Keith Nunes 2019KANSAS CITY — Fresh water scarcity may one day lead to a realignment of food and beverage supply chains throughout the world. As climate change advances, many producers and processors are becoming more efficient with fresh water usage, but near-term threats will continue to add pressure and require embracing more innovative solutions.

Three per cent of the water on earth is fresh water. A majority, approximately 2 per cent, is in the form of glaciers and ice sheets, and the remaining 1 per cent may be found in lakes, rivers and wetlands or transported through precipitation.

A study published in September online in Science Advances shows how climate change may affect global wheat production. The study found that 60 per cent of current wheat-growing areas in the world may experience simultaneous, prolonged drought by the end of the century unless steps are taken to mitigate climate change.

Already today, severe drought could affect up to 15 per cent of wheat-growing areas, the researchers said. Strategies recommended to mitigate the impact of climate change include shifting the wheat growing season, implementing full or partial irrigation, increasing the efficiency of water use, and using wheat varieties with enhanced drought and heat tolerance.

Food and beverage manufacturers are at tremendous risk. As fresh water becomes more scarce and agricultural production around the world more volatile, the profitability and perhaps even the viability of some sectors of the global food industry may be imperiled.

A new report from Ceres, a nonprofit group that works with investors and companies to identify solutions to sustainability challenges, illustrates the threat posed. One example in the report uses the Colorado river, which has long suffered from historic drought conditions, as an example of the immediate threats facing food companies. Agriculture currently uses approximately 80% of the Colorado river’s water to irrigate 15% of the nation’s farmland. Next year the Federal Bureau of Reclamation will require several states to reduce their withdrawals for the first time. Many food companies will be indirectly impacted, the report said. Several, including Conagra Brands, Inc., General Mills, Inc., J.M. Smucker Co., Kellogg Co. and Kraft Heinz Co., will be directly exposed to water supply disruption.

The industry is taking the risks seriously. Seventy-seven per cent of food companies cite water as a risk in their financial statements, according to the report. A third now charge boards and senior executives with overseeing water risks and strategies, up from just 10% of companies two years ago.

Ceres recommends food companies make their supply chains more resilient by supporting sustainable farming practices and supporting farmers’ transitions to such production methods. The report showed that fewer than half of the companies evaluated provide any form of financial support to growers to encourage the adoption of more sustainable production practices, including more efficient irrigation, cover cropping or diverse crop rotations.

Business as usual is no longer an option. Food and beverage manufacturers must embrace sustainability in their planning, support new ideas to better manage resources and prepare for a time, soon in some cases, when effective resource management will stand as a key consideration of the investment community.