Frito Lay's factory in parched Casa Grande, Ariz., is close to moving off the water grid.

A large-scale water recycling system, now in its final stages of installation, will direct all water used in the plant through a membrane bioreactor filter system to treat it to drinking-quality standards before funneling it back into the facility for reuse. When fully operational at the end of 2009, the Texas-based global snack food company expects to recycle 85 percent to 90 percent of the water used in the plant.

"As an agro-based business, we realized a long time ago that water is critical to our operations," says Al Halvorsen, Frito Lay's director of environmental sustainability.

Drought conditions and impending water regulations are spurring smart and environmentally-savvy companies like Frito Lay to focus their sustainability efforts on conserving and managing a precious resource crucial for their long-term viability. Experts say conserving water is moving from noble gesture to shrewd business decision because of the sour economy and the likelihood of the price rising over the next decade to reflect its true cost. [For more on the challenges facing companies in measuring and reducing water use, see "Water Basics: You Can't Manage What You Don't Measure," by Andrew Collier and Andrew Glantz.]

"Water upgrades used to be 'good to have' but didn't offer a major return on investment," says Eric Meliton, an environmental technology research analyst at Frost and Sullivan. "But now with the economy, companies see water reduction projects as good investments."

Dubbed "Net Zero," Frito Lay's recycling system is one of dozens of projects implemented across the business that have reduced water use 40 percent below 1999 levels.

The Net Zero project is the first of its kind for Frito Lay, and while it's a capital intensive effort with a long return on investment, it's critical to the company's future, says Halvorsen. "When water becomes scarce our ability to produce products will come into play," he points out. "We want to have technology developed and scaled by that time so we won't need to move production to follow the water. This technology could potentially be used anywhere in the world."

Although Net Zero is an impressive display of what innovative companies can do to conserve water, Halvorsen notes that most of the water management projects Frito-Lay has under development are on a smaller scale. From replacing leaky facets and shutting off hoses and taps, to capturing and recycling steam off of potato fryers, the water management projects run the gamut from behavior modification to innovative facility upgrades.

"We focus just as much on people as technology," he says, noting that the water savings the company has achieved can be attributed equally to both. "Technology can solve a lot of problems, but you also have to embed new behavior into the mindset and culture of the company. Otherwise you will hit a wall."

Running Dry

Frito Lay is far from alone. In the face of regional droughts and potential water use restrictions, water management has become a growing concern for water intensive businesses, regardless of their location, says Meliton of Frost and Sullivan.

"States that are experiencing shortages, like Arizona and California, will see a more immediate impact but water management is going to be an issue for all regions," he says.

Fortunately, reducing water use offers a strong business case as the cost of water rises and operating budgets continue to shrink. Halvorsen estimates Frito Lay would have spent $60 million more in 2008 on energy and water use if it hadn't implemented these programs.

"What makes these projects sustainable is that alignment between environmental and business priorities," he says.

For companies that haven't yet experienced the business benefits of water management projects, Meliton predicts the price of water will continue to increase over the next 10 to 15 years to more accurately reflect its true cost, which will drive more businesses to focus on water management.

"These can be capital-intensive projects, which is a drawback," he admits. "But it's a good time to begin assessing water usage so you have a baseline and can identify opportunities for reductions."

Avon Comes Calling for Water Savings

Beauty supply company Avon has tracked water usage across its global operations for more than a decade, and like Frito-Lay, has also seen both environmental and business benefits.