A Big Opportunity For Small Companies To Take The Lead

Over the next 30 years, thanks to global population growth, demand for water will increase by 20%-30%, according to the UN. At the same time, rising average temperatures and frequent droughts caused by climate change are making fresh water more scarce. This is bad for everyone, including the $5 trillion food and agribusiness sector, since these businesses depend on cheap water supplies.

Also, food companies bear some responsibility for water scarcity, since agriculture is draining aquifers globally, and some sectors are major polluters of watersheds, according to Brooke Barton, vice president of innovation and evaluation at Ceres, a nonprofit that works with businesses to address climate change.

Barton was co-author of a report just published by Ceres called Feeding Ourselves Thirsty: Tracking Food Company Progress Toward a Water-Smart Future about the rapidly growing water crisis. It offers guidance and data for investors to evaluate the water risk assessment, disclosure and management practices of major public companies in agricultural products, beverage, meat and packaged food industries. The bottom line conclusion: Major companies in the food sector aren’t doing enough.

Implications for Food Entrepreneurs

For food entrepreneurs and small businesses, however, there is an opportunity to take the lead, according to Barton. That is particularly true for those focusing on sustainable farming and more-resilient agriculture methods in their supply chains. “These companies have the opportunity to help build resilience with the farmers they source from,” says Barton.

According to Barton, one of most important ways to manage water risk and extreme weather events is through building better soil. “Protecting soil is a way to become more water resilient,” she says. That means using more organic matter in soil through regenerative farming practices that make the land better able to retain moisture and, therefore to withstand drought. Plus, the soil has more integrity, that is, it’s less likely to be washed away in a storm. Also, soil-friendly practices lead to land that can enable more carbon sequestration.

In addition, some big companies are looking to work with more sustainable food suppliers. Earlier this year, General Mills, for example, announced a commitment to advance regenerative agriculture practices on one million acres of farmland by 2030. That effort will involve working with organic and conventional farmers and suppliers, among others.

Big Companies Have A Way To Go

As for the report’s findings, Ceres looked at the 40 largest food companies and found that more are recognizing water issues as a material business stress. Specifically, 77% of publicly traded companies have cited water risks in their annual filings, up from 59% two years ago. (This is the third edition of the report, which was first published in 2015). More companies have designated senior executives to have oversight over water-related risks. And most businesses have introduced water-related goals, like improving efficiency in operations.

At the same time, however, “Despite this growing awareness many food companies still are not prepared for operating in a water-stressed world,” says Barton. For example, those goals that more companies have, they tend to be generic. In addition, their emphasis isn’t necessarily on the areas that need the most attention. “If you have operations in Northern Europe and India you probably need to focus more on India,” says Barton. “But it’s not clear that companies are focusing on areas where the issues are most dire.” What’s needed, according to Baron, is more work helping farmers use water-efficient practices.

The report also ranked the 40 companies based on their management of water risks in their operations and agricultural supply chains. The top scoring companies, out of a possible score of 100, by industry were: Unilever (packaged food), 14 points up from 2017; Coca-Cola (beverage) four points up from 2017; Olam (agricultural products)) six points up from 2017; and Smithfield Foods (meat) five points up from 2017.

The average overall company score, however, was just  38 out of 100.