
Current ESG reporting often prioritizes greenhouse gas (GHG) emissions, measured in equivalent tons of carbon, which can lead to overlooking these critical environmental risks.
As experienced reporting strategists, we understand that to build a truly resilient and valuable strategy, your company must look beyond carbon and embrace a holistic view of environmental stability. This comprehensive approach is not merely compliance; it is a fundamental pillar of long-term business continuity.
Beyond GHG: The Critical Environmental Risks to Address
To achieve genuine resilience, organizations must assess and integrate three often-sidelined environmental pillars into their core strategy: water, biodiversity, and natural disaster mitigation.
Water Resources
Water is a shared and finite resource, making responsible stewardship essential for long-term business viability. Scarcity is no longer an isolated issue; it is a global stressor, with water levels dropping across major international systems. Approximately 40 million people rely on the water supply of the Colorado River which is currently a stressed water system.
Higher temperatures, increased demands, and low rainfall has led to historically low reservoir levels endangering the livelihoods and communities of many in the mountain west that depend on this water supply. If your business depends on consistent water supply, something we see as a reality for many of the manufacturing clients we work with, then business financial stability is tied directly to the health of the local watershed.
Why Water Matters
Integrating water risk into your strategy delivers direct and indirect benefits that immediately improve your bottom line and standing:
- Cost Efficiency: Reducing operational water use saves significantly on utility costs, especially in regions facing drought surcharges or rationing.
- Community License to Operate: Responsible water practices prolong the health and viability of both the company and the local communities that share this resource. This critical social alignment reduces conflict and enhances your social license to operate. For example, companies in the water-intensive industries of semiconductor manufacturing, data centers, or textiles may be especially scrutinized in this area.
- Talent Retention: Community support, gained through transparent and responsible water stewardship, contributes to lower employee turnover and additional long-term cost savings.
Did You Know?
How do water risks translate to financial value for a business?
Managing water risk leads to lower utility costs, enhances community support, and signals business resilience to investors
Biodiversity
The success of every economy and industry is fundamentally underpinned by biodiversity. This is not an abstract concept; it touches everything from global supply chains to public health. This includes sectors ranging from agriculture (pollination), pharmaceuticals (natural compounds), and tourism, to the stability of public health and natural defense systems like coastal mangroves.
Why Biodiversity Matters
A strategic focus on biodiversity offers tangible business advantages beyond reputation management:
- Lifecycle Insight: Identifying your company’s biodiversity touchpoints provides a deeper understanding of its product and business life cycle, often as part of a comprehensive materiality assessment. This helps reveal unseen dependencies and risks.
- Risk Mitigation: This process reveals key areas for improvement and protection that are vital for the business to thrive. For instance, businesses can identify and mitigate negative impacts on critical habitats, such as those caused by land use, raw material sourcing, and complex supply chain decisions.
- Employee Health: Protecting biodiversity contributes to better public and employee health outcomes (e.g., reduced infectious disease risks in stabilized ecosystems), leading to more efficient, and happy, employees and associated cost savings related to employment and turnover.
Learn more about how to implement nature and biodiversity disclosures to strengthen your ESG narrative.
Did You Know?
Why should my company prioritize biodiversity in its ESG strategy?
Prioritizing biodiversity helps identify business life cycle touchpoints, mitigate habitat impacts, and improve employee health and retention.
Natural Disaster Mitigation
Natural disasters are an escalating risk that threatens business continuity and market stability. Floods, droughts, and deforestation affect not only a company’s physical location but also the critical infrastructure that supports its operation including utilities, energy production, and employee transportation.
These events also impact supply chains with immediate and expensive consequences: product loss from a natural disaster makes materials more expensive, harder to procure, and severely disrupts the flow of business. A company’s vulnerability to these shocks dictates its long-term market stability.
Why Natural Disaster Resilience Matters
The business case for integrating natural disaster resilience is clear, direct, and speaks to financial value:
- Investor Confidence: Investors and stakeholders increasingly seek out nature-positive strategies. This is an emerging framework that reflects robust business stability and resilience to a changing climate translating to greater financial value and lower cost of capital.
- Sector Resilience: Addressing natural disaster risks reinforces a positive feedback loop within supply chains and industries, making entire sectors more resilient to the changing future. By managing your risk, you strengthen the ecosystem of your industry peers and suppliers.
Explore how resilient supply chain design supports your broader nature and climate strategy.
Moving beyond a narrow focus on carbon is essential for building a future-proof, resilient business strategy. The mounting and interconnected risks posed by water scarcity, biodiversity loss, and natural disasters directly threaten operational stability, supply chains, and investor confidence.
Integrating these critical environmental factors into your reporting and strategy, through clear materiality assessments and nature-positive strategies, is the key to securing long-term financial health and adapting to the irreversible realities of a changing planet.
See how leading companies move beyond disclosure to action in their sustainability strategies.
Did You Know?
What is a nature-positive business strategy?
A nature-positive strategy actively restores ecosystems, protects biodiversity, and reduces long-term business risk while building investor confidence.
Take the Next Step in Your ESG Strategy
Ready to move beyond basic carbon accounting and build truly resilient reporting? Speak directly with our expert team to tailor a reporting plan that integrates complex nature risks and satisfies key investors.