Major US food companies need to adopt far stronger water management practices to use limited global resources more efficiently, according to a report by nonprofit advocacy group Ceres.
The report, Feeding Ourselves Thirsty: How the Food Sector is Managing Global Water Risks, ranks the nation’s 37 largest food companies on how effectively they are managing freshwater supplies. While a relatively small number of firms are taking broad actions to manage water risks in their operations and supply chains — Unilever, Coca-Cola, Nestlé, PepsiCo, General Mills and Kellogg, among those — most have a long way to go, the report concludes.
The report examines how water risks are affecting the profitability and competitive positioning of food companies, such as by disrupting operations, limiting growth or increasing agricultural input costs, in four industries: packaged food, beverage, meat and agricultural products. Companies were each scored on a 1- to 100-point scale on their responses in anticipating and mitigating these risks, with the highest score being Unilever with 70 points, the lowest being Monster Beverage and Pinnacle Foods, with just one point each.
Top scoring companies by industry were Unilever (Packaged Food: 70), Coca-Cola (Beverage: 67), Bunge (Agricultural Products: 29) and Smithfield Foods (Meat: 33).
Other key report findings:
- Although water risk was identified as a corporate governance priority by many of the companies, board oversight of water did not consistently translate into strong overall performance. Sixty percent of the 16 companies with board oversight of water risk received fewer than 35 total points.
- Only 30 percent of the companies considered water risks as a part of major business planning and investment decision-making. Nestlé and Unilever were the only companies that reported using a “true cost” or shadow price for water in analyzing the return on investment (ROI) of water-efficiency capital spending.
- A majority of companies (23) have begun to evaluate water risks in their direct operations, but two-thirds (22) are still not evaluating water issues in their agricultural supply chains, where the vast majority of water risks lie.
- Water quality was a lower priority. Only two companies — Coca-Cola and Nestlé — report goals to reduce wastewater discharges and improve water quality beyond compliance requirements. Most do not disclose the percentage of their facilities complying with local wastewater discharge regulations.
- Only 16 percent (six) of companies have sustainable agriculture policies that address water. Only four companies — Coca-Cola, General Mills, Kellogg and Unilever — have set time-bound goals to source the majority of their agricultural inputs from farmers using responsible water practices.
- Four companies — General Mills, Keurig Green Mountain, Unilever and WhiteWave Foods — offer financial support to help growers farm more sustainably. Examples include premiums for more sustainably grown inputs and favorable financing terms or interest-free loans offered for equipment.
The report also provides specific recommendations for how food companies can improve water efficiency and water quality across their operations and supply chains to reduce risks and protect water resources, including:
- Increase board oversight and understanding of material water risks.
- Conduct robust water risk analysis from manufacturing facilities down to the farm field.
- Address watershed-level risks by investing in projects that improve watershed health and by supporting public policies that ensure sustainable water management.
- Work with farmers to tackle water risks and impacts in agricultural supply chains.
- Improve disclosure to investors and other stakeholders on water risks, performance and management plans.