In 2003, a PepsiCo plant in Kerala, India, lost its operating license after local officials worried it would parch local water supplies.
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A year later, a $21 million Coca-Cola bottling plant there suffered the same fate when community organizers blamed it for a sudden dip in local water levels and accused it of polluting aquifers.
And last year, the Canadian government scaled back Nestle's groundwater permit after residents bemoaned a private company profiting from a public resource -- the same point that has sparked a groundswell of opposition to Nestle's bottled water operations in Michigan and California.
While federal governments are just beginning to grapple with the looming specter of worldwide water shortages, corporations for years have seen the economic impacts of water crises around the globe.
The fallout has prompted some to take a comprehensive look at the way they use a resource that is growing chronically scarcer, placing them ahead of many countries in planning for growth in a water-poor world.
As populations and living standards increase, the world is expecting more from a finite resource. Freshwater accounts for just 2.5 percent of the world's water, and most of that is locked up in the polar ice caps.
Agriculture is the world's largest freshwater consumer by far, accounting for 70 percent of global withdrawals, according to the U.N. Food and Agriculture Organization. But industry's 23 percent share puts it well ahead of domestic and municipal users, who use only 7 percent.
If, as research suggests, two-thirds of the world's population will face water scarcity by 2025, corporations will provide a highly visible target for community resentment, observers note.
"A lot of companies are operating in countries where basic protections in terms of water quality and access are not being implemented by the host governments," said Brooke Barton, director of water programs at CERES, an investor advisory and sustainability advocacy group. "The companies are exposed to reputation risk by the mere fact that they may have access to resources, but a number of people around them do not."
Coca-Cola learned that lesson after its local battle in India sparked national backlash and global publicity.
In the wake of the fiasco, Coke teamed up with WWF to launch what the environmental group terms a "transformational partnership," one in which the company aspires to make deep operational changes to reduce its environmental footprint.
"With situations like India, I think we saw that there was a great amount of time where we and other companies just focused on using water as efficiently as we could -- our focus was insular," said Lisa Manley, Coke's director of environmental communications. "India was an excellent example for us, and I think a learning opportunity. It showed us that we have to be much more engaged with the communities where we operate and we need to be much more aware of the water stresses there."
As part of the deal, Coke committed $20 million in 2007 to help conserve seven of the world's key freshwater river basins. The company also pledged to improve its water efficiency by 20 percent by 2012, and ultimately to recycle all of the 180 billion liters of water it uses each year for manufacturing.
Manley says Coke had a strong economic incentive to partake in the initiative: The company needs both water to manufacture its products and customers who can pay for them.
"The future growth of our business depends upon communities that are developing economically, and if you look at what are the key ingredients to that, I think a fundamental building block is that the community have access to safe water and sanitation," she said. "Also, our business is a water business. Every single beverage we make, the key ingredient in any of it is going to be water. We need to have access to safe, quality water in the areas where we work."
Looking at the "water footprint"
Last week, WWF announced a partnership with SABMiller, the world's second-largest brewer, to study the company's "water footprint," an emerging companion to the better known carbon footprint.
Water footprinting entails examining a company's water use through the entire value chain, from crop cultivation to distribution. It's a key element of the United Nations' CEO Water Mandate, a voluntary corporate sustainability program launched in 2007 that boasts as signatories such corporate giants as Coca-Cola, PepsiCo, Nestle, Cadbury, Dow Chemical Co. and Royal Dutch Shell.
According to a 2008 analysis by JP Morgan, the sectors at greatest risk from burgeoning water issues are power generation, mining, semiconductor manufacturing and food and beverage.
Some of the biggest players in those industries have already taken notice.
Calif.-based Intel, which requires vast amounts of ultra-pure water to manufacture its semiconductors, reported that it reclaimed more than 3 billion of the 7.8 billion gallons of water it used last year through wastewater collection systems.
Australian miner Rio Tinto, which has developed a comprehensive water stewardship program, says it saw a 6.3 percent reduction in freshwater withdrawal per metric ton of product last year over 2003 levels.
Consumer goods giant Unilever, which makes brands such as Lipton and Ragu, is experimenting with water-saving drip irrigation among its tea- and tomato-growers, and says it reduced its overall water use by 7.8 percent last year through recycling and improved cooling technology.
"I don't think it's a trend -- I think it's a way of doing business," said Suzanne Apple, vice president of business and industry for WWF U.S. "If you look at water around the world, population is growing, there is an increasing demand for water, and there are many river basins and watersheds that are either in drought conditions or are polluted. Communities need access to water, and companies need access to water."
Pressure to change
For some companies, the pressure to commit to wiser water use is coming from within.
Last year, Pepsi, Intel and AIG all received shareholder resolutions asking them to endorse the human right to water -- a right now inscribed in non-binding U.N. resolutions and recognized by a growing number of national governments in developing countries.
Investors also increasingly are requesting that companies disclose their water practices and policies, including the environmental and social impacts of their water use.
According to a February report by the Pacific Institute, a nonprofit focused on sustainability issues, shareholders filed 18 such resolutions between 2006 and 2008, more than quadruple the number filed between 2000 and 2002.
The food, beverage, oil and chemical industries are particularly susceptible to investor advocacy around water issues, the group says. Coca-Cola has seen one or more water-related shareholder resolutions every year since 2004.
But despite growing corporate awareness, advocates assert that most companies have miles to go. Even those that recognize the threat of stressed water supplies are mainly looking to their operations for savings, neglecting to trace the water use of their suppliers or distributors.
J.P. Morgan says the problem is acute in the food and beverage industry.
"The large food and beverage companies are directly involved in agriculture only to a very small extent," the company's risk assessment report states. "However, their businesses are critically dependent upon agricultural commodities, and the threat of supply disruptions due to a shortage of fresh water resources is not well defined."
And not everyone is a fan of corporate sustainability programs. Some groups see them as little more than savvy public relations moves aimed at luring customers to buy products from companies that ultimately still tread heavily on the environment.
"The public is very easily convinced through glossy sustainability reports and high-priced advertising campaigns that basically paint these companies green," said Richard Girard, research coordinator for the Polaris Institute, a Canadian public-interest advocacy group. "I think people put a lot of faith into what corporations say, and they put a lot of money into convincing us that what they're doing is the right thing. We can't just believe what they're saying, we need to verify it, and verifying it is very difficult.
Many companies' sustainability reports are not verified by independent sources, or only minimally so, Girard said.
The Polaris Institute, along with the Africa Water Network and watchdog groups Corporate Accountability International and Corporate Europe Observatory, argue initiatives such as the U.N.'s CEO Water Mandate provide a platform for water privatization by encouraging corporate interests to participate in global water planning.
In a March letter to U.N. Secretary-General Ban Ki-moon, the groups wrote: "Led by Coca-Cola, which has a highly questionable track record when it comes to water takings and water pollution, the companies which have signed on to the CEO Water Mandate all have a vested interest in gaining control over water in times of increasing scarcity."
"The UN should be looking to local communities and representative governments, rather than for-profit corporations, to set the global policy agenda and lead the development of solutions to the world water crisis."
Girard asserts that encouraging multinational corporations to participate in water dealings in Third World countries exposes powerless local communities to manipulation from an outsized opponent.
"It's a huge power imbalance when a multinational is dealing with local governments and securing a resource that many people there don't have access to," he said. "The United Nations is putting a lot of faith in these multinational corporations, who basically exist to make profit for their shareholders."
But Apple, of WWF, sees the potential for big business to be one of the conservation community's most powerful allies.
"If we can engage business in the solution, then we get to the solution faster," she said. "We can do the best conservation on the ground, but if we aren't really looking at who's using the water on the Yangtze River, we'll still be cleaning up the water 10 years from now.
"We've had companies see the value of that," she added, naming as an example Coca-Cola's work in the Mekong Delta teaching farmers how to curb pollution from fertilizer runoff. "We have seen firsthand the benefit of working with them and really actively engaging them."
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