From Conservation to Restoration: How Investing in Water Can Deliver Concrete Business Value

Speakers

• Greg Koch, Director of Global Water Stewardship , The Coca-Cola Company
• Ryan Flaherty, Manager, Advisory Services, BSR (Moderator)

Highlights

• Climate change, population growth, economic growth, and urbanization are four factors that exacerbate water stress and increase the rate of change of water patterns.
• Coca-Cola’s strategy is to look beyond the four walls of the factory to the impact on the watershed and on communities.
• To address issues systematically, companies should use assessments and modeling to develop a clear understanding of the stresses on local water supplies.

Memorable Quotes

“Water is fundamental to life, to ecosystems, to communities, and it’s fundamental to our business.” —Greg Koch, The Coca-Cola Company

“Water is unlike any other challenge, as we all have a deep emotive, philosophical, religious, and economic connection with water.” —Greg Koch, The Coca-Cola Company

“Water is local, so companies need to address it locally. Businesses need to act based on a clear understanding of their interdependencies with ecosystems and other water users. That’s what is going to create value.” —Ryan Flaherty, BSR

Overview

Flaherty kicked off the session with an overview of how access to water is increasingly becoming an issue. According to the Organisation for Economic Co-operation and Development (OECD), 47 percent of the world’s population will be living in water-stressed areas by 2030. Water is closely linked to climate, since increasing extreme weather patterns affect water resources through more extreme droughts or floods. And as population grows and countries pursue economic development, water consumption will increase. For example, the UN estimates that a child born in the developed world consumes 30 to 50 times more water than one in the developing world. Additionally, increased hypertransparency is pushing the public to be more vocal on issues like water scarcity and quality.

Flaherty then introduced Coca-Cola’s work in this area through its Live Positively platform. Coca-Cola’s water stewardship goal is to “work to safely return to nature and communities an amount of water equivalent to what we use in our beverages and their production.” They are working toward this goal with a three-pronged approach: reduce, recycle, and replenish. Koch then described Coca-Cola as a “canary in a coal mine” when it comes to water because Coca-Cola is a nonexport-based company, meaning that Coca-Cola consumes the water in the communities that also consume the products they sell.

Koch asked the audience if water should be free and to recount their first memories of water. After hearing from some audience members, he observed that the first memory most people have of water is usually a good one: “We all have a deeply emotional relationship to water.” This is why when water comes under stress people will react strongly and might not respond to rational and, oftentimes, scientific explanations. Although water itself is free, water services require resources to store, treat, and deliver it, and these services are not free.

According to Koch, climate change, population growth, economic growth, and urbanization are four factors that affect water and increase the rate of change of water patterns. Ecosystems are having a hard time adapting to a faster rate of change of water patterns.

Coca-Cola’s response to this challenge was first to develop a comprehensive understanding of water stress throughout their operations by conducting in-depth research, modeling, and performing risk analyses. Although its strategy had previously focused on water quantity and quality at the plant level, Coca-Cola’s strategy now addresses impacts on watershed and nearby communities as well as raises global awareness of water issues. More specifically, all plants, both new and existing, must identify the watershed from which they source water. Then, the plant must perform a source-vulnerability assessment and develop and implement a source water-protection plan.

Coca-Cola also works with local communities to find common solutions to enhance access to water and better manage water resources through its community water partnerships. By first identifying the activities and needs of local communities affecting watersheds, Coca-Cola was able to identify the restoration activities that support both community and watershed well-being. Activities include building capacity on improved agricultural practices, investing in new technologies to avoid deforestation, and installing buffer strips. In 2009, Coca-Cola partnered with several third-party organizations to understand the effects of these projects in terms of water restored to ecosystems.

During the Q&A session, Flaherty asked how Koch obtained the support and buy-in from his management to dedicate resources to manage Coca-Cola’s water challenges. Koch said that they conducted a qualitative risk assessment, which revealed several anecdotes about where water stress has affected the business. These findings helped convince management to invest in a proactive water strategy. Flaherty then asked Koch why he talks about value but does not mention monetary value. Koch replied that there are a lot of initiatives looking at how to accurately monetize the value of water services. There are not yet reliable assessment methods, but Coca-Cola will continue to focus on this issue.