Water scarcity poses a critical threat to global food security, with most major protein producers ill-prepared to address escalating risks. FAIRR's recent analysis unveils alarming gaps in water risk management among leading agri-food companies. From undisclosed feed origins to inadequate reduction targets, the sector faces a looming crisis. To avert disaster, business leaders must urgently adopt comprehensive strategies, including mapping water footprints, setting basin-specific goals, and standardizing metrics. Failure to act not only jeopardizes water supplies but also endangers investor returns. As freshwater demand surges, the imperative for sustainable practices in the trillion-dollar livestock industry has never been more pressing.
Inadequate Water Risk Management in Agri-Food Companies
The recent analysis by FAIRR highlights a concerning trend in the agri-food industry, with most major protein producers failing to effectively manage water-related risks. This lack of preparedness poses a significant threat not only to the companies themselves but also to global food security and investor returns. The failure of nearly two-thirds of the assessed companies to address water risks adequately underscores the urgent need for strategic action. For instance, the revelation that 84 percent of livestock firms do not disclose the sources of their feed crops, particularly from water-stressed regions like northern China and India, raises red flags about the sector's vulnerability to water scarcity. Companies like Fonterra, which have committed to reducing water withdrawals by a significant margin at high-stress sites, serve as beacons of responsible water management practices in an industry grappling with sustainability challenges.
The lack of transparency in disclosing water usage and risk within supply chains further exacerbates the industry's vulnerability to water-related challenges. Notably, the failure of many companies to report water intensity per unit sales and link it to specific basins hinders investors' ability to assess and compare risks effectively. By not standardizing metrics related to water consumption, companies are not only limiting their own ability to track progress but also impeding investors' capacity to allocate capital towards sustainable practices. The call by FAIRR to standardize reporting on water usage and stress levels in different basins is crucial for enhancing transparency and enabling informed decision-making. Companies like Fonterra can set an example by embracing such standardized metrics, thereby enhancing their credibility and attractiveness to sustainability-focused investors.
Urgency of Setting Basin-Specific Reduction Targets
Setting basin-specific reduction targets emerges as a critical strategy for mitigating water risks in the agri-food sector. While only a limited number of companies have established targets to cut water withdrawals, the focus on efficiency rather than absolute reductions remains a prevalent issue. Companies need to follow the lead of industry pioneers like Fonterra, which has committed to a substantial reduction in withdrawals by 2030 at high-stress sites. Linking these reduction targets to executive pay, as suggested by the FAIRR report, not only incentivizes responsible water management but also aligns financial interests with sustainability goals. By expanding such targets to overseas operations and suppliers, companies can create a ripple effect that promotes water resilience across the entire value chain, safeguarding against future water scarcity risks.
The correlation between setting basin-specific reduction targets and financial performance underscores the business case for proactive water management strategies. Research cited in the FAIRR report indicates that high-efficiency water users tend to achieve better returns, highlighting the potential for companies to enhance their bottom line by embracing sustainable water practices. Companies like Fonterra, with their ambitious water reduction targets, are not only mitigating operational risks but also signaling to investors their commitment to long-term sustainability and resilience. As global freshwater demand continues to outpace supply, the imperative for companies to adopt basin-specific reduction targets as a core component of their strategic agenda cannot be overstated.
Conclusion
In the face of escalating water scarcity risks threatening global food security, the agri-food industry stands at a critical juncture. FAIRR's analysis underscores the urgent need for comprehensive strategies, from transparently mapping water footprints to setting basin-specific reduction targets. Companies like Fonterra exemplify responsible water management practices, but the sector at large must heed the call for standardized metrics and proactive risk mitigation. As freshwater demand soars, embracing sustainable practices isn't just a moral imperative—it's a strategic necessity for safeguarding investor returns and ensuring long-term resilience in the trillion-dollar livestock industry. The time for action is now; the future of food security depends on it.