Tuesday, January 31, 2012

Water Risks- the corporate response

Trillium Asset Management is a 900 million dollar fund management company that specializes in environmentally sustainable investments.  While they have an obvious green sensibility, their primary concern is money.  And you can talk all the high-rhetoric that y want, people get really serious when their money is concerned.  Jonas Krons, the fund manager, is the person being quoted.

Peter S. Green, Bloomberg, 10 January 2011 (hat tip nc).

"We're not talking about charity here," says Kron. "These are investors seeking to have the company address the risks in its supply chain." …With the world’s population expected to grow to 10 billion by the end of the century from 7 billion today, and the need for fresh water increasing twice as fast as a larger middle class emerges in the developing world, the competition for scarce water resources is unprecedented.

Siting a battle that Coke got into in Kerela State of India, who shut down their plant for using too much water.  Coke was able to prevail in court, siting an ongoing drought as the source of problems.

Coca-Cola Inc. has been collecting data on water [stress] for years, and its models can predict water stress in some basins through the year 2095… But the Kerala case prompted the company to rethink its water strategy and factor in local farmers, towns, nearby factories and local government leaders. "We lost the public perception battle," says Coke spokeswoman Lisa Manley. Now the company requires every one of its plants to assess its water risk, share that information with the local community and create a water protection plan…

As the Aqueduct maps come on line, Coke hopes its data will help ease the global water crunch. “When companies look at water resource management or community water partnerships most of them relegate that to Corporate Social Responsibility, more of window dressing,” says Rozza. “So when a big brand says I am having a hard time making the business case to my company to think about water, we can say we’ve done it before and here’s how.”

It is interesting, at least to me, that while the environmentalist tend to paint businesses as the bad guys, and sometimes they are, that businesses want to succeed in any future world as well.  So while some (Smucker’s) ignore the problem, others (Coke) plan ahead.  So businesses can also be part of the cure.   A somewhat related example that comes to mind is the crises management skills of the various big box stores, such as Wal-mart, Home Depot, and Lowes.  They do so much of a better job than the government at keeping up with what is where, that NORCOM puts the placement of big box stores on their disaster response maps.

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