Nestle Waters North America began in the bottled water market in 1976 with the Perrier brand. Since then, the market for bottled water has continued to grow. Nestle Waters NA now encompasses 11 brands in the US, representing over $4b in sales and controlling 37% of the market. Despite strong growth, Nestle as an industry leader is facing significant challenges as climate change poses a threat to its core operations.
Water – an increasingly scarce resource
Currently, Nestle sources its water from natural springs and reservoirs. Increases in global temperatures and changes to weather patterns are causing droughts and limiting the availability of water, upon which Nestle directly depends. Compounding this increasing scarcity of water is the fact that for each 1L of water that Nestle bottles, Nestle needs ~3L of water:
The climate effects of plastic bottles
Producing plastic water bottles is extremely energy resource intense. Polyethylene terephthalate (PET), the most commonly used plastic for water bottles, is a crude oil derivative product. It takes about 17.6m barrels of oil to meet demand for US water bottle manufacturing each year. It is estimated that the oil used in water bottle manufacturing could instead fuel 1m cars for a year. In addition to the use of oil, bottling water produces more than 2.5 million tons of carbon dioxide each year, which directly contributes to climate change5.
Transportation is the one of the largest contributors to greenhouse gas emissions worldwide. Nestle transports its products from its factories to its distribution and retailers or directly to consumers. In 2013, on average, customers were located 450km from the Nestle factory10. As a result, a significant portion of Nestle’s greenhouse gas emissions were related to its transportation of finished products. On the bright side, 80% of products were shipped directly to consumers, which helped to limit transportation distances by removing the middle man in the supply chain10.
Even though all plastic water bottles are recyclable, data from the National Association of PET Container Resources (NAPCOR) shows that only 38.6 percent of bottles were recycled in 2011. NAPCOR also shows there have been recent significant increases in recycle rates (up 20% from 2010 to 2011). It is important to note that this data was commissioned by an industry association and may be skewed towards positive outlook on recycling rates. However, the data still show that the majority of plastic bottles end up in landfills.
What is Nestle doing about it?
Nestle is already trying to lessen its impact on the environment through its sustainability initiatives. From 2010 to 2015, Nestle decreased packaging weight per liter by 9%, its use of additional water by 19%, and its energy consumption per liter by 19%. With respect to distribution, Nestle is trying to optimize its logistics by reducing its distance from consumers, optimizing its payload, and exploring alternative transportation. Additionally, Nestle is educating consumers about recycling through labels and advertisements and supports initiatives that increase the number of recycling receptacles available. These actions are aimed at improving recycling rates, so that fewer plastic water bottles end up in landfills and therefore decrease the impact Nestle’s bottles have on the environment.
However, these incremental actions may not produce a large enough impact. As a result, governments are beginning to take action against bottled water manufacturers. For example, Ontario has recently approved a 2-year ban on the creation or expansion of bottled water operations (an area where Nestle operates) in response to a local drought and growing concerns about the industry’s effect on the regional groundwater supply.
What other opportunities exist?
Along with continuing to pursue their current sustainability initiatives, Nestle can do even more to lessen its impact on the environment:
- Decrease the amount of water used to make 1 liter of bottled water. Currently, Nestle uses nearly 3L of water for each liter of bottled water it produces. Given its scale, decreasing the amount of water needed per bottle even slightly could have significant effects on its need for water.
- Invest in alternative water purification techniques. Nestle should develop technologies that extract less freshwater by utilizing currently non-potable water. For example, Nestle could invest in technologies that purify rain water or desalinate ocean water.
- Develop alternative containers that have less of an impact on the environment. Production and destruction of plastic bottles has a huge impact on the environment. Nestle should seek alternative materials for its containers that require less energy to produce or are biodegradable.
As climate change continues to progress, Nestle can build upon its current sustainability initiatives to lessen it environmental impact by limiting its energy use, water use, and waste.