By John Davidson SABMiller plc
There was a time not long ago when the threats to business profitability and sustainability from water shortages were largely ignored by corporate investors. Companies like ours fully understood how essential water was to us and our future and the demands that put on how we operated and behaved. But in general there was little pressure from investors to act or to fund the inevitable short-term costs. For some businesses, this could be a brake on the changes needed.
These barriers are disappearing fast. Last month more than 60 leading institutional investors publicly called for companies to give a higher priority to good water management. This shows that there is now a widespread recognition of just what a risk this is to future profitability.
This weekend, the UN General Assembly will approve the Sustainable Development Goals intended to tackle the world’s big social and environmental challenges. Goal Six seeks to ensure availability and sustainable management of water and sanitation for all. With 70% of the world’s fresh water going into agricultural and other supply chains, business has a critical delivery role to play.
But tackling this problem effectively has to go well beyond simply reducing water use in operations. For long-term results, it must also involve businesses working with local communities, governments, and civil society to manage and conserve shared water resources.
This is an approach which SABMiller is already following – and for good reason. We pride ourselves on being the most local of the global brewers, sourcing our crops and brewing our beers as close as we can to the communities where they are consumed. This requires us to understand local water stresses and challenges.
Local water stress hurts us both directly and indirectly. Without access to water in the future, we won’t be able to produce our beers. Nor will farmers be able to grow the crops we need. But indirectly, water stress also holds back other local businesses and communities – and if they don’t prosper, there will inevitably be less demand for our products.
So the business case for us to care about water stress is strong. And this is true not just in agricultural areas but also in cities, which are growing in the developing world at the rate of five million people a month. Lack of access to clean water and poor sanitation is one of the major causes of poverty.
Helping to ease water stresses takes us into unfamiliar territory. It requires us to look outside our traditional core competences as brewers and work on finding long-term solutions for all water users that maintain the integrity of the natural systems. This requires cooperation with a whole range of other groups including national and local government, other businesses, campaigning groups and, of course, communities.
This must go beyond improving infrastructure, important as that is. As a joint report by SABMiller and WWF shows, water security also requires programs that strengthen the resilience of ecosystems and societies from the shocks and stresses resulting from climate and population shifts.
What does this mean in practice? Let me give three examples from three different continents. Our brewery near Bogota has faced rising water charges from the local utility company in recent years, due to treatment costs caused by increased sediment levels in the river. These were the result largely of the clearing of vegetation by farmers and cattle ranchers upstream.
The solution was to support The Nature Conservancy’s Water Fund – an innovative mechanism to support the rehabilitation of the watershed through investments in more sustainable farming practices and higher milk-yielding cattle. In return, farmers commit to long term conservation agreements.
The expected reduction in sediment should deliver savings of $4 million per year for the Bogota water utility and, of course, for its users. Water bills fall, farmers develop more efficient and sustainable practices, and natural resources and the community’s future are protected.
South Africa’s Strategic Water Partners’ Network is another example of a bold partnership which brings together government, companies, and civil society groups. Joined up policy interventions have led to improved water use in agriculture, better waste water management, and increased municipal and industrial water efficiency.
In India, SABMiller has partnered with a local agricultural institute to work with small-holder farmers and communities in the Telengana area. India, with 17 per cent of the world’s population and just 4 per cent of its fresh-water resources is in the front-line of the battle against water stress. This availability challenge is made worse by the inefficient use of water by agriculture, which in India accounts for 90 per cent of fresh water consumption compared to the 70 per cent global average.
Our initiative involves working across the board with communities to secure water resources. There is investment in infrastructure to harvest and retain better rainwater. Farmers are helped to increase yields – more crop per drop – through improved practices. Incomes are also being improved by supporting communities to develop new enterprises such as using spent malt from our local brewery to increase the milk yield of their cows. The ultimate aim is to create a model than improves water availability, water usage, and incomes in a way that can be scaled and replicated.
These partnerships illustrate an important change that has occurred since the Millennium Development Goals were agreed in 2000. Business is no longer an after-thought, perhaps to be approached for funding, but is now understood to be integral to development. There is a greater focus on how the right core business investment can have a multiplier effect across value chains and communities to drive important development outcomes than on the investment alone. Companies in turn have recognised that healthy successful businesses require healthy, successful communities.
As we move beyond the debate about the Sustainable Development Goals and into implementation, it is this new alignment of interest which offers the best hope for transformative change. We should welcome, rather than be suspicious of, the profit imperative being used to help solve some of society’s toughest challenges.
John Davidson is General Counsel and Corporate Affairs Director, SABMiller plc John joined the group as General Counsel and Group Company Secretary in 2006. In November 2014 he assumed responsibility for regulatory affairs, communications and sustainable development, and is now General Counsel and Corporate Affairs Director.