Many big-name food brands such as Hershey, Kraft and Perdue are wasting water resources through lax conservation practices and poor planning. And as climate change and other factors amplify the water risks plaguing the food industry, the bottom lines of these companies will suffer unless they change course, according to a new report.
The Boston-based sustainability group Ceres ranked 37 of the top food sector companies globally on their water risk management in a study released Thursday.
"For most of these companies their business model is premised under the assumption that there will always be cheap, plentiful water to grow the produce, to grow the grains that they use," said Brooke Barton, senior water program director at Ceres and one of the study's co-authors. "And that assumption needs to shift."
Ceres' study, "Feeding Ourselves Thirsty: How the Food Sector is Managing Global Water Risks," identified five issues threatening the food industry: competition for water; weak regulation; aging and inadequate infrastructure; water pollution; climate change and weather variability.
Most of the 37 companies are public, U.S.-based and appear on the S&P 500 and Russell 1000 indices. There were four categories of companies: agricultural products, beverage, meat and packaged food. All businesses were rated on a scale of 0 to 100 based on how their businesses address water use and management. Ceres used data from public disclosures.
Fewer than 17 percent of the companies—only six—scored above 50; the top scorer was the U.K.-based Unilever, owner of several ice cream brands such as Ben & Jerry's and Klondike bars, with 70 points.
On the opposite end of the spectrum, 10 companies scored less than 10 points. Pinnacle Foods, owner of Aunt Jemima maple syrup and Celeste frozen pizzas, and Monster Beverage Corporation, maker of Monster Energy drinks, each scored only 1 point.
"The key message here is that very large businesses who have a lot of influence in our country, and globally, have a lot of progress to make," said Marcia DeLonge, an agroecologist at the Union of Concerned Scientists.
According to the report, 60 percent of the reviewed companies are evaluating the water consumed only in their factories and not in their vast agricultural supply chains. A whopping 89 percent of companies aren't offering financial support to help their suppliers grow their food more sustainably. Similarly, the majority of companies haven't set goals to purchase their crops from more sustainable sources.
Some of the companies are already seeing how water risks are costing them money. For example, Campbell Soup Company bought a carrot farm in California back in 2012. Partly due to the state's historic drought that has ravaged the farm's cropland, the division reported a 28 percent decline in profits in the fourth quarter of 2014, according to the Ceres report.
California's four-year drought has drawn public attention to how much water goes into agriculture, said Barton. The snowpack there has reached historic lows. Gov. Jerry Brown ordered a first-ever mandatory 25 percent reduction in water use, a move approved by the State Water Resources Control Board this week.
But those cuts don't apply to the agricultural sector, even though it uses 80 percent of the state's water and makes up a relatively small slice of the state's total economy, the eighth largest in the world. And that slice is shrinking in the midst of drought. A half-million acres, or about 10 percent of available farmland, lay fallow last year, explained Peter Gleick, director of the research and analysis group Pacific Institute. "It's going to be worse this year...there's no doubt about it," he said.
Californians need to start discussing how they are going to address their agricultural industry's water use, he said, and the private sector can play a part in those conversations.
According to the Ceres report, only two of the companies reviewed (General Mills and Coca-Cola) have developed plans to protect the watersheds affected beyond their direct operations. General Mills, is working to identify the current and future risks affecting at least two farming regions that provide the company with supplies: Idaho, where its wheat supplies are sourced, and Irapuato, Mexico, where some of its vegetables are grown.
The role these companies can play on this front "is quite catalytic," said Barton, "and we really believe that more brands, more food companies should be stepping up to the plate and should be getting involved."