Sustainability in Soft Drinks & Water - Part I - Water and Water Efficiency

This month's management briefing looks at environmental sustainability in the soft drinks & water categories. Part one, appropriately enough, looks at water usage.

When listening to environmental sustainability champions within major soft drinks and bottled water companies and looking through their sustainability reports, one key defining feature emerges. Water is the dominant environmental issue.

And in this sense, soft drinks companies such as the Coca-Cola Co and PepsiCo and the major bottled water players, Danone and Nestle, could be said to have been somewhat ahead of the curve.

As the corporate approach to environmental sustainability began to evolve from simply being a part of a company's social responsibility platform to the central position it now occupies in the strategies and business models of all major corporations, carbon tended to be the primary focus, with concern over global warming the key catalyst for changing attitudes, both corporate and public.

As underlined most clearly by current thinking around the water-food-energy 'nexus', it is now not only clear that water is seen as an equally important issue to carbon but that the two issues are inextricably linked.

For beverage companies, however, there are clear reasons why water has always been an important environmental issue. 

"It's the essential ingredient in our products, in everything we make and it's a shared resource under growing stress around the world," says Jeff Seabright, vice president for water resources and the environment at the Coca-Cola Company, whose job title even hints at the pre-eminence of water over other environmental issues for the soft drinks giant.

Seabright summarises the importance of water succinctly as being about "revenue, reputation and risk". Ensuring a consistent safe supply of water is simply vital for these businesses, while optimising water consumption drives down costs and can also protect a company from reputational risk.

Similar thinking is reflected in corporate sustainability strategies across all sectors, with water rising up the agenda and most companies adopting a more comprehensive, proactive approach. However, the criticism and controversy that soft drinks companies in particular were subject to, notably in India some years ago, concerning how the water requirements of bottling plants were impacting on other community and agricultural water needs, was clearly a particular catalyst. 

"We had been on the receiving end of some allegations of not doing the right thing," says Seabright. "And for a consumer goods company that wants to be loved in the marketplace every single day that was a pretty powerful push."

Responding to these multiple imperatives, both Coca-Cola and PepsiCo have adopted what can be termed "holistic" approaches to water encompassing water efficiency in production, understanding and protecting local watersheds, ensuring that their needs do not adversely affect other local users, and undertaking broader community investment projects around water, often in partnership with other organisations. 

"We've been conserving water within our operations through eco-efficiency for years," says Dan Bena, senior director of sustainable development at PepsiCo. "And we've been doing it because it made good business sense, there were financial savings obviously associated with that, but we also realised relatively early on that we need to expand beyond our direct operations."

Jeff Seabright characterises Coca-Cola as taking a "360" approach to water with a "comprehensive and proactive" strategy.

A similar perspective is reflected in the water strategies of the dominant global bottled water producers, Nestle and Danone.

Improving water efficiency

While the significance major beverage companies attach to their broader sustainability work around water and the holistic nature of their approaches is now a defining characteristic of those strategies, maximising efficiency in the bottling plants clearly remains fundamental to any comprehensive water strategy.

The Beverage Industry Environmental Roundtable (BIER), a technical coalition formed in 2006 and comprising all the major companies from every beverage sector, has collated extensive data on water use and water efficiency across the different sectors. Based on a large sample of the plants operated by BIER members, the data provide a good indication of overall trends.

According to BIER's Water Use Benchmarking in the Beverage Industry study, the average water use ratio across a sample of some 705 CSDs bottling plants fell by 7% between 2008 and 2010 to 2.11 litre/litre. 

Both Coca-Cola and PepsiCo have set ambitious targets for water efficiency improvements in their production units. PepsiCo set a goal to improve water-use efficiency by 20% per unit by 2015 against a 2006 baseline in continuing global manufacturing operations. By 2010, it had improved water-use efficiency by 18.7% across its food divisions and by 17.8% in its beverage units. 

It was recently announced that PepsiCo would be this year's recipient of the Stockholm Industry Water Award, conferred by the Stockholm International Water Institute, which Dan Bena, senior director of sustainable development at PepsiCo, describes as the "Nobel Prize" for those working in water sustainability.

"We've been taking a holistic approach for years, a really comprehensive approach to water and that recognition by the Stockholm International Water Institute is just a demonstration of that," Bena says.

Meanwhile, Coca-Cola set a target of a 20% improvement in water efficiency in its plants by 2012 against a 2004 baseline, and has achieved a 19.44% improvement to date. Average water use ratio fell from 2.7 l/l in 2004 to 2.26 l/l in 2010.

Water use ratio in the bottled water sector is lower than for carbonated drinks. Figures from the BIER sample of some 112 bottle water sites suggest average water use ratio in bottled water has remained relatively stable over the past few years, standing at around 1.53 l/l in 2010.

This year saw the launch by the European Federation of Bottled Waters (EFBW), which has an active environmental sustainability platform, of a common methodology for the measurement of water use which Bernard Pruvost, chair of the EFBW's environmental working group, says "has set the basis for continuous improvements in water efficiency".

According to the EFBW's Water Use Ratio Survey, based on data collected from EFBW members, average water use ratio in European water bottling plants fell by 18% from 2.23 l/l in 2006 to 1.82 l/l in 2010. The findings were based on data gathered from 51 production sites.

Jean-Christophe Bligny, environment director at Danone Waters, believes his company's 'WaterWatcher' programme has been a key management tool in maximising water use. The WaterWatcher tool, now used in all Danone's water production sites globally, monitors water use and helps to identify areas for improvement. For example, Bligny explains, it can facilitate the re-use of water that has been used to rinse bottles for other purposes for which used water would still be adequate.

For instance, in 2011 the company's Minas (Salus) unit in Uruguay was able to use this tool to identify the stations with the highest water consumption and reduce its water use ratio by one third compared with the previous year, from 0.9 m3/m3 in 2010 to 0.6 m3/m3 in 2011. Danone reports that the water use ratio in its production units fell by 21% between 2008 and 2011 from 0.6 m3/m3 in 2008 to 0.5 m3/m3 in 2011.

Measuring and reducing water footprint

As with other industries, soft drinks companies are now engaged in quantifying and reducing the total water footprint for their products, which most crucially involves measuring water consumption in their agricultural supply chains. This is the most difficult challenge facing any food or drink producer.

While both companies have now embarked on this challenge, they like many other food and drink manufacturers are not as far along in the process as they are in maximising efficiency in their plants. 

The next section of this briefing looks at the approach beverage companies take to water stewardship more broadly both with regard to the watersheds feeding their plants and in the wider community.