Food Industry Unprepared for Water Shortages

The food industry - the most water-intensive business on earth - is unprepared for global water shortages, according to a report which ranks the best and worst offending companies for their water management

The global food sector faces extraordinary risks from the twin challenges of water scarcity and water pollution.

Growing competition for water, combined with weak regulations, failing infrastructure, pollution and climate change impacts threaten the sector's water security and contribute to a water availability emergency that was recently ranked the world's "top global risk" by the World Economic Forum.

Thereport examines how water risks affect the profitability and competitive positioning of 37 major food sector companies in four industries: packaged food, beverage, meat and agricultural products. It evaluates and ranks these companies—the majority of which are U.S. domiciled and publicly-traded—on how well they are positioned to anticipate and mitigate these risks, as well as contribute to improved water resource management.

It provides recommendations for how analysts and investors can effectively evaluate food sector companies on their water risk exposure and management practices. It also provides recommendations for how food companies can improve water efficiency and water quality across their operations and supply chains to reduce risks and protect water resources.

Water Risks Facing the Food Sector

From farm to factory, producing food is the most water-intensive business on earth. Abundant clean water is essential to food processing - as an ingredient, for cleaning and moving raw materials, and as the principal agent used in sanitizing plant machinery.

However, the vast majority of the food sector's water use and water pollution footprint is associated with the agricultural supply chain. Seventy percent of the world's freshwater is used to irrigate crops and raise animals.

Currently, one-third of total food production is in areas of high or extremely high water stress, or competition.2 The run-off of fertilizers from farm fields is one of the most common causes of water pollution worldwide, causing dead zones, harming fisheries, affecting human health and raising water treatment costs.

This report identifies five important water risk drivers that affect the water security of the food sector: 1) growing competition for water, 2) weak regulation, 3) aging and inadequate water infrastructure, 4) water pollution and 5) climate change.

These water risks are already affecting corporate income statements and balance sheets due to: disrupted operations and limits on growth driven by water shortages and loss of social license to operate; increased operating costs due to abrupt water rate hikes and stricter regulations; and reduced margins due to higher commodity costs linked to decreases in agricultural productivity.

Source: Ceres

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Taxonomy

• Scarcity
• Water Management
• Food & Beverage