Coca-Cola and Water Scarcity: substantial progress or just another drop in the bucket?
Coca-Cola claims to have attained water neutrality, but are communities truly reaping the benefits?
‘‘When the well is dry, we know the worth of water”
-(Benjamin Franklin).
An astonishing 1.9 billion servings of Coca-Cola products are consumed every day throughout the world, requiring the funneling of over 300 billion liters of water through 863 bottling plants each year to deliver carbonated beverages to eager consumers.[1] Although such a feat is logistically impressive, the Coca-Cola Company has grown increasingly concerned about the sustainability of its water usage and the associated implications for its bottom line, [2] especially given that within the next 10 years an estimated 2.8 billion people will be at risk of encountering water shortages [3]. As climate change threatens global water security—and as political activists publicly call into question the acceptability of its practices—the Coca Cola Company has made great strides to establish their position as an eco-conscious producer. But have their efforts gone far enough?
The Case of India
Groundwater tables and freshwater sources are being depleted at alarming rates in many parts of the world due to accelerating demand by industry, and in some markets the consequences are quite serious; for instance, the World Bank recently estimated that without further intervention or technological advancement, all of the available water supplies in India will have been exhausted by 2050. [4] This was especially worrisome for Coca-Cola since, prior to 2007, it operated 24 bottling plants across India. With reliable water access already in short supply, residents and regulators alike began to fervently oppose the presence of Coca-Cola bottling plants, opening the doors to legal and reputational damages to the brand. With bad PR mounting following the shuttering of multiple bottling plants in India due to protracted legal battles with local residents and ongoing protests decrying exploitation of local resources [5], the company shifted focus toward sustainability.
Steps Toward a Sustainable Future
Their solution was to institute a system-wide water stewardship platform to achieve water neutrality by “returning to nature and communities an amount of water equivalent to what we use in all of our products and their production by 2020.” [6] Strategies to offset water usage included plant-level innovations—such as improving manufacturing efficiency to reduce water waste and reuse of treated wastewater in boilers, evaporators, and chillers—and improving local infrastructure through partnerships with governments and NGOs to finance and build water treatment facilities, install rainwater harvesting structures, construct check dams, and restore water to natural reservoirs. [7] In essence, when water is consumed by the production process, an equal amount of usable water is returned to the environment at large or conserved from use altogether.
Global Neutrality vs Community Inequity
In 2015, Coca-Cola announced that they had achieved global water neutrality five years ahead of schedule. However, there is reason to be skeptical of the mission’s success. Although the amount of water purportedly replenished to the environment may very well balance their overall water usage from bottling, the underlying inequity at the community level remains problematic; notably, each bottling plant is not required to replenish water to its direct source, [8] and thus total water neutrality was often achieved by replenishing aquifers at locations far removed from the plant’s actual water sources, leaving local communities ever vulnerable to depletion of their water source while Coca-Cola reaps positive PR for replenishing it elsewhere. It is imperative that the next step should incorporate a blanket policy to replenish water sources within the community from which it is derived, lest the company remain vulnerable to depletion of its primary input in the given region, regulatory interference, and further reputational damage.
Bigger Opportunities Ahead
Coca-Cola’s rhetoric grossly underestimates the water footprint required to produce its beverages, commonly citing bottling requirements of 2.16L per 1L of finished product [9]. These calculations only include water consumed as an operational input but do not take into account contributions from the overall supply chain (for example, a single plastic bottle uses 4.5L of water input alone). However, the single largest contributor to the overa
ll water footprint of the company’s beverages is its major ingredient—sugar. Agriculture requires immense amounts of water to produce sugar crops, and although highly dependent on region and type of crop, it is estimated that the water footprint per beverage is at minimum 169L (using sugar beet from the Netherlands) up to a maximum of 309L (using sugar cane from Cuba). [10] Indeed, agriculture contributes the largest water footprint globally.
This represents a key opportunity; by utilizing suppliers with efficient water usage strategies—instead of those offering lowest purchase price—Coca-Cola can fulfill ethical obligations to conserve water while also fostering a future competitive advantage since, as water becomes more scarce and crop yields decline due to climate change, the company is better insulated from the expected increases in volatility of input costs and availability. [11]
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Sources:
1) Water & agriculture: Adaptive strategies at farm level. (2015). Retrieved November 4, 2016, from http://www.coca-colacompany.com/stories/collaborating-to-replenish-the-water-we-use
2) The Coca-Cola Company. (2008). Form 10-K submitted to the United States Securities and Exchange Commission for the fiscal year 2007, Washington, D.C. Retrieved November 4, 2016, from http://www.coca-colacompany.com/investors/2008-annual-report-on-form-10-k
3) Water and Climate Change. Retrieved November 04, 2016, from http://water.worldbank.org/topics/water-resources-management/water-and-climate-change
4) The World’s Water 2006–2007: The Biennial Report on Freshwater Resources. (2007). P. H. Gleick, H. Cooley, D. Katz, E. Lee, J. Morrison, M. Palaniappan, A. Samulon, and G. H. Wolff. 2006.
5) Coca-Cola just achieved a major environmental goal for its water use. (2016). Harvey, C. Retrieved November 04, 2016, from https://www.washingtonpost.com/news/energy-environment/wp/2016/08/30/coca-cola-just-achieved-a-major-environmental-goal-for-its-water-use/
6) Sustainability Update: Water Stewardship. (2011). Coca-Cola Company. Retrieved November 04, 2016, from http://www.coca-colacompany.com/our-company/sustainability-update-water-stewardship
7) Business and Climate Change Adaptation: Toward Resilient Companies and Communities. (2012). United Nations Global Compact and United Nations Environment Porgramme. Retreived November 04, 2016, from http://caringforclimate.org/wp-content/uploads/Business_and_Climate_Change_Adaptation.pdf
8) Fortune 500 Company to Replenish All the Water it Uses Globally. (2016). The Coca-Cola Company. Business Wire. Retrieved November 04, 2016, from http://www.nasdaq.com/press-release/cocacola-is-the-first-fortune-500-company-to-replenish-all-the-water-it-uses-globally-20160829-00001
9) Water Stewardship: Sustainability Update. (2011). The Coca-Cola Company. Retreived November 04, 2016, from http://www.coca-colacompany.com/sustainabilityreport/world/water-stewardship.html#section-meeting-our-goal-for-water-efficiency
10) Ercin, A. E., Aldaya, M. M., & Hoekstra, A. Y. (2010). Corporate Water Footprint Accounting and Impact Assessment: The Case of the Water Footprint of a Sugar-Containing Carbonated Beverage. Water Resources Management, 25(2), 721-741. doi:10.1007/s11269-010-9723-8. http://temp.waterfootprint.org/Reports/Ercin-et-al-2011-CorporateWaterFootprint-Softdrink.pdf
11) Achieving food security in the face of climate change: Final Report from the Commission on Sustainable Agriculture and Climate Change. (2012). Beddington J, Asaduzzaman M, Fernandez A, Clark M, Guillou M, Jahn M, Erda L, Mamo T, Bo NV, Nobre CA, Scholes R, Sharma R, Wakhungu J. Commission on Sustainable Agriculture and Climate Change. https://cgspace.cgiar.org/bitstream/handle/10568/35589/climate_food_commission-final-mar2012.pdf
Fig 1: http://water.worldbank.org/topics/water-resources-management/water-and-climate-change
Fig 2: http://www.ceres.org/issues/water/agriculture/water-risks-food-sector
Fig 3: http://www.ceres.org/issues/water/agriculture/water-risks-food-sector
Very insightful analysis of Coca-Cola’s business and its impact on sustainable water sources. I admire how you dismantle their takeaways on the whole water neutrality program, first, by raising the point of communities inequality and replenishment of water sources that might not be the same ones they’ve depleted, and second, by challenging their assumptions on how much water it takes to manufacture a bottle of Coca-Cola. However, I am deeply troubled by how they can actually force suppliers to adapt to more sustainable strategies without pushing costs up the supply chain. Coca-Cola has without a doubt inmense purchase power, but I wonder if by forcing their suppliers to evolve, they may be forcing them to be unprofitable. Wouldn’t a partnership between both suppliers and Coca-Cola create more value for both parties?
Interesting analysis (and critique) of Coca-Cola’s sustainability efforts. In many ways, your solution of Coke utilizing suppliers with efficient water usage strategies reminds me of our recent IKEA case, in which IKEA was debating a similar problem relating to their wood sourcing.
Though I agree there is a significant amount of water used to make Coke’s end product, it would seem that they have done some real good, for both themselves and the planet as a whole. Also, as you said, the media seems to be praising their efforts, as in the below article:
http://www.nytimes.com/2014/01/24/science/earth/threat-to-bottom-line-spurs-action-on-climate.html?_r=1
At what point has the company done enough? Or is the answer never? For example, you note a plastic bottle uses 4.5L – if Coca-Cola restored 3.0L, would that satisfy critics? How about 4.5L, have they done enough or do they still need to restore more than the supply chain uses? Everything has trade-offs, and it would seem Coke has made reasonable efforts while still ensuring value for their shareholders.
One particularly interesting point that I think you have raised is how Coca-Cola has chosen to communicate its water neutrality message with customers (conveniently leaving off the part about all of the water consumed during manufacturing). Though it seems like an admirable mission for Coca-Cola to undertake, it may go to show that by surfacing the issue, Coca-Cola is leaving itself open to increased scrutiny and criticism surrounding its water usage. While before, many retailers and customers may not have thought too long about how much water the company consumes, Coke has now put a spotlight on a very sensitive global issue. This attempt to create positive PR around Coke’s initiatives could leave some customers wondering why they are doing so little (and how replacing water in other parts of the world will help solve the crisis in places like India?). It is interesting that the company has chosen to focus on water replenishment for the water within each can when its “thirstiest” ingredient (sugar) is also one that has long been criticized for its contribution to obesity and health problems. Finding breakthrough ways to reduce or remove sugar would help Coca-Cola’s image on both fronts.