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All content in this area was uploaded by Filipa Pires de Almeida on Apr 21, 2021
Content may be subject to copyright.
WATER
A KEY VALUE DRIVER
FOR SUSTAINABLE GROWTH
RESEARCH NOTE # 5
CENTER FOR RESPONSIBLE BUSINESS AND LEADERSHIP
1
This research note was developed by the Center for
Responsible Business & Leadership (CRB), a unit of
Católica Lisbon School of Business and Economics. The
Center is a strategic initiative in CATÓLICA-LISBON’s
ambition to be a catalyst for impact creation, through
knowledge development and innovation, in order to place
responsible business at the core of the corporate
strategy.
Responsible Business (RB) is becoming an essential part
of corporate strategies and the CRB aspires to develop
critical knowledge among students and executives to
face the sustainability trends as opportunities. Our aim
is to contribute to CATÓLICA-LISBON’s mission to be a
top business school and create a position of intellectual
leadership while finding the right answers for the world’s
toughest challenges.
We believe that corporations able to act as a
Responsible Business, integrating all its dimensions into
their strategies and culture, will be the leading
companies of the future.
We gratefully acknowledge the support to the Centre
provided by BP Portugal and Efacec.
Authors:
Filipa Pires de Almeida
Francisco Barreiros
Natália Cantarino
Scientific Advisor:
Filipe Santos
2
Index
1. Introduction ……………………………………………………………………………………………………………….… 3
2. Global Context ………………………………………………………………………………………………………….… 3
3. The Challenge …………………………………………………………………………………………………………..… 6
4. Why do water matter for business? …………………………………………………………….…… 10
5. How can companies create competitive advantage through water
management? …………………………………………………………………………………………………………… 25
6. Conclusion ……………………………………………………………………………………………………………….… 37
3
1. Introduction
Water is a fundamental life-sustaining resource. We are used to see it a quasi-free resource,
available both for human basic needs and companies’ operations. However, the era of water
abundance is over and, with a perspective of a 40% water supply gap by 2030 (WEForum, 2012)
and more than 6 billion people suffering from clean water scarcity by 2050 (UNESCO, 2020),
urgent measures are needed, mainly from companies, the ones mostly contributing to the
problem we have in hands.
This Research Note aims to analyse the water-stress problem in a clear and concise way,
exposing how critical it is for companies to act on this problem that is affecting their entire value-
chain and, consequently their bottom-line and license to operate.
The research note starts with a “Global Context” in which the water problem is exposed, followed
by “The Challenge” section highlighting why this problem is a Global Challenge affecting both
public and private sectors, as well as civil society. The section “Why do water matters for
business” emphasizes why water availability is a real problem for companies’ operations, how
businesses use water along their value chain and what water-related risks should companies take
in consideration on the definition of their business strategies, as they try to achieve competitive
advantage. The last section, “How companies create competitive advantage through water
management” is the last chapter where we propose a Water Stewardship approach for
companies to actively engage in water management strategies through their core operations,
using efficiency, re-use and awareness mechanisms.
This Research Note in enriched with examples from Multinationals and small companies like
Nestlé, Microsoft, Unilever, BlackRock, Coca-Cola, Burberry, General Motors, L’Óreal, Esporão,
Pestana Group, ABInBEV, Scubic, Colorifix and many others, representing different industries and
different world geographies.
4
2. Global Context
The last two centuries have seen remarkable changes across the world. On the back of significant
technological advances and affordable access to fossil energy, unprecedented improvements in
living standards (namely incomes, literacy rates and average life expectancy) took place in many
parts of the world. Global population grew from 1 billion to 7.3 billion people, and worldwide
energy consumption is now estimated to be about 25 times higher than in 1800 (IEA, 2014;
ExxonMobil, 2019, BP, 2020).
These trends seem set to continue. Three billion people are expected to join the global consumer
class over the next two decades (McKinsey, 2015). China and India are doubling their real per
capita incomes at about ten times the pace England achieved during the Industrial Revolution,
and the world economy will nearly quadruple by 2050 (OECD, 2012). Demand for natural
resources is expected to boost, escalating competition for its access, and accelerating its
degradation. In all likelihood, these global trends will considerably increase the scale and
complexity of different supply systems. Moreover, this will happen at a time when finding and
accessing adequate sources of supply is seemingly becoming more and more challenging and
expensive. Nowhere is this growing imbalance unfolding more strikingly than in the water domain.
The world has plenty of water, but less than 4% of it is freshwater. Moreover, only a fraction of
this freshwater is accessible surface or groundwater, and mankind is dependent on it for
elementary and essential functions: sustaining life, growing food, supporting various economic
activities and ecological processes, producing energy, transporting cargo or even assimilating
wastes (Kumma et al., 2010; Palmer et al., 2008; UN-Water, 2006).
Figure 01 – Water as Natural Resource
Source: OHIO University, 2020
5
Water is vital for the production of almost everything. For instance, an average car tyre requires
about 2 m3 of water to manufacture; a ton of steel calls for 237 m3; an egg entails about 0.5 m3;
and a single 200 mm semiconductor that powers a computer requires 28 m3 of ultrapure water
(Hoekstra and Chapagain, 2008). Further, not only is water a very significant driver of yield in
almost any industrial process, or in the extraction of raw materials, but also conveys benefits
such as reduced heat or nutrient loss during processing. On the Beverage and Oil sectors, for
instance, improved site-level water management seems to have largely benefitted the bottom line
by increasing beverage yields by 5%, and oil-well productivity by 20%, respectively (McKinsey,
2015).
Taken altogether, all these characteristics make water a pivotal and powerful value driver.
However, increasing pressures on water supply have been experienced globally, and prominent
companies have already registered detrimental water-related business impacts, or even business
interruptions (CDP Water Disclosure Global Report, 2012). In many regions of the world, a steady
and affordable supply of good-quality water is no longer a given or even reliable variable for
companies to run or grow their business. Industries such as textile, beverages, energy production,
agri-food, and chemicals that rely on plentiful, or high-quality water, are particularly vulnerable to
the risks of water shortages or pollution.
Furthermore, it should be noted that water stress issues work as a risk multiplier. Whenever
compounded with risks such as those related to food and energy systems, politics or
infrastructure, its potential to edge out socioeconomic and ecological systems becomes
exponential (Mckinsey, 2020). It is of no surprise, therefore, that the World Economic Forum
(WEF) has been signalling, in each of the past five years, the menace of the water crisis as one of
the top risks which economies face worldwide. In its 2020 Global Risk Report, the water supply
crisis stands as the fifth greatest risk to society (WEForum, 2020). And, while the World Bank
estimates that water-related issues may slow some regions growth rates by as much as 6 percent
of GDP by 2050 (World Bank, 2021), the UN projects that one in four people may live, by then, in a
country affected by chronic shortages of fresh water (UN, 2021).
Such a scenario reinforces the need to promote preventive and precautionary approaches to face
of the increasing drought and scarcity risks in most of the Mediterranean region due to climate
change (ANP and WWF, 2019). This is, for instance, the case of Portugal, where such risks mingle
with phenomena such as the desertification of its south.
6
3. The Challenge
Demand for water now outstrips renewable supplies in certain regions of the world, and it is likely
this gap will widen. Water is progressively scarcer due to the confluence of population growth,
urbanization, and climate change. Widespread urbanization is expected to continue at an
accelerated pace, giving place to the emergence of Mega-Cities, Mega-Regions (cities and its
suburbs), and Mega-Corridors (areas that link mega-cities or mega-regions, aggregating up to a
population that can reach 120 million people). Urbanization tends to be accompanied by
industrialization, which has its own water demands. And higher incomes, together with changing
consumption patterns, will add mounting pressures in water use per capita.
On top of this, water pollution is getting extensively worse (particularly in developing regions),
exacerbating the challenge of delivering sufficient and affordable water of the required quality to
those sectors that rely on clean water as an input into supply chains or production processes. In
our globalized economy – which is driven by highly complex, tightly interconnected, and time-
sensitive supply chains – exposure to water scarcity and pollution is not limited to onsite
production processes and may be even greater in companies’ complex supply chains than in their
own operations. Further, uncertainties are exacerbated by the paucity or complete lack of reliable
data on both supply and demand. And, as information on water use data and impacts is spotty
and partial, the financial impact of water shortages on sectors and companies is far from clear.
Figure 02 – Global Water Scarcity
Source: World Resources Institute, 2013
7
In short, the situation is dire, and the effects of climate change which are being increasingly
registered worldwide, particularly those altering hydrologic cycles (leading to increased flooding
in some areas, drought in others), will only add pressure to the need of businesses, governments,
and stakeholders alike, urgently work toward finding sustainable solutions for water management
and use. It is, therefore, time for businesses to move beyond compliance-oriented strategies on
water management. It is no longer enough for businesses merely to identify the places where
their operations are at risk. Companies need to incorporate water sustainable management into
the organization’s strategic priorities and must fully understand the business and financial
Impacts of key water risk drivers such as competition for water, weak regulation, inadequate
infrastructure, pollution, and climate change (Ceres, 2015).
Together with less controllable factors such as climate change and environmental risks, such a
context represents a new set of challenges for both private and public institutions.
21st Century Water Management: A Framework Approach
Water – by far one of the most valuable resource on this planet – seems, too often, to have no
clear price, and is perceived as a free good. The real cost of providing it is frequently hidden under
subsidies, taxes, and sunk costs of municipal and regional departments. Economic data is often
insufficient, corporate water management policies lack a coherent strategy, and the diverse
stakeholders, most of the time, barely communicate between each other, and have a common
vision on the issue.
There is a growing consensus among several paramount companies and institutions, however,
that Water is a strategic issue. The spiralling challenges of decreasing water resources and
mounting pollution, both requiring increasing energy, are understood as major threats which may
affect their industries and increase their business risk on the next 10 to 15 years. Physical scarcity
is seldom the limiting factor. Instead, along the complex supply chains, pricing, quality, supply
infrastructure, competing use, regulatory limits and social acceptance issues are of a much
greater concern, particularly in terms of the security and stability of the processing,
manufacturing or industrial systems.
Recognising the existence of such overwhelming challenges related to the interconnection
between water management and sustainable development, the UN has put forward two out of the
17 Sustainable Development Goals (SDGs) explicitly addressing water-related issues (SDG 6:
Clean Water and Sanitation and SDG 14: Life below Water). Likewise, and when considering the
8
SDG’s principles, i.e., people, planet, prosperity, peace and partnerships and its needed nexus
approach, it becomes evident that fostering sustainable management to address the multiple
pressures concerning water goes beyond the water sector has requires one to take in
consideration other SDGs’.
Figure 03 – Water and the UN SDGs
Source: Tsani, Koundouri and Akinsete (2020)
It was in this context that the Center for Responsible Business and Leadership (CRB) at Católica
Lisbon School of Business & Economics, as an endorser of Goal 17: Revitalize the global
partnership for sustainable development, organized in June of 2020 a Water Summit in Portugal.
Aspiring to be a catalyst for impact creation, knowledge, and innovation promotion, CRB intended
to provide an overall understanding as to how water and its intrinsic dependencies affect
businesses at the core of global economic activity. Above all, though, the main purpose of the
event was to lay out the ground for the establishment of partnerships at scale to deliver on the
SDGs, and to offer practical solutions with regards to water management.
As a result, a coalition of private and public players, including the CRB as main facilitator, was
formed to coordinate and structure these efforts into a Water Initiative, an endeavor that aims to
put the Water theme at the center of the Portuguese national agenda. The entities that are part
of this initiative assume their responsibility to adopt measures to contribute to more sustainable
water management, ensuring the effective response that the challenges referred to require. The
partners involved are Microsoft, L’Óreal, Jerónimo Martins, Veolia, Tintex, Águas de Portugal,
Fundação Calouste Gulbenkian, Toyota, SuperBock, LNEC, Esporão, Pestana Hotel Group, Sugal,
Seantia, Scubic, Bgi and Beta-i.
9
As stated at the Water Summit by the Minister of Environment and Climate Action of Portugal,
and several other keynote speakers, the urgency to actively address water scarcity is undeniably
(Fernandes, 2020). This is particularly true for Portugal which is clearly amongst those water
stress regions in the world that can be affected most severely.
Figure 04 – Water Scarcitity in the Mediterranean
Source: WRI Acqueducte, 2014
Alongside with greenhouse gas emissions, water issues might be understood as a global
problem. However, it is important to note that water requires a different approach as problems
arise mainly locally, in a dynamic way (water shifts both seasonally and over the long term,
because of climate changes), and is of a shared nature, frequently cheap, if not free for some of
the users (BCG, 2020). It is, therefore, of major importance that efforts are placed in measuring
the water footprint along value chains, and in mitigating the potential impact of most-likely effects
of a water crisis on operations (e.g., minimizing water usage and reducing pollution). Moreover,
collective action needs to be in place to align efforts to conserve and protect the water. And
finally, efforts should also be placed in shaping governance, by engaging with policymakers and
NGOs.
For too long water has been an issue that is at once everywhere and nowhere. The challenge for
twenty-first century governance is to place water at the heart of decision-making at all levels –
horizontally across departments and sectors, and vertically at local, national, regional, and global
scales. To make good decisions about managing natural resources, a new approach framework,
based in partnerships, and which considers water and its systemic interdependencies along the
entire path from sources to end use, is clearly and decisively needed.
10
4. Why do water matter for business?
“Water should be a priority on the boardroom of every company In the world. Managing
water better is a key opportunity for business to create and develop competitive
advantages, while securing their license to operate, reducing financial losses, and
altogether ensuring continuity of operations.”
CEO Guide to Water – building Resilient Business (2018)
Water is a valuable resource, and it matters for business.
Water is a scarce but a barely free resource. In the first two sections of this Research Note we
have exposed the important problem arising around water scarcity and increased unavailability.
However, in most countries, water is still an affordable resource, under-priced, easily accessible
for businesses - that are unable to understand its real value.
This context is changing. As reliable, available water sources are decreasing, access to water
may become extremely difficult and shortages may be more frequent, due to overuse and uneven
distribution. As Filipe Santos mentioned in the Water Summit organized by the Center for
Responsible Business and Leadership in June 2020, soon, the price of water will increase and the
quest for fresh water sources could eventually make it “more expensive than diamonds'' (Santos,
2020). One of the signs of this trend is the debut of water joining gold, oil and other commodities
traded in Wall Street, highlighting worries that this life-sustaining resource may be at risk
(Bloomberg Green, 2020). This means that investors will now literally control the water-market,
taking a toll on access to a basic human need.
“As clean, useable water is becoming scarcer, the incentives in capitalism work to commodify it, and
work to ensure that the scarcity is an opportunity to make money. It’s the way in which capitalism
makes profits from human misery.”
Basav Sen, Climate Justice Project Director at the Institute for Policy Studies
For business, the risk of high prices and inaccessibility to water may be the “ring of the bell” to a
more cautious action on water management. With a shrinking supply, demand, both from the
final consumer and businesses, is increasing (population on earth almost quadrupled in the last
century, but water use increased sixfold (Mckinsey, 2020)). If this trend remains, we will not have
enough water to satisfy our needs in the future and the world will face a 40% water supply gap by
2030 (WEForum, 2012).
Moreover, as referred, according to the World Economic Forum’s Long Term Risk Outlook, “water
crisis” positions as the fifth greatest risk to society over the next decade, alongside with risks of
11
climate action, weapons of mass destruction, biodiversity loss, and extreme weather events
(WEForum, 2020). Water is also positioned as the biggest risk on the societal category (from the
list of economic environmental, geopolitical, societal and technological risks screened on the
Report).
If business does nothing about that, we foresee dramatic losses, since 45% of companies report
exposure to risks from water insecurity estimated at far over than US$ 425 billion (CDP, 2019),
with about 40% of the risks anticipated to hit within the next 1-3 years.
Figure 05 - Water Risks Timeframe
Source: CDP (2019)
As we can see from the figure above, the CDP annual survey shows that most of the companies
(1174 out of a total of 2437) reiterate the risks of water will be felt in the short term (from the
current time to a period of 3 years).
A 2017 Trucost study also shows that if the full costs of water availability and water quality
impairment had to be absorbed, this would represent an average decline in profits of 44% for
utilities and 116% for food and beverage companies (Trucost, 2017).
The costs and risks of water management are undeniable. Some other hidden costs like water
treatment and transport may become even more relevant for companies’ operations in the future,
as water pollution and scarcity will demand companies not only to treat discharged water, as well
as to find it in more and more distant reserves.
12
Figure 06 - Top 10 water risk drivers
Source: CDP (2019)
The chart above shows that water scarcity and declining quality, as well as regulation and
increased prices can represent higher risks for the future. These risks can be felt directly on the
company’s revenue, operating costs, capital expenditure and on the costs of goods sold.
Actually, the UN refers to studies that predict water scarcity continuing to increase in the future,
with around 52% of the world’s population living in water-stressed regions by 2050 (UNESCO,
2020). Moreover 6 billion people will suffer from clean water scarcity in that year. As mentioned
before, the World Bank estimates that this can slow the GDP by 6 percent in some countries by
2050 (World Bank, 2016), so the economic effects of water shortages will undoubtedly affect
markets, company's operations and the way world economic interactions will be shaped.
Moreover, according to a study of Van Zanten and Van Tulder (2021) the SDG 6, target 6.3
(reducing Water Pollution) is one of the most affected SDGs from companies’ operations (in a list
of 169 SDG’s targets), just after climate change (13.2), industrialization (9.2) and diseases from
pollution (3.9). This raises, more than ever, corporate responsibility on water issues.
How do companies use water?
Agriculture is responsible for 70% of water withdrawal worldwide, while industry in general is
accountable for 19% and general consumers only 11% (UN FAO, 2020). To better understand the
usage of water in agriculture you may consult Appendix 1.
13
If agricultural water efficiency is not improved, the other water management efforts by the
government and industry will not be enough. This is a conclusion of the CEO GUIDE TO WATER -
Building Resilient Business (2018). The data available from the last century corroborates this
trend and shows how important it is to act on the water management where it is consumed the
most (UNESCO, 2020).
Figure 07 - Global water withdrawal throughout the previous century
Source: The United Nations world water development report 2020: water and climate change, facts and figures.
UNESCO (2020)
Considering that some of the agricultural usage is directed towards industry use - for example,
half of the production of maize, which is one of the top five top global crops by total acreage and
water consumption is used for producing ethanol - we understand how relevant water is to
business (Mckinsey, 2020).
Moreover, according to the World bank, the water needs for the global food system will increase
between 40/50% in the next three decades. Industrial water demand will also increase by 50/70%
and water demand for energy will increase by 85% (World Bank, 2020). All industries, one way or
the other, and water demands are increasing industry-wide. Companies’ water footprint can be
seen in four key areas of the value chain: in the raw materials, supply chain, direct operations, and
in the product use (Mckinsey, 2020). In all these areas, companies have opportunities to explore
water efficient usage, reuse and recycling as well as increased awareness to a more conscious
consumption, as we will see in the next chapter.
14
The following figure illustrates how water is being used by different industries:
Table 01 - How different industries use water along the value chain
TEXTILE
FOOD AND BEVERAGE
METALS AND MINING
TECH
To produce a t-shirt, for example,
a company needs to use water
on the raw materials (to produce
cotton), on the cotton
transformation in fibre, on the
production process -
manufacturing and dyeing - as
well as on the shipping of the
product and lately on the final
consumer usage (washing).
Food and beverage companies
use water as a crucial ingredient
to produce everything they sell.
Water is also needed to irrigate
the raw materials - agriculture
products - as well to clean and
rinse them, and also to feed
livestock. Water is also needed in
the production process, in the
shipping as well as in the
consumption from clients (for
example: to boil potatoes or
make a vegetable soup).
Metals and mining companies
need water for dust control,
drilling and slurry when
transporting products. Water is
essential for the energy they use
on the exploration process as
well as for the processes
involving the usage of the mining
products.
In the tech industry, data centres
need huge quantities of water for
the cooling processes. Servers
get hot and cooling them off has
traditionally involved water —
hundreds of thousands of litters
a day for a medium-sized 15-
megawatt data centre (Earth
Magazine, 2016). Moreover “up
to 30 litters of water are needed
to make a single chip for a laptop
or smartphone, and the average
semiconductor factory guzzles
as much water in a year as a
town of 50,000 people”.
AUTOMOBILE
FORESTS
INSURANCE
ENERGY AND UTILITIES
“Major water uses in the
automotive manufacturing
industry include surface
treatment and coating, paint
spray booths, washing, rinsing,
hosing, cooling, air-conditioning
systems and boilers. The
component manufacturing
segment has its own list of
water-intensive processes”
(Automotive World, 2014). Up to
4,000 litters of water are used to
manufacture one car (Ecolab,
2019). In addition to the use of
water for these processes, there
is the matter of wastewater,
which then needs to be treated to
high standards in order to meet
environmental regulations.
Forest based products demand
companies to rely on water for
the production of lumber, pulp,
paper, fuel and firewood (Schyns,
Booij and Y. Hoekstra, 2017).
Water is needed for the raw
materials, to grow trees, during
the production processes,
mainly for paper and fuel
production. A A4 sheet of paper
may consume as much as 20
litres of water during its
production. And in some
countries an incredible 10% of all
freshwater goes to make paper
(PaperontheRocks, 2020).
Insurance companies are
affected by water stresses
mainly as risks related to water
availability increase and claims
related to water that come to the
agenda, such as crop-production
insurance because of droughts
and other events (Deryugina and
Konar, 2017).
“Energy and water are intricately
connected. All sources of energy
(including electricity) require
water in their production
processes: the extraction of raw
materials, cooling in thermal
processes, in cleaning
processes, cultivation of crops
for biofuels, and powering
turbines. 90% of global power
generation is water intense.
Energy is itself required to make
water resources available for
human use and consumption
(including irrigation) through
pumping, transportation,
treatment, and desalination” (UN,
2015).
As seen by the figure above, businesses rely heavily on water. Indeed, data shows that two-thirds
of businesses have substantial risk in direct operations or in their value-chain in what concerns
water (Mckinsey, 2020).
In this context, every company should consider water as a management and strategic issue, be it
a central or a peripheral resource in its operations. According to water usage intensity, risks may
vary, but no industry or company will be able to pass throughout this crisis without seriously
engaging in water management.
15
Water-related risk for business
Water related risks can be divided in 4 main groups: 1. Physical/Economic; 2. Reputational; 3.
License to operate and regulation; 4. Pressure from the investment market:
Table 02 - Water related risks
COMPANY’S USAGE OF
WATER
WATER RELATED RISK
Very high
Physical/Economic
Scarcity and increasing prices
From low to very high
Reputational
Consumers and society demand a rational use, considering
the huge consequences of water scarcity for humanity
From low to very high
License to operate and
regulation
No company can operate without considering water issues
From low to very high
Pressure from the
investment market
Investment market is more and more considering water
related risks
Source: from the authors
1. Physical/Economic risk
This risk comprises two issues:
● the scarcity of the resource, that may become more and more inaccessible or unfit for
the industry and human’s needs, and consequently,
● the increasing costs of water, resulting from increasing prices and risk mitigating
collateral costs.
Illustrative examples of Physical/Economic risk:
In 2015 a deep drought affected Brazil. The lack of water availability pushed
up water costs and at the same time the reduced availability of hydropower
pushed up electricity costs. General Motors saw its costs for water
increasing by US$2.1 million and electricity cost increasing by US$5.9
million (Mckinsey, 2020). After this event, the company started to increase
its water conservation efforts.
16
Unilever is struggling in the issue of water availability/ quality on the
Mississippi river, where it finds the water needed for the production of many
products, for example the Hellmanns’ products like its worldwide known
mayonnaise. The lack of quality in water and its pollution (which creates
scarcity of available water for industry usage) is increasing the costs of
water and wastewater treatment provision, as it is also bringing many
restrictions in water use in the Mississippi basin river. The immediate
consequences of this scenario are a higher price for water for Unilever (CDP,
2019). As consequence, the company is investing $1-$2 million a year on
the prevention of water risks in this region.
BlackRock also provides a materiality matrix comparing different industries
and water stress related risks, that is worth of analysis. We can see that
Agriculture, Electric Power, Food and Beverage and Mining are the industries
exposed to a larger number of risks.
Figure 08 - Industries and Water Risk
Source: BlackRock Investment Institute, with data from WRI. BlackRock (2020
17
2. Reputational risk
Population in general and consumers in particular are increasingly concerned with sustainability
and environmental problems (Nielsen, 2018; Herédia Colaço, Moreira da Cruz and Pires de
Almeida, 2020). This way they are prone to consume more sustainable products, to have higher
willingness to pay for sustainability (Whelan and Kronthal-Sacco, 2019; Nielsen, 2018; Ross and
Milne, 2020) and even to stop buying from companies that are active contributors to climate
degradation (Accenture, 2018). Reputational factors are more and more important for business,
since they may influence the company’s financial performance, quality employee recruitment and
retention, and may bring greater support from communities and governments (Deephouse,
Newburry and Soleimanic, 2016; Lambooy, 2011).
As Friedlander (2020) mentions “consumers are not passive observers – they are playing a critical
role in how companies address sustainability in the marketplace”.
In a world where if you want to sell, you need to comply with environmental issues, companies
need to act on the water stewardship and show to the clients that their commitment to water
preservation is serious, as we see from the example of Unilever Water Use Disclosure (Unilever,
2020). Otherwise, they will lose market share and the adjustment will be costly or fatal.
Illustrative examples of Reputational risk:
Nestlé was highly criticised in 2020 on its water extraction operations in the
Arkansas River Valley. Locals considered it is not acceptable for the
company to make use of a scarce resource they have and contribute to
environmental degradation: “We don’t need Nestlé to bottle our water and
sell it back to us in plastic bottles”. Once the county’s population is
increasing and drought being more serious, Nestlé Waters has been
targeted by conservation groups across the country as it expands its water
bottling operations (Colorado Sun, 2020).
In 2011 Greenpeace launched the “Dirty Laundry campaign” on the
discharge of toxic chemicals in textiles manufacturing, hazardous residues
in clothing, and their impacts on water quality. Burberry and other brands’
operations were polluting waters that were unable for human use. After a
18
campaign involving Greenpeace, consumers and organized groups,
Burberry and other brands, like Adidas, Zara and Valentino committed to
Detox their clothes and produce them respecting the environment
(Greenpeace, 2014; WWF, 2015)
3. License to operate and regulation
Companies that don’t comply with using water as a resource wisely, will also run the risk of losing
its license to operate. Water stresses emerging from bad management will be reflected in brand
damage, losses in market share and loss of social license to operate (Lamboy, 2011; Cesar and
Jhony, 2020; Porter and Kramer, 2011).
Moreover, Governments are being obliged to protect water as an endangered resource and are
more and more launching new regulation on this direction. In the coming future, more stringent
legislation and fines for water pollution incidents or water misuse will be increasingly common.
As in other environmental issues, companies have two options: either they anticipate these new
obligations for the future as opportunities to innovate or will be followers and pay the adjustment
costs (Van Tulder, 2018).
Illustrative examples of license to operate and regulation:
The Coca-Cola Company was forced to abandon its plans to build a US$81
million new bottling plant in Tamil Nadu, India after fierce resistance from
local farmers, who feared the company would cause a fall in the water
reservoirs. The Indian state agency has been limiting the company's
operations in the country due to water scarcity problems. In other states,
like Uttar Pradesh, the company is also having problems installing its
operations and is now reviewing the way it will operate in India in order to
overcome this problem (Financial Times, 2015).
In 2017, the state government of Kerala, India, facing a severe drought,
restricted PepsiCo’s groundwater consumption by 75% (Mckinsey, 2020).
19
In 2015, the Chinese regulators mandated that papermakers cut water
consumption by 10%. Chenming Group, one of the top ten players in the
global paper industry and the leading player in the Chinese market, was
obliged to adapt and upgraded its assembly line with advanced equipment
that reduced daily water consumption by 45%. In 2018 the Chinese
regulators also made a huge plant inspection in the country and closed
thousands of companies for water pollution (CDP, 2020). Some companies
like Ford motor company and DIC Corporation are recording higher risks on
their operations due to Chinese enforcing in what concerns water issues.
In 2019, the European Parliament approved a law to ban single-use plastic
in order to prevent water and oceans pollution: The “Single-Use Plastics
Directive” – Directive (EU) 2019/904. Mitsubishi Chemicals Holdings
Corporation anticipates US$1.4 billion worth of disruption to its sales and
value chain if similar regulations are introduced worldwide (CDP,2020).
4. Pressure from investment market
Knowing that water stress is one of the biggest risks for companies in the coming years, investors
know this is a critical factor to consider on their investment decision.
BlackRock
1
CEO, Larry Fink, cited the water risk in his 2020 letter to CEOs, stating, “What happens
to inflation, and in turn interest rates, if the cost of food climbs from drought and flooding?“. In
addition to BlackRock, more than 600 other investment firms with $69 trillion in total assets under
management, are urging their companies to report on water-related risks and act to mitigate them
(Mckinsey, 2020).
Another example is the words of Carine Smith Lhenacho, Chief Corporate Governance Office,
Norges Bank Investment Management: “Water scarcity and pollution may pose business risks to
companies. How these are managed may drive long-term returns for the fund as a shareholder”
(CDP, 2019). Additionally, the Fund and Asset manager Actiam also aims to make its investments
water neutral by 2030 (Actiam, 2020). Another evidence on the attention driven to this topic is the
1
BlackRock is the biggest Asset manager in the world with assets worth US$7 trillion
20
fact that 14% of green bonds issued in the year of 2016 were already on water related projects
(Climate Bonds Initiative, 2017).
Actually, “water risks are often about top-line revenues and access to the capital markets,”
according to Monika Freyman, a Director of Investor Engagement for Ceres (Global Finance,
2019). Indeed, it was found that companies that disclose their water management issues have a
greater ability to access capital than the average business (Craig, Coulombe and Nosrat, 2019).
Moreover, the “Drought Stress Testing Tool” also reveals that even when exposed to drought
scenarios of only medium severity, most companies see their credit ratings downgraded (NCFA,
2020).
In this sequence, the recommendations recently developed by the Task Force on Climate-related
Financial Disclosures advise on disclosures on water as a demand from investors, in order to
promote improved climate-related financial disclosures (TCFD, 2020).
Illustrative examples from the investment market:
In September 2019, Moody’s Investors Service warned that the mining
industry faces increasing risks of facility shutdowns due to water availability
and pollution concerns. These factors can affect these companies’ ability to
fund future growth (Global Finance, 2019).
Newmont Mining Corp’s, the world’s 2nd largest gold miner, was obliged to
give up of a $5 billion project in Peru after a relentless community
opposition, due to water scarcity problems. This episode had huge effects
on the company’s future revenue and on the way investors look for the water
risk profile of the company (Miningdotcom, 2016). This case highlights both
a license to operate problem, as well as challenge on the investment market.
21
BMO Global Asset Management is considering water risk in their
investment decisions. They prefer to invest in companies with a proactive
approach to water management. They believe good water management has
benefits on the Cost of Goods Sold (COGS), from raw material sourcing to
manufacturing costs. (BMO, 2020)
Blackrock, the biggest Asset manager in the world, is also considering water
as a major risk on its investment portfolio. As they mention: “Water stress
has financial implications. Companies with production facilities in stressed
regions may face greater operating costs and insurance premiums. They
will likely need to spend more on efficiency measures, recycling and
conservation – to meet stringent regulations that could tighten even further”
(...) “Water stress has wide-ranging implications across asset classes. We
show how the agriculture, electric power and food and beverage industries
may be most at risk. The creditworthiness of some countries, states and
municipalities facing shortages could also come under threat as they face
additional costs to fortify their water infrastructure. This comes on top of
other growing physical climate risks such as exposure to flooding and other
extreme weather events. Companies resilient to water stress and other
climate-related risks may fetch a premium in the transition to a more
sustainable world, we believe” (BlackRock, 2020).
As we saw, several water-related risks can affect companies' operations and their performance.
They need not only mitigate the above-mentioned risks and bring the Water Agenda to the center
of their operations. They also need to consider the necessary initiatives to explore these
challenges as opportunities and make water management a key driver of competitive advantage
creation.
22
Opportunity: Competitive Advantage
When companies embrace the water risks in a proactive way, they can achieve high levels of cost
reduction, increasing reputation, brand awareness and attract stakeholder’s positive attention.
Moreover, a positive contribution to the global water agenda can unfold greater competitive
advantage and be reflected on the bottom line. Here are some key-reasons:
• Companies will be actively contributing to communities where they operate and are able
to create an emotional bond leading to loyalty - Consumers will buy more from these
companies and be more loyal to brands that want to actively do good (Cesar and Jhony,
2018).
• The cost of capital will decrease, allowing companies to grow, attract more investors and
open new opportunities for business.
• The probability of losses and negative impact on the bottom line will decrease since
external crises on what concerns water shortage are taken into attention in the company
strategy (Levinson, 2008).
• Companies’ strategy will be aligned with a broader global agenda (water emergency and
the sustainable development agenda – SDG 6) that will generate advantages for both
society and business (Van Tulder, 2018).
• Water management issues open windows to innovation along the value chain - either
promoting more shared value and cost reduction (Porter and Kramer, 2011)
• Water risk management is also able to align different stakeholders with a focus on the
same purpose of water resources protection. That has the potential to bring together
companies, employees, investors, suppliers and communities with a single common
objective and support the company ability to implement profitable and sustainable
strategies.
Overall, the possibility to engage in partnerships can open new opportunities to collaboration
across the industry and across sectors, bringing added value and transforming companies into
proactive agents of change, as spotted on the SDGs’ agenda. (Bulcke, Vionnet, Vousvouras and
Ghislaine, 2019; Van Tulder, 2018).
23
Figure 09 - From Risk to Opportunity: the creation of Competitive Advantage
Source: Authors
Investing in water management practices that contribute to environmental resilience can be a
source of future revenue. Markets are increasingly demanding quality water services, renovated
infrastructures, and a rising digitalization of the utilities sector. Moreover, government regulations
are also favouring the development of smart water management solutions. For these reasons,
the market for smart water management alone, for example, is estimated to grow from US$11
billion in 2019 to US$21.1 billion in 2024 , at a Compound Annual Growth Rate of 12.9% during the
this period, which represents a very promising business opportunity (CDP, 2019).
CDP (2019) also harnesses that some leading companies are already achieving competitive
advantage through the way they look to the future and adequate their water management
practices with a positive look on preserving this resource.
Companies have the chance to match their internal needs to mitigate risk, capture opportunities
and contribute to healthy water systems, according to stakeholder’s demand. They can transform
themselves into agents of proactive change by a collaboration with stakeholders towards a
transformational systemic agenda in water issues. The present water stress issues are also an
opportunity to leave behind an inactive/reactive agenda and embrace the opportunity to capture
an authentic competitive advantage in what regards the way water is embraced in the company’s
strategic agenda.
24
Table 03 - Examples of companies embracing competitive
advantage through water management:
Water reuse in manufacturing
95% reuse of cleaning water at a Chinese manufacturing site,
responding to strict regulatory requirements and local water scarcity.
Impact: Over 60,000 m3 in annual water savings. Today, this site is
the company's international benchmark for water reuse.
Going water circular
Zero-water withdrawal technologies have been used at a water-
scarce site by recovering water from milk (in a milk powder
production facility in Mexico) for daily operational water needs.
Impact: The dairy factory can operate without using any groundwater,
running solely on water recovered from milk.
More crops per drop
Replaced flood irrigation with drip irrigation with farmers on more
than 2,600 acres, provided training on efficient practices and invested
in new technologies to save water in India in 2016.
Impact: Annual water savings of over 800 million liters in
Maharashtra (2016), verified by Deloitte and greater reliability of
supply of potatoes for the growers and PepsiCo.
From discharging to providing
Heidelberg cement, in Belgium, went from discharging water to
supplying water by partnering with Société Wallonne de Distribution
des Eaux (SWDE), which provides drinking water to local
communities. Before the agreement, the water was discharged
directly to the local Escaut river. Now, water is instead supplied to
SWDE.
Impact: The partnership with SWDE constitutes a mutually and
socially beneficial relationship. Heidelberg cement can now give
value to a natural resource that normally needs to be discharged.
Likewise, SWDE is being supplied with water that it can treat and
sequentially supply to local communities as drinking water.
25
5. How can companies create competitive advantage through water
management?
A sustainable approach to water management should encompass a strategic perspective that
places sustainable practices at the centre of the organization’s decision-making process, leading
to a strategic agenda that embraces positive ways to explore water related challenges as
opportunities and as a key source of competitive advantage, as seen in the previous chapter.
Traditional methods, also known as end-of-pipe solutions, focus solely on solving problems as
they arise, while modern methods adopt a strategic perspective and are mainly designed to
prevent the occurrence of problems by dealing with their causes (Aragón-Correa, 1998). When
acting proactively towards water risk drivers, companies have the opportunity of unfolding
greater competitive advantage and achieve a sustainable positioning in the market.
The implementation of water management strategies relies on the companies’ capacity to
understand that water resources stewardship goes beyond rationing water. It implies moving
from operational to measurable improvements based on the identification of risks and
opportunities for the business and the establishment of metrics and concrete objectives on the
impact of water on business operations and strategies (CEBDS, 2017). Companies should be able
to identify and analyse all the environmental aspects of its operations to establish comprehensive
management programs (Aragón-Correa, 1998).
The implementation of water stewardship
2
in organizations should consider a number of steps
and actions designed to create a strategy that best suits the organization needs. According to an
assessment of the CEO Guide to Water (2018) and the CEO Water Mandate (2011), the following
diagram could guide organizations towards this path:
2
A collaborative and multi-stakeholder approach for sustainable water management that aims to achieve social, environmental
and economic benefits (A4WS, 2020)
26
Figure 10 - Water Stewardship Implementation Process
Source: Authors, adapted from the CEO Guide to Water (2018) and the CEO Water Mandate (2011)
To guide the development of these strategies, managers can proactively adopt globally accepted
goals aligned with the United Nations SDGs targets, such as the implementation of integrated
water resources management or to substantially increase water-use efficiency across all sectors,
as defined on the SDG 6, “Clean Water & Sanitation''. They should also consider the targets aligned
with the SDG 17, that focus on strengthening the partnerships to promote the achievement of
global sustainable development, by, for instance, enhancing multi-stakeholder partnerships to
mobilize and share knowledge, expertise, technology, and financial resources, to support the
achievement of the sustainable development goals. Achieving economic growth and promoting
sustainable development also requires an urgent reduction of the global ecological footprint, which
includes changes in how society produces and consume goods and resources, as identified on the
SDG 12. Taking into consideration its nexus with the water, SDG 14, on “Life Below Water”, should
also be taken seriously as it aims to protect marine ecosystems to avoid significant adverse
impacts.
The incorporation of sustainable practices by organizations can be supported by frameworks
designed specifically for that, such as the UN SDG Ambition Benchmarks, a series of reports that
assist companies to define priorities, set goals, and identify actions in alignment with what is
required to achieve the SGDs targets (United Nations Global Compact, 2020a).
27
According to the United Nations Global Compact (2020b) report on Net-positive Water Impact in
Water-stressed Basins, there are two preliminary actions that can support companies in their
efforts to incorporate better water management practices:
• The first is the adoption of standardized metrics and definitions to facilitate comparison
across industries. This relates to the need of creating a systematic approach to structure
and organize all organizational water-associated information, with the efficient
deployment of metrics and measurement systems that allow companies to evaluate their
performance and assess it against others through benchmarks. It is paramount that
companies have a well-designed and functional system that allows them to conduct this
assessment by having a clear definition on the data they need to collect, how they will
collect and treat this information, and how it impacts the organization. Having access to
high-quality information that fully represents the company's reality is fundamental to
support the company's decision-making process and all its sustainable related practices
and strategies. With this type of system, organizations will be able to compare their
practices and results with others, creating a baseline for good practices and setting
industry standards. Organizations can adopt this procedure as indicated in the table 04,
as the third and fourth step, in the “Development of Water Stewardship Strategy” and the
“Adoption and Investment of new practices and technologies”.
• The second is the incorporation of water stewardship into materiality assessments by
evaluating the risks, opportunities, and impacts associated with water across all business
facilities and suppliers to inform strategies, as identified in the second step on table 04.
To enable the achievement of the targets associated with the SDG 6, the Net-positive Water
Impact in Water-stressed basins report (United Nations Global Compact, 2020b) highlights that
companies must set targets for direct operations of water use in the short-term, that supports a
pathway to achieve net-positive impact in water-stressed basins by 50% in 2030 and 100% in
2050.
Companies can adopt several methods and practices to achieve better water stewardship and a
more efficient use of this resource. These practices can be broadly classified into three main
areas that involve all business processes: efficiency, reuse, and awareness.
28
Efficiency practices are related to the organizational capacity to conduct assessments of the
water consumption in all of its operations and the development and/or deployment of techniques
and technologies that aim to conserve water, minimize losses and optimize or reduce its use.
Some of the initiatives that can be deployed by companies might include:
• Water-use assessment within company operations and production chain;
• Management and measurement of water efficiency on its operations;
• Investment in technologies to decrease water use;
• Include water sustainability considerations in strategic decision-making;
• Build capacity to analyse and respond to watershed risk.
Reuse encompasses initiatives related to wastewater treatment throughout the organizations’
value chain and the deployment of recycling and reuse techniques in the organization's
operations and/or ecosystem, promoting its circularity and better allocation. Water reuse can
help to close the loop between water supply and wastewater disposal (Leverenz, Tchobanoglous
and Asano, 2011).
Awareness involves activities of sensibilization and can be achieved through the development of
both internal and external initiatives, such as campaigns and partnerships with private or public
institutions with the goal to inspire and guide the organizations’ and population’s actions towards
more sustainable practices. It also involves the companies’ ability to advocate for water
sustainability and to engage its stakeholders, such as suppliers, consumers and employees, to
adopt more conscious practices towards the use of water. To raise awareness, companies
should be active members of their local community, and encourage or provide support to local
government groups and initiatives seeking to advance the water and sanitation agendas (CEO
Guide to Water, 2018).
Below, we present a few illustrative examples of companies that are targeting sustainable water
stewardship on its strategy and have successfully implemented practices 1) to increase the
efficiency of water use on its operations, 2) to ensure water reuse on its facilities and processes
and 3) to raise awareness around the challenges of water.
29
“From the specific perspective of a food company, water is probably its
most strategic resource”
Bulcke et al, (2019)
Nestlé has made water protection and preservation a priority on its strategy. Through its flagship
initiative, Caring for Water, the company is operationalizing a water agenda to drive change within its
operations, investing in technologies to improve water efficiency on its manufacturing processes and
engaging with stakeholders to develop and implement a series of actions to address water scarcity
(Nestlé, 2020a).
Efficiency
Since 2010, Nestlé has reduced water withdrawal by 31% on its manufacturing
operations and in 2019 it has implemented a new monitoring system that allows
the company to live-monitor every aspect of the production process, resulting in
more efficient operations and better water management in 20 countries. Nestlé
is also investing in the development of innovative solutions for agriculture, where
water challenges are putting the sourcing of raw materials at risk. In
collaboration with the Institute of Water Informatics in Pakistan, it has developed
more cost-effective solutions for soil moisture that can help farmers reduce
water use by 12% while increasing crop productivity by 15% (Nestlé, 2020b).
Awareness
In Kenya, Nestlé is a founding member of KIWA, a water alliance that acts as a
forum through which stakeholders can collect data on water use and design and
implement plans to promote sustainable industrial water management and
pollution prevention. Nestlé also aims to raise awareness on water conversation
and improve the access to water and sanitation across its value chain. In Ghana,
it developed new systems to enhance access to water, sanitation and hygiene
services that has achieved 600.000 beneficiaries in local communities around its
manufacturing facilities and key agricultural supply chains (Nestlé, 2020c).
30
"We can’t accomplish our sustainability goals alone. As a global brewer,
we are excited to collaborate with governments, NGO partners,
universities and innovators to tackle some of the world’s biggest
challenges."
Tony Milikin, Chief Sustainability Officer (Ab-Inbev, 2020a)
As the world’s leading brewer, Anheuser-Busch InBev relies on water as a key ingredient for its
products and has committed to the development of a strategic Water Stewardship agenda. Its’ goal
is to ensure water access and quality for both its communities and breweries, assuring that "100% of
our communities in high stress areas will have measurably improved water availability and quality" by
2025. To achieve its goal, Ab InBev is looking beyond its own operations and improving high-risk
watersheds in the areas where it operates. (Ab-Inbev, 2020b).
Efficiency
In Brazil, the company has successfully implemented new technologies to
improve the efficiency of its operations, reducing the amount of water used on
its breweries. With more technological equipment and the deployment of reused
water, the company avoids waste and has reduced its water consumption by 50%
over the last 20 years, saving 18 trillion liters of water (Ambev, 2020).
Awareness
Ab InBev also focuses its efforts on sensibilization practices and launched a
campaign during the Superbowl to endorse the partnership between its
subsidiary, Stella Artois, and the NGO water.org, to promote the discussion of
water accessibility and raise funds to tackle it in developing countries (Ab-Inbev,
2018). In Brazil, it has developed strategic partnerships with institutions that are
investing in watershed protection efforts, collaborating in the recovery and
preservation of important hydrographic basins, and sponsoring a coalition that
contributes to conservation and restoration projects in key areas for the health
of water sources (Ambev, 2020).
31
“Addressing water challenges around the world will require transforming
the way water systems are managed and advancing new technologies to
reduce water consumption and increase water quality and
replenishment”, Brandon Middaugh, director of Microsoft’s Climate
Innovation Fund
Microsoft is committed to water challenges and has several initiatives that broadcast the importance
of sustainability on its strategy. Its goal on water stewardship is to be water positive on all its direct
operations by 2030, which means Microsoft will replenish more water than it consumes on a global
basis. To achieve its goal, the company has adopted practices to reduce water intensity and
replenishing water in the water-stressed regions where it operates (Microsoft, 2020).
Efficiency
Microsoft has adopted a method called adiabatic cooling that uses air instead
of water for the cooling process. This system is highly efficient and uses 90%
less water than other water-based cooling systems. Through its Climate
Innovation Fund, Microsoft is investing 10 million $ in the Emerald Technology
Ventures, a fund focused on supporting the acceleration of companies that are
driving critical innovation and developing technologies to address the most
pressing challenges of water (Microsoft, 2020).
Reuse
On its facilities, Microsoft is deploying innovative ways to reduce water use
intensity. The Silicon Valley campus features an on-site rainwater collection
system and waste treatment plant that will ensure 100% of the site’s non-potable
water comes from onsite recycled sources. An integrated water management
system manages and reuses rainwater and wastewater. By recycling the water,
the campus saves an estimated 4.3 million gallons of potable water each year
(Microsoft, 2020).
32
“Over the past decade, we have profoundly transformed our company, putting
sustainability at the very core of our business model. With our new commitments,
we are entering a new phase of acceleration of that transformation: going beyond
our direct environmental impact, helping consumers to make more sustainable
choices, as well as generating positive social and environmental contribution.”
Alexandra Palt, Chief Corporate Responsibility Officer of L’Oréal
L'Óreal’s ability to operate effectively and meet the needs of its consumers depends on sustainable
water access, management, and conservation. Therefore, the company has committed to a
multipronged approach that involves the sustainable use of this resource and the development and
implementation of several practices to achieve better water stewardship. As part of L’Oréal’s
sustainability program, Sharing Beauty With All, the company has set a series of tangible
commitments in line with the Sustainable Development Goals. By 2030, the company aims to innovate
to enable consumers to reduce by 25 percent, on average and per finished product, the water
consumption linked to the use of products, compared to 2016. L’Óreal also aims to have 100% of the
water used in its industrial processes recycled and reused in a loop and to have all strategic suppliers
using water sustainably in the areas where they operate (L'Óreal, 2020a).
Efficiency
L’Oréal prioritizes responsible water use within its manufacturing
operations by minimizing its water requirements and taking into account
the local availability of the resource. The group uses a Waterscan tool in all
its plants to assess the use of water and between 2005 and 2019, has
reduced its water consumption (in liters per finished product) by 51%. This
represents a reduction of 33% of the Group’s consumption in absolute
terms, while production increased by 37% during the same period (L'Óreal,
2020a). Recently L’Óreal has partnered with Gjosa, an environmental
innovation company, to launch the L'Oréal Water Saver, an innovation that
revolutionizes hair washing by reducing water consumption by almost 70%
while improving the experience and effectiveness of care. It is based on a
low-flow showerhead (2 liters of water per minute instead of the usual 8
liters) that decreases the flow of water while accelerating the speed of the
droplets (L'Óreal, 2020a).
Reuse
L'Óreal is promoting water treatment and reuse and has implemented a
program to ensure that 100% of the water used for industrial processes is
cleaned and recycled in a loop on-site for re-use. Four of the group factories
are already “waterloop factories”, which means that all industrial water is
retreated, recycled, and reused. Other factories already have similar
installations and are on the path to achieve the “waterloop factory” status
(L'Óreal, 2020a).
Awareness
Since 2013, L’Oréal has encouraged its packaging and raw materials
suppliers to participate in a program whose mission is to engage
companies in publishing their water management strategy and
performance annually (L'Óreal, 2020b). It has also undertaken practices to
promote a more conscious consumption of water by its consumers.
33
“The way we treat and handle water and how we use rainwater efficiently is the
really biggest driver of resiliency long term for us.”
Jonathan Webb, founder and CEO
AppHarvests, one of the largest indoor farms in the world, is an AgTech company committed to the
sustainable growth of fruits and vegetables. The company was built with the purpose of having a
positive impact on its workers, its surrounding community and the environment, placing sustainable
policies and practices and minimal environmental impact on its core.
Efficiency
It also grows hydroponically, deploying techniques to increase water efficiency
use, and as a result, uses 90% less water than open-field traditional agriculture
(Marquis, 2020).
Reuse
AppHarvests collects rainwater and adopts practices to ensure that 100% of
the water used on its facilities is recycled.
“Preserving natural resources like water, land and energy is central to
Bayer’s sustainability mission. In the same vein, farmers have a vested
interest conserving and protecting natural resources like water - their
mission, business and families depend on it.”
Mehdia Mounir, Sustainable Ag. Manager- Water conservation lead
Bayer, a pharmaceutical leader company, has been investing in agricultural activity as it claims to
have the opportunity and responsibility to address the world’s most pressing challenges and believes
agriculture is part of the solution. Preserving natural resources like water is central to Bayer’s
sustainability mission. In close collaboration with growers and other partners, the firm is committed
to shaping the future of agriculture by providing customers with innovative solutions to better manage
water resources and sustainably achieve better harvests with less water (Bayer, 2020a).
Efficiency
Bayer is using and developing digital tools to help growers track water usage and
provide guidance on where and when to irrigate their fields. It has collaborated
with key partners such as Netafim to develop and promote the use of modern
and efficient drip irrigation systems. With this method, tube hoses distribute
water throughout the fields, allowing water to slowly drip directly to the roots of
the crops. As opposed to conventional aerial irrigation, this method enables
farmers to apply water precisely for direct intake by the plant without waste due
to excessive evaporation or imprecise coverage (Bayer, 2020b). This more
efficient use of water translates into a water-use reduction of more than 40
percent over traditional flooding methods.
34
Reuse
To protect water from being wasted due to contamination with crop protection
residues, Bayer has developed, in partnership with TOMIX, a system called
Phytobac that allows growers to direct their wash water into special tanks with
microbes that instinctively degrade any crop protection residuals. This system
not only saves water but also prevents product residues from getting into
sewage systems or nearby bodies of water (Bayer, 2020b).
Awareness
Bayer is a partner of the TELA Maize Project, which helps protect harvests in
locations where there are water-limited conditions. TELA provides research and
expertise to sub-Saharan African farmers to improve their food security and
livelihood. Since 2013, more than 100 drought-tolerant hybrids have been
approved for commercial release in Kenya, Mozambique, South Africa, Tanzania,
Ethiopia, Nigeria, and Uganda (Bayer, 2020a).
Water is the origin of life and we depend on it for the cultivation of our
vineyards and olive groves, for the development of our products, and,
sometimes, for the generation of our energy.
Esporão
Esporão is a Portuguese company that produces wine and olive oil with the mission of making the
finest products that nature provides, in a responsible and inspiring way. The company is globally
known for its biological products and sustainable practices and has adopted a "slow" philosophy that
believes in creating, innovating, and cultivating with care and responsibility. Esporão has assumed
the committment of “understanding the roots of culture and the communities where they are inserted”
(PBS, 2017) and has made several choices to develop optimal management of natural resources to
eliminate the use of synthetic materials and enhance the quality of its fruit naturally. Over the years,
it has developed several initiatives to preserve natural resources used on its production, including the
reduction of water consumption associated with its activities, either through consumption monitoring
programs by department or in process optimization. The firm is committed to the continuous
improvement of its performance through improvement actions that complies with all legal
requirements and setting ambitious objectives, ensuring the formation, information, and resources
necessary to achieve them, always keeping in mind environmental protection and impact (Esporão,
2020).
Efficiency
Esporão has implemented strict supervision of its entire water system to avoid
losses due to ruptures and bad adjustments. Thus, all pipes are checked and the
pressure is adjusted accordingly. The installation of flow meters at the exit of the
pumping station and of the filtering stations was fundamental for the control of
ruptures. The firm also installed specific technology such as soil water
monitoring probes to measure soil moisture and water quality, continuously,
through calculations and laboratory analysis (Esporão, 2016).
The company also has an ambitious goal of spending only one liter of water for
each liter of wine produced, avoiding the waste of water. To this end, it installed
meters at the main branches of consumption, allowing the identification and
repair of most of the inevitable water leaks. It also improved the general
35
pressurization of the network and installed “pistols” in the hoses of the cellars,
always in an attempt to rationalize the internal use of water. These procedures
have allowed the company to save, from 2010 to 2016, around 11 million liters
of water per year (Esporão, 2016). All these initiatives have allowed Esporão to
reduce its water consumption by 50%.
Reuse
In terms of reuse, the most significant practice adopted by Esporão is to use the
water from five Wastewater Treatment Plant to irrigate the vine, which can reach
savings of 100 M3 per day.
Awareness
As part of its awareness strategy, Esporão has joined the Water Initiative, a
recently created committee of Portuguese organizations formed to coordinate
and structure water-related efforts and to put this theme at the center of the
Portuguese national agenda, assuming its responsibility to advocate and keep
adopting measures to contribute to more sustainable water management.
“In our units we educate our guests towards a more responsible water
consumption, through flags that highlight the need to preserve this
resource, especially in areas of water scarcity, such as Africa, where we
have several units.”
Pestana Group Sustainability Report, 2016
Pestana Hotel group is the largest multinational group of Portuguese origin in the tourism industry.
In 2018 the group launched The PLANET GUEST program, Pestana’ s Sustainability Program, with the
objective of position Pestana Group as an organization and a group of people who respect and value
the environment, society and corporate ethics. Water management issues are central for this Hotel
Group that acts in many water-stressed regions, from Portugal to Africa and many other geographies.
Efficiency
Since 2011, Pestana Hotel Group implemented an eco-efficiency initiative to
reduce energy and water consumption.
They have also implemented water-saving systems on the taps and showers of
rooms and kitchens, calibration of toilet flushes in order to reduce the water
discharge, implemented toilet flushes with dual flush and have daily monitoring
of water consumption, in order to detect any loss or waste.
As the group manages many hotels, golf resorts and green areas they have
implemented automatic watering and drop-by-drop systems making more
efficient the irrigation and defining irrigation periods, wherein the evaporation is
lower, during the morning and late day (Pestana, 2011).
Reuse
In order to reduce water consumption and reuse water resources three of
Pestana Group units have desalinization systems, which allow sea water
treatment, transforming it into water suitable for consumption in the Hotels
(Pestana, 2011).
One example is the case of Alvor Pestana Hotels that are using water coming
from the sea and use it for the many needs of the Hotels. This allows reduce the
36
consumption of water from the public network and diversify the water sources
in a water stressed region, which is the Algarve region case.
Moreover, Pestana Group also uses other techniques to re-use water, which is
the case of Pestana Carlton Madeira. The whole gardens irrigation is done by
drawing water from the spring and reusing water from levadas (aqueduct
specific to the Portuguese Atlantic region of Madeira), being translated into
costs savings every year.
Awareness
Pestana Group also conducts training activities of awareness raising and
dissemination of good environmental practices among collaborators and places
awareness signs for the customer.
In many units, particularly those in Madeira, employees received environmental
training to help them adopt good practices at work. This training focused on the
procedures put in place for waste separation, but also more efficient use of
energy, water and gas (Report 2018).
During 2018, the Amsterdam hotel carried out a campaign to raise guest
awareness of towel reuse. As part of this campaign, which aimed to reduce
operational costs and encourage more responsible consumption of water, the
hotel has also extended the number of days between the replacement of bed
sheets, which were changed every three days.
Another hotel, Pestana Promenade has undertaken a similar initiative with its
guests to reduce water consumption, called ‘Stop and Think’. (Report 2018)
In addition, there is a plethora of new ventures that develop innovative solutions to
address the water shortage issue, exploring these as profitable business opportunities
with a global potential. A few examples are:
Another example is Colorifix, a company that aims to engineer natural solutions to solve man-made
problems, such as the ones caused by the textile dyeing process, that uses 8,000 chemicals and is
the second-largest polluter of water in the world. The company, led by Cambridge University
scientists, uses a biological process to produce, deposit, and fix pigments onto textiles, by inserting
pigment-forming genetic information into bacteria that will literally grow colourful organic dyes.
Efficiency
The result is a chemical-free dyeing process that also uses up to 40% less
energy and up to 90% less water (the fashion industry uses enough water for
dyeing to fill 2 million Olympic-sized swimming pools each year) (Colorifix,
2020).
37
SCUBIC is a Portuguese software company with the purpose of developing solutions to help society
manage and preserve two of the most critical resources of humankind: Water and Energy. All the
products developed by SCUBIC must be optimized to consume the least energy possible, and provide
to its clients and partners real improvements on their use of water and energy.
Efficiency
Since 2019, SCUBIC has reduced its clients' water costs up to 18% and
energy costs up to 11%. The company keeps improving its algorithms and
integrating them with other systems (ex. renewal energy production) to
reach even higher reductions while consuming the least energy possible.
SCUBIC is also improving its system to reduce the cost of implementation,
making it accessible to countries with lower income, helping utilities,
farmers, and general industry to reach their sustainability goals.
Reuse
SCUBIC is now developing a solution to wastewater system optimization,
to help treat its wastewater and reuse it, making it more affordable and
helping mitigate water scarcity. Additionally, SCUBIC has a close
relationship with its clients and partners, proposing solutions to improve
their networks and systems, making them achieve higher sustainability and
prevent water pollution.
Awareness
SCUBIC also makes awareness campaigns in Universities and schools to
the better use of water and energy, educating the new generations for
climate change consequences and how they affect the water and energy
availability.
Finally, it is important to reinforce that the path towards the implementation of a sustainable
agenda and the achievement of the Sustainable Development Goals can only be achieved with a
strong commitment to the development of local and global partnership and cooperation between
governmental and private institutions and organizations. "Strengthening global solidarity is one
of 17 Global Goals that make up the 2030 Agenda for Sustainable Development. An integrated
approach is crucial for progress across multiple goals"(SDG Fund, 2020), and in the case of water,
to work in partnerships is fundamental to guarantee we continue using this resource in the
coming future.
38
6. Conclusion
As we discussed in this Research Note, Water is a precious resource for humankind and is critical
for business performance. Water scarcity is increasing, which makes it increasingly important
both for industries (with different degrees of usage intensity), and the final consumer. Being
already a traded commodity in Wall Street, alongside oil and gold, the scarcity of water creates
perspectives of high price volatility, putting water on a high-risk category for companies and for
life-sustaining of basic needs.
Since most business operations depend on water, the water challenge demands special attention
from companies if they want to continue operating in the future. They need to pay attention to
water-related risks (physical/economic, reputational, license to operate/regulation and pressure
from the investment market) and act to integrate the management of water strategically in their
operations and capture competitive advantage from water partnerships and stewardship
programs. Water is a central resource for companies and to manage it wisely means a better
performance and efficiency that then leads to an improved bottom line.
As this Research Note suggests, water management programs can be implemented through the
development of a strategic agenda focused on increased efficiency in operations, reuse of water
and awareness actions that promote its responsible use. Moreover, considering water and its
systemic interdependencies along the entire value chain, from sourcing to end use, a partnership
approach is clearly and decisively needed and there will also be many opportunities for
implementing innovative solutions to water stewardship and opening new markets. Looking at
water as a precious resource through the SDG’s lenses is a wise starting point that can change
the expectations and ambitions on the water footprint for both business and the entire society.
39
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Appendix 1
Water Dependence: Key Water Use and Pollution Issues in the Food Sector