The CSR Newsletters are a freely-available resource generated as a dynamic complement to the textbook, Strategic Corporate Social Responsibility: Sustainable Value Creation.

To sign-up to receive the CSR Newsletters regularly during the fall and spring academic semesters, e-mail author David Chandler at david.chandler@ucdenver.edu


Wednesday, February 18, 2015

Strategic CSR - Water

The three articles in the urls below record the growing importance of water scarcity as a business issue for companies. The first article demonstrates the extent to which water has leaped up the list of top concerns for executives:
 
“A risk that wasn’t even on the corporate worry list a few years ago has jumped to the top: water. Over two thirds of global companies reporting information for a new study … say that water risk ‘could generate a substantive change in their business, operations or revenue’ and more than one in five expect water problems to hamper their growth. Water risk hasn’t historically featured in most corporate supply chain and investment plans. The Global Risks 2014 report from the World Economic Forum lists water risk as the third most important source of concern.”
 
This growing threat is being felt by all firms, irrespective of whether they utilize water directly in their products. This risk is heightened if the firm’s customers use water as a result of consuming the firm’s product:
 
“For example, use of Unilever PLC’s products for dishwashing, laundry, handwashing, etc. can account for over 90% of domestic water use in some countries, according to the company’s website.”
 
The second article provides an example of the sort of steps firms are taking in response, such as Nestle’s new milk factory in Mexico:
 
“The Swiss multinational says the factory, in Lagos de Moreno, is the first of its kind in the world not to rely on external water sources. Instead, it recycles the waste fluid extracted from milk when it is powdered and puts it back to work.”
 
This matters because Nestle is the world’s largest food company and when it is able to shave percentage points off its total resource use, the effects are meaningful:
 
“NestlĂ© says [the new factory] will allow it to cut total water consumption from its 13 plants in Mexico by 15 per cent this year. The company said it has already slashed its global water use by a third since 2005 and … operations in Mexico had halved their water use in total.”
 
And the third article demonstrates the consequences if firms fail to account fully for water in their planning:
 
“In 2013 a Chilean court ruled that Barrick of Canada, the world’s largest gold-mining firm, could not go ahead with its Pascua Lama mine until it could guarantee not to pollute downstream water or damage nearby glaciers. The company eventually suspended the project, taking a $5 billion write-down.”
 
As a result of the rising strategic importance of water:
 
“A survey by CDP, a research firm that works for institutional investors, finds that in almost two-thirds of the world’s largest listed companies responsibility for dealing with water problems lies at board level. An increasing number of bosses say water is or will soon become a constraint on their firm’s growth.”
 
Ultimately:
 
“Shortages do not only affect those that use millions of gallons in their industrial processes (miners, say) or whose products are made of water (beer and soft-drinks makers). It also affects those whose inputs depend on the stuff (food companies) and, indirectly, almost all firms that do business in water-stressed countries, which include China.”
 
Take care
David
 
David Chandler & Bill Werther
 
Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/
 
 
Companies Discover Water, Water Everywhere–No More
By Gregory J. Millman
November 6, 2014
The Wall Street Journal
 
Nestle opens ‘zero water’ plant in Mexico
By Jude Webber
October 30, 2014
Financial Times
Late Edition – Final
17
 
Value diluted
November 8, 2014
The Economist
67