In the second part of this month's management briefing for just-drinks' subscribers, Ben Cooper continues his review of sustainability in the soft drinks and bottled water sectors. Here, he looks at water stewardship and community investment.

The increasing attention paid to water efficiency within bottling plants bears witness to the sensibility towards responsible water stewardship now viewed as vital by major soft drinks companies and bottled water producers.

Equally important for these companies, however, is a water strategy which looks beyond maximising water efficiency in production to the watersheds which feed the plants and which the companies share with local communities and agriculture, taking account of local challenges, and above all ensuring that their activities do not impact on the needs of local populations.

Licence to operate and protecting watersheds

Beverage companies regard this as crucial for retaining their "licence to operate". Their experiences in India amply demonstrated to the Coca-Cola Co and PepsiCo how destabilising and difficult criticism and controversy over watersheds can be.

Sustainability strategies today tend to reflect a more positive, proactive view towards this vital aspect of water management, aimed not only at ensuring the company does no harm, but also making a positive impact with regard to water in environmental and social terms.

Jeff Seabright, VP for water resources and the environment at Coca-Cola, contends that his company has moved on from the "incident-based and reactive approach that might have characterised previous responses to a much more engaged, comprehensive, proactive approach to really trying to get it right".

Describing watersheds as "nature's water factories", Seabright sees a threefold challenge facing Coca-Cola and its bottling partners. "The first part is to understand the source water picture, the second is to understand the shared users in that watershed and the third is to understand the kinds of risks and issues and pressures that exist within that watershed."

In addition, Seabright continues, Coca-Cola made a commitment in 2007 that it would "offset or give back as much water as we use in our beverages", and says the company is currently around 35% of the way to achieving that "water-neutral" goal.  

In total, Coca-Cola is currently engaged in almost 400 water-related projects in 90 countries, working with multiple partners from industry, government, NGOs and academia, including WWF, the UN Development Program and the US Agency for International Development (USAID).

PepsiCo also views responsible water stewardship in terms of licence to operate. "One of the most important things for a company is our licence to operate," says Dan Bena, company senior director of sustainable development. "We call it 'Licence to Operate and Grow' because we think just operating in a geography isn't quite adequate; we want to be able to grow and thrive as a business. And one of the easiest ways to lose that licence to operate and grow is through water because I can't think of a single thing that evokes a more emotional, visceral, cultural response than water."

PepsiCo has also placed an onus on making a positive contribution rather than simply avoiding negative impacts, aiming to address "the broader challenge of water scarcity and strive for positive water impact in our operations, especially in water-distressed areas".

To this end, the company entered a partnership with The Nature Conservancy in 2010, with the aim of testing "credible, scientifically-sound ways to achieve positive water impact in high-risk areas", focusing primarily on selected watersheds in China, Mexico, Europe, India and the US.

The company is striving to achieve "positive water balance", Bena explains, "to give back as much or more water as we take out from the environment". He adds that the company's operations in India, across beverages and snacks, achieved this in 2009 and 2010, with the repetition of the achievement in 2011 now waiting to be certified by auditors.

Meanwhile, mineral and spring water companies which derive their product from a particular named water source could be said to have an inherent sensibility towards this area of sustainability, and longer experience of protecting watersheds. Bernard Pruvost, chair of the environmental working group at the European Federation of Bottled Waters (EFBW), explains: "The sector has a long history and tradition in protecting  catchment areas, dating back to over a hundred years. Effective ground water management is essential  to protect the source from pollution and to ensure their long-term sustainability. Catchment areas surrounding natural mineral water springs can be several thousands of hectares. Protection measures require a sustained, long-term approach."

Moreover, Pruvost believes the experience that bottled water companies have in this field can be useful to other sectors. "We are very proud of our experience and knowledge in water resource management and we try to share it with other sectors and key stakeholders," says Pruvost. 

For instance, EFBW recently held a workshop at the Committee of Regions in Brussels to showcase examples of how bottled water producers are safeguarding ecosystems in collaboration with local authorities, community groups, agricultural producers and forestry services. It also shares best practices through reports and documentation, Pruvost adds.

Community investment around water

Clearly, protecting watersheds in the areas around bottling plants fulfils a practical function in terms of helping ensure a safe and consistent supply as well as providing reputational benefits. However, underlining just how significant water is as an issue, companies view the community investment aspect to water more broadly than that. 

For example, Coca-Cola has made a commitment to help provide safe water access to 2m Africans who lack it by 2015. According to Seabright, the figure currently stands at 1.4m and he is "confident" that the company will exceed the target. PepsiCo has made a similar undertaking, pledging to provide access to safe water to 3m people by 2015.

Partnership is vital in community investment programmes related to water, whether it is with charitable foundations, government agencies or NGOs.

Campaigners and NGOs will always feel the corporate sector can do more but the many partnerships major beverage companies have secured with important third parties suggests confidence in what they have to offer to such collaborations.

In fact, Seabright goes as far as to suggest that Coca-Cola is a "magnet" for such partnership and the funding that goes with it, principally because of its local presence on the ground. Coca-Cola includes the Inter-American Development Bank, the Gates Foundation and USAID among its list of partners, and two thirds of the US$250m invested in programmes involving Coca-Cola over the past five years, Seabright points out, have come from partner funds. "They know we are local; we're not parachuting in and parachuting out. We are a very attractive partner because we have staying power."

Jean-Christophe Bligny, environment director at Danone Waters, says partnership is "essential" in tackling water issues, highlighting the company's collaboration with NGO partners in Indonesia and Mexico as examples of productive collaboration.

Engagement in the global water debate

A further broader function major soft drinks and water companies perform in relation to the preservation of a sustainable global water supply is their involvement in the wider international debate regarding water, along with other sustainability issues. Their CEOs are often prominent voices in important forums which influence policies of national governments and inter-government agencies.

For example, Coca-Cola and Nestle were among the driving forces behind the UN Global Compact CEO Water Mandate, while Seabright adds that Coca-Cola chairman Muhtar Kent has taken "a very active role" in advancing water higher up the agenda within the World Economic Forum. Coca-Cola also helped launch the Water Resources Group at the World Bank, which, in Seabright's words, aims to provide "smart water policy support to national governments around the world".

As in many areas of corporate responsibility and sustainability activity, there is an advocacy element to engagement of this kind. The CEOs want to show that their companies are part of the solution and ensure policies that are economically sustainable for their businesses. But, such activity and engagement at the highest level would be severely undermined if the companies' strategies regarding water lacked credibility.

To a degree, then, their vocal involvement in global policy debates around water helps guarantee that any sustainability rhetoric is supported by action.

To read part one of this four-part management briefing, click here. Parts three and four will be published early next week.