By Katherine Christ and Professor Roger Burritt CA

Recent years have seen unprecedented interest in corporate-level water management.

Select commentators have even gone so far as to suggest water access and management now present a more immediate concern for contemporary business than climate change and the need to manage greenhouse gas emissions.

Water research undertaken by the Carbon Disclosure Project (CDP) goes some way toward substantiating these claims. The Global Water Report published by the CDP in 2013 found 70 per cent of respondents reported water to present a source of substantial business risk with economic implications as high as US$1b for some companies.

In addition, two thirds of the risks reported were expected to impact on direct operations and/or the organisation’s supply chain within the next five years, highlighting the urgency of corporate-level water management.

The need for tools to support business water management in a way that minimises short- and long-term exposure to risk, as well as to capitalise on water trading and management opportunities, occasioned a new discipline that has been steadily gaining in prominence, especially over the past five years: corporate water accounting.

This should not be confused with the macro-level water accounts prepared by the Australian Bureau of Statistics. Corporate water accounting seeks to provide the means to manage business-level water resources in a manner that is both efficient and effective, protecting and building corporate economic investment and limiting negative environmental impacts and thereby safeguarding the organisation’s licence to operate.

Yet at a time when corporate water management has been found to be increasingly important and the global business community cries out for leadership, it is curious that Australia’s federal government has elected to disband the Water Accounting Standards Board (WASB).

What does the decision mean for corporate water management in Australia and what opportunities might it present for Chartered Accountants Australia and New Zealand and its members?

Firstly, development of water accounting must continue as China is introducing water trading, and the demand for professional services (in management, reporting and assurance of corporate water information) is likely to escalate.

Since its inception in 2009, the WASB had made significant inroads into laying the foundations for improved and more transparent water management at the catchment and national levels. Drawing on the principles of conventional economic accounting practice, specific achievements included development of a conceptual framework that clarifies the principles required for general purpose water accounting and reporting and two Australian Water Accounting Standards, AWAS1 and AWAS2.

Water accounting at the corporate level remains in need of further development.

Despite falling outside the bounds of “traditional” accounting, accounting professionals have been involved at every step of the WASB’s journey, providing expertise in measurement, monitoring, standards development, analysis and reporting.

Secondly, water accounting requires various types of professional expertise. The prediction of short- and long-run rainfall and weather patterns is critical and undertaken by meteorologists.  Predictions of the stocks and flows of surface water on the land and groundwater within the land are fundamental, with hydrologists being the specialists. Likewise storage capacity of water in dams and river systems, where engineers are the experts, is essential to productivity, safety and the quantities and quality measures for water trading.

Accountants have shown themselves to be adaptable, versatile business professionals working side by side with meteorologists, hydrologists and engineers to advance knowledge in an area of increasing importance to the global community.  

There is an opportunity for accountants and accounting firms to position themselves as global experts in the area of corporate water risk and water trading opportunities.

Overseen by the Bureau of Meteorology, the achievements of the WASB represent an encouraging start to understanding and improving water management on the driest inhabited continent on Earth.

With increased business interest concerning water-related matters, the future will see accountants called upon to provide clients with analysis regarding the economic costs associated with water-related decisions. This suggests there is an opportunity for accountants and accounting firms to position themselves as global experts in the area of corporate water risk and water trading opportunities.

At the very least, accountants should ensure they are familiar with the water-related risks and opportunities facing contemporary business and how these might impact their clients’ and/or employers’ interests.

The decision to abandon the WASB for short-term budgetary reasons hurts businesses that are looking for long-term engagement with improving water management. It hurts accountants who are seeking guidance from, and progress in, the existing water accounting and assurance standards. It hurts the agribusiness community, which knows that drought conditions will recur and has much to gain from transparent water information.

Chartered Accountants ANZ members might expect to look for water accounting to be saved as a commercial opportunity.

We suggest the following:

• Water management and accounting should become a part of the core accounting curriculum to help recognise the new environment in which businesses now operate.
• Professional development segments or modules and workshops in water management and accounting be introduced to help members get up to speed with water accounting guidance that will be required by clients in the future.
• Professional accounting bodies and firms can benefit from the new trade in water management and accounting services that will be critical to the provision of information to help solve, for example, China and Indonesia’s serious water pollution issues.
• The profession can take up water accounting, encompass the other professional groupings and act as leaders in order to ensure that Australia continues to lead in this era where natural capital is being eroded.

Katherine Christis a PhD scholar at University of South Australia’s Centre for Accounting, Governance and Sustainability. [email protected]

Roger Burritt CA is professor of accounting and sustainability in the Department of Accounting and Corporate Governance at Macquarie University. [email protected]

This article was first published in the December 2014 issue of Acuity magazine.