Climate

Why Food Companies Aren’t Prepared To Deal With Water Scarcity

CREDIT: Shutterstock

As water becomes increasingly scarce, a new report warns food companies aren't prepared to adapt.

Leading global food companies are failing to account for impending water scarcity in their business plans, a new report finds.

Released Thursday by the Boston-based sustainable business consortium Ceres, Feeding Ourselves Thirsty: How the Food Sector is Managing Global Water Risks looked at how the world’s top 37 food companies, like Coca-Cola, Cargill, and General Mills, are planning for a world with water shortages. The results, according to Brooke Barton, senior director of Ceres’ Water Program, are concerning.

“If you look at the science of groundwater depletion, climate change and the math of growing population, we’re coming to the end of cheap plentiful water,” Barton told ThinkProgress. “By and large, most companies seem to be asleep at the wheel.”

Using publicly available information — from financial and sustainability reports — the report ranked the companies based on how they use and track water, whether or not they manage water waste throughout their entire supply chain, and whether or not they had water conservation plans in place. Companies were awarded a score from 0 to 100 — and while some companies scored highly, 31 of the 37 received scores below 50. Kraft Foods, which produces brands like Jell-O, Oscar Meyer meats, Kraft cheeses, and Maxwell House coffee, received a score of a 6. Both Monster Beverage, makers of the eponymous energy drink, and Pinnacle Foods, which owns brands like Vlasic Pickles and Log Cabin syrup, received a 1, the lowest score given.

A ranking of 37 food companies water plans.

A ranking of 37 food companies water plans.

CREDIT: Ceres

“The urgency of the issues have crept up on them,” Barton said about the low scores. “The reality is that for a very long time the business model for the food sector has been premised on cheap abundant water.”

Globally, 70 percent of the world’s freshwater is used to irrigate crops or raise animals. Numerous models show that even a small rise in the global temperature could lead to dramatic reductions in available water — according to one study, a 2°C average rise in global temperature could cause one-fifth of the world to suffer from water shortages.

Currently, one-third of food production takes place in areas that are experiencing water stress — and food companies are already seeing negative impacts of producing food in a water-scarce world. Of the companies mentioned in the report, 91 percent cited water as a “material risk” in their financial filings, according to Bloomberg.

Cargill, the largest privately held corporation in the United States, reported a 12 percent drop in their fourth-quarter 2014 earnings due to drought in the Southwest, which impacted pastures used to raise beef. Unilever — which makes Hellmann’s mayonnaise — estimated that natural disasters linked to climate change, including water scarcity, costs the company $400 million annually.

Only 16 percent of companies have sustainable agricultural policies that address water resources, however.

“We believe it’s important for the investment community to understand how financially material these issues are,” Barton said. “By and large, it’s really a moment when the food sector needs to invest in agricultural productivity in the areas they source from, rather than looking to cut and run.”

Barton points to companies like General Mills or Coca-Cola as examples of food corporations that are implementing water conservation measures within their own company and throughout their supply chain. Last month, Coca-Cola cancelled plans to develop a $81 million bottling plant in North India, citing concerns over groundwater depletion. Since 2010, General Mills has partnered with outside organizations, like the World Wildlife Fund, to look at water use in their supply chain and identify areas of agricultural production most at risk of water scarcity.

“They’re working to provide Mexican growers with no-interest loans on drip irrigation equipment,” Barton said of General Mill’s commitment to water conservation throughout their entire supply chain. “They’ve decided to prioritize those regions [at risk of water scarcity] as areas that they’re going to invest in.”

The report is the first time that Ceres has benchmarked companies based on their water resource management, but Barton hopes it’s just the beginning of a larger conversation about how investors and corporations prioritize water conservation.

“We hope that the report serves as a call to action for more food companies to get involved in supporting more efficient water use in the watersheds that they depend on,” Barton said. “We want the shareholders of these companies to understand the severities of the risks that are facing the food sector.”