Most Companies Act Like Fresh Water is Limitless

It takes water to produce food. The global food sector uses 70 percent of the world’s freshwater during a time when a number of areas, including California, are experiencing extreme drought. A recent report by Ceres, entitled Feeding Ourselves Thirsty, looks at how the food sector is managing water risk.

The report looks at 37 major food-sector companies in four industries: packaged food, beverage, meat and agricultural products. Companies were scored on a zero to 100 scale in four different categories. The results are not exactly inspiring. What the report found is that, although many of the companies identify water risk as a priority, board oversight of water is not translating into strong overall performance. Sixty percent of the 16 companies with board oversight received less than 35 total points.

Here are some other results, equally uninspiring:

• Only 30 percent of companies considered water risks to be a part of major business planning activities and investment decisions.


• Only two companies, Nestlé and Unilever, use a shadow price for water to analyze the return on investment (ROI) of water-efficiency investments.


• While most companies have started evaluating water risks in their direct operations, two-thirds are not evaluating water issues in their agricultural supply chains.

Why don’t most companies understand the importance of managing water risk? The problem is that water is cheap, and as a result “it’s seen as limitless,” Eliza Roberts, manager of the water program at Ceres, told me. “When something is cheap and seen as limitless, it's just not going to be valued,” she added.

The California drought is starting to change perceptions of water. As Roberts explained: “It's becoming clear to all with the drought in California, that water is not limitless and that water scarcity can have a real impact on business operations and bottom line. So, additionally, as supply goes down and demand increases, it's becoming clear that water may be cheap for now, but this is likely to change."

What can companies, both higher-scoring and lower-scoring, take away from the report? They need to understand that the global freshwater supply is facing “extraordinary risks from the twin challenges of water scarcity and water pollution,” Roberts pointed out. “These risks are posing a material and financial impacts.” In other words, while water may be cheap for now, it is certainly not limitless.

How General Mills and Kellogg value water

A handful of companies stand out as leaders in managing water risk. General Mills is one of only four companies that have developed collaborative watershed protection plans linked to regions of high water risk. General Mills and Kellogg Co. are 2 of 4 companies (16 percent) that have time-bound goals to source the majority of their agricultural inputs from farmers with responsible water practices. General Mills is also one of a handful companies that offer financial support to help farmers practice sustainability in their operations.

Wanting to know more about water management at the companies that scored higher, I spoke with Ellen Silva, senior manager of applied sustainability at General Mills, and Diane Holdorf, chief sustainability officer for Kellogg Co. It’s clear that both companies understand that their business operations depend on access to freshwater.

As Holdorf said: “We use water as an ingredient in our foods, for heating, for cooling, for cleaning and, in some locations, irrigation. We’re determined to do our part to reduce our water use and use water more efficiently.”

Or, as Silva put it, “We do acknowledge publicly that water for safe drinking and hygiene is a human right.” She added that the drought in California highlights how important it is to manage water risk. For General Mills, that means helping growers farm more sustainably because most of the company’s water use “happens in agriculture.”

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