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Coke bottles

Coca-Cola CEO: Reducing Water Use Inside Our Operations Isn’t Enough

Coke bottlesThe cola wars may be ancient history, but Coca-Cola and PepsiCo are facing off again. This time, it’s about water.

CEOs, NGOs and government officials are gathering in Stockholm for the UN’s World Water Week to address water availability challenges. This also means companies and entire countries are announcing water efficiency and safety targets and accomplishments. Two of these private sector announcements come from Coke and Pepsi.

On Monday, Coca-Cola said the company and its bottling partners have met their goal to replenish the equivalent amount of water used in their global sales volume back to nature and communities. They also improved water use efficiency by 2.5 percent from 2014 to 2015, adding to a cumulative 27 percent improvement since 2004.

Also on Monday, PepsiCo said it reduced operational water use by 26 percent last year, compared to a 2006 baseline, and has now saved $80 million over the past five years through water conservation efforts. Additionally, the company said its charitable arm, PepsiCo Foundation, has now provided 9 million people with access to safe water since 2006 through partnerships with nonprofits.

Tomorrow, Environmental Leader talks water conservation with Pepsi. Meanwhile, here is what rival Coke is doing about water use and scarcity in regions where it operates.

Coca-Cola’s ‘Water Wakeup Call’

Coca-Cola returned about 191.9 billion liters of water to nature and communities in 2015 through community water projects in 71 countries. This represents about 115 percent of the water used in Coca-Cola’s beverages last year. The projects focus on safe water access, watershed protection and water for productive use.

LimnoTech and Deloitte, working with The Nature Conservancy, validated Coke’s water use. The water projects and methodology for calculating water replenishment benefits are detailed in a 1,188 page report.

By achieving this milestone in 2015, Coca-Cola beat its 100 percent water replenishment goal five years early. The company says it is the first Fortune 500 company to achieve this.

In an op-ed, Coke CEO Muhtar Kent says India was the company’s water wakeup call.

Twelve years ago, Coca-Cola’s operations in India came under fire for misusing water during a drought. While the company was cleared of any legal wrongdoing, the accusations resulted in plant closures and hurt Coke’s reputation.

“Back then, we were focused on water use inside our operations, but it wasn’t enough,” Kent writes.

In response, Coke made water a key business priority and in 2007 committed to replenishing all the water the company used.

“I predict that if you aren’t responsibly managing water in your business, you won’t be in business 20 years from now,” Kent writes. “I’m not saying this as a detached observer.”

Business Case for Water Replenishment

In an interview with Environmental Leader, chief sustainability officer Bea Perez, and Greg Koch, global head of water stewardship said there’s a clear business case for Coke’s water replenishment projects.

“If you think about what we sell as a finished product, our no. 1 ingredient is water,” Perez said. “It’s very important for us to be as efficient as possible with water and we also have to ensure we’re protecting the water source — quantity, quality and infrastructure — for the local communities in which we operate. That’s what allows us to be welcomed by the community and operate as a thriving business.”

And partnerships, the Coke executives say, — Coca-Cola current partners with about 400 governments, nonprofits and other private companies — are key to these projects’ success. These include partnerships with Global Environment & Technology Foundation, Millennium Challenge Corporation, The Nature Conservancy, United Nations Development Programme, UN-Habitat, United States Agency for International Development, WaterAid, Water and Sanitation for the Urban Poor, Water for People, WWF, and World Vision.

This includes a nine-year partnership with WWF to promote river basin conservation along the Mekong River, which runs almost 3,000 miles through China, Myanmar, Laos, Thailand, Vietnam, and Cambodia.

In Vietnam’s Tram Chim National Park, Coca-Cola and WWF worked with park officials and local governments to pass a new wetlands management statute based on the two organizations’ work with the community. “The government said this is how we are going to manage wetlands throughout Vietnam,” Koch said. “You couldn’t be prouder of what you do then when the government says we’re going to make that the law.”

How to Reduce Manufacturing Water Use

Coca-Cola also focuses on its water use inside factory walls, which has led to a 27 percent improvement in water efficiency since 2004. The company has set a 2020 goal to improve water efficiency in manufacturing operations by 25 percent, compared with a 2010 baseline.

“In 2004, when we first started reporting our water-use ration, we used 2.7 liters of water to make 1 liter of product,” Koch said. “This means for every liter of product produced, we were using an additional 1.7 liters in the manufacturing process, to run the factory and keep equipment clean.”

Coca-Cola now uses 1.98 liters of water to make 1 liter of product and is working to reduce it to 1.7 liters of water per liter of product by 2020.

To achieve these efficiency improvements, Coke started with the “low-hanging fruit” like fixing leaks, Koch says. It has now moved on to optimizing and, in some cases, eliminating water used in manufacturing processes.

This includes using ionized air instead of water to “rinse” beverage packages before filling them with product and using dry lubrication to move bottles along conveyor belts. Coca-Cola also treats and reuses water for some manufacturing processes and to wash its delivery trucks.

Since 2004, the company and its bottling partners have spent upwards of $300 million investing in these types of water efficiency technologies, Koch says. But if Coke meets its 25 percent efficiency improvement by 2020, these investments will help the company and its bottlers avoided about $1 billion.

“These include fees we pay to obtain water from a municipality,” Koch explained. “We also pay to discharge treated water. We look at the total cost of water, inclusive of those two municipal costs, but also fees we incur from CAPEX, depreciation, chemical and energy use standpoint, labor standpoint. We incur costs and carbon footprint to treat water, make it safe. When we all that up and see the true cost of water, efficiency becomes a lot more attractive from a business standpoint.”

Tomorrow, Environmental Leader talks water efficiency and access to safe water with PepsiCo.

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