Major Food & Beverage Firms Taking The Lead In Managing Water Sustainability

U.S. food companies need to adopt far stronger practices to use global water resources more efficiently, according to a report released today by Ceres. The report, Feeding Ourselves Thirsty: How the Food Sector is Managing Global Water Risks, ranks the nation’s 37 largest food companies on how effectively they are managing freshwater supplies.

Globally, food production is the most water intensive business on earth, using 70 percent of the world’s dwindling freshwater supplies. At the same time, surface water pollution from fertilizers, manure and pesticides is contaminating drinking water around the world and led to the shutdown of the city of Toledo’s water supplies last summer.

While leading firms are taking broad actions to manage water risks in their operations and supply chains including Unilever, Coca-Cola, Nestlé, PepsiCo, General Mills and Kellogg, most have a long way to go in using water more sustainably, the report concludes.

The report examines how water risks are affecting the profitability and competitive positioning of food companies, such as by disrupting operations, limiting growth or increasing agricultural input costs, in four industries: packaged food, beverage, meat and agricultural products.

The report makes clear that escalating water competition, combined with weak government regulations, increasing water pollution and worsening climate change impacts, is creating unprecedented water security risks for the food industry.

In California, an estimated half-million acres of farmland have already been fallowed by a prolonged drought, causing more than $1 billion of economic losses for the agriculture sector. Similar water risks are being experienced in other major growing regions, including Brazil, Mexico and China.

The report scored companies on a 1- to 100-point scale on their responses in anticipating and mitigating these risks. Top scoring companies by industry were Unilever (Packaged Food: 70), The Coca-Cola Company (Beverage: 67), Bunge (Agricultural Products: 29) and Smithfield Foods (Meat: 33). See all company scores.

Other key report findings:

–Although water risk was identified as a corporate governance priority by many of the companies, board oversight of water did not consistently translate into strong overall performance. Sixty percent of the 16 companies with board oversight of water risk received fewer than 35 total points.

–Only 30 percent of the companies considered water risks as a part of major business planning and investment decision-making. Nestlé and Unilever were the only companies that reported using a “true cost” or shadow price for water in analyzing the return on investment (ROI) of water-efficiency capital spending.

–A majority of companies (23) have begun to evaluate water risks in their direct operations, but two-thirds (22) are still not evaluating water issues in their agricultural supply chains, where the vast majority of water risks lie.

–Water quality was a lower priority. Only two companies – Coca-Cola and Nestlé – report goals to reduce wastewater discharges and improve water quality beyond compliance requirements. Most do not disclose the percentage of their facilities complying with local wastewater discharge regulations.

–Only 16 percent (6) of companies have sustainable agriculture policies that address water. Only four companies – Coca-Cola, General Mills, Kellogg and Unilever –have set time-bound goals to source the majority of their agricultural inputs from farmers using responsible water practices.

–Four companies – General Mills, Keurig Green Mountain, Unilever and WhiteWave Foods – offer financial support to help growers farm more sustainably. Examples include premiums for more sustainably grown inputs and favorable financing terms or interest-free loans offered for equipment.

The report provides specific recommendations for how food companies can improve water efficiency and water quality across their operations and supply chains to reduce risks and protect water resources, including:

–Increase board oversight and understanding of material water risks.
–Conduct robust water risk analysis from manufacturing facilities down to the farm field.
–Address watershed-level risks by investing in projects that improve watershed health and by supporting public policies that ensure sustainable water management.
–Work with farmers to tackle water risks and impacts in agricultural supply chains.
–Improve disclosure to investors and other stakeholders on water risks, performance and management plans.

Download the complete report.