According to the World Economic Forum’s The Global Risks Report 2021, a “global risk” is defined as an uncertain event or condition that, if it occurs, can cause significant negative impact for several countries or industries within the next 10 years. Water crises and water-related events (e.g., extreme weather, climate action failure, and natural disasters) lead the shortlist (7) in terms of likelihood. The latest Intergovernmental Panel on Climate Change (IPCC) report reinforces the message that the current climate crisis will intensify our risks to water crises.
No country or company is fully insulated from potential commercial, operational, and workforce disruptions created by climate events. For this reason, in addition to just being good for business, a host of multinational firms appear to be coming to terms with this new normal through water specific strategies, including water positivity, green bonds, partnerships, and in-house water technology solutions.
Already, more than two billion people live in regions of water stress—from California to Cape Town—and another two million die of waterborne diseases cholera, dysentery, and guinea worm EVERY YEAR! Nowhere is this more evident than in sub-Saharan Africa, where an estimated 70% of homes lack facilities for basic household sanitation.
In the absence of any wide sweeping, government-led regulations at local and national levels, global corporations, in many respects, are on their own to protect their own financial bottom lines and brands. For this reason, PepsiCo’s recent announcement to explicitly integrate improved water efficiencies into its sub-Saharan Africa operations is worth noting.
But Why Africa and Why Now?
Globally, PepsiCo’s product portfolio is headlined by US$1 billion-dollar global brands, such as Lay’s, Walkers, Doritos, Cheetos, Ruffles, and Quaker. And as recently as 2019, PepsiCo acquired South Africa-based Pioneer Foods Group for US$1.7 billion. While unlocking potential new markets for growth—Namibia, Botswana, Kenya and Nigeria—the company becomes more exposed to water risks. It was only three years ago that Cape Town was weeks away from “Day Zero”.
The food & beverage industry hinges on water, from agricultural supply chains to wastewater discharges, thereby underpinning opportunities for efficiency gains. Improvements in supplier irrigation practices, wastewater reuse, and, in some cases, energy capture from organic-rich wastewater, are all potential options. By 2030, PepsiCo aims to reduce its water footprint by 50% across its 1,000 company-owned (and third-party) facilities. According to the company, nearly half are in areas of water stress.
At the same time, the public and social media spotlight has never been more intense for companies to be environmentally responsible. Organizations failing to disclose climate and water-related risks to their stakeholders (local communities and shareholders) are themselves at risk. Just this last week, Harvard University divested its global investments in fossil fuels from its US$42 billion endowment. The writing is on the wall.
PepsiCo is not unique. Last week, Google announced plans to go “Water Positive’ by replenishing 20% more water than its offices and data centers use by 2030. This would be achieved by using less water in its facilities and helping with conservation efforts in communities where water is scarce. At the end of the day, companies like PepsiCo see the benefits of embracing better water management. It’s good for business and a lot cheaper than having no water.