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Why Water Stewardship in the Food Sector Is Failing — and How to Change It

Claudia Baldwin

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In many ways, 2021 was the year that investors and companies stepped up to address climate change, with historic commitments making the front page of newspapers on a regular basis. Unfortunately, the same cannot be said for water. Missing from these stories were concrete action plans to address water pollution and scarcity. And just like with the climate crisis, we are running out of time to address this issue — a new report released this year by the IPCC suggests that the frequency and intensity of droughts exacerbated by climate change are poised to ratchet up over the next decades.

This summer gave a preview of the toll more frequent droughts will take, with farmers in the American West fallowing fields, ploughing under fruit and nut trees and selling off cattle because of high feed prices and lack of water. In fact, no sector has a bigger role in deciding how we will manage through the existing water crisis than the food and agriculture sector. This $6 trillion industry uses a whopping 70 percent of freshwater resources worldwide. And yet, new research from Ceres suggests that the food industry is not meeting this challenge — and is fundamentally unprepared for a water stressed-world.

What are the missing pieces?

Our most recent edition of Ceres’ Feeding Ourselves Thirsty benchmark analyzed and ranked 38 of the largest food and beverage companies across the globe on their water use and management practices. The results were not impressive. The food sector overall racked up an average score of just 45 points out of a total of 100, with the meat sector lagging significantly with a total of just 18 points.

Graph of the top and bottom performers on water in the food sector. Image courtesy of Ceres.

Granted, some companies have notched progress since our last benchmark report in 2019. One bellwether of a significant commitment to water is the role it plays in high-level decision making. Some 71 percent take water risks into consideration in planning major business activities and investments, up from 58 percent in 2019. And 53 percent of companies link executive compensation to water and sustainability performance goals, up from 33 percent in 2019.

However, the food industry is overlooking the area where it needs the most help: the fragile supply chain. The food industry is dependent on the ranchers and farmers who make up the supply chain, many of whom are in highly water-stressed areas and produce water-intensive products. But only 18 companies even assessed the vulnerabilities of their agricultural supply chains to water scarcity. Even fewer are focusing their support where it is most needed — only 12 companies are providing support to farmers growing essential ingredients in high-stressed water basins, and only nine implemented water reduction targets for their supply chain’s key growing regions.

What are the stakes?

Failure to manage water where it matters most shows that there are still critical parts missing from stewardship practices of food companies. If this oversight is not corrected, more than our dinner plates will be affected. The financial fallout will affect all of us — with the higher cost of producing food under these conditions being passed on to consumers, forcing farmers and ranchers to make difficult decisions, and exposing investors to material risk.

Due to a drop in the water supply, a beer plant’s water permit was denied. Now the plant is being dismantled.

Price volatility of ingredients, reduced access to inputs, loss of markets, legal actions for negative environmental impacts, and stranded assets are all real risks that investors take on when investing in the food sector.

For example — when beer maker Constellation Brands Inc. began construction on a $1.5 billion plant in Mexicali in 2016, it was expected to consume 20 million cubic meters of water annually from the Colorado River Basin. But due to a drop in the water supply, the plant’s water permit was denied. Now the plant is being dismantled — costing the company an asset impairment of $680 million. Preparing for this type of fluctuation must become a routine consideration for investors, as the water crisis grows in intensity over the coming years.

What can be done about this?

Investors have considerable power to help turn things around. An $11.4 million global investor engagement launched in 2019 by Ceres and global investor network FAIRR urged the largest fast-food brands to reduce their supply chain greenhouse gas emissions and manage water use more sustainably. As a result, five out of the six companies publicly agreed to set emissions reduction targets, which should also lead to positive water outcomes through land use changes, and half have assessed the water risks in their supply chains.

[Interested in learning more about the latest sustainable business news, trends & analysis? Subscribe to our free GreenBuzz weekly newsletter.]

By leveraging the Feeding Ourselves Thirsty analysis and joining investor initiatives such as Ceres’ Valuing Water Finance Initiative, investors can spur corporations to act on water-related risks and raise awareness about these risks in the capital markets.

The Ceres’ Valuing Water Finance Task Force was convened to help address these concerns. An advisory council of major investment funds, financial institutions, and banks, the Valuing Water Finance Task Force helps make the case for corporations to mitigate water-related financial risks and encourage corporate leaders to implement sustainable water practices. In its next phase of work to be launched next year they will release a framework of specific steps based on scientific and academic research for corporations to take and galvanize investor engagement with companies around water risks,.

The key to change lies with this large tent of investors and the companies they own. Let’s hope they take up the mantle — before it is too late.

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Environment

Episode 327: Meet Carbontech Startup Air Company

Claudia Baldwin

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This week’s run time is 29:34.

WEEK IN REVIEW (3:45)
FEATURES
Turning carbon into value (18:55)

Gregory Constantine, co-founder and CEO of Air Company, talks growth plans for his startup — a leading carbon use company specializing in consumer goods such as vodka and fragrance made from air.

*Music in this episode: Lee Rosevere: “And So Then,” “4th Ave. Walkup,” “I’m Going for a Coffee” and “Let That Sink In.”

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To make sure you don’t miss the newest episode of GreenBiz 350, subscribe on iTunes or Spotify. Have a question or suggestion for a future segment? E-mail us at [email protected].

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The Sustainability Scorecard, Reviewed

Claudia Baldwin

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A version of this article originally appeared in our Circularity Weekly newsletter. Subscribe to the newsletter here.

I was invited to read a new book and interview one of the authors. As someone who has long enjoyed reading books about sustainability, it was very flattering to be sent a copy of a new book, “The Sustainability Scorecard,” by Paul Anastas and Urvashi Bhatnagar, and asked to provide my thoughts in a review.

Many of our Circularity Weekly readers are probably familiar with Paul Anastas. A hero of mine since graduate school, Anastas is a deep thinker, a brilliant chemist and an engaging speaker. I was far less familiar with Urvashi Bhatnagar. Fortunately for me, I had the opportunity to chat with Bhatnagar over the phone about her book and immediately became a fan. A healthcare executive and population health expert with a keen eye toward sustainability, Bhatnagar brings a different perspective to “The Sustainability Scorecard” that pairs quite well with Anastas.

“The Sustainability Scorecard” provides a simple and straightforward method for identifying where a company currently is on its sustainability journey and a method to track progress. The book proves that sustainability makes economic as well as ecological sense and guides leaders in creating and scaling their own green supply-chain initiative. I’ve read a lot of sustainability books, and this one provides the most practical steps for corporate improvement. According to Goodreads, “Through repeatable, reliable processes that address operating model design and new key performance indicators to scaling, this book is a practical guide that leaders can rely on to make their existing systems more sustainable and profitable.”

What I learned No. 1: Entrenched systems are not so entrenched

To some degree, this takeaway from the book follows quite well on my piece from a couple Fridays ago. We often get the false sense that the status quo is the status quo is the status quo is the status quo (Wait, did I just type that a bunch of times? Whoops, leaving it in because it helps make the point). “Entrenched systems and globe-spanning companies may appear impossible to dislodge,” Bhatnagar and Anastas write, “but consider that none of the top-10 most valuable companies today were on that list in 1990. Many didn’t even exist in 1990. Big changes can happen within only a few decades.” Because of this, we need to overcome the learned behavior that we can’t make a difference because the behemoths in the economy will never change.

What I learned No. 2: The scorecard framework

Bhatnagar and Anastas have provided a straightforward and scalable model for firms to move directionally towards sustainability. The framework focuses on four areas:

Waste prevention
Maximizing efficiency and performance
Renewable inputs
Safe degradation of materials

While these endpoints are largely rooted in environmental sustainability, they also cross over into social wellbeing for workers, fence-line communities and product users — all very important considerations for any sustainability practice.

When I looked at the scorecard, I was struck by how it is simultaneously simple and in-depth. The four high-level goals manage to get to the heart of how to make more sustainable products and processes without overcomplicating things. The authors have developed a data-driven methodology that can be approached whether you are starting your sustainability work (Initiate phase), are down the path but still learning (Develop phase) or are an industry leader that’s been focused on sustainability for quite some time (Maturity phase). The key to this framework, and I think one of the key insights I pulled from the book, is that directionality is important. In other words, set a direction for your sustainability work that aligns with the best science available and start moving. Sure, the pace we are moving is important, but the direction is far more so.

What I learned No. 3: Perfection is unattainable

When I spoke with Bhatnagar about the book, she mentioned this was one of the sticking points in writing and publishing it. There is always a desire within any framework to define the perfect state, to show users how to grab the brass ring. Bhatnager and Anastas argue that sustainability doesn’t have a perfect state. Even if firms can achieve the best score in all areas of the sustainability scorecard (zeros for all categories in this case), there will always be work to do. The work could be remediating the issues the firm has created in the past or pushing upstream and downstream partners to improve their sustainability. In other words, firms should be reaching for perfection, but it should always be getting farther away as the science evolves and shows us what it means to be sustainable as an individual, a company, a nation and a global community.

Overall

When I look at this book and the Sustainability Scorecard as a whole, I am excited for the structure it can bring to corporate sustainability in all sectors of the economy. Having spent a considerable amount of time in the private sector trying to build sustainability programs, I can confidently say that these broadly applicable frameworks are always welcome as inputs to a sustainability strategy.

I’d encourage folks to pick up this book, give it a read and think about how you can apply the Sustainability Scorecard to your own work. If you set directional goals, track data and measure progress, you can ensure you are moving in the right direction. And remember, if you reach for the brass ring and fall, at least you tried.

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Source: greenbiz.com

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Environment

Episode 326: the Heat Index; a Historic Climate Policy Opp

Claudia Baldwin

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This week’s run time is 44:51.

WEEK IN REVIEW (3:30)
FEATURES
A sweltering European summer (21:05)

James Murray, editor-in-chief of BusinessGreen, chats about record-breaking heat waves in the U.K. and Europe are challenging infrastructure and economies, and reshaping the dialogue about climate risk.

Cognizant CSO reflects on climate change and employee well-being (30:20)

Sophia Mendelsohn, chief sustainability officer and global head of ESG at tech services firm Cognizant, addresses the company’s broad ESG strategy and why employee well-being needs to be considered in the context of climate change.

*Music in this episode: Lee Rosevere: “Keeping Stuff Together,” “Not My Problem,” “Snakes,” “Southside.”

STAY CONNECTED

To make sure you don’t miss the newest episode of GreenBiz 350, subscribe on iTunes or Spotify. Have a question or suggestion for a future segment? E-mail us at [email protected].

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