Unilever, Coca-Cola, General Mills and Nestlé rank highest among food and beverage businesses in managing scarce water resources, but most major companies need to adopt far stronger practices, according to a new report released Thursday by nonprofit sustainability advocacy group Ceres.
The report, Feeding Ourselves Thirsty: How the Food Sector is Managing Global Water Risks, ranks the country's 37 largest food companies on how effectively they are managing freshwater supplies. While a relatively small number of firms are taking broad actions to manage water risks in their operations and supply chains, most have a long way to go in using water more sustainably.
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.
Companies were each scored on a 1- to 100-point scale on their responses in anticipating and mitigating these risks, with the highest score being Unilever with 70 points, the lowest being Monster Beverage and Pinnacle Foods, with just one point each.
Top scoring companies by industry were Unilever (Packaged Food: 70), Coca-Cola (Beverage: 67), Bunge (Agricultural Products: 29) and Smithfield Foods (Meat: 33).
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, the report claims.
In California, for example, 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.
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.
A majority of companies have begun to evaluate water risks in their direct operations, but two-thirds are still not evaluating water issues in their agricultural supply chains, where the vast majority of water risks lie, the report finds. Only 16 percent have sustainable agriculture policies that address water.
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 increasing board oversight and understanding of material water risks; conducting robust water risk analysis from manufacturing facilities down to the farm field; addressing watershed-level risks by investing in projects that improve watershed health and by supporting public policies that ensure sustainable water management; working with farmers to tackle water risks and impacts in agricultural supply chains; and improving disclosure to investors and other stakeholders on water risks, performance and management plans.
It also includes recommendations to help investors and analysts evaluate food sector companies on their water exposure and management practices.
Some companies have looked to address global water concerns beyond their supply chains. Coca-Cola and WaterHealth International (WHI) last year announced a plan to bring safe drinking water to one million school children in 2,000 schools in developing countries by the end of 2015.