Finding a way to put people first

Corporate responsibility (CR) is a term that can mean many things. Some say it makes good business sense to operate in ethical ways; others that it is a burden on business, interrupting the natural order of the free market. Some believe it helps hold multinational companies to account; others that it puts regulatory power into their hands, taking it away from government. Some view it as a public-relations exercise; others say it benefits communities and the environment.

What can more easily be determined is that it is a multi-billion pound industry, and one of the fastest-growing areas in CR is water. There are many reasons for this – global water shortage, the rising cost of energy, legislation, changing investor behaviour, consumer and campaigner pressure, and risk to reputations.

Companies with a combination of a water- intensive operation and a highly visible brand, especially, are finding it necessary to take action. What they are learning is that, once water is looked at in the full context of its social, political, economic and environmental value, it becomes supremely complex – and more expensive.

“Forward-facing brands need to look at it very differently,” said Stuart Orr, freshwater policy officer for WWF UK. “A lot are making claims on water that are just tinkering around the issue.”

HIghest level

The corporate response to CR on water was perhaps crystalised at the highest level when some of the world’s largest and most water- intensive brands signed up to the UN CEO Water Mandate in July 2007. Signatories include the chief executives of companies like Nestlé, Unilever, Siemens, Coca-Cola, Dow Chemical and SABMiller.

The stated aims of the Water Mandate are to assist companies in the development, implementation and disclosure of water sustainability policies and practices.

Signatories commit to leadership in direct operations, supply chain and watershed management, collective action, public policy and transparency.

What all this might mean in practice is much harder to quantify and qualify. Participants are using terms like “water neutral” and “water footprinting”, but precise definitions of what they mean have yet to be established. John Gummer MP, an environmental advisor to The Coca-Cola Company, recently praised the company – before an audience of water industry leaders in London – for its pledge to go water neutral. The company is going “to put back a drop for every drop they take out”, he said.

When I asked for more detail on what measures were being taken and how they were being monitored, he could not give an example. Orr explained that, while companies say that they want to estimate what they use and put back into the community and environment, “in reality, this may prove impossible to do”.

Coca-Cola does have a comprehensive list of global community and environmental programmes in which it is engaged. It is using monitoring and reuse solutions to minimise consumption in its UK operation – see WWT December 2007. Its environmental report reveals it intends to “set a goal to offset the litres of water used in our finished beverages (about 122 billion litres in 2007), through locally relevant projects that support communities and nature”.

This loosely phrased objective can be loosely commended. But Coca-Cola’s environmental report reveals that, should it ever achieve its ambitious aspiration to go water neutral, this will not necessarily mean the company will replenish resources in the place the impact is being felt.

So, even if it were to put back a drop for every one it takes out, at a global level, this does not necessarily make its operation sustainable. Further, this goal is about its processing operation, not its agricultural supply chain.

When Coca-Cola says it uses 2.47 litres of water for every one litre product, it admits it is not counting its agricultural footprint. As the company’s report states, sugar cane is “a crop that uses approximately 180 litres of water for the sugar needed in one litre of Coca-Cola”.

It is hard to imagine how that amount of water could be offset by any means. Tim Hess, a senior lecturer at Cranfield University, explained that companies are focusing on efficiencies in water used for processing because this is where they can save money on the cost of treatment and supply. “Upstream embedded footprint is given less attention,” he said, “and the majority of water footprint is on food growing, not processing.”

Of course, in some areas, water may be plentiful enough that extraction has zero

impact. And where irrigation water for plantation agri­culture is sustainably managed, that may not be a problem.

In others, though, as Stuart Orr explained, even improved efficiency may not reduce risk, because the catchment is already so badly managed.

Embedded footprint

Given that this is the case, the cost of the whole-cycle water stewardship required to ensure global sustainability is unlikely to be palatable to the shareholders and finance directors of many water-intensive businesses.

International brewer and bottler SABMiller says it is one of the first companies to conduct a water-footprinting exercise. In an announcement on 13 November, in addition to its commitment to a 25% reduction in water use across its global operation by 2015, its South African subsidiary SAB has undertaken a water-footprinting project.

This scheme identifies how much water is used at each stage of the value chain and calculates the proportion of available local water resources that this represents. SAB has taken advice from WWF and says it employs agronomists to engage with farmers who need to become more water efficient.

SABMiller CEO Graham Mackay said: “In an increasingly water-constrained world, it is critical that we become as efficient as possible, while working with communities to protect water resources. This is an extremely challenging but achievable target and sets a new industry benchmark.”

Measures such as these are certainly to be welcomed, but the real test will be whether SAB can maintain the momentum and roll out the initiative across all its operations in the six continents in which it operates.

It falls to the water industry, which has not only a moral duty, but a business interest too, to monitor and motivate water-intensive industry to continually aim higher and be more honest. Tougher international standards for multinational companies would certainly be a welcome step.

Given the combined clout of the UN Water Mandate, leaving their own operations aside, one would think its signatories could clean up the world’s water in a week, had they the will. But it is not inconceivable the participants will look after their own best interests first.

Water-intensive companies may indeed be looking at the impact of unsustainable practice on communities, but there are also big risks to business from depleted and polluted supplies. Cranfield has been working with one company that is assessing its vulnerability, not only hydrologically, but also technologically.

Further, it is taking account of its vulnerabilityto war, terrorism and activism in an increasingly volatile world.

Raise standards

As the water brief of CR gathers momentum, the water industry has a responsibility to add to the pressure to raise standards, not only where legislation exists but also where it does not.

Over-extraction and pollution of water resources need to be addressed where they are occurring – they cannot be offset in other places.

Detailed investigation of sites for water-intensive businesses should be undertaken. Claims of water neutrality should mean exactly that – over the whole supply chain, not just production.

And they should be verified through a formal peer-approved process. Pledges, likewise, should have a time frame, should be monitored, and should not be subject to the self-interest of shareholders and whims of consumers.