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Water Shortages Now Affect Companies’ Bottom Lines

Leon Kaye | Friday October 28th, 2011 | 1 Comment
Drought in rural Australia courtesy WikiCommons

Drought in rural Australia courtesy WikiCommons

Call it what you want: climate change, climate volatility, drought, or a long act of god. Water crises from Texas to Australia are affecting commodity supplies and raising their prices. Changes in the world’s weather patterns now have an impact on corporate profits across different sectors.
The smart companies are the ones that now include water stewardship within their overall strategies. Other companies are reacting by cutting profit forecasts. And meanwhile, companies like General Electric (GE) are finding business opportunities in technologies that now redefine the clean technology sector.

Campbell Soup Company is one firm that has ramped up investment in water management projects. Water recycling, reengineered cooling systems, and wastewater treatment are crucial for a company whose end product contains only two percent of the water used in the manufacturing process. For beer companies like MillerCoors, water use is a huge concern as many of their breweries are in regions confronting water shortages, from Orange County to Idaho. Most beer companies operated under a ratio that saw five parts of water consumed for every one part of beer. Now most of these companies are nudging close to a 3:1 water-beer ratio. One of MillerCoors’ parent companies, Molson Coors, has pushed more companies to participate in the Water Disclosure Project, an initiative that asks the world’s largest 500 companies to share information about their water usage.

Other beverage companies, including Coca-Cola and PepsiCo, have been quicker to reduce their water consumption than their counterparts in the food processing industry. In fairness that is because water is a much more integral part of these companies’ operations. Companies like Sara Lee and Kraft, which have supply chains almost as complicated as electronics manufacturers, are raising prices due to drought. Nestle has also raised its prices, but activist investor organizations like Ceres have lauded the company for its ability to cope with water risk.

While many regions suffer from drought, other areas of the world are inundated with floods. Thailand’s worst floods in 50 years have forced companies like Toyota, Hitachi, and Fujikura to halt production, the effects of which have rippled throughout their supply chains. Other companies, such as the European pharmaceutical giant Sanofi, are finding themselves engaged in Bangkok relief efforts–Sanofi is donating vaccines to help prevent outbreaks of water borne diseases.

Water has long been underpriced and overused. With only one percent of the earth’s water available for human consumption, peak water could be a more pressing problem than peak oil. With water consumed at a faster pace than the natural rate of evaporation, precipitation, and storage, water stewardship will define many companies’ long term success or struggle.

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Leon Kaye is a consultant, writer, and editor of GreenGoPost.com and also contributes to The Guardian Sustainable Business; you can follow him on Twitter.  He lives in Silicon Valley.


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  • Gareth

    Peak water is a FAR more pressing issue than peak oil. We have alternative options to crude oil, but I can’t think of anything that can replace water.

    Our only option is to reduce consumption and waste at industry level, and within agriculture.

    I get really annoyed when I eat at restaurants or food halls that use woks (and I eat asian a lot) and I see the taps behind the hotplates running full time, just so it is a bit quicker and easier for them to clean the wok between each cooking cycle.

    From a domestic perspective, I have no problem with the looming increases in water prices here in Australia and I’d happily pay more than I do now for clean safe water to be piped straight to my house (what a luxury!) but it should be based on the amount I use, NOT the Government’s estimated value of my property.

    And a simple hint for readers: put an empty bucket in the kitchen before you prepare the evening meal. Tip the water from boiling vegetables and rinsing pans and dishes into the bucket, and before bed put it into the pot plants or onto the lawn. You’ll be surprised how much water you waste just preparing dinner!