Water is one of the critical factors of ESG (Environment, Social, and Governance). Fresh and clean water is increasingly endangered despite being considered a plentiful renewable resource mainly due to population growth and economic activity leading to an increase in water demands and pollution.
According to United Nations, if current consumption and production patterns do not change, there will be a 40% shortfall in water supply by 2030. Companies are expected to face increased scrutiny such as limits on water withdrawal and tight regulations over their water use as global water resources face increased stress.
Groundwater is withdrawn by industries such as manufacturing, mining, oil and gas, energy and utilities, and construction. Apparel and food & beverage industries are highly dependent on groundwater through supply chains. According to Aquastat, 19% of global freshwater withdrawals come from industry and energy.
In terms of water withdrawal, the beverage and bottled mineral water sectors need to be careful because groundwater is a raw material for them. Globally, food and beverage companies face disputes with local communities over the amount of groundwater that can be withdrawn without depleting local resources.
Water withdrawal by companies means freshwater taken from the ground, surface, or other water sources, permanently or temporarily for use in products. LVMH, P&G, Nestle, Coca-Cola, and PepsiCo were major FMCG companies by market capitalization with significant water withdrawal in 2021.
LVMH is a manufacturer and marketer of luxury goods with a market capitalization of $298 billion as of October 2022. In 2021, LVMH withdrew 4 million cubic meters of water, an increase of 1% over 2020. By 2026, LVMH wants 100% of its strategic raw materials to be certified to the highest standards, ensuring the preservation of ecosystems and water resources, and zero sourcing in areas where there is a very high risk of deforestation or desertification.
P&G is a manufacturer and marketer of fast-moving consumer goods and has a market capitalization of $296 billion as of October 2022. In 2021, P&G withdrew 69 million cubic meters of water, an increase of 3% over 2020. P&G has set a target to increase water efficiency by 35% per unit of production by 2030 against the 2010 baseline. The consumer goods company also aims to source 5 billion liters of water from circular sources by 2030.
Nestle is a manufacturer and marketer of food products and beverages with a market capitalization of $291 billion as of October 2022. In 2021, Nestle withdrew 98 million cubic meters of water, a decrease of 15% over the year 2020.
Coca-Cola and PepsiCo had a market capitalization of $236 billion and $224 billion as of October 2022, respectively, and were among the leading companies with significant water withdrawal in 2021 with 298 million cubic meters and 86 million cubic meters of water withdrawn, respectively.
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