A recent Economist feature considered the role of business in managing the world’s water supply. Industrial production of goods – from soft drinks to microchips – consumes far more water than agriculture, and competes with other uses in arid climates worldwide.
Water is a human necessity, but is it a human right? If so, should access to water be guaranteed by governments? This question engages the United Nations, and governments in both poor and wealthy nations. There is growing evidence, though, that even without an “official” declaration of water’s special status, businesses will be compelled to help ensure access to water.
Water Contamination and Scarcity Kills More People than War
On March 22, 2010, World Water Day, the United Nations Environment Program (UNEP) announced that dirty water is responsible for killing more people than war or other forms of violence. UNEP has estimated that 1.8 million children under the age of five die due to water-borne diseases, approximately one child every 20 seconds.
On that day, several companies announced moves to support access to water initiatives and unveiled new goals on water management. Pepsico announced a goal to assist three million people in developing nations to access safe water resources by 2015, including providing one million people with access to clean water by the end of 2010.
Coca-Cola has pledged to expand its partnership with USAID with an additional $12.7 million donation for a Water and Development Alliance. In addition, Dole announced the implementation of a new packaging process at its Costa Rican banana facilities that would reduce water use by approximately 80 percent.
UN Stops Short of Declaring Water a Human Right
According to a 2007 report published by the UN High Commissioner for Human Rights, the international community must consider water a human right, regardless of whether it is a self-standing right or derived from other human rights. In 2008, however, the UN General Assembly declined to endorse this finding, amid fears (among others) that it could compel cross-border transfers from water-rich nations like Canada.
Still, the UN Committee on Economic, Social and Cultural Rights (ECOSOC) states a human right to water in Articles 11 and 12 of the International Covenant on Economic, Social and Cultural Rights. While the covenant itself imposes legal obligations on states, not the private sector, one of these obligations is to prevent corporate third parties from infringing on the right to water by “…polluting and inequitably extracting from water resources.”
These mixed messages are reflected at the state and community level. For example, in May 2009, the California State Assembly voted to approve the Human Right to Water Act. Supporters of the legislation claimed over 150,000 Californians lack access to safe and affordable water, but Gov. Arnold Schwarzenegger vetoed the Act in October 2009. A month later, however, the Governor announced a “Comprehensive Water Package.” According to the Office of the Governor's Web site, the Package established a Delta Stewardship Council, and consists of four policy bills and an $11.14 billion bond for water projects.
Pepsico, Intel Respond to Shareholders
Northstar Asset Management has made water management a priority. The firm submitted right-to-water resolutions at PepsiCo and American International Group (AIG) in 2008, receiving 7.2 percent and 18.7 percent support, respectively. In 2009, it submitted a nearly identical proposal at Intel, which received 5.9 percent shareholder support and is still pending for 2010.
The Intel resolution noted the company’s use of “vast quantities of water” in its manufacturing sites in arid areas, such as Israel and the American Southwest. On behalf of the proponents, attorney Sanford Lewis wrote: “IT firms require vast amounts of water—Intel and Texas Instruments alone used 11 billion gallons to make silicone chips in 2007. This is an enormous social policy issue facing the company in this shareholder resolution.”
Even as the proposal is pending, Intel has announced a new water policy that recognizes the human right to water. Released in March 2010, the policy supported the preservation of quality water resources, minimizing the impact of the company’s operations on the availability of water, transparent engagement, and communication regarding water usage and conservation efforts with the communities in which it operates. The policy also committed the company to continuous improvement in its water management protocols.
Northstar’s 2009 resolution at Pepsico was withdrawn after the company published Guidelines in Support of the Human Right to Water on its website, stressing safety, sufficiency, acceptability, physical accessibility, and affordability.
Water Conflicts Most Acute in Poorer, Drier Nations
Pepsico’s declaration comes after years of water-related controversy in India. Along with other beverage makers, Pepsico has been accused of overdrawing scarce water resources and of producing beverages contaminated with pesticides.
Again, different levels of government have reached different conclusions about how to respond. Pepsico lost its operating license in Pudussery, in Kerala, India, in 2003 for allegedly depleting the community’s groundwater. In April 2007, however, the Kerala High Court ruled that the village council did not have the right to strip Pepsi of its operating license. Environmental groups challenged the ruling in the Indian Supreme Court, but the challenge failed. In February 2008, the Supreme Court upheld the Kerala High Court’s verdict, noting that it was “not inclined to interfere with the judgment of the high court,” as reported in the Press Trust of India.
Corporate Water Risks, Opportunities Go Beyond PR
As an essential material condition of life, access to water is an intensely political issue. The examples above demonstrate that even without a legal right to water, governments, investors and other stakeholders are demanding corporate attention to the issue. Indeed, Pepsico’s assertion of support for the right to water may be seen as a response to its Indian experience.
In this environment, some companies have begun to work together to set new benchmarks for corporate water policy. The Economist reports that Coca-Cola is one of a consortium of companies that in 2008 formed the 2030 Water Resources Group. It also retained McKinsey to produce a study of various water policy scenarios.
The Global Environmental Management Initiative (GEMI), a group of 37 large U.S. firms, has a working group devoted to the issue of water sustainability and offers a water sustainability tool. GEMI notes on its Web site:
"There are emerging signals that the business case is building for companies to develop more coordinated, forward-looking, and sustainable water strategies…Companies that understand the trends shaping the global business environment will be better positioned to identify new market opportunities, mitigate risk, develop sustainable water strategies, and create shareholder value."
[Ed. Note - In response to this article, Amit Srivastava of the India Resource Center sent a link to a March 2010 article from India's Business-Standard. The report makes clear that the conflict between Pepsico and the government of Kerala persists today. The government has called for Pepsico to reduce its water use at the Pudussery plant by nearly 60%, noting that it is located in a drought-prone area. Notwithstanding Pepsico's revised water policies, apparently its actual water consumption remains problematic in Kerala, among other arid regions. Thanks to Mr. Srivastava for the information. ]