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Approaches to water risk management

illustrative examples of agriculture and food companies

Martijn van der Heide, Stijn Reinhard en Eltjo Ebbens1

1. Introduction

The link between water and food is strong. Therefore, agriculture, as the single largest user of freshwater on a global basis (accounting for about 70% of global water consumption), has cause to be concerned about the global implications of water quality and quantity.2 It is extensively supported that the agricultural sector is bearing a large part of the losses and damages caused by extreme weather events, especially droughts (OECD, 2016) and will face droughts and insufficient water in the future (Smit and Skinner, 2002). As a result, concern over improving water use efficiency in the agricultural sector has been widely reflected in the water economics literature (Zilberman and Lipper, 1999).

Also the associated global food companies (such as food, beverage, meat and agricultural products industries) face extraordinary risks from the twin challenges of water scarcity and water pollution.3 Leaders at the 2013 World Economic Forum named water supply as one of the top five risks facing companies (both in terms of impact and likelihood). Although food companies are waking up to water risks, most are doing far too little to respond to these risks, according to Roberts and Barton (2015). This despite the fact that ‘poor’ water management practices, especially in areas where water supplies are limited, can lead to increased operational and commodity costs (e.g. compliance costs with wastewater act or penalties related to water issues imposed from government) as well as reputational risks.

Nikolaou et al. (2016) state that the food industry addresses water problems mainly by using specific practices either proactively or reactively to achieve water savings and eliminate wastewater discharges arising from food processing operations (see also Ölmez and Kretzschmar, 2009). One popular technique used in the food industry for auditing water risks throughout the product life cycle is the Life Cycle Analysis (LCA). In this note, we identify and briefly analyse other (innovative and effective) practices by companies on how to proactively consider and reactively respond to water risks.

It is obvious that the effects of water risks are not uniform for agriculture and food (processing) companies, and as a result they respond differently to water risks. Moreover, different levels of water risk could be met in different countries. In this brief note, that serves primarily as an input to the OECD-Netherlands Workshop on “Managing Water Risks for Agriculture: a Discussion with the Private Sector” (November 9, 2016), we focus on how agriculture and food companies deal with looming or current water risks – both quantity (frequent and intense droughts) and quality (including salinity risks). It is not an exhaustive overview of all the innovative and effective approaches to these water risks. On the contrary. This note outlines some illustrative examples (i.e. case studies) to demonstrate different ways in which agriculture and food companies deal with

1 Martijn van der Heide (corresponding author. Tel.: +31 70 335 82 18; e-mail address: martijn.vanderheide@wur.nl) and Stijn Rijnhard are affiliated with Wageningen Economic Research (the Netherlands) and Eltjo Ebbens is affiliated with Ebbens Wateradvies & Projecten (the Netherlands). 2 Brown (2006, p. 42) writes: “We each drink on average nearly 4 liters of water per day in one form or another, while the water required to produce our daily food totals at least 2,000 liters – 500 times as much.” 3 Ölmez and Kretzschmar (2009) rank the food industry third in water use and wastewater discharges following the chemical and refinery industries. Moreover, according to these authors, in Europe more water is used for the processing of food than for agriculture.

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and manage the risks associated with availability and quality of usable water resources in the medium and long term. Moreover, it shows for each of these examples the role that the governments played in developing and implementing these approaches. Particular attention has been paid to the Netherlands – the country we are most familiar with, and therefore of which we could most easily access information. We also included case-studies located within or nearby key water risk regions such as parts of India.

The rest of this note is structured as follows. Section 2 presents the various case studies on water risk management. Each case study is covered in a factsheet. In section 3 we draw some preliminary conclusions and discuss these.

Before we start with section 2, a disclaimer must be made. The factsheets have been prepared in a fairly short period of time, and are first and foremost based on reports, research studies and information gathered from the internet. Moreover, the factsheets are merely descriptive rather than evaluative: they do not assess or judge the value of each initiative. So far, they have not been verified or checked on errors and inconsistencies by the companies under consideration. Another disclaimer is that it has only been possible, for reasons of time, to include private companies and that initiatives undertaken by NGO (such as WWF, WRI, etc.) are not captured in our analysis yet.

2. Some illustrative approaches to water risk management

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Salt Farm Texel (the Netherlands)

1. Situation The world population is growing fast which means that food production

has to increase in a time that there is a fast depletion of natural

resources. Especially fresh water is a scarce resource while agriculture

is using up 70 to 90% of the available water in most countries. With the

world population expected to reach 9 billion before 2050, agricultural

production has to increase with 70%. However, less water will become

available for agriculture so the challenge is to produce more food with

less water. At the same time the world is losing farmland at a rate of

2,000 hectares per day because of salinization. Already 62 million

hectares of irrigated farmland is salt affected and crop damage caused

by salinization is estimated at $ 27 billion annually. Worldwide about 1,5

billion hectares of land is salt affected which is believed to be either very

low productive or even unproductive land. Rural communities are more

and more forced to abandon these lands, destabilizing entire societies.

So although the planet consists mainly of salt water (98% of all water is

salt water), salts are experienced as a treat to agricultural production.

This is mainly caused by the fact that present day agriculture is focused

solely on fresh water conditions but these conditions don’t apply to the

present day situation.

3. International spinoff Potatoes are a major part of many Pakistanis’ diets. For the past 2

years, a salt tolerant potato variety was introduced in the salt affected

areas of Pakistan (in total 6 million hectares of salt affected arable land

in Pakistan). For this specific project in Pakistan, Salt Farm Texel

collaborates with MetaMeta and Jaffer and this project is supported by

the “Securing Water for Food” Grand Challenge of USAID and the

governments of Sweden and The Netherlands. Results from 2016 show

that it is indeed possible to double the yield under saline conditions in

Pakistan and good yields were realized on locations where there was no

crop growth at all for the past 5 years. Also, a 50% fresh water saving

was realized on several locations by alternating fresh water irrigation

with brackish water irrigation.

Several other projects are being prepared worldwide (Bangladesh,

Egypt, Kenya, among others) where the results can be validated and

implemented.

2. Solution: Salt Farm Texel (the Netherlands) Salt Farm Texel is a company committed to develop saline agriculture as

a widespread success. It has been experimenting with and testing the

salt tolerance of different cultivars of several crop species, such as

carrots, onions and cabbage, but chief among the crops Salt Farm Texel

works with is the potato. By identifying salt tolerant crops and varieties,

together with a tailor made cultivation strategy, it is possible to cultivate

food directly on salt affected soils that were assumed to be unproductive.

So, rather than focusing on de-salinization, the farm makes adjustments

to adapt agriculture to the saline conditions and the solutions have to be

profitable for farmers. Salt Farm Texel is implementing the results not

only in The Netherlands, but also in other salt affected areas, in

particular Pakistan and soon in Bangladesh (see 3).

Salt Farm Texel is based on the large-scale screening of different

varieties of one crop. Natural differences in salt tolerance occur often

between varieties, and the open-air lab can quickly identify these

varieties. The second step is to determine the exact level of salt

tolerance in order to identify even the smallest differences in tolerance

levels between varieties and to set a reference for when these varieties

are used on other, salt affected locations. Because of the close

collaboration of Salt Farm Texel with different breeders it was possible to

screen many different varieties of many different crops. This resulted in

a salt tolerant potato that can withstand salinity levels that are more than

2 times higher than previously believed to be possible.

4. Role of the government Successful brackish cultivation is first and foremost a prime example of

private innovation in agriculture. The Dutch government has shown great

interest in the development potentials of saline agriculture, and believes

that the agricultural and water management sector can benefit from the

experiences gained and knowledge generated by Salt Farm Texel.

Moreover, the Dutch government is keen on promoting and exporting

this knowledge to other parts of the world.

However, despite this enthusiasm by governmental organizations, the

Salt Farm Texel also encounters difficulties with local governments in

obtaining legal permits.

5. Sources • www.saltfarmtexel.nl.

• Telephone conversation with Marc van Rijsselberghe.

• Vos, A. de. Rise and Shine. Salt tolerant crops and the use of the

saline resources of the world. Salt Farm Texel.

(https://www.cdfa.ca.gov/climatesmartag/docs/CSA_Presentation_

deVos.pdf).

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Lamb Weston / Meijer: a sustainable potato (the Netherlands)

1. Situation Lamb Weston / Meijer manufactures frozen potato products and

dehydrated potato flakes, sold mainly under the LambWeston® brand.This company uses the principle, ‘sustainable & responsible’, which aims

to inspire everyone in the company to think about making the right

choices for the long term and translating these into action to make the

products, processes and supply chain more sustainable. Lamb Weston /

Meijer defined six sustainable core themes to make a difference, and

one of these themes is water.

3 Stakeholders Lamb Weston / Meijer believes that it the company wants to be relevant

over the long term, it has to collaborate with a variety of stakeholders in

a number of ways. This includes customers and consumers, employees,

growers and other suppliers, and our partners. More particular, the

company wants to ensure that water conservation is not only restricted

to its own operational activities, but that this sustainability message is

also being actively implemented by communicated to the various

stakeholders in the value chain. As far as we could find, Lamb Weston /

Meijer does not impose water conservation standards to which its

suppliers must conform. Raising awareness about water conservation

seems to be mainly done by preaching and communicating the

sustainability gospel as a license to operate. Lamb Weston / Meijer

considers it as the company’s responsibility to play an active and leading

role in its industry on sustainable development.

2. Solution Lamb Weston / Meijer believes in water conservation. Water is a key

natural resource for a sustainable future, and one of the main

requirements in the supply chain. Globally, water is considered one of

the biggest risks the company faces today. Knowing the relation with

water is thus becoming a license to operate. The focus of Lamb Weston

/ Meijer is on reducing the fresh water intake – more specifically: their

direct water use per tonne of finished product – by 50% toward 2020.

Additionally, they are investigating how to best support our farmers with

more efficient irrigation methods, thereby reducing the amount of ground

and surface water needed for the irrigation of crops in water stressed

areas. In particular the company has set up a project with a number of

growers and the drip system supplier, Netafim, to study the effects of

drip irrigation. This form of irrigation saves water by allowing water to

drip slowly into the roots of the plants, through a network of irrigation

lines. Efficiency levels are around 80% to 100%.

Moreover, Lamb Weston / Meijer aims to purify wastewater to such a

degree that it could be reused in its production processes. That end, the

company is integrating the ‘Innowater’ purification technology into its on-

site wastewater treatment processes. Innowater reduces freshwater use

by 10%, conserving 70,000 m³ of water per year. After going through the

Innowater process, the water that’s returned to the production process is

of drinking quality. This specific type of innovation won in 2014 one of

McDonald’s global Best of Sustainable Supply Awards, in recognition of

its future contribution to water sustainability.

4 Role of the government There is little government involvement in realizing water conservation.

Lamb Weston / Meijer claims that, although there’s a lot of evidence that

water will be scarce, the company sees very little government urgency to

do something about it. From a more practical perspective, however, local

governments are particularly important for business operations, because

of their involvement with legal permits and, for example, discussing

extension plans. At local and regional levels, regular meetings take place

between Lamb Weston / Meijer content matter experts and the

responsible managers with local authorities and government

representatives.

5 Source • Lamb Weston / Meijer. Sustainability Report 2012-2014

(http://lambweston-sustainable.com/wp-

content/uploads/2015/07/LWM-SustainabilityReport_2013-

2014_UK.pdf).

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SAB Miller – Neemrana (district of Anwar), India (Anheuser-Busch InBev acquired SAB Miller September 2016)

1. Problem Water scarcity is a potential risk that has a direct impact on SABMiller’s

business. Water is vital not only in the brewing process but also in

growing the crops used to make beer. Making more beer using less

water is one of SABMiller’s key sustainable development priorities.

The deep water aquifer in Neemrana (Alwar district of Rajasthan,

situated approximately 120 km from Delhi) is the only reliable source of

water supply for the agricultural, industrial and municipal sectors in this

semi-arid region. The seasonal monsoon rainfall is the only other source

of water supply. A gap of 59 million m3 water exists between abstraction

and recharge of the aquifer.

SAB Miller India has set a target of reducing water use per hectolitre of

beer by 25% between 2008 and 2015 globally and in India. The

company has adopted a water strategy based on the 5 ‘R’s: reduce,

reuse, recycle water within the fence and recharge and redistribute

outside the fence. The 5‘R’s water model was first developed in India,

which was later rolled out around SABMiller operations around the world.

And (ii) demand management to reduce withdrawal from agriculture,

through:

• Enhancing water use efficiency in agriculture; and

• showcasing water efficient agricultural practices by 136 knowledge

firms covering 68 villages.

The initiative has the potential to help decrease the groundwater

abstraction in the region by approximately 23% and reduce the overall

runoff in the region by as much as 40%. Crop productivity has been

enhanced by over 20%.

A Water Resource Centre to centralise all knowledge, information and

data on water and put it in public domain has been set up so that

stakeholders can access and use this for scientific planning of water

conservation and recharge projects.

SABMiller India is part of Indian consortium led by (ICRISAT) to explore

the use of treated wastewater to increase agricultural productivity and

the livelihoods of smallholding farmers in India (Water4Crops-

India). 2. Stakeholders / participants

SAB Miller India partnered with local stakeholders in Anwar to implement

a basin-wide groundwater initiative which ensures the security and

sustainability of the local deep aquifer. The Confederation of Indian

Industries (CII), International Crops Research Institute for the Semi-Arid

Tropics (ICRISAT), Advanced Centre for Water Resources Development

and Management (ACWADAM), Gridline Consultancy and Humana

People to People (a local NGO), have been initiated for water resource

management in SAB Miller areas of operation.

In November 2009, the Water Futures Partnership was initiated by

SABMiller, WWF and GIZ to create mechanisms for companies to

engage in local collective action to help address shared water risks

facing businesses, communities and ecosystems. The partnership

supports water risk mitigation projects in various countries across the

globe, including India.

4. Key factors for success

• Partnership approach to deliver the groundwater management initiative;

• identification of suitable locations and construction of six recharge structures to the deep bedrock aquifer; and

• 136 demonstration farms showcasing water efficient practices coupled with farmer outreach and training programme

Next Steps: Create a multistakeholder platform to facilitate collective action for scale up.

3. Solution The initiative has successfully demonstrated a participatory ground water

management model with specific focus on showcasing recharge

technologies, irrigation techniques and benefits of IWRM practices. The

project interventions look at (i) supply management through:

• Exploiting the natural conditions in the ridges for deep recharge; and

• building small water diversion deep recharge structures in the alluvial

plains on government land for diverting water to tube.

5. Role of the government Offering land for the deep recharge structure.

6. Sources • https://www.waterscarcitysolutions.org/new-basin-based-

approach-for-groundwater-management/

• SABMiller India. “Sustainability in Action”: Sustainable

Development Summary Report 2013.

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Vittel, Nestlé Waters, Agrivair, France

1. Situation Concerns about the increasing trend in nitrate rates in the early 1980’s.

posed a serious risk for the French producers of ‘natural mineral water.

French legislation on the quality of “natural mineral waters” is very strict

and, unlike in other countries, prohibits any treatment. In response to this

increasing risk of nitrate contamination, Nestlé Water, (Vittel natural

mineral water and thermal tourism), proposed to farmers in 1988 (when

it became the majority shareholder in The Vittel Company) to transform

their intensive dairy farming system into extensive. In response to the

reluctance of farmers to adopt the suggested changes, Nestlé Waters

decided to take the initiative and develop a set of incentives (‘Payments

for Environmental Services’ (PES) - pprogramme) to encourage farmers

to permanently change their farming practices.

A caveat is in order here. Although looming and existing water risks are

here mainly for the bottled water company, water quality improvements

will reduce risks for all, including agriculture. As such, this case is an

example of a beverage company taking action to reduce water risks for

its own process, but not for agricultural production per se.

3. Solution The objective was to provide a high level of water quality, specifically

nitrate rates below 4.5mg/l in the aquifer. This required maintaining a

rate of 10mg/l in the root zone of the plants, which is achieved by

reducing fertilizer use, animal waste and manure application and making

use of the capacity of the soil to absorb nitrates. Cash payments are

made, and technical assistance is provided for practices that reduce

ground water pollution:

- Replacing maize animal feed with alfafa and hay

- Reducing stocking rates to 1 head/ha

- Lowering agrochemical use

- Improve waste management

Similar assistance (financial, research and technological) assistance was

available for other landowners, such as golf courses, park and railroad

tracks (SNCF).

Agrivair provides:

- Financial, research and technological assistance to local

farmers on environmental farming techniques;

- Increased protection of biodiversity and ecosystem services in

the region; and

- Employment generation.

2. Stakeholders In 1992, Nestlé Waters established the agricultural advisory firm Agrivair,

an intermediary responsible for negotiating and implementing the

programme. It took more than 10 years, from 1992 to 2004, to move

from experimentation to negotiation and adoption by individual farmers.

The Agrivair concept can be seen as a 360o approach to protect

groundwater resources. For example, the use of pesticides is totally

banned in the groundwater protection area.

Key parnters include(d): INRA (the national institute for agronomic

research); Rhine Meuse Water Agency; Société d’Aménagement

Foncier et d’Etablissement Rural (SAFER, a private institution created by

the public sector to intervene in farmland market); National farmers

Federation (FNSA); National Forrest Office (ONF) and the National

railroad company (SNCF).

4. Key factors for success Several reasons led to the successful establishment of PES in Vittel, all

of them necessary but not sufficient.

1. A constraining legislation for natural mineral water prohibiting water

treatment; A lack of alternatives to reduce nitrate levels

2. The development of a shared vision as the basis for a set of

innovative partnerships that enabled buy in, successful participation and

cost-sharing with a variety of key stakeholders

3. A small number of farmers to limit transaction costs;

4. A multidisciplinary and participatory, “learning by doing” research

action programme that took into account farmers’ livelihood strategies

over the long run

5. The assurance of acceptable farmers’ income levels at all times

7. Clear win-win situation for a large set of stakeholders because VIttel is

a major employer in a region where unemployment is high

8. The establishment of Agrivair as a trusted local mediator and business

partner in the implementation process

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5. Role of the government A constraining legislation for natural mineral water prohibiting water

treatment. Moreover, it is considered necessary to ffurther integrate the

implementation procedures and scales (national level and top down

implementation of the agri-environmental schemes by the Chambers of

Agriculture, concerted action at watershed level by the Water Agencies

to implement the Water Framework Directive) and reflect on the role of

the various stakeholders, especially public territorial institutions

(municipalities, department, region) in shaping local development and

spearheading a shared vision of sustainable development. After all,

Agrivair had to go negotiate a series of legal, regulatory, social, technical

political and administrative hurdles before a successful partnership

between Vittel and the farming community could be established.

An actively supporting government (research grants, man power) is

essential here. After all, the successful long-term partnership with a

public research institute was also a key element of success.

6. Sources • Fanic, R. Le. 2009. Water resource management in the bottled

water business. pp. 23-34. In: C.A. Brebbia and V. Popov (eds).

Water Resources Management V. Southampton and Boston, WIT

press.

• FAO. Case studies on Remuneration of Positive Externalities

(RPE) / Payments for Environmental Services (PES). Prepared for

the Multi-stakeholder dialogue 12-13 September 2013 FAO, Rome

(http://www.fao.org/fileadmin/user_upload/pes-

project/docs/FAO_RPE-PES_Vittel-France.pdf).

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Coca-Cola Company

1. Situation For the Coca-Cola Company water is needed to grow the agricultural

ingredients, used in manufacturing, and it is in the beverages. To better

understand and manage water stress and risk, in 2015, Coca-Cola

conducted a global plant-level, water-risk assessment to inform our

global water strategy. This was a refresh of a risk assessment first

conducted in 2004. The process involves a detailed, plant-level survey

for each facility, extensive geospatial monitoring of various factors

affecting water and a risk quantification model. For the

community/watershed, the watershed sustainability was evaluated

including quantity, quality and the effectiveness of policy, as well as the

social considerations of water and sanitation access, community

engagement, government interactions and media. The assessment

covers 99% of the global manufacturing system.

3. Solution Coca-Cola and WWF jointly developed the following 2020 environmental

sustainability goals for The Coca-Cola Company and its nearly 300

bottling partners in more than 200 countries:

1. Improve water efficiency by 25% through operational advancements.

2. Help maintain healthy, resilient freshwater systems.

5. Sustainably source key agricultural ingredients. Coca-Cola also has

established Sustainable Agriculture Guiding Principles, and will work

with WWF to implement the guidelines throughout the global Coca-Cola

system.

In addition, Coca-Cola is reaffirming its environmental goals for water

replenishment and package recovery through 2020 to include:

6. Replenish 100% of water used. To date, Coca-Cola’s replenishment

work has balanced an estimated 52% of product volume through 468

projects.

To illustrate: Project Catalyst – a quintessential Golden Triangle partnership of cane farmers, industry, government and civil society – aims to reduce polluted run-off from cane farms from entering the Great Barrier Reef. This grower-led initiative has expanded over eight years to nearly 80 cane farmers introducing and adopting innovative agricultural practices to improve soil, nutrient, pesticide, irrigation and storm water management on more than 20,000 hectares of farm land in North Queensland. Now in its eighth year, Project Catalyst farmers are increasing yields while reducing inputs on their crop, thus reducing agricultural runoff to the Great Barrier Reef by more than 180 tons each year. They’ve built artificial wetlands to capture water and topsoil run-off, altered paddock and drainage layouts, applied filter press and fly ash by-product, employed high-technology soil and yield mapping overlays, and changed irrigation and machinery technology.

2. Stakeholders (some examples)

- GETF Nonprofit that promotes sustainable development through

partnerships and targeted action.

- Millennium Water Alliance, Alliance of international NGOs with

expertise in water supply, hygiene education and promotion of

sanitation.

- USAID Protecting and improving the sustainability of watersheds

and enhancing productive uses of water

- World Resources Institute

- Global research turning big ideas into action to sustain our natural

resources.

Coca-Cola and World Wildlife Fund (WWF) have worked together since

2007 to conserve and protect priority river basins and catchments

around the world; to improve water efficiency and reduce carbon

emissions across Coca-Cola’s manufacturing operations; and to promote

sustainable agriculture throughout the company’s supply chain. The

partnership has expanded from a headquarters-to-headquarters

collaboration to nearly 50 countries, with Coca-Cola and WWF teams

working together at the local level.

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4. Key factors for success The risk assessment (see ‘situation’) is complemented by a

comprehensive source water protection plan program. The first step is a

Source Water Vulnerability Assessment (SVA) then a Source Water

Protection Plan (SWPP) is developed. To date, this program has

identified over 3,700 mitigation actions.

In 2004, 2.7 liters of water was used to make 1 liter of product. Today,

we’re using 1.98 liters of water to make 1 liter of product and we’re

working to reduce it to 1.7 liters of water per liter of product by 2020.

The largest portion of the product water footprints comes from the field,

not the factory. Guided in part by these assessments, to date, we have

focused studies on the “blue,” green” and “grey” water footprints. Coca-

Cola Europe has proposed a methodology for water footprint

sustainability assessments that considers impacts as well as water

quantity.

6. Sources • http://www.coca-colacompany.com/coca-cola-unbottled/project-

catalyst-grower-led-partnership-inspires-progress.

• http://www.coca-colacompany.com/stories/beyond-water-coca-

cola-expands-partnership-with-wwf-announces-ambitious-

environmental-goals.

• https://www.rt.com/news/167012-coca-cola-factory-closed-india/

5. Role of the government The Coca_cola Sustainable Agricultural Guiding Principles and Criteria

with respect to water are related to local water policy (amongst others)

- The annual volume of water withdrawn is recorded and withdrawal

amounts do not exceed an authorized or permitted amount per

local laws and rules.

- If the water source is considered by authorities or others to be

under stress, the producing farm engages in a dialogue with other

stakeholders to develop a solution.

- The producing farm has appropriate management and treatment

systems for all wastewater discharges, to help ensure that they do

not contribute to degradation of receiving waterbodies. The

producing farm is in compliance with applicable local and national

laws.

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PepsiCo, Europe

1. Situation Agriculture is at the centre of global sustainability challenges, including

water. So growers need to produce more crops with fewer as water.

PepsiCo works together with their agricultural partners to overcome

these challenges so that the farmers can focus on what they do best –

growing wholesome and nutritious crops. Pepsico initiated the

Sustainable Farm Initiative (SFI). The SFI is a comprehensive program

with application to potato, citrus, oats and corn crops and to growers of

all sizes in developed, developing and emerging markets. It enables

PepsiCo to measure the environmental, social and local economic

impacts associated with our agricultural supply chain.

4. Key factors for success - Corporate strategy on sustainability

- Targets for water use

- Focus on both production plants and supply chain (agriculture)

- Projects to provide water services to the underserved regions

Water stewardship is an absolute business necessity, and PepsiCo is

committed to progress in their own operations, via our extensive, global

network, by partnering with government and development agencies, and

through grants made by our philanthropic arm, the PepsiCo Foundation.

Co-creation is critical to impactful partnerships, and PepsiCo is an active

collaborator with our water partners. Each partner shares with PepsiCo

the common goal of sustainable access to safe water for millions of

people. Collectively, we seek to leverage the individual and unique

strengths of PepsiCo, the PepsiCo Foundation and our partners to drive

innovative, sustainable and comprehensive solutions to the crisis of

water insecurity.

2. Stakeholders Achieving a sustainable future for agriculture can only be achieved

through partnerships with farmers and supply chain, other businesses,

researchers, government and non-government organisations. The

following is a list of some of the organisations PepsiCo collaborated with

in Europe:

- Linking Environment and Farming (LEAF)

- Dacom

- SAI platform

Through the PepsiCo Foundation, PepsiCo has identified projects and

partners that help provide safe water access to millions of people in

underserved communities in China, India, Mali, Brazil, Colombia and

other Latin America countries.

3. Solution 1. Supporting local agriculture.

2. Producing more with less. PepsiCo is developing and rolling out

best practice approaches, learning from colleagues around the

world, and reducing the use of key inputs such as water and

fertiliser.

3. Innovating for better farming. PepsiCo brings technological

innovations to their growers that allow them to measure and then

reduce their water and energy use.

To illustrate: Turkey: PepsiCo has worked with Turkish farmers to reduce

water usage by 34% in 2012 versus 2010 by increasing the use of drip

irrigation and mini sprinkler systems and boosting yields. As a result,

around 10 million tonnes of water is saved. And in Greece and Bulgaria,

PepsiCo works with Greek and Bulgarian potato growers to use water

more efficiently by rolling out learnings from i-crop™ and putting in place

drip irrigation. Drip irrigation trials that Walkers conducted with its

growers in 2011 and 2012 have resulted in increases of 6% in yield over

the two years and 42% less use of irrigation water per tonne of potato.

5. Role of the government PepsiCo has revealed that its water stewardship efforts have led to a

26% reduction in operational water usage since 2006 - exceeding its

initial 20% goal. PepsiCo’s water conservation programs have cut

company costs by more than $80m between 2011-2015 as part of its

larger sustainability initiative that has resulted in $600m in savings over

five years in water, energy, packaging and waste reduction. The role of

the government in it has not been clear yet.

6. Sources

• http://www.edie.net/news/4/PepsiCo-exceeds-water-reduction-

goals-in-world-water-week/.

• PepsiCo Europe. Delivering sustainable agriculture Performance

with Purpose.

• PepsiCo. Delivering Access to Safe Water through Partnership.s

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Farmer, Beer and Water (Boer Bier Water) – The Netherlands

1. Problem ‘Farmer, Beer and Water’ (FBW) is a social innovation platform, taking

place in the south-eastern part of the Netherlands, municipality of

Lieshout, It focusses on groundwater extraction by farmers for irrigation

and the Bavaria Brewery for its production process. Bavaria Brewery

extracts each year 2.5 million m3 of groundwater for its brewing process.

This water is extracted from the area near its factory. This extraction

affects the famers in the neighbourhood because they use water in case

of droughts in the summer period. At the same time about 1.5 million m3

rinse water per year is discharged into the Goorloop and finally leaves

the area. The brewery is obliged by the province of North-Brabant to

reduce the discharge of nutrients (phosphates).

require collaboration with multiple actors in the area. FBW initiates

sustainability projects (mainly for farmers) aimed at conserving

groundwater resources in the long run. As a platform, it applies for

subsidies and grants that help to fund these projects. In addition,

participants of the case found common interest in a sustainable use of

soils, and creating an image towards sustainability.

2. Stakeholders / participants The case concerns one brewery (Bavaria), a network of about 50 to 60

famers, and other stakeholders like the regional water board,

municipality, and the province of North-Brabant. The common interest

among the brewery and farmers (mostly dairy farmers with no direct link

with Bavaria) is in conserving the public resource of groundwater,

sustainable use of soils, and creating an image towards sustainability.

Bavaria Brewery and the farmers are aware of the fact that a good

quality and the availability of groundwater in the long run is essential for

running and growing their businesses, now and in the future. Crucial is

that participants are either dependent on the groundwater for a

substantial portion of their economic activity (farmers and the Brewery)

or attach high value to the sustainability of the resource and an attractive

landscape (municipality, regional water board). Several policy fields like

the (European) Water Framework Directive as well as requirements in

the food process industry concerning the use of cleaned process water

provide important (boundary) conditions for FBW (and its related

activities) to operate. Since the start of FBW, a few farmers (12 in 2015)

started to produce barley as input for a premium brand of Bavaria:

Swinckels’ bier. Barley fields with their golden colour increases the

variety and attractiveness of the landscape.

4. Key factors for success To frame the water resource as local issue is crucial to safeguard the

interests of all the participants in FBW. The local scale has the

advantage that the various participants share moral and ethical

standards regarding how to behave in the self-organization they form,

and thus the norms of reciprocity. This results in lower transaction costs

in reaching agreements, and lower costs of organizing. Crucial here is

that they have sufficient trust in one another to keep agreements. The

role of the stakeholders differ, some are more active than others. A

group of key actors from the farmers union (ZLTO), the Brewery and

governments, together with representatives of local farmers and

landholders are important for leading the case process and for

innovation and entrepreneurship in FBW.

Having a budget to experiment or to gather, elicit or exchange

knowledge from professional experts is crucial for the sustainable use of

local water resources. However, it is often time consuming and difficult

to apply for national or European grants and budget funding.

3. Solution Until now, famers have been financially compensated by the Brewery in

case of droughts. The idea behind this case is that water authorities,

local agrarians and Bavaria Brewery find alternative (and sustainable)

solutions for (looming) water risks in agriculture. Together they

cooperate to diminish effects of drought for agrarians by reusing the

process water of the brewery on the one hand, and increase water

quality by the deployment of new technologies on the other. The various

stakeholders constitute an organisational network that addresses local

sustainability issues – issues that go well beyond the individual, and

5. Role of the government The initiative in this project is primarily taken by the private stakeholders,

there was no special role for the government. Building and fostering

relationships between stakeholders through trust (see also above) is

particularly important to ensure compliance with environmentally friendly

production techniques. That is, compliance is on a voluntary basis. FBW

will thus not actively pursue enforced compliance through administrative

remedies, penalties or the power of authorities.

Nowadays, however, stakeholders ask the government to offer more

room for experimentation and thus for exceptions in specific rules and

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laws in order to make it easier to start with experimental pilot projects.

Implementation of sustainability projects are hampered by the slow pace

with which governments issues licenses and permits for innovative

ideas.

6. Source Heide, M. van der and N. Polman. 2016. Case Study “Boer Bier Water –

Farmer, Beer and Water”, the Netherlands. The Hague, Wageningen

Economic Research, PEGASUS project (H2020).

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3. Conclusions and discussion4

Food and beverage firms are water dependent in several ways:

• Water used in the final product (especially in the beer and beverage industry; • process water; and • waterfoot print of the crops and livestock used in the production process.

In water risk hotspots, food companies have to adapt to this water scarcity risk. Adaptation can be either demand management (e.g. reducing the water use, increasing the water efficiency) or supply management (e.g. improving the allocation of water). Water used in the final product cannot be used more efficiently, but in the application of process water and in the water footprint demand management measures are suitable. Actions to reduce the water risk can be distinguished to their location

• Site based actions (e.g. investing in a more water-efficient production unit). These actions could be suitable for water in the final product and process water.

• Catchment based action (e.g. constructing a wetland upstream, to maintain sufficient flow in dry conditions), suitable for all water the company uses.

Steps towards adaptation

• The first step for actions in food industry is to assess the water risks the company is facing. A number of water risk assessment tools allows companies to estimate their water risk exposure (e.g. WBCSD Global Water Tool, WRI’s Aqueduct). According to Morikawa et al. (2007), companies in the food manufacturing and beverage sector have comprehensive water reporting, in which inter alia their water use is measured. However, these reports do not always include water risk assessment programs, neither do they describe the water-related risks the companies are facing.

• The company has to understand the water risk they are exposed to (is it, for example, related to supply or availability, or is the risk associated with a poor quality of water? What is the type, intensity and the characteristic of the risk? Et cetera), and with whom they are sharing this risk. The risk of a depleting ground water table can only be addressed in a collaborative effort together with other water users in this catchment. To that end, it is necessary to convene water users groups and other relevant stakeholders to undertake collective action.

• Site based actions: measurement of water efficiency in plants and success in reducing on-site water use.

• Catchment based actions: assessment of contribution of the different water users to the catchment’s water balance. Success of catchment specific action is more difficult to measure and not frequently reported. Stakeholder management skills to realize catchment specific interventions are an important factor for success.

Strategy of a company

4 Sources: WBCSD (and WBCSD white paper: Realizing Water Stewardship: A simple framework for a complex journey), Alliance for Water Stewardship, Behind the brands, http://www.globalresearch.ca/the-privatization-of-water-in-india-how-cocacola-destroys-the-aquifer/5472625.

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If the water risk is high and the degree of risk sharing is low, demand management (on site actions) is the common approach. Especially for companies for whom water use (or release of waste water) is an important costs.

When water risk exposure and risk sharing are high, water cooperation is the logical strategy for companies. The company need to apply catchment based action in cooperation with other water users in the catchment. Examples are:

• Invest in natural infrastructure to replenish the ground water aquifer (see factsheet SAB Miller India, investment in six recharge structure to the deep bedrock).

• Stimulate other water users (in the catchment) to reduce their water use. • Change the allocation of water: compensate firms (farms) that attach a small monetary

value to water for a reduction of their water use. • A strategy to create trust; for instance to cooperate with a credible non-governmental

organisation that is trusted by other stakeholders.

A (multinational) company can also develop supply chain management policies or programs concerning the environment, such as supplier codes of conduct, which are not directly related to catchment based actions. These policies or programs can be wide and diverse, ranging from efforts such as information sharing and educational programs for water conservation to implementing water standards for suppliers and measuring and monitoring water performance. Nestlé, for example, “works with agricultural suppliers to promote water conservation among farmers.” (Morikawa et al., 2007, p. A24). And Heineken has implemented the so-called ‘Supply Chain Aware of Water Programme’, which focuses on “all aspects of water consumption, management and treatment and requires all breweries and production units to set local targets for water consumption. These targets must reflect their efforts in the gradual reduction of water consumption with a three-year horizon.” (Lambooy, 2011, p. 860).

There are various examples of water-related stakeholder consultation in the beverage or food manufacturing sectors. The Dutch brewer Bavaria cooperates with farmers, communities, and other local stakeholders to explore new and technological initiatives to promote sustainable water practices. Moreover, food and beverage companies work with key stakeholders to develop initiatives and pursue research in water management, and they provide educational program to raise awareness of water conservation and watershed protection issues. “Groupe Danone reports that it cooperates with farmers, communities, and other local stakeholders to draw up guidelines for sustainable water management. It also reports appointing local managers to oversee operation of each spring in partnership with local communities and participants from the local economy.” (Morikawa et al., 2007, p. 14).

Based on the above elements of company’s strategy in water risk hotspots, the following challenges exist:

• Multinationals have embraced (part of) the methodology described above. This is either based on their corporate social responsibility or on their large dependence on water. It can be said that what matters for companies, is the view of the board, and boards are more and more asking for results on key environmental aspects, including water impact and risk management. The experience gained by these multinational should be used by smaller companies that are lagging in this process. However, a major issue here is whether there is evidence that the implemented approaches to water risk management really work (in a cost-effective manner).

• Water is a local (catchment) resource , and drought risk has to be addressed at local (catchment) level. Replenishment in other regions does not solve the problem in water risk hotspot (unlike CO2, that can be addressed globally).

• Catchment based actions are most difficult, but they are necessary to solve the problems in water risk hotspots. Companies have to take the lead in catchment processes, because they have experience in the water risk problem and actions necessary to combat it.

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• Cooperation within a catchment is necessary and trust is important (e.g. Coca Cola has been the target of communities across India holding it accountable for creating water shortages and pollution, resulting in closure of plants). NGO’s can be credible a partner for both the company and community.

• Governments are responsible for water allocation. They should provide instruments to obtain an allocation of water that is equitable, economic and environmentally sound (see OECD on water governance) .

If we focus on agriculture itself, it appears that farmers respond to water risks by changing practices, switching activities or innovative solutions (see factsheet Salt Farm Texel). However, very few of these solutions have been scaled up so far. Hence, there might be unrealized potential to deploy innovative practices to manage water related risks, and a proactive approach to water management by the government might help to address and ‘capture’ this potential. More specifically, although most innovative approaches are being created and disseminated by the private sector, the farmers and food industry cannot do it all alone - the government also has an important role to play. For example, a collaborative approach, uniting industry, agriculture and government should be considered to align the diverse needs of stakeholders while addressing the shared challenges faced in managing future water risks (see also WHO, 2010).

When realising such a collaborative approach, the ever-recurring question is: what can be done by private actors – where ends their responsibility – and where begins the role of the government? In the Netherlands, for example, the Civil Court concluded that groundwater control is primarily the responsibility of the government. And India, “the Court recognised that the State as a trustee is under a legal duty to protect natural resources, which cannot be converted into private ownership. In addition, the Court added that the government had a duty to ‘protect against excessive groundwater exploitation and the inaction of the State in this regard was tantamount to infringement of the right to life of the people guaranteed under Article 21 of the Constitution of India’” (Lambooy, 2011, p. 855).

The private actors described in this brief note see it to be in their own interest to invest in approaches to water risk management. Such an approach may provide them a license to produce, is a necessary condition for long-term growth or creates a profitable niche. However, the benefits of these approaches are often not restricted to the companies themselves, but accrue to different stakeholders (and sometimes to society as a whole).

The role of the government can be diverse. For instance, the government can raise awareness through inter alia the Sustainable Development Goals, climate change impact assessments on a regional level or education. These communicative instruments aim at influencing private decision making and to make them aware of (future) water risks. Moreover, governments can allocate water at water basin level (transboundary). That is, water risks can be all pervasive, ranging from isolated cases to river basins and delta regions. Hence, water risk management often cannot be restricted to small groups of farmers or sectors. This characteristic, however, is largely responsible for competence issues between government ministries, and between different policy levels within and between countries.

Governments, have the ability to formulate and implement transboundary policy measures. Transboundary water agreements are essential as downstream river basins can be impacted by management decisions in the upper basin. Also, governments have a role to play in water allocation at a regional level, by linking linking regional stakeholders (permits for water use linked to total regional water use). They also play a role in imposing (environmental) standards and restrictions for food companies and farms, which might induce innovative approaches to water risk management in order to attain environmental goals.

Governments can also stimulate innovation, for example through:

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- Flexibility in restricted policies for experiments - Public Private Partnerships - Tax reduction for innovation:

ü Golden triangle (government, firms, research, education), e.g. research programmes such as H2020 & Dutch Deltaprogramme, Dutch Topsector water

- Farmer knowledge groups

The government also has the capacity to stimulate adaptation of farmers not incorporated in the supply chain. It is unrealistic for the small holder farmers to proceed in investing in water conservation measures or other environmental management practices owing to the high costs of certification processes and the lack of adequate government support. When a private company wants to initiate an innovative approach, it sometimes has to compete against deeply embedded, well-funded, entrenched interests and bureaucratic obstacles. Governments have the ability to cut through these obstacles in realising innovative ideas.

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References

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Lambooy, T. 2011. Corporate social responsibility: sustainable water use. Journal of Cleaner Production, 19, pp. 852-866.

Morikawa, M., J. Morrison and P. Gleick. 2007. Corporate Reporting on Water. A Review of Eleven Global Industries. Oakland, California, Pacific Institute for Studies in Development, Environment, and Security.

Nikolaou, I.E., M.K. Nikolaidou and K.P. Tsagarakis. 2016. The response of small and medium-sized enterprises to potential water risks: an eco-cluster approach. Journal of Cleaner Production, 112 (part 5), pp. 4550-4557.

OECD. 2016. Mitigating Droughts and Floods in Agriculture: Policy Lessons and Approaches, OECD Studies on Water, OECD Publishing, Paris. DOI: http://dx.doi.org/10.1787/9789264246744-en.

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WHO. 2010. The Global annual assessment of sanitation and drinking-water (GLAAS) and WHO, fact files on water. <http://www.who.int/features/factfiles/water/water_facts /en/index2.html>.

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