Megatrends in water, concerns and responses in a ‘3 by 3’ view from a Nestlé perspective

By Peter Brabeck-Letmathe

12 September 2016 See comments (0)

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The ‘3 by 3’ view below is bringing together the major challenges in the water space, the concerns for a company such as Nestlé and the different levels of action in a three-by-three scheme. It summarises some of the main themes addressed over the last four years in my blog and also discussed in countless public speeches I gave all over the world.

Water has been central to Nestlé from the very beginning. The picture below illustrates this well: the very first Nestlé factory was built right next to a river. (NB: in June 2016, on the occasion of the company’s 150th anniversary, this site was re-opened as a visitor centre for the broad public to discover Nestlé, showing the company’s historic roots, as well as providing a vision into the future around the complex relationships between nutrition, health and wellness).

first Nestlé factory

Until the 1990s, and in many cases subsequently, all major factories of the Nestlé Group have been located next to water sources (rivers, canals, underground aquifers), typically within a water-rail-road triangle. Water matters for the company, even if its’ factories are not big water users.

Besides the very responsible access and withdrawal, Nestlé’s first wastewater treatment plant became operational already in the 1930s. Right across the world today, we do not leave our wastewater untreated, even where conditions make this difficult. An example of this is the wastewater treatment plant set up in the early 1990s in one of our factories in northern China that needs heating because of the often very cold climate. Indeed, Nestlé’s comprehensive view of, and sense of responsibility for, water is not just a recent phenomenon but is one that is well rooted in the company’s history and culture and one that has deepened further throughout its 150 years of existence.

The first acquisition of a bottled water company in the 1970s added a new dimension to Nestlé’s approach. Steps to protect the quality of groundwater became an integral part of the Nestlé toolbox. One example of this is Agrivair, an initiative set up at the end of the 1980s in cooperation with the local farming community (including paying farmers who were reducing the use of pesticides, artificial fertilisers and manure for their ‘environmental services') to protect the entire water catchment area (i.e. also the municipal water) in and around Vittel.

Today, the global situation is changing, with three megatrends in water challenging societies and economies in major ways and making our concerns related to water even more strategic:

  • Overuse and bad water management create and exacerbate water shortages. For the year 2015, estimates by the 2030 Water Resources Group suggest that withdrawals exceeded sustainable supply (natural renewal minus environmental flows and needs) by close to 20%, i.e., some 800 km³. Scenarios for 2030 show that this gap could increase to 2,700 km³, i.e. withdrawals that are more than 60% in excess of sustainable supply. Often this overuse is visible (drying rivers, Aral Sea being transformed into a sand desert), more often it is not, as water tables of underground aquifers in both developed and developing countries are sinking at alarming pace. As I have said on several occasions (including when the oil price was much higher than today): we will run out of water long before we run out of oil.
  • Water scarcity leads to political and/or societal tensions, one aspect of which is an increasing pressure on private companies This may, in turn, lead to politically generated insecurity of access to water for those in the driving seat of delivering economic prosperity. As water is local, problems will not emerge in all countries simultaneously. People will therefore have difficulties to understand the global nature and repercussions of the development. And the fragmented availability of data and transparency of national water accounting (including, but not exclusively, in cross-border river basins) increases the risks further. As water is key for individual life and for societies, the political dimension of these trends is particularly delicate. We may see, and see already, increasing water conflicts, particularly within countries. Companies may be held responsible or at least accountable for the overuse, pollution and other water issues far beyond their operations and their area of influence. These and other factors combined may lead to an increased risk of arbitrary re-allocation.
  • And finally, the poor state and deterioration of water infrastructure (municipal, other, i.e., including wastewater collection and treatment) due to a global gap in investment for renewal and extension in an order of magnitude of around 50% of actual requirements. This leads to the erosion of both the quality and quantity of municipal water that actually reaches consumers.

There are three major areas of concern for Nestlé as the world’s leading Nutrition Health and Wellness Company:

  • Water is essential for farmers to be able to grow the food that Nestlé then buys from them to add value for consumers. Global food supply risks being affected in a very significant manner by water overuse. If no measures are taken, the world may face shortfalls in the order of 30% in cereal production by 2030 due to water scarcity and, in particular, risks the overuse of buffers (groundwater and lakes in excess of renewal) that should be protected to serve in times of drought.
  • Water matters for the company’s factories to operate; it must also be available for the daily needs of its workers/families. From a broader vantage point, water may no longer act as a driving force behind societal prosperity and economic growth as we have seen in the past. A particularly important example of this is illustrated by the fact that more than half of the water withdrawn for industry is used for the generation of thermal power. Fresh water is also needed for the generation of solar power (pdf, 403Kb).
  • Safe water is a requirement for the consumers of many, if not most, Nestlé products, i.e.to prepare meals and ensure basic hygiene in the kitchen and beyond; consumers moreover expect safe and high quality water for healthy hydration.

Nestlé sees a three-pronged action strategy in response:

  • At the operational level: mitigate the direct risks for the company emanating from water shortages and quality failure, and to protect operations at all levels (factories, administration, sales, etc.) from (arbitrary) political interventions. One way this can be done is by reducing water withdrawals, extending wastewater treatment (quantity and quality) and looking into the location of factories and bottling plants. While focus is given to our operations, this may, at least partly, be extended to the entire value chain to make it more resilient.
  • At the societal level: running projects to give access to water and, in some instances, sanitation, to the population in and around factories within the perspective of good corporate citizenship;
  • A third prong at the strategic level: advocating and developing comprehensive solutions within watersheds and countries through coherent and credible government-driven multi-stakeholder action. This must be done with a global perspective, i.e., not only in those countries and river basins where we operate, because of the generalised risk of global food shortage from water overuse/shortfalls. Actions include partnering with stakeholders for (and, at times, taking leadership in) comprehensive solutions to address water overuse country by country, watershed by watershed - actions that are both relevant and cost-effective. This also includes participation in the public policy dialogue both at the international and local levels. Government lead in setting coherent strategies is essential. The most important among the initiatives we are actively involved in is the 2030 Water Resources Group (2030 WRG), which seeks to address and redress water overuse/management and other issues watershed by watershed (no global solutions!) in a relevant (i.e. also credible) and cost-effective manner. Still too often emotions instead of economics, declarations instead of sustainable (i.e., also financially viable) action are dominating the scene.

The strategy has a long term perspective, but the time for action is now!

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