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Our Insights 12 Jul 2016

Context Matters: Setting Corporate Water Targets Based on Watershed Needs

By Corinne Hanson
California’s water resource challenges are universally accepted to be a major problem. Image © PA Images.

California’s water resource challenges are universally accepted to be a major problem. Image © PA Images.

California Drying

With the unique exception of Donald Trump’s denial, California’s water resource challenges are universally accepted to be a major problem. Although I’m a native east-coaster used to snowy winters and muggy summers, I today call California home and spend my days working with the private sector to protect our water resources. Living in the arid west has made what was once a purely intellectual understanding of the state’s drought, part of my daily life. In California, taking short showers, tearing up lawn in favor of drought resistant shrubs and discussing the dwindling snowpack in the Sierras is everyday, normal.

But this wasn’t always the case, this isn’t normal, and this phenomenon is not limited to California – it’s just more immediately apparent here given the huge and growing population and teeming industry in the midst of a climate and geography that was already arid pre-drought. So while water insecurity increasingly plagues the globe, California’s critical role in agriculture and business (including myriad critical supply chain elements) has pushed observers to take early and particular note of what lessons the state’s water crisis may foretell. Recognition of water risk is firmly on the radar of leaders in the private sector, a major preoccupation for government at all levels, and an existential threat to public utilities.

Drought, Drought Everywhere

If you are in the private sector, I’ll warrant that having recognized the severity of this risk has caused a conundrum, because you will also have discovered how difficult and complex water security is to address. The first step is obvious: use less. Conservation alone though doesn’t solve the problems plaguing water resources in the first place; especially for growth industries, conservation may only take you a fraction of the distance that must be travelled.

While the first steps for most businesses are internal – limiting direct impact and reducing risk by using less water – comprehensive and enduring solutions demand looking outside a company’s walls and engaging the systemic problem. As WRI’s reigning water risk expert, Paul Reig puts it, “Companies can’t afford to be clean fish in a dirty pond; they need a clean pond to survive.” How can companies build momentum beyond operational efforts and help address the varied challenges facing the watersheds they rely on as much as we do? What kinds of goals and targets will truly guide us toward a water-secure future?

Georgia On My Mind

Far from my state, Atlanta-based Coca-Cola is perhaps the best-known leader on water stewardship thanks to their 2020 water replenishment goal. Coke hit their original target towards the end of 2015 and now replaces or replenishes 100% of the nearly 300 billion liters of water they use annually to make 160 billion liters of product. This is essentially an operational water neutrality goal, meaning that there will be zero net impact on water from Coca-Cola’s direct operations.

Coke’s achievement is excellent, even unprecedented in terms of water efficiency. Coke’s path also provides lessons on partnership, as the company has worked closely with WWF, USAID, The Nature Conservancy, Water for People, UN-HABITAT and the United Nations Development Programme (UNDP) on projects varying from improving local community access to water and sanitation to directly conserving watersheds. In addition, all these projects have third-party verification systems in place to support their target achievements. Still, the achievement of this goal does not fully address Coca-Cola’s overall exposure to water risk, most of which is in their supply chain, where it is shared by all stakeholders in the at-risk watersheds where Coke operates.

Sweet Tooth = Thirsty Tooth

The operational efficiency of Coke plants is dwarfed in comparison to the water required to grow one of the crops used to make one of Coca-Cola’s critical ingredients, sugar cane. Replenishment related to operations aside, Coke’s forward challenge (like all companies) is external – in its case water use in its agricultural supply chain.

The company has in fact already helped pioneer sustainable agriculture projects that address water usage and mitigate against drought. The partnerships Coca-Cola has created and the $2 billion Coca-Cola has spent on its replenish goal show incredible commitment, but even this early adopter’s leadership will be judged increasingly in future based not on operational efficiency or even supply chain partnerships, but by how it addresses the rest of its water footprint. Solutions may include water targets that incorporate agricultural water footprint and demonstrate the connection between growing crops and water usage to a concerned public at the same time as providing unique lessons for broader industry.

Beyond Neutral

The Harvard Business Review describes water neutrality such as Coca-Cola achieved in its operations as “…a parallel concept to the carbon neutrality that many companies try to achieve by, for example, using renewable energy, planting trees, or buying carbon offsets. Water neutrality has always been a trickier concept: unlike carbon molecules which have the same climate warming impact anywhere, water use is inherently local.”

Coke realizes this and is moving forward rapidly, stretching beyond its operational replenishment pledge. Given Coke’s position as a widely acknowledged leader on water strategy, other companies can see how challenging achieving and maintaining water security will be.

Again, first steps for corporate action on water are clear: Assess the challenge in each operational location, reduce and reuse as much as possible, then replenish and achieve water neutrality like Coke. The next step requires deepening your understanding of local systemic water challenges, and examining your company’s impact within the wider network of watersheds in which the company operates. And, finally, you will need to accelerate your company’s ability to contextualize water goals and collaborate across industry to improve water security overall.

From Isolated Best Practice to Systemic Approach

After spending more than two years exploring corporate best practice on water management, I find it incredible how far behind we are on comprehensive water management. Few organizations set science or context based goals for water the way has become common on climate. I will continue to explore corporate water challenges and the various barriers to protecting such a vital, shared resource in future blogs– if this is of interest to you too, please comment or get in touch.

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