Water Void

Businesses can play a key role in improving the management of water supplies and reducing their impact on biodiversity and society, writes Toby Pickard, a Sustainability Business Analyst at IGD Companies. Although awareness of the importance of water is increasing, the level of knowledge and engagement on this issue is fragmented and incomplete.

 

 

In 2007, the Australian wheat and rice crop was almost wiped out with low rainfall across Canada and Europe. Global wheat prices doubled and Sam’s Club in the USA began to ration rice. This year, Russia is experiencing a severe drought that has damaged grain production so much that they have halted all grain exports, which in turn has increased food prices. Premier Foods, the owner of Hovis, has confirmed that the price of a loaf is set to rise; other foods will also be affected, ranging from poultry through to beer.

 

According to the United Nations, water scarcity will rise to between 50-65 per cent by 2025. Population growth, increasing consumption and climate change are among the factors that threaten to exacerbate this problem, with serious implications for human security and development.

 

It is inevitable that water will become a business continuity issue for many companies in the future. As demand starts to outstrip supply, everyone will need to become more efficient at preserving water. Already, the leading businesses of tomorrow are embarking on this journey.

 

The UK Government;s food strategy – Food 2030 – the first published in over 50 years ‘sets out the Government’s vision for a sustainable and secure food system’. The strategy highlights the significant impact of the food industry on water consumption within the UK. It identifies that: “The food system is a major water user, taking 10 per cent of all industrial abstractions and another 10 per cent of total industrial water from the public supply.”

 

The strategy also recognises that the UK’s food supply chain can have a significant impact on water reserves overseas. According to Food 2030, 62 per cent of water needed to produce goods consumed in the UK comes in the form of embedded water in imported agricultural and industrial goods.

 

Typical products imported by the UK, such as coffee and cotton are water- intensive, carrying a large amount of embedded water, and it is likely that some of these products come from water-scarce regions of the world.

 

Importing goods from water scarce regions is likely to become an even greater issue in the future for the food sector, as competition for this natural resource increases and the way in which businesses use water comes under greater public scrutiny. This in turn could have a knock-on effect for business continuity and reputation.

 

It will therefore become increasingly important for companies to strike the right balance between the economic benefits of trade, and the long-term environmental impacts and social ramifications of operating in water scarce regions of the world.

 

There have already been public campaigns and national press coverage about the impact and amount of water used by drinks manufacturers, the cut-flower industry and the strawberry industry, all operating in water-scarce regions in the world.

 

Leading financial services firms have reported that when public scrutiny translates into public campaigning, companies could face business risks, especially those who are deemed wasteful or irresponsible.

 

Institutional investors are increasingly seeking information from companies on how they are addressing, managing and even reporting water risk and opportunities. At the beginning of February 2010, Ceres – a coalition of investors, environmental groups and other public interest bodies – launched a report with UBS and Bloomberg about corporate reporting on water risk. According to a WWF report, PwC advises its clients to consider environmental risk as a ‘portfolio issue... in the light of public and media vigilance’.

 

At the end of 2009, the Carbon Disclosure Project (CDP) launched a new investor-driven water disclosure initiative backed by the UK government, European and U.S. investors focusing on approximately 300 of the world’s largest companies in sectors that are water- intensive or face a particular water- related risk. These include fast moving consumer goods and food and beverage.

Reporting a company’s water usage will help businesses understand how to reduce their impact in the long-term, and will be essential when ‘hot spotting’ and addressing the issues.

 

Understanding and being aware of the water challenges that a company faces will undoubtedly allow them to make better management decisions and provides a platform to engage with a broader set of stakeholders, addressing issues outside their direct sphere of influence.

 

Businesses can play a key role in improving the management of water supplies and reduce their impact on biodiversity and society. Companies must ensure that their own operations make efficient use of water, and they will need to start understanding and addressing the issue of water use throughout the supply chain.

 

Although awareness of the importance of water is increasing, the level of knowledge and engagement on this issue is fragmented and incomplete.

 

In response to this, IGD has undertaken some work to signpost the wide range of activities and organisations that are relevant to the many aspects of water in the food and grocery supply chain; these can be viewed at www.igd.com/water

 

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