Diageo, PepsiCo make the connection on food-water risk

Illustration of farm irrigation
Water risks pose material financial impacts for food and beverage companies.

The food and beverage sector is enormous. It represents 10 percent of global consumer spending and 40 percent of employment worldwide and is slated to grow in the coming decades. Fueling it all is a precious resource we too often take for granted: water. Globally, agriculture consumes over 70 percent of the world’s freshwater.

But according to a recent U.N. report, by 2030, 40 percent of water demand is unlikely to be met, which could bring catastrophic consequences, including food scarcity and other threats to the global economy.     

Gone unaddressed, these issues will pose material financial impacts for food and beverage companies — from supply disruptions to higher operating costs to constraints on growth — not to mention their impact on the environment.

However, these companies can and should help shape a water-secure future for all. Many are already committed to sustainability, seeking new ways to responsibly source products or adopting water stewardship policies. However, sustainable sourcing and water are too often viewed as separate programs within a company, weakening the ability for real progress to be made. It’s time for the link between agriculture and water to be embraced and addressed holistically.

It can happen, as a handful of companies demonstrated this week through our AgWater Challenge. The AgWater Challenge called on companies to acknowledge the connection between food and water systems, and emphasized that in order to achieve sustainable food, they must address embedded water risks in agricultural supply chains.

Representing over $123 billion in annual net revenue, Diageo, General Mills, Hain Celestial Group, Hormel Foods, Kellogg Company, PepsiCo and WhiteWave Foods used the Challenge’s resources to take a hard look at their programs and policies, share their experiences candidly with each other and in many cases, develop new commitments to reduce water impacts associated with agricultural commodities along their supply chains.

PepsiCo, for example, the largest AgWater Steward with over $63 billion in annual net revenue, made some particularly noteworthy new commitments. Despite the relative size of the company and the complicated nature of its massive supply chain, PepsiCo set specific, time-bound sustainable sourcing goals that include key water criteria for its major commodities.

And it’s doing that while also improving agricultural water efficiency. Working towards these targets has the potential to improve the availability and sustainable management of water for people and nature, including in places with high water risks.

Hain Celestial, the smallest company in the inaugural cohort at $2.7 billion in annual net revenue, also set some robust goals. It committed to initiating a water risk assessment that will inform a watershed-by-watershed strategy, which will reduce water use and water pollution risks linked to agriculture. This will include helping farmers in its supply chain to embrace more sustainable practices and reduce water and climate impacts.

These AgWater Stewards are to be commended for bridging the food/water gap through existing commitments and bold new targets. Through their leadership they are calling attention to key issues that affect all companies in their sector.  

Being truly sustainable is hard; the issues are complicated and often overwhelming. Through the challenge, companies are signaling that when it comes to their agriculture supply chains, they can better navigate the water stewardship journey beyond their four walls by working together, sharing learnings and pushing each other further.

If they can do it, so can others in the sector. And they should. To encourage other food and beverage companies to take similar steps, we share "Five Key Ingredients toward Becoming an AgWater Steward."

Promising sustainable sourcing in a supply chain without fully acknowledging water is not enough. Neither is creating a water stewardship plan or engaging in water-related philanthropy that ignores the challenges embedding in agriculture sourcing. It’s time to leverage the full influence of the food and beverage sector to secure fresh water, the precious resource on which all agricultural supply chains hinge.