The food sector uses 70 percent of the world’s freshwater. At least 20 percent of the water used to irrigate crops is non-renewable and comes from groundwater basins that are being rapidly depleted. To put it another way: Eight percent of the world’s crops rely on non-renewable groundwater.
So, what is the food sector doing about these water risks?
On World Food Day earlier this month, seven food and beverage companies agreed to publicly disclose how they are managing water risks. The companies include Dr Pepper Snapple Group, Hain Celestial, Hormel Foods Corp., Kraft Heinz Co., Pinnacle Foods, Tyson Foods and WhiteWave Foods. They have agreed to report to the 2016 CDP Water Questionnaire on their water risks, their strategies for managing them, and their progress.
Perhaps a Ceres report released last summer, which scored 37 companies based on water risk management, influenced these firms to disclose their water risks. The report gave all seven companies low scores. Pinnacle Foods scored a mere 1 on a 1-to-100 scale, while the other six companies also had low scores:
- Kraft Heinz: 6
- Hain Celestial: 8
- Tyson Foods: 8
- Hormel Foods Corp.: 11
- WhiteWave Foods: 11
- Dr. Pepper Snapple Group: 15
Another factor influencing the companies is investor pressure. In August, a group of 60 investors collectively managing $2.6 trillion in assets sent letters urging 15 food companies to disclose water risks and how they are managing them.
Or, as Eliza Roberts, who is the manager of the Ceres Water Program, told me: Investors recognize that “water should be at the core of a business strategy, particularly for food companies that require so much water for the production of food.” Investors are “ focusing more on these issues,” she added. “They want more information about what companies are doing to evaluate their water risks and how they’re actually responding to it.”
The financial impact water risks pose is still another factor in these companies’ decision to disclose water risks.
“We know that these risks pose huge material and financial impacts to companies such as disruption of operations and operating costs,” Roberts said. “It’s clear these risks are translating into financial impacts. Companies are seeing it, and they’re starting to disclose a lot more in their financial statements and 10-Ks about their risks.”
The Ceres report highlighted the financial impacts associated with water scarcity, which include:
- Cargill reported a 12 percent drop in 2014 fourth-quarter profits as a four-year drought in the U.S. Southwest damaged pastures used to raise beef.
- The Campbell Soup Co. experienced a 28 percent drop in its California-based carrot division profits in early 2015 partly due to drought followed by intense rains.
- GrainCorp, Australia’s largest agribusiness, reported a 64 percent drop in 2014 profits due to a prolonged drought that reduced grain deliveries by 23 percent and almost halved grain exports.
- Unilever estimated that natural disasters linked to a changing climate cost the company about $400 million annually.
How companies can lead the way
The Ceres program, Connect the Drops is “great example,” in Roberts’ words, of how companies can practice water conservation and educate people about it.
An initiative established last year, its goal is “to elevate businesses in protecting fresh water in the state of California,” Roberts told 3p.
A number of companies signed on to the program’s declaration, which proclaims: “Water is the lifeblood of California … It is central to our communities, our economy and our natural resources.”
Ceres is working with the participating companies “to be much more active in advocacy and policy efforts supporting key bills and legislation,” Roberts said. And Ceres is seeing “a lot of interest from companies in this, particularly those that really have a stake in the California economy, and a lot from food and beverage companies,” she added.
Image credit: Kevin Cortopassi