Financial Times Water Summit — Key Takeaways:
Invest in Water: The Solution of the Commons
Last month, I was fortunate enough to speak at the Financial Times Water Summit in London organized by the Financial Times and the World Water Council. The focus of the Summit was to discuss how we can improve water productivity in organizations, corporations and how to further participate in shaping and influencing the discussion of water scarcity. I am going to share with you some of my key learnings from the conference.
This is what we already know — water is this planet’s most precious resource, and it is running out. The global watershed finds itself under increasing pressure in both water quality and scarcity. These are issues that should be front and center for every governmental environmental policy around the world.
However, it should also be a top priority for corporations as well. Access to appropriate water and access to wastewater treatment is a prerequisite for economic development. Moreover, by having a sound water policy, businesses can make immediate impacts on their brand, credibility, credit rating insurance costs and — most importantly — bottom line. Therefore the consequences of inaction demand that we go beyond a business as usual approach.
Recent estimates indicate that total annual investments of between $500 billion and $1 trillion will be required to solve the problems of universal access to safe drinking water and sanitation. Increased investment in resilient and multi-purpose water infrastructure and more efficient water resources use and management is central to delivering water security globally, as well as bringing about a new class of consumers who no longer have to devote daily resources towards simply acquiring water and food. In order to achieve this, companies must properly manage water’s risks — both in internal operations and through the supply chain — to secure future supply and establish integrity.
A number of global brands (including Unilever, Diageo, Pernod Ricard and Monsanto) have already highlighted the efforts they’ve made as well as the challenges they’ve encountered in addressing water risks and taking action to preserve their business and reputation.
When speaking at the Summit, I discussed a few of Coca-Cola’s achievements on water replenishment and what we’ve learned on that journey. The subject that resonated the most with the audience was on the topic of India, in which we have put a lot of effort into sustaining local water tables and aquifers.
One of the main issues that confronts our industry as well as other global brands and governments is what Mark Carney, Governor of the Bank of England, called the ‘Tragedy of the Horizon.’ Though this statement was issued to the insurance giant Lloyd’s regarding climate change in general, it still defines our water challenges just as conclusively. As Carney said, “The horizon for monetary policy extends out to two to three years. For financial stability it is a bit longer, but typically only to the outer boundaries of the credit cycle — about a decade. In other words, once climate change becomes a defining issue for financial stability, it may already be too late.”
For businesses having to look at annual/quarterly results and for policy makers looking at 4 year election cycles, that makes it hard to get meaningful investment commitment over a longer time period (except when the decision makers want to build their legacy) and build a case for ROI.
I think another well-known economic theory applies to water management as well: the ‘Tragedy of the Commons.’ Water is a shared resource and therefore the interventions that have been made on its behalf — both good and bad — are difficult to accredit. The Coca-Cola Company has tried to overcome this dilemma with the establishment of our Foundation, like others have done such as the Bill & Melinda Gates, the Schmidt Family and the Rockefeller Foundations. We have been able to leverage significant additional investment from that, but there are still issues of scalability as these global issues continue to amount.
The good news is that investors are starting to set the pace on water investment. Some pension funds like the Norwegian Norges Bank (NBIM) are looking for long-term returns at acceptable risk for mining operations, which is where investment in water and energy become interesting. Private equity funds are getting in on the action, too. These institutions are built on the leveraging of undervalued resources to make large gains, and what is more undervalued than water?
Some are looking to secure water rights and drive innovation and technology in the market; some simply try study how water risks will impact their overall investments in mining, food and other industries. Overall, it is clear that investors are looking for increased disclosure, dialogue and research amongst the users of water and providers of solutions; increasingly technology providers not only offer solutions for increased water efficiency and treatment, but also for data collection, information and knowledge management.
What might seem to be an issue for the nations of the world to solve is actually one that businesses not only need to protect, but should want to protect as well, given the economic benefits of such actions. While it requires a long-term vision and a steady commitment to accomplishing a seemingly abstract goal without a defined finish line, the dividends these investments will pay out are significant both financially and in terms of solidifying the integrity of their corporate social responsibility initiatives.
Here is more from my talk at the Summit. These are a few illustrative examples of key water replenishment initiatives and impacts we’ve rolled out at Coca-Cola Company.
There is still much left to do.
The Coca-Cola Water Journey
Learn more about our water journey here.