A Deeper Dive into the Business of Water

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by: Joel Makower

Water hasn’t yet risen to the level of energy and climate as a pressing issue for most companies, but the conversation seems to be flowing lately. And that conversation includes two concepts likely to enter the green lexicon.

One of those, "virtual water," received currency last month when its foremost proponent, Professor John Anthony Allan from King’s College London and the School of Oriental and African Studies, was given the 2008 Stockholm Water Prize.

Allen coined the term back in 1993 to refer to the amount of water embedded in the production and trade of food and consumer products. A cup of coffee, for instance has 140 liters (about 37 gallons) of virtual water, when you consider the amount of water used to grow, produce, package, and ship the beans. A hamburger contains 2,400 liters (634 gallons) of virtual water.

The concept of virtual water (also known as embedded or embodied water) is of more than academic interest. As water concerns flood a greater number of regions, the embedded water of common products provides a useful understanding of how water resources are impacted by global trade. For example, it explains how and why nations such as the U.S., Argentina, and Brazil "export" billions of gallons of water each year — in the form, say, of water-intensive grain or meat — while others like Japan, Egypt, and Italy "import" billions.

The concept also could be useful in national agriculture policy, much as "embedded energy" has helped policy makers understanding that growing and processing corn to produce biofuels can require significantly more energy than the process yields. (Not that this knowledge has dissuaded policymakers from supporting energy-intensive biofuels, of course.) And it may become a factor in the price of many raw materials, should carbon taxes or trading systems illuminate the energy and carbon intensity of things like aluminum, glass, and plastic.

There are other implications. Virtual water calculations will, no doubt, lead companies, individuals, and others to calculate their "water footprint," the full measure of the water embedded in the products they buy and the activities in which they engage. And it may accelerate interest in what Peter Gleick, co-founder and president of the Pacific Institute, calls the "soft path," a much more integrated, sophisticated approach to water in which different types of water — potable water, gray water, brown water, etc. — are used for their highest and best use, rather than using potable water — the highest quality, for flushing toilets, watering lawns, etc.

Last year, in an interview, Gleick expressed to me how little companies understand the water embedded in their systems.

There are very poorly understood or appreciated connections between business and water. Every business uses water in one form or another. Some use a lot of water, some not so much, but for many businesses, water is a surprisingly large component of production, either directly or indirectly, in the supply chain. So, for example, the beverage industry may use three or four gallons of water to produce a gallon of soft drink or beer or milk, but often a thousand times as much water is used in the upstream part of the process, perhaps to grow the sugar that goes into a soft drink. Similarly, in the textile industry, it takes water to make clothing but it takes a lot of water to grow fiber.

Businesses are often unpleasantly surprised where a local community objects to their use of water or there’s a drought that affects their supply chain or there’s a water contamination problem that results in their license to operate being removed. We’re seeing more and more examples where businesses that don’t pay attention to the water required to run their business run into unpleasant surprises.

Gleick went on: "I actually think the risk to companies is larger in some ways for water than it is for energy. There are substitutes for energy. You can replace oil or electricity with biofuels or with renewables. Water has no substitutes."

Coca-Cola recognizes that. And over the years, it has bumped up against activists, communities, and others for its water use — which is, of course, a fundamental ingredient of all of its beverages. In recent years, a series of developments pressed the need for a more comprehensive global water strategy. In the late 1990s, it began acquiring water brands — its principal U.S. offering is Dasani. In 2002, the company faced protests in India about the company’s drawing down of groundwater resources. A year later, it began reporting water quality and quantity as a material risk to its business in its U.S. Securities and Exchange Commission Form 10-K for investors.

In response to this Coca-Cola "developed and continues to evolve one of the more sophisticated water stewardship programs in the private sector," according to a new report from Business for Social Responsibility (Download — PDF). "As of March 2008, no other organization in the world has publicly pledged to achieve "water neutrality" across global operations that span more than 100 basins and sub-basins around the world."

Water neutrality. It’s a compelling idea in the age of carbon-neutral and zero-waste commitments. But water is a bit different from carbon and waste: unlike the other two, there’s a finite amount of water. And unlike the others, there’s no known substitute for water. Moreover, as BSR points out:

True sustainability as it relates to water will involve more than "neutralizing" the volume of water that [Coca-Cola] uses. This is because fluctuations in the amount and quality of water available to a given community or ecosystem play an important role in sustaining the diversity and proper functioning of river ecosystems and watersheds.

Coke announced its water-neutral goal last summer. The company committed to "set specific water efficiency targets for global operations by 2008 to be the most efficient user of water among peer companies" and that by 2010 it would "return all the water that we use for manufacturing processes to the environment at a level that supports aquatic life and agriculture."

Coke has its work cut out for it. The BSR report notes that last year, six organizations — Twente University, WWF, Coca-Cola, World Business Council for Sustainable Development, Water Neutral/Emvelo Group and UNESCO-IHE — came together to investigate the benefits of water neutrality as a meaningful milestone. The groups developed three criteria for legitimate use of the term:

  1. Defining, measuring, and reporting one’s "water footprint";
  2. Taking all action that is "reasonably possible" to reduce the existing operational water footprint;
  3. Reconciling the residual water footprint (amount remaining after a company does as much as possible to reduce footprint) by making a "reasonable investment" in establishing or supporting projects that focus on the sustainable and equitable use of water.

There are more than a few squishy issues here — the definitions of "reasonable investment" and "reasonably possible," for starters. But we’ve got to start somewhere. Over time, I hope, the bar will rise.

Can it work? Will "water neutral" become the Next Big Thing in the field of corporate resource efficiency? Can it actually make a difference? It’s a nascent idea, so it remains to be seen. But the high likelihood of continued water crises suggests that more and more companies will be learning about "virtual water" and "water neutral."

For now I’m guessing that only a handful of companies — those whose products and reputation are most linked to the precious resource — will be willing to take the plunge.

Original Post: http://makower.typepad.com/joel_makower/2008/04/a-deeper-dive-i.html