Carbon is a much talked about environmental issue, and should be. But down the road, water may present equal, if not bigger, impacts for societies and business.
The Pacific Institute and Ceres just released a fascinating report on water: "Water scarcity and Climate Change: Growing Risks for Businesses and Investors." They describe how global climate change is exacerbating water scarcity problems around the world, "yet few businesses and investors are paying attention to this growing financial threat."
We wanted to learn more about this emerging issue, so we invited Jason Morrison, the lead author, to our home office to join McDonald's colleagues who deal with water in some way (and we had it webcast to an additional McDonald's employees and suppliers outside our office).
I was really struck by the session. Since McDonald's is in the food business, I was anxious to hear more about water and agriculture. According to the report:
"Water plays a fundamental role in the food industry. Roughly 70 percent of the water used globally is for agriculture, with as much as 90 percent of water dedicated to agriculture in developing countries. JPMorgan estimates that the total annual direct use of five of the world's biggest food and beverage companies (Nestlé, Unilever, Kraft, Danone and Coca-Cola) represented about 600 billion liters - or 95 liters for every person on the planet in 2006."
Freshwater consumption worldwide is expected to rise 25% by 2030, largely due to population increases, which are projected to climb from 6.6 billion currently to about 8 billion by 2030.
Water demand for agriculture, primarily due to irrigation, is projected to increase by 40%.
According to the report, water is already over-appropriated in many regions of the world. More than one-third of the world's population - roughly 2.4 billion people - live in water-stressed countries, and by 2025, that number is expected to rise to two-thirds of the population. I asked what "water-stressed" means, and Jason said that it implies that there is no available water unless individuals in affected areas travel inordinate distances to get it.
It's strange to think turning on the faucet seems as easy as it does, for many of us in our corporate settings, or at our homes, away from these developing markets.
If there is a shortfall in the report, it is that there is nary a mention about the economics of water. Basically, water is artificially kept inexpensive. I know in our restaurants worldwide it is cheap, and with most of our suppliers, it is a low input cost. This will probably change as full-cost accounting takes hold.
Water resources are being squeezed. In my discussions with outside environmental experts, this is THE issue of the next 50 years, but waiting for a crisis is not a good strategy. The report gives outstanding advice to companies, and our team at McDonald's is going to take them to heart. Their first recommendation is to understand your water footprint. We're going to do that.
-Bob
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