Food companies aren’t moving quickly enough to fend off global water crisis, new benchmark report finds
Q3 2021 hedge fund letters, conferences and more
- Companies called on to improve management and disclosure of water risks in agricultural supply chains and high-risk watersheds.
- Industry giants Coca-Cola, Anheuser Busch, and Unilever get high marks in corporate water stewardship.
Food Companies Are Further Worsening The Global Water Crisis
BOSTON: Most food companies are not taking the necessary action to reduce their demands and impacts on freshwater resources, further worsening the global water crisis, according to a new report released today by the sustainability nonprofit Ceres.
Feeding Ourselves Thirsty, a benchmark analysis of 38 food companies, shows some encouraging signs of progress on corporate water management, but underscores that much more work needs to be done by companies to help ensure sustainable water supplies. The average company received 45 points out of 100 on water management, and the meat industry still lags considerably behind the pack, with meat industry companies scoring an average 18 points. Overall, Ceres’ analysis found companies do not have adequate practices in place across categories of water management, including governance structures, risk assessment, target setting and implementation actions.
Food companies are uniquely vulnerable to the water crisis, as growing and processing food consumes more than 70% of the world’s increasingly strained water resources. Without proper management and disclosure of water-related risks, companies increasingly face market, financial and reputational risks, and lose out on new market opportunities.
“Food companies are lagging in taking the appropriate water action, and are fundamentally unprepared for a more water-stressed world,” said Kirsten James, director of water at Ceres. “As Feeding Ourselves Thirsty shows, companies must move more quickly and more boldly to value water and better manage the related risks in their direct operations and global supply chains. Strong water management and disclosures will ensure the continuity of food production, while improving companies’ long-term profitability and return value to investors.”
An Even More Intense Water Stress
The report comes on the heels of new dire predictions from the Intergovernmental Panel on Climate Change that forecast even more intense water stress than previously predicted, underlining the urgency for companies to do their part to take necessary water stewardship action. Companies have a business imperative to act as the intensifying effects of the climate crisis places an increasingly intense strain on water resources and agricultural productivity, placing the future of the $6 trillion global food sector in jeopardy.
To determine each company’s water management practices, Ceres used voluntary corporate disclosures from CSR and sustainability reports, company responses to CDP water add climate change questionnaires, and mandatory financial disclosures in the analysis. Ceres evaluated food companies in four industries with the highest exposure to water risks: Agricultural Products, Beverages, Meat, and Packaged Foods. These industries include some of the largest U.S.-based and publicly traded companies, as well as a small number of large private and non-U.S. companies.
Agricultural supply chains, which contain the bulk of the food sector’s exposure to water risks, stand out as an area in need of critical improvement. Less than half of the companies analyzed performed robust water risk assessments (inclusive of water quality) that focus on their agricultural supply chains. Highly-stressed areas in these supply chains are not getting the attention they need from companies - only a handful of companies have implemented water use reduction targets or provided support for farmers in high-stress water basins.
This is the fourth edition of Feeding Ourselves Thirsty. Since Ceres began tracking this information in 2015, some companies have shown steady improvement. 71% of companies now consider water risks as part of their major business planning activities and investment decisions, up from 58% in 2019. More than half of companies (53%) tie executive compensation to water and sustainability performance (up from 33% in 2019), and 87% of companies are providing educational support to farmers to encourage adoption of practices that reduce impacts and dependence on water (an increase from 70% in 2019).
Top Scoring Companies
The top scoring companies, out of a possible score of 100, by industry were: Coca-Cola with 90 (Beverage); Unilever with 83 (Packaged Food); Cargill with 67 (Agricultural Products); and Tyson Foods with 37 (Meat); Coca-Cola, Anheuser Busch, and Unilever top the list of highest overall scores.
“We are pleased to be this year’s top scoring company,” said Michael Goltzman, Vice President, Global Policy & Sustainability at Coca Cola. “Our 2030 Water Security Strategy focuses on increasing water security for our business, supply chain and in the communities where we operate. Importantly, we prioritize our investments based on an in-depth understanding of water-related risks at a watershed level, contextualizing our targets to address local risks while focusing on the water used to produce our agricultural ingredients.”
“The growing scarcity of freshwater resources is not just a material issue for our company; it is a global risk to the economic, social and environmental well-being of our communities,” said Ezgi Barcenas, Chief Sustainability Officer at Anheuser-Busch InBev. “Efforts to increase our water efficiency, which began decades ago, have expanded beyond our walls into measurably improving the health of the watersheds across our supply chain. We appreciate the recognition in this year’s Ceres report as a top scorer and, in the context of the growing climate crisis, we will continue to lead a corporate shift toward measurability and a results-based approach.”
Strong water management and disclosures will not only ensure the continuity of food production, it can improve companies’ long-term profitability and return value to investors. Water risk has become an increasing concern for institutional investors, as water management challenges create volatility in investment portfolios. Feeding Ourselves Thirsty can be used as a guideline for engagement by investor initiatives, such as the Ceres’ Valuing Water Task Force, an advisory council of major investment funds, financial institutions and banks. The Task Force has grown to 13 investors and asset managers with 1.8T assets under management since its launch in March 2020.
“My job as the Illinois State Treasurer is to prudently invest the money entrusted to my office. I also have a responsibility to the long-term fiscal health of our state and local government institutions, which rely on a vibrant and sustainable economy,” said Illinois State Treasurer Michael Frerichs, who is a founding member of the Valuing Water Task Force. “I am also committed to the well-being of the communities I represent, including the economic security and dignity of millions of workers. Given the growing threats of climate change to the companies in which we invest, as well as the ways flooding and droughts have impacted Illinois’ agricultural community over the years, I have to consider water as a material risk when upholding my duties. Investors have a direct interest in advancing better water management practices that both protect our investments and the people in our communities.”
In anticipation of COP26, Feeding Ourselves Thirsty shines a light on the crisis of water management as a blind spot in international sustainability governance. The effects of climate change are first felt on the ground through water availability and quality, suggesting a link between climate policies and water policies.
About Ceres
Ceres is a nonprofit organization working with the most influential capital market leaders to solve the world’s greatest sustainability challenges. Through our powerful networks and global collaborations of investors, companies and nonprofits, we drive action and inspire equitable market-based and policy solutions throughout the economy to build a just and sustainable future. For more information, visit ceres.org and follow @CeresNews.
