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 includes all volumes an organization extracts or sources for production, cooling, cleaning, or sanitary purposes - regardless of the source (groundwater, surface water, municipal water supplies, or rainwater harvesting systems). This is distinct from water consumption, which refers only to the portion of water that is not returned directly to the water cycle.
Why water withdrawal is relevant for SMEs
Supply chain pressure (the CSRD effect): Large corporations subject to CSRD reporting requisites 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 business site viability.
Operational risks from water scarcity: In water-stressed regions, organizations risk production disruptions and rising water tariffs - making water management a strategic cost and ESG risk factor.
Integration within the VSME standard
Water is recognized under the EFRAG Voluntary SME Standard (VSME) within the "Environment (B6)" module as a key environmental aspect, particularly relevant for water-intensive business models or facilities operating in areas high in water stress.