Water as a Critical Corporate Resource

Executive Summary Water is a unique resource that does not receive enough attention given its essential contribution to human life. Its uniqueness among all resources results from its environmental, socio-political and economic characteristics. Several corporations, in recognizing water‟s uniqueness, have taken actions to manage this resource.” Coca-Cola is a leader among these corporations, and we can learn from this company about suggested actions that others might want to take in the future. The major actions that we must take relate to increased stewardship (corporations taking more responsibility for and pricing of water within operations and products), sustainability (the increased recognition of water in all environmental policies and regulatory actions) and technology and design (allocating resources to the development of new technologies to address our water challenges). “There is not lack of water in the Mojave Desert unless you try to establish a city where no city should be.” [Edward Abbey]

Introduction Water is a unique resource that is essential to human life and one that is often not well understood or protected compared to other natural resources. The uniqueness results from its properties, its importance to our ecosystem, and the way in which we use this resource. It presents challenges for individuals who need drinkable water, for companies that are dependent on water for their core products, and for public policy designers who seek to develop regulatory approaches to solving social justice and property rights disputes. Water has increasingly attracted attention with recently published books, such as “Running Out of Water: The Looming Crisis and Solutions to Conserve Our Most Previous Resources;”1 “Water: The Epic Struggle for Wealth, Power and Civilization;”2 “Unquenchable: America‟s Water Crisis and What to Do About it;”3 “Dry Run: Preventing The Next Urban Water Crisis”4 and “The Big Thirst: The Secret Life and Turbulent Future of Water.”5 The pessimism of „doom and gloom‟ is not balanced by optimistic scenarios, even as engineers explore ways to harness ocean water, an expensive solution that some believe to be unrealistic for mass human consumption.6 One McKinsey report concluded that “there is little indication that left to its own devices, the water sector will come to a sustainable, cost-effective solution to meet the growing water requirements implied by economic and population growth.”7 The purpose of this paper is to explain water‟s uniqueness to human society, especially how one company, Coca-Cola, is approaching the management of this resource and to describe a few major issues in the near future that companies face to access water. Thus, this is a paper that focuses on organizations as they attempt to be environmentally sustainable and competitive when they use a critical corporate resource.

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The Triple Bottom Line The Triple Bottom Line model is one means of explaining water‟s uniqueness and challenges.8 My view of the Triple Bottom Line is that organizations, to be sustainable, are required to balance the three parts of the model. The Triple Bottom Line refers to achieving a balance of corporate outcomes among economic, environmental and social performances. This balance requires difficult choices for allocating scarce capital and for ways in which firms approach the conduct of their businesses. Also, I view the environmental part of the model as paramount, with social and economic outcomes of lesser importance. This view of the model is not popular among those who adhere to the model‟s tenants that all model elements are equally important. Yet, “Simply put, no environmental goods and services, no economy.”9

Water and the Environment The environmental challenges with water are enormous for organizations. Less than 1 percent of the earth‟s water is accessible as fresh water. Close to 97 percent is in the oceans and 3 percent is fresh water, yet most is inaccessible because it is locked up in ice and glaciers. The volume of water will stay constant on earth, about 1.3 x 1013 m3 of water. Water observes a well-known hydrologic cycle of evaporation, condensation, precipitation, and gravitational flow that is ever changing, yet the total volume stays constant (see Attachment 1). The cycle is further defined by reference to green water, which is in vapor form, blue water, which is liquid water wherever it occurs, and various other designations that describe the state of the liquid, such as grey water, or water that contains pollutants, salt water, brackish water, etc. Each year approximately 151,000 quads10 of solar energy distills and moves 5 x 1014m3 of water from the earth‟s surface into the atmosphere, 86 percent from oceans and 14 percent from land.11 This is about 400 times the total amount of fossil energy burned each year in the world.12 All living organisms are composed of cells that contain at least 60 percent of water. Their metabolic activities take place in water. Its physical properties are distinctive, as well. Water molecules have slightly negative and slightly positive poles so they tend to stick together and have the ability to separate other molecules. It acts as a solvent and can store heat and cold. Because it heats and cools more slowly than most substances, it is used in many industrial processes. While the amount of water has not changed since prehistoric times, the number of people who need it has changed dramatically. Estimates are that we will share the same amount of water with 8 billion people by 2025, as compared to less than 7 billion today.13 The growth of standards of living (requiring more water), the increased contamination of water from household and industrial use, climate change and the lack of clarity of who is in charge of water make for further challenges. Water‟s availability is finite in terms of the amount available per unit time in various world regions. Those regions with a water problem, defined as those with yearly water availability per capita less than 1000 m3 per year, are hardest hit by hydrologic cycles and other factors. Other factors include amounts and patterns of rainfall, substrate qualities, termperature, vegetation cover, and runoff. Of the 14 Middle Eastern countries, nine are facing shortages of water. For exmaple, Egypt, the West Bank, Gaza Strip, Yemen, Jordan, Israel, and Saudi Arabai have less than 300m3/year/capita.14

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Water vapor is a powerful greenhouse gas, contributing about two-thirds to the total warming from all greenhouse gases. Yet, a large share of the environmental problems we face today stems from direct or indirect impacts on the water cycle. Humans have caused changes to the Eath‟s surface and thus, impacted water availability and quality. As forests are cleared or land is overgrazed, and plants are unavailable to intercept rainfall, the water cycle pathway is altered from infiltration and groundwater recharge to predominately runoff into streams or rivers. The destruction of wet lands has the same impact as deforestation. These changes can cause flooding and habitat destruction. Table 1 summarizes some of the major sources and impacts of selected pollutants.

Table 1: Sources and Impacts of Selected Pollutants

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The water cycle is being altered as the Earth‟s climate is warming. A warmer climate means more evaporation from land surfaces, plants and water bodies. In effect, global warming is speeding up the hyrdologic cycle.15 If mean annual temperatures rise 3o – 4o C, rainfall in the United States corn belt is projected to decline by approximately 10 percent.16 Predicted global warming could increase world irrigation needs by 26 percent to maintain current production.17 Atmospheric pollution occurs as a result of increased sulfates, carbon and dust. These impacts result from industrial processes. They impact cloud formation and where these aerosols occur and solar radition to Earth‟s surface is reduced, having a cooling effect. Paradoxically, the unique size of the anthropogenic aerosols causes them to suppress rainfall. This impact means the climate cleansing is suppressed. Finally, humans use water for irrigration (70 percent of all water is used for this purpose), industry (20 percent) and human use (10 percent). Figure 1 shows areas of the world experiencing water stress.18 A person whose annual water resources fall below 2000 cubic meters runs the risk of joining 700 million people in 43 countries living under the critical threshold of 1700 cubic meters per person. At this level, water-stressed countries have difficulty meeting water requirements for agriculture, industry, energy, and the environment. By 2005, 3 billion people could be living in water-stressed countries, and 14 countries could move from being water-stressed to being water-scarce (under 1000 cubic meters per person). In sum, humans have profound impacts on the water cycle. These impacts pose critical problems for all of us, and corporations are no exception.

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Figure 1: Water-Stressed Areas in the World19

Water and Socio-Political Challenges Water‟s social-political challenges are immense. The U.S. government created the River and Harbors Act of 1899, also known as the Refuse Act, to protect against possible interference by pollutants with the navigation in the U.S. Waters. This is the oldest environmental statute affecting any environmental medium.20 Thus, water has been a concern in modern society for over a century.

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South Africa, for one, has legally enshrined the right to minimum amounts of water as a human right, even though the government has difficulty delivering the water. The inclusion of water and sanitation within the Millennium Development Goals highlights that all citizens must have access to water.21 CEOs of Suez and Véolia have recognized the universal nature of the right of access to water.22 At the 2007 Global Compact Leaders Summit, the U.N. secretary General and a group of business leaders launched the CEO Water Mandate.23 This mandate was a voluntary action in six areas to ensure a more judicious management of water throughout the world. In 2009, the UN Human Rights Council report included the statement: “A growing number of states are adapting corporate social responsibility policies.”24 These policies will certainly include mandates on water. Denmark, for example, requires companies to report on their corporate social responsibility programs, which will include commentary on use of scarce resources, such as water.25 The Pacific Institute in California has drawn up a list of conflicts in which water has played a part. The list shows that water has not yet been the major reason for war. Yet, recent disputes have shown that 61 of the 203 incidents have taken place in the past ten years and one can predict an increase in water as a source of conflict (see Table 2). In 2010 for example, a violent protest occurred in India. This was a protest about erratic water supply, and eventually a complete cutoff of water in the Kondli area of Mayur Vihar in east Dehli. This situation caused the violent protest and several injuries. Also, Pakistani tribes reported that more than 100 were dead and scores injured following two weeks of tribal fighting in Parachinar in the Kurram region of Pakistan, near the Afghanistan border. The conflict over irrigation water began as the Shalozan Tangi tribe cut off supplies to the Shalozan tribe. Some report that the terrorist group al Qaeda may have been involved; others claimed sectarian violence was to blame as one group is Sunni Muslim and the other Shiite.26 Water is not evenly distributed throughout the world. Nine countries have approximately 60 percent of the fresh water supplies.27 Many countries worry about water security, a term that means every person has access to enough safe water to lead a healthy life, that there is sufficient water available to the population to provide food, and that the vulnerable are protected from the risks of water-related hazards.28 In 2011, 450 million people in twenty-nine countries suffered from water shortages. By 2025, this estimate is that two-thirds of the global population will live in water-stressed areas. In Africa, twenty-five countries will experience water stress, defined as below 1700 cubic meters per capita per year.29 This lack of water impacts sanitation, the lack of which accounts for 80 percent of all diseases and more than 5 million deaths annually.

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Table 2: International Water Disputes30

Finally, water is not owned, yet laws provide the right to use water. This usufructuring (right to use) legal status means that the legal claims on water are much weaker than claims normally associated with land. This outcome is critical in disputes such as drilling, especially the modern issues surrounding fracking.31 In summary, the social political issues with water span the globe, related to wealth, health and core human existence.

Rivers/ Lakes

Countries Involved

Alluvial Deposits

Floods Irrigation & Dams

Allocation; Diversion

Salinity Pollution

Intl. Quotas

Americas Colorado, Rio Grande

US, Mexico X X X

Great Lakes Canada, US X Lauca Bolivia, Chile X X Paran Argentina, Brazil X X Cenepa Ecuador, Peru X Asia Brahmaputra, Gangles, Farakka

Bangladesh, India, Nepal

X X X X

Mekong Cambodia, Laos, Thailand, Vietnam

X X

Salween Tibet, China (Yunan), Burma

X X

Middle East Euphrates, Tigris

Iraq, Syria, Turkey X X

West Bank Aquifer, Jordan Litani, Yarmuk

Israel, Jordan, Lebanon, Syria

X

Africa Nile Egypt, Ethiopia,

Sudan X X X X X

Lake Chad Nigeria, Chad X Okavango Namibia, Angola,

Botswana X

Europe Danube Hungary, Slovak

Republic X

Elbe Germany, Czech Republic

X

Meuse, Escaut

Belgium, Netherlands

X

Szamos (Somes)

Hungary, Romania

X

Tagus Spain, Portugal X

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Water as an Economic Good Water is unique as an economic good especially because of its mobility. It is a previously unclaimed resource that tends to wander from place to place (a “fugitive resource”). The fact that water is left over following its primary use has important economic, legal, and social implications. Keeping track of water is difficult, and often its movement causes trans-boundary and upstream-downstream conflicts, some of which were catalogued in the previous section. Also, if nobody seems to own water, or if there are no sanctions against taking it, then the users will take as much as they please and pollute it at their leisure – a classic tragedy of the commons.32 Economists also suggest that water pollution, in particular, is created because of externalities, that is, polluters are not charged for the pollution they produce. Water is variable in terms of its quality, quantity, time and space. Regional variations result from temperature and seasonal conditions. For example, rainfall is highly variable within space and time. Thus, water agencies are constantly trying to plan for steady and increasing demands in the face of this variability and to find ways to price water in an equitable manner. Water is a bulk commodity that is heavy relative to its unit price. It is heavy where one cubic meter equals about a metric ton. The transportation infrastructure for water (such as pipes, reservoirs, dams, etc.) is large and bulky, as well. The ratio of the amount that has to be invested to provide one dollar of revenue of water is much higher than the amount invested for one dollar‟s worth of electricity.33 A company‟s risk of providing water infrastructure leads to natural monopolies. This organizational outcome arises where the largest supplier in an industry, often the first supplier in a market, has a cost advantage over other competitors. Pricing is unlike other minerals and natural resources. Payments typically have no royalty payments by users to the governments for extracting the resource. Pricing does not seem to be related to scarcity, anticipated replacement costs, whether or not the local environment is water-rich or how much is used in a day, or other usual factors in pricing goods. Also, the prices of water vary widely throughout the world, sometimes without obvious reasons for the variability. Assume that water to a consumer is supplied by a municipality and is 100 gallons based on roughly 4000 gallons a month‟s usage, in 2009 US Dollars. The price of this amount varies as much as $3.50 across the world (see Table 3). Copenhagen‟s fee reflects capital operating costs and purging pollutants from runoff. By contrast, Ireland‟s property taxes cover water delivery. San Diego‟s water is among the costliest in the U.S. Ninety percent of it is pumped from northern California and the Colorado River. Dakar, in Senegal, keeps prices relatively high because the tariff provides enough revenue that the water utility can pipe water to all citizens, even those in the slum. By contrast, New Delhi‟s water system has low prices yet is consistently broken so citizens tend to use highly priced private vendors.34 The pricing is difficult also because of water‟s variability. For example, on a river, the water available to the ultimate users is often contaminated with industrial and agricultural wastes from upstream users. This pollution means that the same amount of water is less valuable to the downstream users since they will have to pay to clean it up before using it. Yet, because water is so

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essential, one research study showed that in the developing world, the willingness to pay for improved water supply was in the range of 3-5 percent of household income.35

Table 3: Cost of Water36

City Price/100 gallons based on roughly 4000 gallons/month usage, $US 2009 Berlin, Germany $2.52 Cairo, Egypt .03 Calcutta, India .00 Caracus, Venezuela .08 Copenhagen, Denmark 3.43 Dakar, Senegal .28 Hiroshima, Japan .69 Memphis, TN .30 San Diego, USA .65 Singapore, Singapore .61

Demand for water varies based on the season, the day of the week, time of day, and price changes. Industrial uses take about 60 percent of water in rich countries and 10 percent for the rest of the world. The difference in domestic use is smaller – 11 percent and 18 percent respectively. Humans have a basic need of two liters in food and drink per day. Yet, while Americans use about 100 U.S. gallons of water at home each day (about 378.54 liters), millions of the world‟s poorest subsist on fewer than 19.1 liters per day. Forty-six percent of people on earth do not have water piped to their homes; so women in developing countries walk an average of 3.7 miles to get water. One study shows that in 15 years 1.8 billion people will live in regions of severe water scarcity.37 Industry generates about 70 times as much value from a liter of water as agriculture. The ratio of water use to GDP has declined dramatically in many rich and middle-income countries in recent decades, suggesting that industry can use water much more productively if it tries. Agricultural uses of water are mostly resource intensive. For example, California growers consume 80 percent of the state‟s water yet contribute only 2 percent to the gross state product. Federal farm policy and our increasing demands for tasty food push these farmers to grow more water intensive crops.38 McKinsey and Co., et al. produced a report entitled “Charting our water future: Economic frameworks to inform decision making.”39 They found that under an average economic growth scenario and if no efficiency gains were assumed, global water requirements would grow from 4500 billion M3 to 6900 billion M3 by 2030. This amount is 40 percent above current accessible, reliable supply. At local levels, some of these shortages will be much more severe. Figure 2 shows the global aggregated gap from the study. The drivers of this resource challenge are fundamentally tied to economic growth and development. As indicated in other parts of this paper, the water challenge is related to food provision and trade.40 The report concludes that at current rates of productivity improvements, only 20 percent of the supply-demand gap will be addressed by 2030.41 If these trends continue, we will need “additional annual investment in upstream water

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infrastructure of up to $200 billion over and above current levels, more than four times current expenditures.”42

Figure 2:

[the passage next to the “•” reads: “relevant supply quality is much lower than[sic] than the absolute renewable water available in nature.”]

The Millennium Ecosystem Assessment was one of the most comprehensive studies of the world‟s econsystems.43 The Millennium Ecosystem Assessment assessed the consequences of ecosystem change for human well-being. Their findings provide a state-of-the-art scientific appraisal of the condition and trends in the world‟s ecosystems and the services they provide, as well as the scientific basis for action to conserve and use them sustainably. The section on water and wetlands was particularly useful to summarize the environmental, social and economic challenges we are facing as a world.44 Table 4 shows a few of the more salient points45:

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Table 4: Summary from the Millennium Ecosystem Assessment

More than 50% of specific types of wetlands in parts of North America, Europe, Australia, and New Zealand were destroyed during the twentieth century, and many others in many parts of the world degraded.

Wetlands deliver a wide range of ecosystem services that contribute to human well-being, such as fish and fiber, water supply, water purification, climate regulation, flood regulation, coastal protection, recreational opportunities, and, increasingly, tourism. When both the marketed and nonmarketed economic benefits of wetlands are included, the total economic value of unconverted wetlands is often greater than that of converted wetlands.

The degradation and loss of wetlands is more rapid than that of other ecosystems. Similarly, the status of both freshwater and coastal wetland species is deteriorating faster than those of other ecosystems.

The primary direct drivers of degradation and loss include infrastructure development, land conversion, water withdrawal, eutrophication and pollution, overharvesting and overexploitation, and the introduction of invasive alien species. The primary indirect drivers of degradation and loss of inland and coastal wetlands have been population growth and increasing economic development.

Global climate change is expected to exacerbate the loss and degradation of many wetlands and the loss or decline of their species and to increase the incidence of vector-borne and waterborne diseases in many regions.

The projected continued loss and degradation of wetlands will reduce the capacity of wetlands to mitigate impacts and result in further reduction in human well-being (including an increase in the prevalence of disease), especially for poorer people in lower-income countries, where technological solutions are not as readily available. At the same time, demand will increase for many of these services (such as denitrification and flood and storm protection).

Physical and economic water scarcity and limited or reduced access to water are major challenges facing society and are key factors limiting economic development in many countries. However, many water resource developments undertaken to increase access to water have not given adequate consideration to harmful trade-offs with other services provided by wetlands.

Cross-sectoral and ecosystem-based approaches to wetland management.such as river (or lake or aquifer) basin-scale management, and integrated coastal zone management.that consider the trade-offs between different wetland ecosystem services are more likely to ensure sustainable development than many existing sectoral approaches and are critical in designing actions in support of the Millennium Development Goals.

Many of the responses focused on wetlands and water resources will not be sustainable or sufficient unless other indirect and direct drivers of change are addressed. These drivers include actions to eliminate production subsidies, sustainably intensify agriculture, slow climate change, slow nutrient loading, correct market failures, encourage stakeholder participation, and increase transparency and accountability of government and private-sector decision-making.

Major policy decisions in the next decades will have to address trade-offs among current uses of wetland resources and between current and future uses. Particularly important trade-offs involve those between agricultural production and water quality, land use and biodiversity, water use and aquatic biodiversity, and current water use for irrigation and future agricultural production.

The adverse effects of climate change, such as sea level rise, coral bleaching, and changes in hydrology and in the temperature of water bodies, will lead to a reduction in the services provided by wetlands. Removing the existing pressures on wetlands and improving their resiliency is the most effective method of coping with the adverse effects of climate change. Conserving, maintaining, or rehabilitating wetland ecosystems can be a viable element to an overall climate change mitigation strategy.

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In sum, the economic value and property rights around water are difficult for business people. How to balance supply and demand conditions are often unclear with pricing mechanisms equally difficult to discern. The economic future looks more challenging.

Corporate Responses Many of the companies at the forefront of water savings and management campaigns are aware of their vulnerability to the growing scarcity of water and to social pressures that they are part of the problem. Despite the lack of clarity of economic value, they are acutely aware of water‟s essential nature – there is no substitute. Many companies are being transparent about this concern. One study commented that their

…report provides some basis for encouragement. It finds evidence that most companies are providing basic disclosure on overall water use and water scarcity risks, with mining and beverage companies in the forefront. We also saw various examples of strong governance, water accounting, and reduction strategies.46

Yet the same report found that leading companies in water-intensive industries are inconsistent and have weak management and disclosure of water-related risks and opportunities. Also, less than half the electric-power companies surveyed even provided data on total water withdrawals.47 Several organizations have taken steps to address water challenges. For example, Unilever supports the Medusa project, formulated in Brazil in 2003, which shows results of cutting its total water use by 8 percent and reducing the load per metric ton of production by 15 percent.48 Nestlé wants to be the most efficient water user among food manufacturers and has cut water withdrawals by a third since 2000 even though the volume of the foods and drinks it makes has increased by 60 percent.49 Danone has an incentive system for senior managers that integrates environmental and social criteria – including water objectives – into compensation.50 Pinnacle West / APS, an Arizona-based utility, is using treated sewage to cool its electric power plants in Phoenix, preserving enough potable water for approximately 75,000 homes.51 Cisco, which supplies internet routers, switches and the like, uses recycled water in its gardens and fountains in California and has installed waterless urinals and low-flow showers in its buildings.52 The involvement of corporations in water matters has not been smooth. A recent issue with bottled water illustrates these challenges. The U.S. is the largest consumer of bottled water (approximately 28 gallons per person in 2008). Only 20 percent of the plastic bottles, however, containing water is recycled. A significant amount of the bottled water comes from international sources, while 25-40 percent comes from a public tap. Environmentalists were after Nestlé because of the use of springs to acquire scarce water, the energy they use to transport water, and the use of billions of plastic bottles.53 Interestingly, the consumption of bottled water has declined in the U.S. starting in 2008.54 Nestlé has about 38 percent of the U.S. bottled water market excluding Wal-Mart and convenience stores. Therefore, the company is very concerned about the reaction from environmentalists.55 The food, beverage and tobacco sector have long recognized the importance of freshwater to their business success. The sector has pioneered several water footprint methodologies and worked to advance methods for the Global Reporting Initiative,56 UN CEO Mandate,57 Water Footprint

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Network,58 WBCSD Global Water Tool59 and UN FAO Aquastat,60 among others. Table 5 summarizes some of these initiatives that are most utilized by corporations.

Table 5: Impact Assessments Used by Corporations

Assessment Assessment Areas Comments

CEO Water Mandate (within UN Global Compact)61

Direct Operations Supply chain and watershed management Collective Action Policy Community Engagement Transparency

Launched July 2007

Water Footprint, Neutrality and Efficiency (WAFNE) Umbrella Project62

Sponsors and Connections: UNEP Global Environmental Management Initiative (GEMI) “Connecting the Drops” Corporate Water Accounting The CEO Water Mandate Pacific Institute Institute for Environmental Research and Education ISO 14046 WFN Water Footprint LCA WBCSD Global Water

Water Disclosure Project (Carbon Disclosure Project)63

Addresses two questions: How do we split a finite amount of water among a variable and growing number of users? The impacts on water resources from population growth, urbanization and rising per capita consumption are already being felt, albeit unevenly across different sectors and geographies.

How do we manage water in response to climate change, where changing patterns of precipitation are affecting the supply of this critical resource?

The 2011 water questionnaire will again be sent to a subset of the world‟s largest 500 companies in the FTSE Global Equity Index Series, focusing on sectors that are water-intensive or particularly exposed to water-related risk. The questionnaire will also be sent to a sample of the largest publicly listed water-intensive Australian and South African companies.

Global Water Tool64

WATER RISKS: How many of your sites are in extremely water-scarce areas? Which sites are at greatest risk? How will that look in the future? How many of your employees live in countries that lack access to improved water and sanitation? How many of your suppliers are in water scarce areas now? How many will be in 2025 and 2050?

WBCSD

Tool for companies and organizations to map their water use and assess risks relative to their global operations and supply chains.

Fair Water Initiative65

Process of Stewardship Methodologies Concepts and Principles Intersection of all three: Better Practice Fair Water

WBCSD: Started June 2008

The Water The unique TWI process is to: The Water Initiative (TWI) is a business that co-creates with

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Assessment Assessment Areas Comments

Initiative66 understand the local unclean water conditions (diagnose); co-create affordable, convenient, effective, and trustworthy clean water solutions at the POD (solve); and then distributed these solutions through our local micro-entrepreneur network (sell).

our targeted communities point-of-drinking (POD) water solutions and scales these solutions through micro-entrepreneurs in our targeted communities, home developers and government entities.

Beverage Industry Environmental Roundtable (BIER)67

World Class Water Stewardship in the Beverage Industry: five shared principles: Conservation - Water efficiency is fundamental to operational excellence; Watershed - Water is a limited and shared resource; Community - Community involvement is essential; Partnerships - Partnerships lead to more effective water management; Supply Chain - Supply chain engagement is a critical element of water stewardship. The Roundtable has utilized the above categories as context for the following core Water Stewardship activities: Benchmarking data from over 1,100 beverage facilities, Best Practice Sharing, and Water Footprinting.

CERES The 2010 Ceres report provides ranking of water disclosure practices of 100 publicly-traded companies across eight sectors; highlights key water risks facing these industries, documents gaps as well as best practices in water risk reporting, and lays out a set of recommendations for companies and investors.

Water Initiatives: working with companies, investors, policymakers, environmental organizations and other stakeholders to improve water management and increase reporting on water issues that pose risks both businesses, communities and the environment. An integral part of our work is improving how capital market players – including investors, companies, utilities, credit rating agencies and regulators such as the SEC – are factoring these risks into their own governance systems and strategies: Benchmarking and Education; Defining 21st Century Water Management; Stakeholder Engagement; Investor Action; Policy and Regulatory Action.

Alliance for Water Stewardship68

The Alliance aims to establish a global water stewardship program that will recognize and reward responsible water managers and users by creating opportunities for enhanced community standing and competitive advantage.

The sector engages in a broad range of projects that focus on stakeholder engagement, reducing direct water use through innovation and use of technology, and introducing novel ideas to enable customers and communities to reduce their water use. Thus, water management is particularly advanced in this sector. For the CDP Water Disclosure 2010 Global Report survey, all respondents have formulated a water strategy or management plan, and all have set either an efficient target or an absolute reduction target and undertaking a series of water-related actions.69 Respondents reported significant water use and cost savings and continue to strive for more operational and financial savings. 67 percent of responding companies report that responsibility for water-related issues lies at the Board or Executive Committee level, while 8 percent have developed specific water policies, strategies, and plans. The next section of this paper will present Coca Cola‟s actions and management of this key resource as a way to illustrate corporate responses to water challenges within the food, beverage and tobacco sector.

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Coca-Cola Coca-Cola, one of the largest companies in the world, has been a leader in water management. It owns four of the top five soft drink brands (Coca-Cola, Diet Coke, Fanta, Sprite), and it makes or licenses more than 3000 drinks tied to over 500 brands, providing 1.7 billion servings per day in over 200 nations. The brand is worth over $67 billion, the most valued brand in the world. Worldwide, it provides work for over 139,600 employees. Revenues in 2010 were $35,119,000,000, an increase of over $4 billion from 2009, 78 percent of which came from markets other than North America.70 Coca-Cola has lots of reasons to worry about water as a core resource for its company. 71 It produces all of its product in local facilities relying on local water sources. This reliance has caused some challenges. For example, Coca-Cola has been attacked in India for its dependence on groundwater and the effects on the water table. It takes Coca-Cola two liters of groundwater to produce a liter of bottled water. Coca-Cola joined a consortium of companies that in 2008 formed the 2030 Water Resource Group, a group that strives to deal with the issue of water scarcity. They commissioned a report on the economics of a range of solutions.72 The report concluded:

Constraints on a valuable resource should draw new investment and prompt policies to increase productivity of demand and augment supply. However, for water, arguably one of the most constrained and valuable resources we have, this does not seem to be happening. Calls for action multiply and yet an abundance of evidence shows that the situation is getting worse.73

“Live Positively” is Coca-Cola‟s brand for its sustainability program that focuses on seven core areas: beverage benefits; active healthy living; community; energy efficiency and climate protection; sustainable packaging; water stewardship; and workplace. I am focusing on water stewardship, which Coca-Cola defines as “work to safely return to nature and communities an amount of water equivalent to what we use in our beverages and their production.”74 The company set four major goals for water stewardship:

Improve our water efficiency by 20 percent by 2012, compared with a 2004 baseline.

Return to the environment, at a level that supports aquatic life, the water we use in Coca-Cola system operations through comprehensive wastewater treatment by the end of 2010.

Assess the vulnerability of the quality and quantity of water sources for each of our bottling plants and implement a source water protection plan by 2013.

Replenish to nature and communities an amount of water equivalent to what is used in our finished beverages by 2020.75

Water is the main ingredient in Coca Cola products and an important part of their manufacturing processes. The company has over 900 bottling plants that serve local markets and source the water locally. The Company used 309 billion liters of water to manufacture 130 billion liters of product in 2009 – a large amount, yet a 13 percent reduction in water use since 2004. Compared to other ingredients, water is a fraction of the total cost of their products. Yet, the availability is critical. For this reason, Coca Cola‟s goal is to drive to zero water discharge in their operations, where they

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would recycle and reuse all processed water again and again so no water leaves the plant. As a global company, their desire is to continue to produce locally for most of their products. To improve their water efficiency, Coca-Cola teamed with the World Wildlife Fund (WWF). Brian Kelley, Chief Supply Officer for Coca-Cola describes the partnerships with WWF as follows:

We are very proud of our partnerships and have learned a great deal from working with organizations such as WWF, the Nature Conservancy and local conservation groups. We believe that to succeed in the 21st century, businesses must collaborate in new ways with governments, NGOs and civil society. The challenges facing our planet, like climate change and water stress, are too urgent and complex for governments alone, businesses alone and NGOs alone to solve. But working together, we can create a multiplier effect that helps address the issues of our planet.76

He continued with:

Water has become a central theme for discussions at Davos77 including the work of the Water Resources Group, which is now being staffed at the World Bank and actively engaged in water policy dialogue at the national level in several countries. We think this kind of collaboration is vital to addressing the water resource management challenges we all face.78

These partnerships are complemented with several working groups as mentioned in this paper. The company is very active within these groups. For example, they are active participants within the CEO Water Mandate project working on such issues as responsible business engagement, water policy and management, water and human rights, and corporate water disclosure. Coca-Cola listed water as a risk in their sustainability reporting since 2004. This recognition highlights the link between their “Live Positively” commitments and their standard business practices. They added climate change as a risk factor in a recent Securities and Exchange Commission Form 10-K report. Coca-Cola has an increasing concern that the effects of climate change could have long-term adverse impacts on their business and results of operations.79 One of the most important initiatives is the development of a methodology to measure a company‟s water footprint. This is measurement of water used throughout a company‟s operations and supply chain. Coca-Cola partners with the Water Footprint Network, the Nature Conservancy, and local conservancy groups to accomplish this work. For example, in 2010 the company worked with The Nature Conservancy(NC)80 to develop a report on three water footprint assessments, including the 500 ml PET bottle of Coca-Cola produced in their bottling plant in the Netherlands.81 Another example was their analysis of water use across the beet sugar supply chain in Europe. The study included an analysis of three types of water: Green – water consumed from rainwater stored in the soil as moisture. Blue – water consumed from surface and ground water (rivers, lakes and aquifers)

Grey – amount of water required to dilute pollution to meet local water quality standards (for example, from excess nutrients).

August 7, 2011 Daniel S. Fogel 17

These analyses yielded some telling results. If one were to analyze the total water footprint of a PET bottle, 35 liters of water are used for a 500 ml PET bottle of Coca-Cola produced. The analysis is summarized in Figure 3. Talking about this work, Kelley said:

Working with the Water Footprint Network, we have developed a methodology to understand our direct and indirect (supply chain) water use. This has helped us understand where in our value chain we use the most water and it helps us target our stewardship initiatives. Our initial water footprint studies show, for example, that the vast majority of our water use is in growing agricultural commodities, like sugar, that we rely on to produce our beverages. Armed with this knowledge, we have begun to work on sustainable sugarcane production.82

Figure 3: Total Water Footprint: 35 Liters/ 500 ml PET Bottle of Coca-Cola Produced83

Coca-Cola has a goal to return all the water used in their manufacturing processes to the environment at a level that supports aquatic life. In 2009, the company‟s operating system released 179 billion liters of treated wastewater back to the environment and 89 percent of the system facilities (representing about 95 percent of product volume) were deemed compliant with their wastewater treatment and discharge standards. Those standards involved twenty quality parameters. The company implemented system-wide sustainability standards. These standards include the evaluation of the sustainability of water resources used to produce their beverages and used by the surrounding communities. The standard also requires manufacturing operations to identify associated water risks at the plant level and mitigation methods to overcome these risks. Also, through the 2009 Supplier Sustainability Summit, it became clear that Coca-Cola‟s suppliers were

August 7, 2011 Daniel S. Fogel 18

“just as concerned about sustainability. Working with our top suppliers, we identified opportunities for collaborations on environmental sustainability initiatives. Our suppliers have responded favorably.” 84 Their work does not stop with their company operations. The company has numerous water partnership projects in over 70 countries, in addition to their major NGO partnerships. For example, in Niger, the Coca-Cola Africa Foundation and USAID partnered on a project to provide water access and sanitation to 14,000 people in Zinder. They spent $24 million in funding support with the WWF to help conserve freshwater basins. Several lessons come from the work of companies such as Coca-Cola. The value of product water footprinting is its ability to disaggregate water use by component, e.g., direct and indirect use; green, blue, grey, etc. This separation allows one to assess water usage impact in the context of local watersheds where water is being sourced. The largest portion of the product water footprint comes from the field, not the factory. This outcome means that Coca-Cola, for example, will focus on its supply chain to gain major improvements in the use of water. This supply chain work will involve major education and investment to ensure that suppliers can meet a customer‟s demands. The results of a water footprint analysis can help any company direct its efforts to encourage improved water stewardship in the supply chain. For example, the sugar beet study indicated that some sugar processing plans have large grey water footprints due to low levels of treatment, highlighting a potential area for future engagement with suppliers. The assessment can help identify the need for more sustainable agricultural practices related to water use by providing information on where the most water is used and where there may be the greatest potential for adverse impacts on water producers. The Nature Conservancy (NC) and many other NGOs are committed to building solutions to the world‟s water problems. NC, for example, sees tremendous opportunities to improve the way water is used and managed. Also, the NC determined that corporations can provide leadership in implementing sustainable water practices. These improved water practices make good sense for businesses and can bring substantial benefits to freshwater ecosystems. This type of partnership is relatively new for most NGOs, given that they historically had an adversarial role with corporations.85 The Alliance for Water Stewardship is probably one of the most active organizations attempting to develop a certification process based on international standards developed though (1) an equitable, transparent science-based, multi-stakeholder process; (2) verification to determine whether these standards have been met; (3) a global brand that allows managers, users, and organizations to demonstrate their compliance with a support for water stewardship; and (4) training and education to promote achievement of water stewardship.86 Given the environmental, socio-political and economic pressures related to water use and the evolving corporate actions, what should we do in the future to manage this important resource? This question is addressed in the next section.

August 7, 2011 Daniel S. Fogel 19

Water and Companies Going Forward I believe we are in a serious need of reform to handle our increasing demands for water. Also, I believe that we need to find ways to have industry take action to help solve the problems we currently face and will be facing. Industrial organizations will be the largest contributor to water productivity. Firms can reallocate resources more quickly than governments. They have more impact than individual citizens and can create impacts on supply chains beyond their corporate borders. The challenge is that they use enormous amounts of water and have resources to keep doing so. For example, Nestlé, Danone, Unilever, Coca-Cola and AMBEV consume enough water to meet the daily domestic needs of every person on Earth. I advocate three areas of corporate action: stewardship as a corporate responsibility, observing principles of sustainability and using science and design as means of developing new technologies. Stewardship To make a dramatic impact on our society and to ensure our water future, we must redefine the role of water in our society and change the narrative we use to talk about our challenges. We must recognize that water is tied to choices we make about product design, corporate locations and living communities, land use,87 population, farm policy, energy policy – all of which will profoundly impact our water supply. We have to treat water as a valuable, exhaustible resource. Water has no substitute; therefore, we should price water in a way that reflects its importance, uniqueness and finite limits.88 To overcome the tragedy of the commons, we probably should consider more privatization. Is privatization of water acquisition and delivery a good solution to conserving and using water? A large privatization effort occurred in Coca-Cola‟s backyard in Atlanta. The city was convinced that privatization would save money and contracted United Water, a subsidiary of Suez Environment (based in France) to run the Atlanta water system. In 2003, after four years, the contract was dissolved in the face of extremely poor service.89 One lesson learned from this experiment and others is for privatization to be successful, governments must regulate water as a social good, ensuring access to all…Privatization can benefit a city…where a private company administers the water delivery system but does not own the water supplies.”90 Finally most analysts conclude: “in the United States there is no reason to surrender the ownership of a municipal water supply to a private corporation.”91 Coca-Cola stated, “we already see privatization in many markets and that trend will likely continue. It costs money to develop and maintain the infrastructure to ensure safe water and sanitation for communities. This has a cost. Either government will subsidize the cost or there will likely be some business model that enables access.”92 Coca-Cola claims that it uses less than 1 percent of the municipal water supplies, and therefore, they are not likely to use joint ventures with municipalities as a means of working in the future.93 Yet, partnerships are critical. We learned from the Coca-Cola example that partnerships can help focus a company and bring new competencies to a problem that might otherwise be prohibitively expensive.

Furthermore, collective action is critical, and we must find ways to support many NGOs, government agencies and corporations that have made for successful advances in water

August 7, 2011 Daniel S. Fogel 20

management. Also, several solutions come from organizations such as the Land Trust Alliance, which promotes voluntary private land conservation to benefit communities and natural systems. They claim to be the national convener, strategist and representative of more than 1,700 land trusts across America. Their mission is simple: To save the places people love by strengthening land conservation across America. The Land Trust Alliance believes that if we focus our combined efforts to increase the pace, quality and permanence of conservation, we can turn the tide and ultimately change the way the land development takes place in America.94 This land conservation has large impacts on water.

Legislation is important. We need incentives to use water as a finite commodity. This regulation could include taxes on surface water and ground water, clarification of who has rights over water and an important outcome: water access as a human right. Everyone should be guaranteed access. If this access is designated in every country, private suppliers will play a major role in both supplying water and ensuring its quality. Nations will elevate water resources on national agendas. We must enforce standards that are transparent, such as labeling on products or requiring companies to report their water footprints. Finally, similar to the ways we solved acid rain with cap and trade schemes, we should look at water with a similar legislative eye.95 Sustainability Jared Diamond describes how flourishing societies have precipitously collapsed. He examined spatially and temporally different cultures such as Easter Island in the South Pacific, Norse settlements in Scandinavia and Anasazi in North America.96 He found that as these societies grew and flourished, they mismanaged natural resources, eventually stretching the resources‟ carrying capacity to a breaking point. We are in a similar pattern in our contemporary society. Almost half of all irrigation water is lost due to inefficient flood techniques without ever reaching the crops‟ roots. Micro-irrigation systems such as drip and micro-sprinklers and field design for efficient irrigation can have dramatic impacts on efficient use of water for agriculture. Nations need to adopt clear principles for water. These could be principles for environmental sustainability such as (1) ecosystems dispose of waste and replenish nutrients by recycling all elements, (2) the size of the consumer population is maintained so that overgrazing or other overuse does not occur; (3) ecosystems show resilience during a disturbance, assuming humans do not destroy natural processes; and (4) ecosystems depend on biodiversity.97 Science and Design Technology development must be part of the solution. I advocate that we invest at least to the level we are investing in renewable energy. We probably should focus on a few high impact sectors such as agriculture, fishing and several industrial industries. This focus means tax incentives and several government programs to kick start this development.

Paradoxically we may solve water problems in developed nations by focusing on developing nations – solving the “bottom of the pyramid” issues as a means of inventing new technologies.98 Also, we can learn a great deal in the U.S. from other nations. Singapore‟s NEWater program recycled its sewer water to produce drinking water and water for high-tech industrial uses. With available recycling technology, there are many ways to greatly increase water efficiency through water reuse.99

August 7, 2011 Daniel S. Fogel 21

Australia‟s Murray-Darling River Basin should be a case study for anyone who touches water. In brief, Australia is the second driest continent in the world. The Murray-Darling River basin is responsible for 40 percent of the country‟s agricultural income. Yet, this basin has been in a drought since 2001. The Australians developed a trading system so that farmers could trade their water rights.100 The Australian government instituted this system in the 1980s. They allocated a certain amount of water that varies according to the water sources and the size and location of land. The Australians extended this system to all business sectors in the 1990s. The results were that farmers switched their crops to less thirsty crops and used more efficient farming techniques. We benefited from this switch by now importing large amounts of wine from the less thirsty grape crops (400,000 gallons of water/acre) and from rice (1.3 million gallons of water/acre). Also, the Australian farmers switch from a thirsty cotton crop (uses 800,000 gallons of water/acre) to fruits (530,000 gallons of water/acre).101 The rise in eutrophic and hypoxic events has been attributed to the rapid increase in intensive agricultural practices, industrial activities, and population growth, which together have increased nitrogen and phosphorus flows in the environment. The Millennium Ecosystem Assessment (MA) found that human activities have resulted in the near doubling of nitrogen and tripling of phosphorus flows to the environment when compared to natural values.102 (See Attachment 2 for an explanation of the Eutrophication process).

Before nutrients (nitrogen in particular) are delivered to coastal ecosystems, they pass through a variety of terrestrial and freshwater ecosystems, causing other environmental problems such as freshwater quality impairments, acid rain, the formation of greenhouse gases, shifts in community food webs, and a loss of biodiversity. Once nutrients reach coastal systems, they can trigger a number of responses within the ecosystem. The initial impacts of nutrient increases are the excessive growth of phytoplankton, microalgae (e.g., epiphytes and microphytes), and macroalgae (i.e., seaweed). These, in turn, can lead to other impacts such as: loss of subaquatic vegetation, change in species composition, coral reef damage, low dissolved oxygen, and the formation of dead zones (oxygen-depleted waters) that can lead to ecosystem collapse. Solutions range from further education, economic incentives, regulation and linking eutrophication and hypoxia goals with other environmental goals, such as the use of energy.103

We should strive for higher standards and more efficient use of water. For example, St. Petersburg Florida became the first city in the United States to use recycled water for landscape irrigation. Why don‟t more cities follow this example? Desalination might not be available in the short term but we might want to explore its use in various settings to increase our water supply. 3 million people do not get their water from the sea or from brackish groundwater that is too salty to drink. Three technologies promise to reduce the energy requirements of desalination by up to 30 percent: forward osmosis, carbon nanotubes and biomimetrics. They are viable and are in listed in order of when they will be on the market. Forward osmosis uses water molecules as they migrate by natural osmosis, without energy input, into an even more concentrated “draw solution” whose special salt is then evaporated away by low-grade heat. Carbon nanotubes use an electric charge at the nanotube, where the mouth repels positively charged salt ions. The uncharged water molecules slip through with little friction, reducing pumping pressure. The third technology is biomimetics. Water molecules pass through

August 7, 2011 Daniel S. Fogel 22

channels of aquaporins, proteins that efficiently conduct water in and out of living cells. A positive charge near each channel‟s center repels salt.104 One prediction is that within the next few years we may add as much as 13 billion gallons a day to our water supply as a result of desalination. These are just some of the examples of technologies that will help greatly to increase our water productivity and to increase the quality and supply of this precious resource. In summary, our collective futures in terms of quality of life and possible survival, depends on how we manage water. I have focused on corporate responses because I believe the entities can act quickly and have high impact. Ultimately, we must learn from nature:

“the frog does not drink up the pond in which he lives.” 105

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Attachment 1: The Water Cycle106

August 7, 2011 Daniel S. Fogel 24

Attachment 2: The Eutrophication Process107

ENDNOTES 1 P. Rogers and S. Leal (2010). Running out of water: The looming crisis and solutions to conserve our most previous resources. NY, NY: Palgrave MacMillan. 2 S. Solomon (2010). Water: The epic struggle for wealth, power, and civilization. NY, NY: Harper Perennial. 3 R. Glennon (2009). Unquenchable: America‟s water crisis and what to do about it. Washington, DC: Island Press. 4 J. Yudelson (2010). Dry Run: Preventing the next urban water crisis. Gabriola Island, BC: Canada. 5 C. Fishman (2011). The big thirst: The secret life and turbulent future of water. NY, NY: Free Press. 6 M. Schirber (2007). Why Desalination Doesn't Work (Yet). http://africascience.blogspot.com/2007/08/why-desalination-doesnt-work-yet.html Accessed June 20, 2011. 7 The Barilla Group, The Coca-Cola Company, The International Finance Corporation, McKinsey & Company, Nestlé S.A., New Holland Agriculture, SABMiller plc, Standard Chartered Bank, and Syngenta AG. (2009). Charting our water: Economic frameworks to inform our decision making. http://www.mckinsey.com/App_Media/Reports/Water/Charting_Our_Water_Future_Exec%20Summary_001.pdf Accessed June 15, 2011. 8 A. W. Savitz (2006). The triple bottom line. San Francisco, CA: Jossey Bass. 9 R. Wright and D. Boorse (2011). Environmental science: Toward a sustainable future. 11th Edition. Upper Saddle River, NJ: Pearson Education Inc.: 24. 10 1 quad = 1015 BTU 11 S. Postel (1985). Water: rethinking management in an age of scarcity. Interciencia 10: 290-298; 322. 12 D. Pimentel, J. Houser, E. Preiss, O. White, H. Fang, L. Mesnick, T. Barsky, S. Tariche, J. Schreck, and S. Alpert. (1997). Water resources: Agriculture, the environment and society. Bioscience 47(2): 97-106. 13 United National Report (2011). “World Population to reach 10 billion by 2100 if Fertility in all Countries Converges to Replacement Level.” May http://esa.un.org/unpd/wpp/Other-Information/Press_Release_WPP2010.pdf Accessed June 30, 2011.

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14 M. Falkenmark and G. Lindh (1993). Water and economic development. In P. Gleick (ed). Water in crisis: a guide to the world‟s fresh water resources. Oxford, UK: Oxford University Press: 80-91. 15 Union of Concerned Scientists. (2011). Global Warming Science: Human fingerprints. http://www.ucsusa.org/global_warming/science_and_impacts/science/global-warming-human.html Accessed June 15, 2011. 16 T.E. Downing and M.I. Perry (1994). Introduction: Climate change and world food security. Food Policy 19: 99-104. 17 Postel, 1989, op cit. 18 E.D. Enger and B.F. Smith (2010). Environmental science: A study of interrelationships. 12th Edition. NY, NY: McGraw Hill: 336. 19 Most data were obtained from the United Nations Population Division, UNDP and Aquastat-FAQ, Population Reference Bureau. 20 S. Ferry (2010). Environmental law. Fifth edition. NY, NY: Aspen Publishers: 256. 21 TARGET. Halve, by 2015, the proportion of the population without sustainable access to safe drinking water and basic sanitation. http://www.un.org/millenniumgoals/pdf/MDG%20Report%202010%20En%20r15%20-low%20res%2020100615%20-.pdf#page=60 . United Nations Millennium Development Goals 2015. Accessed June 4, 2010. 22 H. Smets. (2005). “Economics of water services and the right to water.” In E. Brown Weiss, L. Boisson de Chazournes and N. Bernasconi-Osterwalder. Fresh was and international economic law. Oxford, UK: Oxford University Press. 177-183. Cited in Owen McIntyre (2011). Implications of the human right to water for private sector provision of water and sanitation services. Working Paper. University College Cork, National University of Ireland. 23 PriceWaterhouseCoopers (2008). CEO Water Mandate: Independent Review of 2008 Programme of Activities. http://www.unglobalcompact.org/docs/news_events/9.1_news_archives/2009_03_11/ADL_Report.pdf. Accessed June 4, 2011. Also, see http://www.unglobalcompact.org/NewsAndEvents/news_archives/2007_07_05e.html for the description of The Mandate. Accessed June 12, 2011. 24 (2009). Promotion of all human rights, civil, political, economic, social, cultural rights, including the right to development- business and human rights: Towards operationalizing the “protect, respect and remedy framework, A/HRC/11/13 (22 April) at 8, para 21. Cited in Owen McIntyre (2011). Implications of the human right to water for private sector provision of water and sanitation services. Working Paper. University College Cork, National University of Ireland. 25 Since 2009 large companies in Denmark have been obliged to describe their social responsibility activities in their annual report, including the company's efforts to promote human rights and a sustainable environment, cf. Section 99a of the Act on Financial Statements, cf. Consolidated Act no. 395 of 25 June 2009. What is considered a large company is based on the balance sheet, the revenue and the number of employees (for example a company with total assets in excess of 143 million DKK and a total revenue of more than 286 million DKK for two consecutive years is considered a large company.) Approximately 1100 Danish registered companies currently are required to disclose such information, cf. the commence to Act no. 395 of 25 June 2009 on Financial Statements. See: Plesner Law Firm and Mannheimer Swartling. (2011). Mandate of the Special Representative of the Secretary-General (SRSG) on the Issue of Human Rights and Transnational Corporations and other Business Enterprises. Corporate law project. March 2011. http://www.businesshumanrights.org/SpecialRepPortal/Home/CorporateLawTools. Accessed June 4, 2011. 26 Pacific Institute. (2011). Water Conflict Chronology List. http://www.worldwater.org/conflict/list/ Accessed June 18, 2011. 27 R. Clarke and J. King (2004). The Water Atlas. A Unique Visual Analysis of the World's Most Critical Resource. NY, NY: The New Press. 28 K. Hussey (2011). Water security. Unpublished manuscript. Australian National University. 29 United Nations Environment Programme (UNEP) (2008). Vital water graphics: An overview of the state of the world‟s fresh and marine water. Second Edition. December. http://rfflibrary.wordpress.com/2008/12/10/vital-water-graphics-an-overview-of-the-state-of-the-world%E2%80%99s-fresh-and-marine-waters-2nd-edition/ Accessed June 4, 2011. 30 Adapted from Enger and Smith (2010) op cit: 353. 31 Earthworks (2011). Hydraulic Fracturing of Oil and Gas Wells. http://www.earthworksaction.org/hydfracking.cfm Accessed June 10, 2011. 32 The tragedy of the commons is a dilemma arising from the situation in which multiple individuals, acting independently and rationally consulting their own self-interest, will ultimately deplete a shared limited resource, even when it is clear that it is not in anyone's long-term interest. See G Hardin (1968). The tragedy of the commons. Science, 162(3859). December 13:1243-1248. 33 Rogers and Leal, op cit. 123-153.

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34 National Geographic Special Issue: Water: Our Thirsty World (2010). April:114-115. 35 J. Davis , A. Kang, J. Vincent, & D. Whittington( 2001). How Important is Improved Water Infrastructure to Microenterprises? Evidence from Uganda, World Development, Elsevier, vol. 29(10), pages 1753-1767, October. 36 National Geographic Special Issue: Water: Our Thirsty World (2010). April:52 37 Ibid. 38 Robert Glennon (2009). Op cit.: 276. 39 The Barilla Group, The Coca-Cola Company, The International Finance Corporation, McKinsey & Company, Nestlé S.A., New Holland Agriculture, SABMiller plc, Standard Chartered Bank, and Syngenta AG. (2009). Op. cit. 40 Agriculture accounts for approximately 3100 billion M3 or 71 percent of global water withdrawals. The research shows that this withdrawal will increase to 4500 billion M3. 41 Ibid: 8. 42 Ibid. 43 Millennium Ecosystems Reports (2005). http://www.maweb.org/en/index.aspx Accessed June 1, 2011. 44 Ecosystems and human well-being: Wetlands and water.(2005) Millennium Ecosystems Assessment. http://www.maweb.org/documents/document.358.aspx.pdf , Accessed June 1, 2011. 45 Ibid. ii 46 B. Barton (2010). Murky Waters? Corporate Reporting on Water Risk. Boston, MA: CERES: 3. The report can be found at http://www.ceres.org/resources/reports/corporate-reporting-on-water-risk-2010/view. Accessed June 20, 2011. 47 Ibid. 48 For want of a drink: A special report on Water (2010). The Economist. May 22: 6. Also see Brazil: Saving water in Latin America. Unilever website. http://www.unilever.com/sustainability/casestudies/water/brazilsavingwaterinlatinamerica.aspx Accessed June 19, 2011. 49 Nestlé. Water and environmental sustainability. http://www.nestle.com/CSV/WaterAndEnvironmentalSustainability/Pages/WaterAndEnvironmentalSustainability.aspx . Accessed June 6, 2011. 50 C. Marcus, P. Shah, A. Tolleson, B. Thomason (2010). The Dannon Company: Marketing and social responsibility. Harvard Business School. Case #9-410-121. 51 http://www.pinnaclewest.com/main/pnw/AboutUs/commitments/ehs/2008/ehs/water/default.html Accessed June 5, 2011. 52 Ibid. 53 D. Ball (2010). Bottled water pits Nestlé vs. greens. The Wall Street Journal. May 25: 1. It is interesting, however, that June 7, 2011 The Stockholm Industry Water Award recognized Nestlé‟s work to improve the water management of its suppliers, which includes over 25 million people who are involved in its entire value chain. Nestlé employs 1,000 agronomists and water experts, who work directly with farmers to help them reduce their water requirements, increase crop yields, and minimize pollution. In 2009-2010, Nestlé provided expert training and technical support for 300,000 farmers and the company continues to collaborate with other food industry leaders to establish best practice and guidelines for sustainable water use at a farm level. Nestlé also has a leading role in the 2030 Water Resources Group. Award Committee Member and Director of Water Projects at the World Business Council for Sustainable Development, Joppe Cramwinckel, said: “Through its unwavering commitment, Nestlé has established itself as a leader in smart water management and is deserving of this prestigious award. It is providing an example for other food producers and distributors to follow.” About the Stockholm Industry Water Award and organization www.siwi.org. About the World Business Council for Sustainable Development (WBCSD) www.wbcsd.org. 54 Source: Beverage Marketing Corporation cited in Ball (2010). Op cit. 55 Source – the company‟s website. Nestlé USA is a part of Nestlé S.A. in Vevey, Switzerland – the world's largest food company with a focus on Nutrition, Health & Wellness; $10.4 billion in sales in 2010; More than 25,000 employees nationwide; 25 manufacturing facilities, 46 distribution centers, and 15 sales offices across the country. http://www.nestleusa.com/PubAbout/NestleAtGlance.aspx Accessed June 20, 2011. 56 See Global Reporting Initiative at http://www.globalreporting.org/Home . Specific to Coca-Cola see http://www.thecoca-colacompany.com/citizenship/gri_index.html Both sites accessed June 15, 2011. 57 Here is a complete list of those who signed the Mandate and the outline of the Mandate. http://www.unglobalcompact.org/Issues/Environment/CEO_Water_Mandate/endorsingCEOs.html . Launched in June 2007, the CEO Water Mandate is a public-private initiative designed to assist companies in the development, implementation and disclosure of water sustainability policies and practices. Endorsing CEOs acknowledge that in order to operate in a more sustainable manner, and contribute to the vision of the UN Global Compact and the

August 7, 2011 Daniel S. Fogel 27

realization of the Millennium Development Goals, they have a responsibility to make water-resources management a priority, and to work with governments, UN agencies, non-governmental organizations, and other stakeholders to address this global water challenge. The CEO Water Mandate covers six elements: Direct Operations; Supply Chain and Watershed Management; Collective Action; Public Policy; Community Engagement; and Transparency. Accessed June 15, 2011. 58 The Global Water Footprint Network http://www.footprintnetwork.org/en/index.php/GFN/page/at_a_glance/ Accessed June 15, 2011. 59 The Global Water Tool (2011). http://www.wbcsd.org/templates/TemplateWBCSD5/layout.asp?type=p&MenuId=MTc1Mg&doOpen=1&ClickMenu=LeftMenu Accessed June 15, 2011. 60 FAO Water Tool (2011). http://www.fao.org/nr/water/ Accessed June 15, 2011. 61 CEO Water Mandate (2011) http://www.unglobalcompact.org/Issues/Environment/CEO_Water_Mandate/ Accessed August 7, 2011. 62

UNEP Umbrella Project (2011).

http://www.pnuma.org/eficienciarecursos/documentos/taller%20florianopolis/1.%20Introduction%20to%20the%20UNEP%20WafNE%20Project.pdf Accessed August 7, 2011. 63 Carbon Disclosure Water Project (2011). https://www.cdproject.net/en-US/Programmes/Pages/cdp-water-disclosure.aspx Accessed August 7, 2011. 64 WBCSD Water Project (2011). http://www.wbcsd.org/templates/TemplateWBCSD5/layout.asp?type=p&MenuId=MTc1Mg&doOpen=1&ClickMenu=LeftMenu Accessed August 7, 2011. 65 WBCSB London Water Workshop (2011). http://www.wbcsd.org/web/projects/water/London_Water_Workshop_Summary_FINAL.pdf Accessed August 7, 2011. 66 The Water Initiative (2011). http://thewaterinitiative.com/ Accessed August 7, 2011. 67 BIER Roundatable(2011). http://bieroundtable.com/water_stewardship.html. Accessed August 7, 2011. 68 http://www.allianceforwaterstewardship.org/ Accessed August 7, 2011. 69 CDP Water Disclosure: Global Report (2010). https://www.cdproject.net/CDPResults/CDP-2010-Water-Disclosure-Global-Report.pdf Accessed June 15, 2011. 70 Data from Coca-Cola Company‟s 2010 Annual Report. http://www.thecoca-colacompany.com/ourcompany/company_reports.html Accessed June 15, 2011. 71 Most of the information for this section came from internal company reports, especially Live Positively (2009). 2009/2010 Sustainability Review. Coca-Cola Company. Therefore, several sections are not footnoted unless other sources were used or where specific page references were necessary. 72 The Barilla Group, The Coca-Cola Company, The International Finance Corporation, McKinsey & Company, Nestlé S.A., New Holland Agriculture, SABMiller plc, Standard Chartered Bank, and Syngenta AG. (2010) Charting our water future: Economic frameworks to inform decision-making. Available at http://www.mckinsey.com/en/Client_Service/Sustainability/Latest_thinking/Charting_our_water_future.aspx . Accessed June 20, 2011. 73 Ibid: 10 74 Live Positively (2009). 2009/2010 Sustainability Review. Coca-Cola Company:1. 75 Ibid. 76 Interview with Brian Kelley April 2011. 77 This is a reference to the World Economic Forum meetings in Davos Switzerland, where executives and world leaders meet to discuss issues of importance across the world. See http://www.weforum.org/ for more information. Accessed June 15, 2011. 78 Interview with Brian Kelley, 2011, op cit. 79 Ibid. 80 The NC is an international non-governmental organization dedicated to the conservation of biological diversity. They carry out their work in over 30 countries including all 50 states in the USA. They have worked on over 600 freshwater projects around the world. 81 Live Positively, op cit. 29. 82 Interview with Brian Kelley, 2011, op cit. 83 Ibid. 84 Ibid.

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85 An excellent commentary on this change can be found in Ted Nordhaus and Michael Shellenberger (2007). Break Through: From the death of environmentalism to the politics of the possibility. NY, NY: Houghton Mifflin Company. Also, a book that shows the vast array of partnerships and organizations working on environmental issues is Paul Hawken (2007). Blessed unrest: How the largest movement in the world came into being and why no one saw it coming. NY, NY: Viking. 86 http://www.allianceforwaterstewardship.org/about_pdfs/About_AWS/AWSFact_Sheet.pdf , Accessed June 1, 2011. Major partners include: The Nature Conservancy. freshwater@tnc.org ; WWF sorr@wwfint.org ; Water Stewardship Initiative. info@waterstewardshipinitiative.com ; The Pacific Institute, info@pacinst.org ; Water Witness International admin@waterwitness.org; Water Environment Federation, mries@wef.org ; European Water Partnership, info@ewp.eu . 87 The Economist (2011). When others are grabbing your land. May 7: 65-66. 88 P. Brabeck-Lethmathe, A. K. Biswat and L. Kuan (2011). Putting a price on clean water. The Wall Street Journal. A15. 89 Glennon (2009). Op cit: 243-251. 90 Ibid. 91 Ibid. 92 Interview with Brian Kelley, 2011, op cit. 93 Ibid. 94 http://www.landtrustalliance.org/ Accessed June 1, 2011. 95 Environmental Defense Fund. The Cap and Trade Success Story. http://www.edf.org/page.cfm?tagID=1085 Accessed June 15, 2011 96 J. Diamond (2006). Collapse: How societies choose to fail or succeed. NY, NY: Penguin. 97 Notes from University of Massachusetts, Boston course Environmental Science. 101 Professor Nihar Mohanty. Course website: https://learning.umassonline.net/webct/urw/lc26226.tp0/cobaltMainFrame.dowebct Accessed June 10, 2011. 98 C.K. Prahalad (2004). The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits. Philadelphia, PA: Wharton School Publishing. S. L. Hart (2005). Capitalism at the crossroads. Philadelphia, PA: Wharton School Publishing. 99 Rogers and Leal (2010). Op cit.: 32-37. 100 Ibid: 76-83 101 Ibid. 102 Ecosystems and human well-being: wetlands and water. (2005) op cit. 103 Finding solutions for mitigating eutrophication. World Resources Institute (2011). http://www.wri.org/project/eutrophication/about/solutions Accessed June 1, 2011. 104 National Gepographic (2010). Op cit: 32-33. 105 Old Indian proverb quaoted in Glennon (2009). Op cit. 51. 106 The Water Cycle - Water Science for Schools. http://ga.water.usgs.gov/edu/watercycle.html Accessed June 10, 2011. 107 http://www.pewtrusts.org/ The eutrophication process and subsequent formation of sea-bottom hypoxia in coastal waters. Accessed June 1, 2011.