Is yours one of the drinks companies failing the water management challenge? - Sustainability Spotlight, Part I

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The beverage sector's performance on water stewardship has come under close scrutiny with the publication of a new report from sustainability non-profit organisation Ceres. In a two-part special feature, Ben Cooper examines Ceres' findings and what they say about the beverage sector's response to arguably the most challenging sustainability issue it faces.

A recent report from Ceres has given many drinks companies food - or water - for thought

A recent report from Ceres has given many drinks companies food - or water - for thought

The rhetoric of global beverage players has for many years suggested no sustainability issue is taken more seriously by the sector than water stewardship. This rhetoric has been supported by considerable action, but a new report from Boston-based sustainability non-profit organisation Ceres strongly suggests the pace of progress is too slow and the level of engagement across the sector extremely variable.

Ceres' 'Feeding Ourselves Thirsty' report ranks companies on four areas of water management: governance & strategy, direct operations and manufacturing and agricultural supply chain, comparing performance in 2016 with corresponding ratings a year earlier.

On the plus side, major producers of beverages recorded some of the top scores, notably Coca-Cola (72 from a possible maximum of 100), Diageo (68) and PepsiCo (70). Nestle topped the rankings overall with 82 points, followed by Unilever with 73. Another major beverage producer to score above 50 was Danone with 65.

While the average score among the eight companies identified purely as drinks producers was 36, against 31 for all companies, their combined score fell by one point. Meanwhile, the average score in the packaged foods category rose by five points to 37.

The beverage sector comfortably outscored the other two categories, meat and agricultural products, but the results clearly point to stark variation in performance. "There is a big range in performance from 0 to 72 points, with clear leaders who have been focusing on water for years and others who have not yet got their feet wet," says Eliza Roberts, manager of Ceres' water programme and co-author of the report.

In particular, the sector performance was dragged down by extremely low scores from Dr Pepper Snapple Group (DPSG) and Monster Beverage, which scored 11 and zero, respectively.

Asked by just-drinks to respond to Ceres' findings, a spokesperson for DPSG made no direct reference to the report, saying "water management and conservation are important to our sustainability efforts and something we continue striving to improve throughout our operations".

Monster Beverage said management was not available to comment on the report, pointing instead to statements on water in its 2017 Proxy Statement. The third-lowest scoring drinks firm, Constellation Brands, which saw its score fall from 24 in 2015 to 20 in 2017, did not respond.

Responding by referring to what is the same information adds little to the discourse

As Ceres bases its scores on the information that companies have already disclosed, for example in 10-K filings and sustainability reports, responding by simply referring to what is essentially the same information adds little to the discourse. The report provides an independent assessment of companies' engagement and disclosure on water and, according to that assessment, some companies have clearly been found wanting.

That said, Roberts says low scores can be attributed to both a lack of engagement and poor disclosure, and there are likely to be instances where better disclosure of ongoing activities alone could improve a score. 
Disclosure and transparency are increasingly critical, not least because of increased investor interest in water issues. "Investors are increasingly looking for more information on how companies are responding to the sustainability risks," Roberts notes. "Transparency is a cornerstone of responsible business conduct and, with investors and consumers increasingly asking companies to disclose more about how they are responding to sustainability challenges like water, it behoves companies to improve their disclosure on material sustainability risks."

Indeed, a company's score is, in essence, a measure of its transparency. "Because the evaluation only pulls from publicly-available information, transparency and disclosure are at the core of many of the indicators in this analysis," Roberts says.

Anheuser-Busch InBev had the good grace to express disappointment at its score of 43 and resolved to look at its disclosure practices. "Water conservation and efficiency are top priorities", the brewer says. "Therefore, we are not pleased that we are not ranked among the top companies in the report. We are reviewing the report to identify areas of improvement, including better disclosure and reporting of our water stewardship activities and investments."

A-B InBev says it will "continue to invest in industry-leading initiatives and work with partners to ensure a reliable, clean supply of water, not just for ourselves, but also for local communities and the environment". Interestingly, David Croft, global sustainable development director at Diageo, also describes Diageo's 2020 sustainability targets as "industry-leading goals".

Roberts believes leadership by progressive companies to be critical. "There is a unique opportunity for higher-performing companies to play a leadership role and send a clear signal to the rest of the industry that they need to step up their game," she says.

"Collaboration among companies is one of the key pieces of the puzzle"

In this context, Roberts praises the work of the Beverage Industry Environmental Roundtable (BIER), a technical coalition of major beverage groups. "BIER is an excellent example of collaboration within the industry. Collaboration among companies is one of the key pieces of the puzzle when it comes to addressing water challenges. We need more companies working side by side at the watershed level if we are going to truly protect freshwater for future generations."

BIER's collective spirit can also be discerned in the response to Ceres' report from Nick Martin, the group's 'Water Working Group' facilitator and associate director. While stressing that BIER is appreciative of Ceres' work, Martin is keen to defend the record of BIER members.

"Readers of this report might come away with the impression that none of these companies are taking water seriously enough as only one scores within the top quartile of the methodology," Martin tells just-drinks. "The reality is that the top five-to-seven companies have made phenomenal achievements, and have paved the way for this methodology to be defined and for other companies to better understand what corporate water stewardship means in practice. Their current status should be the benchmark by which others are compared." Martin suggests that "nuances get lost" in cross-sector ratings of this sort, adding: "To say that packaged food companies are the definitive leader is not accurate or especially useful."

He believes issues over disclosure may have led to some companies being underrated. "The top beverage companies in this study are recognised and worthy leaders, while others do not get the full credit they deserve and have embedded water more deeply within their organisations than stakeholders realise and their stories sometimes tell." For instance, Martin argues that some of A-B InBev's local work on water is "under the radar".

Significantly, however, the two companies with the lowest scores – DPSG and Monster Beverage – are not BIER members. "BIER membership is open to any beverage company, big or small, public or private. Existing members welcome new companies and aspire to be as representative of the industry as possible," Martin says, adding that the two groups are "both aware of BIER, but have decided not to join".

He also stresses that the materials BIER produces are open to all companies, not only its members. "With regard to sharing, we are highly transparent with work products and open sourcing," he says. "We believe we have amplified our communications this year trying to reach and engage a broad audience."

Providing leadership per se doesn't appear to be the drinks sector's problem. However, ensuring that the lead being shown by BIER and its members is reflected and followed as widely as possible in the sector, represents a slightly different challenge. 

Ben Cooper continues his analysis of Ceres' evaluation of drinks companies' response to water issues in Part 2 of this special feature, which can be found here.

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