Scale
Dependency Scale
How strongly a company's direct operations rely on reliable water supplies, rated Very Low to Very High.
H2Oversight assigns each company a Direct Operational Water Dependency rating.
1
Very Low
2
Low
3
Moderate
4
High
5
Very High
Dependency ≠ Performance
The rating describes how strongly a company's primary operations depend on reliable access to water. It does not measure how responsibly the company manages that dependency.
Water Stress ≠ Water Dependency
Water Dependency asks how important water is to the operation. Water-stress exposure asks where that water dependency is located.
A company with Very High Water Dependency is not automatically performing poorly on water sustainability, just as a company with Very Low Water Dependency is not automatically performing well. The rating provides context for interpreting the company's achievements and quantitative disclosures.
H2Oversight uses ENCORE's Water Supply dependency assessment as its principal baseline. ENCORE was developed through collaboration among Global Canopy, the UN Environment Programme Finance Initiative, and the UN Environment Programme World Conservation Monitoring Centre. It evaluates how economic activities depend on ecosystem services and assigns materiality ratings ranging from Very Low to Very High.
ENCORE is a starting point rather than a company-specific verdict. Economic-activity ratings represent typical global conditions, while actual dependency can differ according to a company's business model and operating structure. Where the operating model materially differs from the typical economic activity, the final rating may be adjusted by no more than one level.
H2Oversight cross-checks these assessments using SASB industry guidance under the IFRS Foundation and, where relevant, other nature-related frameworks such as TNFD. Information Technology, for example, includes asset-light software companies with relatively little direct water demand as well as semiconductor manufacturers whose fabrication processes depend heavily on ultrapure water.
A highly water-dependent company can operate primarily in water-abundant regions, while a moderately dependent company can have facilities concentrated in severely stressed basins. H2Oversight therefore treats geographic water stress as one of the Three Key Metrics rather than incorporating it into the dependency score.