BY ANTONY CURRIE

Reforestation improves the management of water, soil and crops as well as storing carbon. It can also yield investment returns higher than Exxon Mobil and most of the other top 100 emitters of greenhouse gases manage. Especially with the Amazon rainforest ablaze, the idea deserves top billing.

Capital returns on sustainable forests can reach 28% but typically range between 8% and 18%, according to separate research by the World Resources Institute and the Global Impact Investing Network. Profit comes from harvesting nuts and fruits, medical research, tourism and other sources.

Exxon’s return on capital employed will just hit the bottom of that range this year, according to estimates compiled by Refinitiv. Another 45 of the 100 biggest polluters earn that or less, including EDF, Thyssenkrupp and Nissan Motor. A majority won’t breach 10%, while 84 will bring in less than 15%, the estimates suggest.

All in, estimates the WRI, there’s a roughly $300 billion annual shortfall in funding to restore degraded forests and the like. That’s equivalent to about 40% of the annual pre-tax profit of the top 100 emitters, Breakingviews calculates. There’s a case for fossil-fuel industries and others to snap up all the opportunities on investment grounds alone – never mind that trees also sequester atmospheric carbon and reduce flooding and erosion.

Royal Dutch Shell is one company paying attention. Earlier this year it unveiled a plan to spend some $300 million on reforestation and related initiatives. It’s not designed to be a magical solution. Instead it’s just one part of Chief Executive Ben van Beurden’s plan to turn the $225 billion oil and gas giant into a lower-emissions electricity player.

There’s no reason investment should be limited to the biggest producers of greenhouse gases. Heineken’s global manager of corporate social responsibility told the World Water Week conference in Stockholm on Tuesday that reforestation is part of the brewer’s water-management plan. Other industries like utilities, textile makers and food producers could benefit directly as well as making money.

Sustainable forestation is a relatively new business, which means there is scope for mistakes – like planting species that soak up too much water. But the prospect of reaping both financial and environmental returns should prompt the world’s polluters to realize that money, in this instance, really can grow on trees.

First published Aug. 30, 2019

IMAGE: REUTERS/Bruno Kelly

BY ANTONY CURRIE

Stockholm’s architecture, waterways and balmy climate make Sweden’s capital a tourist haven in the summer. Throw in the networking appeal of almost 4,000 people in town for the annual World Water Week confab, including government officials and executives from big companies like Diageo, Apple and Nestlé, and it’s hard to imagine Wall Street types not flooding the event. But most stay away.

They are missing out. The world is facing a 40% shortfall in clean, fresh supplies by 2030, according to the United Nations, with India one example of a country where a huge population and rapid development are on a collision course with scarce water resources. Plenty of factors are behind that, including population growth. But climate change is making floods and droughts worse and changing snow and rainfall patterns. The financial and economic implications are immense and could, the UN estimates, require some $12 trillion in investment over the next 11 years.

That ought to mean plentiful opportunities for finance whizzes. And it won’t just be for large, old-style projects. Some of these will doubtless be necessary, and some will happen regardless. “There’s always a business case for stupid infrastructure,” the Dutch special envoy for water, Henk Ovink, told conference-goers on Sunday during a discussion of dams.

But all manner of smaller, greener projects can often do a better job, and at lower cost – like green roofs, replanting vegetation for flood protection, and so on. Such efforts in Chennai in India, for example, could provide the city with the water its citizens need for a third of the $1.5 billion cost of mainstream projects while also reducing greenhouse-gas emissions by a third, Ovink says.

And there’s plenty of evidence that smart, environmentally friendly investments in water infrastructure can earn a decent return. Lower water and energy needs for its “Water<Less” jeans, for example, have allowed Levi Strauss to lower its vendors’ costs. Boring holes for locals near operations in emerging markets can yield up to a fourfold return for companies thanks to employees’ improved health, attendance and the like, water experts told Breakingviews. Finding backers willing to bet on expanding that kind of idea is precisely what investment bankers are supposed to do.

That’s without considering financing and advisory work as industries including agriculture, energy, consumer products, oil and gas, and mining, to name just a few that rely heavily on water, are forced to change. The finance whizzes are mistaking water for a business washout.

First published Aug. 26, 2019

IMAGE: REUTERS/Brendan McDermid

BY ANTONY CURRIE

Water can still flow around the blockage in U.S. infrastructure. It could cost $1 trillion to fix the nation’s pipes, treatment plants and other water-related systems over the next decade, according to experts at a Columbia Water Center conference hosted in New York on Thursday. That sum isn’t coming any time soon from the federal government, but it doesn’t mean nothing can be done in the meantime.

The vast majority of U.S. water and wastewater utilities are owned by municipalities and other local governments. They’re generally strapped for cash and report to political leaders who tend to be averse to pushing up rates or continually digging up the streets in case it leads to electoral defeat. The shortage of money has no quick fixes. As if to prove that point, President Donald Trump stormed out of a funding meeting with Democrats on Wednesday.

Some municipal-owned utilities capital are finding creative ways around the problem. DC Water in Washington tapped the green-bond market, among other initiatives. New York City has undertaken more than 4,000 green infrastructure projects since 2012’s superstorm Sandy, mostly to deal with excess stormwater. And even some investor-owned utilities struggle to make use of all the data they collect, as Megan Glover, boss of lead-tracking company 120WaterAudit pointed out at the New York summit.

Not all problems require multi-year, expensive projects. One solution is to use what’s available more efficiently. “We have to improve procurement,” Walter Pishkur told the audience at Columbia’s event. The director of water utilities in Arlington, Texas said being aware of various solutions allowed the city to reduce a probable $20 million bill for replacing old sewer pipes to $3 million. He then used the savings to halve the amount of water lost to leaks in the system.

Such smarts might not be able to make up for all the funding needs. But it’s a good start.

First published May 24, 2019

IMAGE: REUTERS/Mike Segar

BY ANTONY CURRIE

Investors and citizens alike are trying to dam U.S. water risks. An Ohio city on Tuesday voted to protect Lake Erie by granting it similar rights to those of humans. And money managers responsible for $6.5 trillion in assets want fast-food giants like McDonald’s and Domino’s Pizza to reduce suppliers’ pollution. These are welcome and much-needed moves.

Voters in Toledo’s special election backed the creation of a Lake Erie Bill of Rights, which would give residents the right to sue governments and businesses that pollute it. Toxic algae caused largely by agricultural runoff has been one of the biggest problems; five summers ago, 400,000 locals went without water for three days because of an algae bloom and 100 were taken ill.

Combating it is costly: The city has committed $1 billion to upgrading its water systems. Preventing the problem makes more sense but farmers, manufacturers and oil-and-gas frackers, who can also taint water supplies, fear they’ll bear the costs.

Often such businesses don’t follow best practices for treating water. Farmers may use more nutrient-heavy fertilizer than needed. Ohio can’t look to Washington for help. Changes to the 1972 Clean Water Act proposed two weeks ago by President Donald Trump’s administration would make pollution easier by exempting groundwater and many seasonal streams from the law’s constraints.

Yet fear of being sued may prompt businesses to upgrade. Shareholders can help, too. Last year Tyson Foods gave in to pressure from two-thirds of independent investors to improve their water practices, even though the family’s supervoting stock defeated the shareholder resolution.

A group of more than 80 investors in January started an even bigger campaign, pushing restaurant chains that some 84 million Americans visit each day to lobby their food suppliers. Many of these behind-the-scenes providers rank poorly on water and emissions standards, according to sustainability nonprofit Ceres, which is working with the shareholders. Done smartly, farmers can often reduce costs and increase yields by adopting more environmentally friendly practices.

It’s sadly ironic that Toledo is again at the center of it all: The Environmental Protection Agency and the Clean Water Act were created in part because Lake Erie was so dirty in the 1960s. With the White House neglecting the problem, it falls to shareholder and civic activism to convince businesses to change.

First published March 1, 2019

IMAGE: REUTERS/Joshua Lott

BY ANTONY CURRIE

The Colorado river crisis ought to be upsetting markets. The U.S. waterway supports some $4 trillion in GDP and at least $1.3 trillion in stock value across seven U.S. states. The river was already virtually tapped out last century, and continuing troubles have now led the federal government to step in to help manage its water use. Yet investors have barely caused a ripple.

The river’s average flow has dropped by a fifth since 2000 and is set to fall more, and screwy governance makes basin-wide planning hard. Matters would have become worse sooner, except the two main dammed storage areas, Lakes Mead and Powell, were full in 2000, and the four upper-basin states have not been tapping their full allocation. But the lower three have been overusing theirs.

As a result, the dams are now less than half full, with Lake Mead so low that the states have for the past few years been trying to agree so-called drought-contingency plans to reduce water use. The failure to get there means the U.S. Bureau of Reclamation’s commissioner, Brenda Burman, last Friday took direct control of planning.

The local economies may already be feeling it, but investors don’t seem to be scrutinizing companies that might be exposed. There are, for example, 38 S&P 500 Index companies worth some $1 trillion based in southern California and the six other watershed states – Colorado, New Mexico, Utah and Wyoming in the upper basin, and Arizona and Nevada joining the Golden State in the lower basin.

That may be partly because not enough companies disclose their water risks. Only two of them – Freeport-McMoRan and Sempra Energy – have outlined how a drier Colorado river could hit earnings in submissions to CDP, a nonprofit pushing for better environmental-risk disclosures on behalf of investors representing more than $110 trillion in assets.

In fact, only 11 public U.S. companies, worth $370 billion, handed over data, along with 13 private and overseas groups including Toyota Motor and Unilever.

The estimated impacts vary. Caesars Entertainment reckons it would cost up to $15 million to significantly reduce water use at four casinos in the region. Defense contractor Raytheon is worried it could lose up to 20 percent of its revenue. It’s not clear, though, whether even these more water-savvy companies have factored in the full extent of the problem.

The state laggards in providing their plans for dealing with the water shortage are Arizona and California. Burman, the USBR commissioner, said she will back off again if they catch up, and Arizona may be on track. But California’s Imperial Irrigation District won’t sign off unless it gets a $200 million federal grant to help protect an endangered area called the Salton Sea.

Burman also stressed that, if no agreement is struck, a 1963 Supreme Court decision gives her bureau wide latitude to change lower-basin water allocations.

Investors shouldn’t think that will be an easy fix, though. The best answer might be to cajole the region to curtail its agriculture sector, which accounts for up to 80 percent of water use. Animal feeds dominate and are thirsty crops; just improving irrigation for alfalfa would save 1 million acre-feet of water annually, according to the Pacific Institute, a water-research firm. That’s equal to roughly a third of what homes and businesses currently use each year.

But farmers own the lion’s share of the rights to the Colorado’s flow, and any attempt to change that is likely to face a long legal struggle. The Imperial Irrigation District may be at the end of the river, but it has the right to a fifth of its water. Shifting large amounts of water from agriculture to cities could in any event harm landscapes, potentially hitting property prices and tourism.

All the while, the dire situation will only get worse. Higher temperatures already account for half of the decline in flow over the past 19 years, according to research by Brad Udall of the Colorado Water Institute, and volume could fall by another third by 2050. Less water isn’t the only risk. Higher temperatures mean less snow and more rain, which will change how and when water flows and bring more floods. The river’s hydropower-generating capability may be seriously impaired.

Yet the lack of response from investors is deafening. Stock-price movements for regional S&P constituents and for CDP respondents show no sign of reacting to the ups and downs in river negotiations in 2018, an analysis by Breakingviews suggests. The topic didn’t even come up on Raytheon’s earnings calls, despite the company’s substantial stated exposure.

Shareholders don’t have influence over the seven affected states’ representatives. But they could push the companies they own in the region – and elsewhere – to investigate, understand and disclose their water risks. That’s the first step to developing a strategy to cope, and avoid a potentially painful hit to valuations.

First published Feb. 7, 2019

IMAGE: REUTERS/Darrin Zammit Lupi

BY LAUREN SILVA LAUGHLIN

West Texas drillers have a water problem – they’re swimming in it. At a time when many parts of the southwestern United States are suffering drought conditions, U.S. shale operators are extracting as much as ten times more water than oil from their wells. Disposing the dirty liquid is costly and threatens to curb production growth, but some companies are showing the way forward through recycling. A few may even turn this problem into a second commodity business.

In hydraulic fracturing, drillers inject water mixed with other compounds to shatter shale formations deep underground and release trapped oil and gas. Much of that flows back to the surface with the hydrocarbons. So too does water that had also been locked in the rock.

Once these so-called fracking wells start producing, the water flows can be prodigious. Operators in the Permian region that extends from West Texas into New Mexico are getting four times more water than oil on average, according to energy consultancy Wood Mackenzie. By 2025, when the region is expected to be producing some 6 million barrels of crude a day, that would generate enough wastewater to fill more than 1,500 Olympic-size swimming pools a day.

Much of the water is currently pumped back into the ground in disposal wells. But water flows tend to increase as wells age, straining capacity, and shipping water elsewhere by truck or pipeline is expensive. Wood Mackenzie estimates that if companies don’t become more innovative, the rising cost of water management could depress the region’s oil production by as much as 400,000 barrels per day by 2025.

Some operators are getting creative. Encana is building water processing plants close to some of its sites to moderately clean up the water for reuse in fracking. The plants are relatively inexpensive and recycling water can save Encana some 80 cents per barrel on disposal costs. Pioneer Natural Resources is implementing similar systems.

Fracking wastewater in Texas is particularly briny, but as costs increase it may become economic to use desalinization techniques to produce water for irrigation. This is already being done in parts of California, according to a workshop report published by the National Academy of Sciences last year. If water becomes scarcer, drillers may find themselves sitting on a second valuable resource.

First published June 14, 2018

IMAGE: REUTERS/Nick Oxford

 BY ANTONY CURRIE

Investors can get a natural kick out of water. Usually it’s huge, costly and time-consuming infrastructure projects that dominate plans for solving the world’s water issues. But nature-based solutions such as restoring forests and soil can yield quicker results and generate decent returns.

The United Nations is trying to address this imbalance by putting the topic at the heart of Thursday’s World Water Day. It’s a pretty simple concept.

First, consider that 75 percent of freshwater depends on forests, according to investor climate lobby group CDP. Chopping those down to build cattle farms, as often happens is Brazil, can reduce the ability of forests to store water underground and upset rainfall patterns. Such factors contributed to Sao Paulo’s water crisis three years ago and remain a concern.

Some 2 billion hectares – about twice the size of the United States – of what were once forests are now low-value land ripe for restoration. Actually doing so “justifies itself on good economics and good finance,” according to Andrew Steer, chief executive of the World Resources Institute. In addition to improving water supplies, it would also curb the growth of climate-warming carbon dioxide in the atmosphere.

Even where forests remain, there’s work to be done. Water-strapped Cape Town could add almost three months’ worth to its supplies by replacing imported trees that soak up far more water than native flora. Replacing them takes just a year or two.

One way for investors to put their money to work is to buy shares in companies that are making nature-based mitigation efforts. Japan’s Suntory Beverage & Food, for example, is expanding its natural water sanctuaries by at least a third to 12,000 hectares by 2020.

Green bonds offer another option. Governments and companies alike are increasingly using the proceeds of these obligations to invest in water and forestry projects that are light on big engineering solutions. And the bonds tend to offer higher interest payments than regular debt.

Investors could simply regard nature-based investments as a hedge: the better managed forests and watersheds are, the less likely their businesses are to suffer earnings-sapping problems with water quantity and quality.

And there’s one more important, intangible benefit of these types of solutions: they come with sustainable-investing bragging rights.

First published March 22, 2018

IMAGE: REUTERS/Mike Hutchings

BY ANTONY CURRIE

Water problems could leave the burgeoning market for green cars high and dry. Ford is the latest to ramp up its electrification efforts with a planned joint venture with China’s Anhui. Trouble is, the industry relies heavily on the Democratic Republic of Congo for cobalt to make electric vehicles’ lithium-ion batteries.

Doing business in the DRC is challenging to begin with. In 2016 fresh violence erupted in parts of the country, displacing nearly a million people and raising fears of a revival of the civil war that raged for seven years at the turn of the century. Water woes add an extra level of difficulty.

Players like BHP Billiton need secure water supplies for their cobalt-mining operations. They also are big consumers of electricity, which is produced mostly by hydropower. With the Congo River running near 100-year lows after two years of drought, blackouts are a big risk.

Wastewater – the theme of the World Water Week conference that kicked off in Sweden on Sunday – is another problem. Adding untreated industrial sludge back into the river basin would make a bad situation worse: the majority of Congolese already lack access to safe drinking water.

Miscalculating water issues can be costly. Barrick Gold spent $5 billion on its Pascua Lama gold mine, which is still mothballed four years after a Chilean court forced its closure, citing pollution problems. BHP Billiton had to spend almost $2 billion on a desalination plant to ensure it had enough water for its operation in that country.

Electric vehicles will have to play a big role if governments and companies are to carry out the Paris climate-change accord and keep the globe’s temperature increase below 2 degrees Celsius. The International Energy Agency estimates there will have to be 1.2 billion electric cars on the world’s roads in 2060, up from just 2 million at the end of 2016.

Meeting that demand will require, by 2050, an almost 12-fold increase in the 121 million tonnes of cobalt mined last year, according to the World Bank. The DRC provided just over half that and holds almost 50 percent of global reserves of the metal, the World Bank estimates.

Cranking up production can generate billions of additional revenue for the impoverished country and help protect the global environment. Without adequate water, though, those opportunities will shrivel.

First published Aug. 28, 2017

IMAGE: REUTERS/Shailesh Andrade

BY ANTONY CURRIE

Water problems could leave the burgeoning market for green cars high and dry. Ford is the latest to ramp up its electrification efforts with a planned joint venture with China’s Anhui. Trouble is, the industry relies heavily on the Democratic Republic of Congo for cobalt to make electric vehicles’ lithium-ion batteries.

Doing business in the DRC is challenging to begin with. In 2016 fresh violence erupted in parts of the country, displacing nearly a million people and raising fears of a revival of the civil war that raged for seven years at the turn of the century. Water woes add an extra level of difficulty.

Players like BHP Billiton need secure water supplies for their cobalt-mining operations. They also are big consumers of electricity, which is produced mostly by hydropower. With the Congo River running near 100-year lows after two years of drought, blackouts are a big risk.

Wastewater – the theme of the World Water Week conference that kicked off in Sweden on Sunday – is another problem. Adding untreated industrial sludge back into the river basin would make a bad situation worse: the majority of Congolese already lack access to safe drinking water.

Miscalculating water issues can be costly. Barrick Gold spent $5 billion on its Pascua Lama gold mine, which is still mothballed four years after a Chilean court forced its closure, citing pollution problems. BHP Billiton had to spend almost $2 billion on a desalination plant to ensure it had enough water for its operation in that country.

Electric vehicles will have to play a big role if governments and companies are to carry out the Paris climate-change accord and keep the globe’s temperature increase below 2 degrees Celsius. The International Energy Agency estimates there will have to be 1.2 billion electric cars on the world’s roads in 2060, up from just 2 million at the end of 2016.

Meeting that demand will require, by 2050, an almost 12-fold increase in the 121 million tonnes of cobalt mined last year, according to the World Bank. The DRC provided just over half that and holds almost 50 percent of global reserves of the metal, the World Bank estimates.

Cranking up production can generate billions of additional revenue for the impoverished country and help protect the global environment. Without adequate water, though, those opportunities will shrivel.

First published Aug. 28, 2017

IMAGE: REUTERS/Wolfgang Rattay

BY ANTONY CURRIE

General Electric picked the wrong time to quit the water business. The H2O sector has been growing slower than hoped despite the rising threat to safe and reliable supplies from drought, flooding, and population growth. But battling climate change will unclog the $1 trillion water industry’s pipes in 2017.

GE’s water struggles are instructive. Chief Executive Jeff Immelt, who took the conglomerate into the sector by spending more than $4 billion on acquisitions over a decade ago, expected revenue to hit $10 billion a year by now. It’s only around a fifth of that, GE revealed on Dec. 14, with up to $300 million of earnings before interest, taxes, depreciation and amortization.

It’s a broader industry problem. Water industry revenue has been growing around 5 percent a year – not terrible, but hardly splashy. So Immelt decided in October to sell the division as part of the merger of its parent unit GE Power with oil-services group Baker Hughes. If the unit fetches the same 10.7 times EBITDA that rival Xylem paid for water-meter manufacturer Sensus in August, the $3.2 billion of proceeds will be less than GE paid to build the business.

Immelt’s earlier optimism was hardly unusual. Global water demand is likely to increase by 55 percent by the middle of the century, according to the Organisation for Economic Co-operation and Development, as the planet’s population swells, the United Nations predicts, by a third to 9.9 billion.

Traditionally, such far-sighted forecasting has been of little use to companies, politicians and investors, though. They tend to base decisions on shorter time frames. But that’s slowly changing. Long droughts in California, India, parts of Brazil, swaths of Africa and elsewhere have focused attention on scarcity. And dire predictions are looming closer: three-fifths of the world’s inhabitants may face water shortages within the next decade.

Rickety water infrastructure in the western world also needs repairing or replacing. The UK loses nearly a third of its water to leaky pipes. In the United States, a lead-poisoning scandal in Flint, Michigan, has exposed the cost of decades of underinvestment in water infrastructure.

The money spigot is slowly opening. Investment by U.S water authorities is expected to jump by $116 billion over the next decade, a 28 percent increase over the previous 10 years, according to Bluefield Research. Overall, the country’s water infrastructure needs $685 billion of investment over the next two decades, reckons the Environmental Protection Agency.

Worldwide, up to $20 trillion of new spending could be needed by 2030, the OECD estimates. China alone has set aside $1.5 trillion to address both inadequate systems and wholesale pollution of its groundwater.

Companies may also start spending more as water risks have moved from a fringe concern to a boardroom issue in recent years. Few firms have yet to develop a comprehensive water policy, though, according to CDP, a nonprofit that runs environmental-disclosure programs for institutional investors. Such a plan takes into account not just their own operations and their suppliers, but the concerns and needs of other water users where they operate.

The Paris climate accord, which took effect in November, could be the extra jolt the sector needs. While water isn’t directly mentioned in the pact, an analysis of corporate climate pledges by CDP found that a quarter of plans to cut greenhouse-gas emissions required a stable supply of good quality water. It takes a lot of energy to move water around, so reducing waste can also cut emissions directly.

Sometimes, the reduction can be huge. Energy use is so inefficient at wastewater plants that carbon dioxide emissions could be halved using current technology, according to Xylem. In most cases, operators would even save enough on energy bills to quickly cover the cost of the upgrade.

And as water becomes scarcer around the world, the need to reuse it will rise. Currently, Israel is the leader, reusing 70 percent of its wastewater. In North America, the figure is less than 4 percent, while in low-income countries only 8 percent of wastewater is even treated, let alone reused.

That all suggests the time of the great water-revenue deluge is approaching. GE might soon be inundated with seller’s remorse.

First published Jan. 4, 2017

IMAGE: REUTERS/Jose Luis Gonzalez

BY KATRINA HAMLIN

The landmark Paris climate agreement that some 150 world leaders will formally sign on Earth Day on Friday is missing a crucial ingredient: water. The December draft didn’t mention H2O once. But the world’s dirtiest industries are also the thirstiest. Efforts to cut their carbon would work best with wiser water regulation.

Energy companies would make an obvious target for such a two-pronged attack. Power generation guzzles around 15 percent of annual global freshwater withdrawals. Demand for electricity is expected to grow as much as 70 percent by 2035, which would require a 20 percent increase in freshwater withdrawals, according to the United Nations.

Fossil fuels such as coal and gas look particularly vulnerable. Electricity from coal plants and natural gas is exceptionally water intensive, and the biggest burners – including China, India and the United States – already face serious water shortages. The world’s coal-fired plants use around 19 billion cubic metres of freshwater each year, enough water to sustain around a billion people; 44 percent of those facilities are in water-stressed regions, according to Greenpeace.

Renewable energy is, on the other hand, relatively efficient. Photovoltaic solar (PV) panels consume as little as a tenth of the water required by coal to produce one megawatt-hour of electricity, according to a U.S. National Renewable Energy Laboratory study. Wind farms need even less, and sometimes none at all. Granted, there are exceptions – nuclear and some concentrated solar power systems are guzzlers; manufacturing the hardware used for PV and wind also requires water. But all in all, there is a convenient relationship between reducing carbon emissions and improving water efficiency.

Policymakers are starting to see water as part of the solution to climate change. Around 300 representatives of international organizations, governments and water-related institutions signed a “Paris Pact” on water and adaptation to climate change on the sidelines of the December summit.

Major players including China, though, are not signatories. And the pact itself – a surprisingly succinct two-page manifesto – only addresses managing the impact of climate change on water basins, rather than leveraging water to support the struggle against emissions.

It’s too late to just add water to the Paris Agreement: but policymakers may yet learn to use H2O against CO2. The dirtiest and thirstiest energy producers should brace for a water fight.

First published April 22, 2016

IMAGE: REUTERS/Stephane Mahe

BY ANTONY CURRIE AND BEN KELLERMAN

Coca-Cola’s sparkling talk about its water achievements is a bit too fizzy. The $170 billion company run by Muhtar Kent reckons it’s on course to hit its goal of replenishing all the water it uses by the end of this year – five years earlier than the 2020 target.

The company uses around 305 billion liters of water a year for its 500-odd beverage brands – enough to cover New York’s Central Park to a depth of nearly 300 feet. Some 160 billion liters end up in its bottles and cans, and the rest is used to run the factories.

Coke has done more than many companies to reduce its impact on water resources. It adheres to stewardship and disclosure standards set by the likes of the Nature Conservancy and the U.N.’s CEO Water Mandate, and it wins praise from investor advocacy groups like CDP and Ceres.

All but one of Coca-Cola and its bottling partners’ 863 factories now meet its standards for treating and recycling wastewater, allowing the company to return 80 percent of it to local water systems. Coke has also set up 209 projects in 61 countries to increase access to water and sanitation. All in, these endeavors account for around 280 billion liters of water a year. The potential to nudge that up to the company’s total consumption is the basis for the imminent claim of 100 percent neutrality.

It’s smart risk and reputation management. Water-guzzling operations can take the flow away from others, especially in certain places in Latin America, Africa and the Middle East. That can spark resentment, boycotts and pressure to close factories. Such concerns in the past year forced Coke to abandon plans to build one plant and expand another in India.

This highlights one problem with Coca-Cola’s figures, though. They’re global, and water scarcity is primarily local. Not everyone affected by the company’s water use may feel the benefits. Moreover, efforts directed at sanitation and reforestation, say, are not always the same as replenishing water at the source.

The company also excludes from its calculations the water used by farmers it buys crops from – though it does have a code of conduct for them. Coke deserves plaudits for its achievements so far. But the claim that it is about to become water neutral doesn’t yet pass the taste test.

First published Aug. 27, 2015

IMAGE: REUTERS/Edgard Garrido