Water Withdrawal: Definition & ESG Reporting Explained
Water withdrawal refers to the extraction of water from natural or artificial sources for operational use. It represents a key environmental metric in ESG reporting, highly relevant to sustainable supply chain requirements and ESG credit ratings.
What constitutes water withdrawal?
Water withdrawal comprises all volumes of water that a company sources for production, cooling, cleaning, or sanitary purposes - regardless of the source (groundwater, surface water, public municipal networks, or rainwater harvesting systems). This is distinct from water consumption, which refers only to the portion of water that is not directly returned to the water cycle.
Why water withdrawal is relevant for SMEs
Supply chain pressure (CSRD effect): Large corporations subject to CSRD reporting obligations must disclose environmental KPIs of their suppliers, including total water withdrawal and site-specific water stress risks.
Green Asset Ratio: Financial institutions are required to disclose their Green Asset Ratio. Key water metrics support the assessment of physical climate risks and long-term location stability.
Operational risk from water scarcity: In water-scarce regions, companies face potential production disruptions and rising water costs - making water a strategic cost and risk factor.
Classification within the VS Standard
Water is recognised in the EFRAG Voluntary SME Standard (VS) under the "Environment (B6)" module as a key environmental aspect, which is particularly relevant for water-intensive business models or operations located in water-stressed regions.