Mar 09, 2014

Corporate Water Strategy and Stewardship

According to the 2013 CDP Water Program Global 500 Report, 70% of respondents believe that water is a substantive business risk. Will Sarni, the Practice Leader of Enterprise Water Strategy at Deloitte, agrees. “Water is really different,” said Mr. Sarni, speaking on February 20th as a part of the "Using Water Wisely: the Business Case for Sustainable Water Management" speaker series at the Yale School of Forestry & Environmental Studies. “Water is here and now; it’s a current business risk and a current business opportunity.”  This was an unmistakable statement delivered by Mr. Sarni in the opening minutes of his talk, and with the confirmation of a wide majority of the global business community, it set the stage for a compelling case to come. A day later, The Coca-Cola Company’s Director of Global Water Stewardship, Greg Koch, and Intel’s Environmental, Social, and Governance Supply Chain Manager, Jocelyn Cascio, echoed Mr. Sarni’s comments.

Note: Watch Mr. Sarni's presentation here and check out Mr. Koch and Ms. Cascio's conversation here.

We have all seen the hockey stick graph of increasing atmospheric carbon and the measurements and projections of rising global temperatures, and most of us are aware of the impact these changes will have on freshwater. Variability and extremes in precipitation will increase, annual totals may increase, they may decrease, or the dominant patterns may shift. The response, invariably, is that “we need to do something”. Increasingly, private sector businesses are doing something, for reasons of operational necessity, license to operate, and some good old-fashioned altruism. Coca-Cola’s Replenish campaign aims for the company to be water neutral by 2020, an ambitious goal for the world’s largest beverage company. For its part, Intel has been working to reduce per chip water use since 2007 and aims to have 2020 water use down to 2010 levels on a per chip basis.  How are they getting it done?

Barriers to Success Are Not Uniform

The semi-conductor industry is one of increasing complexity in process and manufacturing, and if you subscribe to Moore’s Law, it’s not going to slow down anytime soon. It makes sense, then, that Intel’s main challenge to meeting its per chip water goals lie in the manufacturing process and in technical innovation. Working with their machine and material suppliers, Intel is focused on bringing down the resource requirements for the water intensive process of wafer fabrication. A common way to view these process improvements is as a source of competitive advantage. Intel has taken the opposite approach, working with industry associations such as SIA and SEMATECH on what they have determined to be pre-competitive advances in the technology. Working with other industry leaders each company can realize greater improvements more quickly and it is a win-win outcome.

Coca-Cola, on the other hand, has the process and the technology at highly refined and efficient levels. Their barriers are not technical or procedural but rather social and political. The company has bottling facilities in basins across the world and each comes with a unique set of social and political circumstances, which makes standardization and a top down approach less feasible. Instead, each facility, with support from the company, engages locally in the most appropriate manner to achieve the system returns and basin improvements that will yield the greatest benefits.

Engaging Outside of the Four Walls

A common refrain from all three speakers was the importance of engaging with stakeholders outside of the company, to include NGOs, city, local, and national governments as appropriate, and other important actors. Mr. Koch was very upfront with the position that Coca-Cola occupies in the places it does business, saying, “we have to understand and play a role in the broader watersheds and communities we are a part of.” He expanded on this topic, speaking at length about the need to have local partners to ensure that the company’s investments in the basins and the communities are done as collaboration and not by fiat.

Intel has very close relationships with some of the municipalities in which it maintains fabrication facilities. Ms. Cascio described Intel’s investments in wastewater treatment done at the firms Ocotillo facility in Chandler, Arizona. Intel financed and built an advanced reverse osmosis treatment plant to deal with the manufacturing effluent and turned the facility over to the municipality. The treated water is used either for secondary uses like irrigation, or is returned to the aquifer through groundwater recharge to filter for later use. These arrangements allow the respective companies to continue business within the bounds of the social and regulatory licenses governing their operations, and ultimately strive to benefit the communities as well as the companies.

“It is a business imperative, a material risk… It’s all driven from a fundamental business model and a business risk,” said Mr. Koch.

About the Author: Aaron Willis is a first year Master of Environmental Management student at the Yale School of Forestry and Environmental Studies. In addition to co-organizing the "Using Water Wisely" series with Susannah Harris (MEM 2015), Willis writes for the Yale Environment Review and works as a Research Assistant for the Yale Center for Business and the Environment. Prior to coming to Yale, he worked with both the U.S. Army Corps of Engineers and USAID on water issues.