Investors: Food Firms Must Embrace Smarter Water Practices

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Corporations from across the food industry are taking steps to improve their water management, but many remain exposed to high levels of water-related risks that could leave investors exposed in the future.

That is the conclusion of a major new report from the investor-backed Ceres think tank, which today ranks the world’s largest food and drink companies based on their response to water risks, such as water security, droughts, and flood risks.

The report, entitled Feeding Ourselves Thirsty: Tracking Food Company Progress Toward a Water-Smart Future, provides 42 of the world’s largest food and drink firms with a score out of 100 based on the quality of their water risk disclosures and risk management efforts.

It found that overall the food sector’s performance has improved by 10 per cent since the first edition of the report was published in 2015. However, the average score for the 42 companies benchmarked was still only 31 points and despite improvements, the meat and agricultural products industries continue to lag far behind the packaged food and beverage industries.

The top scoring companies included Nestle with a score of 82, Coca-Cola with a score of 72 and Unilever with a score of 70. However, there were signs some parts of the food supply chain are lagging far behind in the quality of their water risk management. For example, Smithfield Foods was the top scorer in the meat category with a score of just 33 and Bunge topped the table of agricultural product companies with a score of just 29.

Brooke Barton, senior director of water and food at Ceres, who co-authored the report, said it was critical for the industry as a whole to step up its response to water-related risks, especially as climate impacts escalate.

“Smart water management is a business imperative for food companies, as the impacts of climate change and water scarcity and pollution accelerate around the world,” she said. “Some corporate leaders are making strong progress, but the majority must do more to water-proof their businesses to protect and sustain our water supplies.”

Anne Sheehan, director of corporate governance at giant US pension provider CalSTRS, predicted the new report would be used by institutional investors to step up pressure on firms that fail to adequately address water risks.

“This updated analysis can be used by large institutional investors to reassess their environmental risk engagements, especially with the low-scoring companies held in their portfolios,” she said. “It also provides investors a clearer perspective on how well – or not – food companies are responding to water risk in order to sustain a competitive advantage in their market sector.”