Last year it was announced that Anheuser-Busch InBev (the worldâ€™s largest beer company) would purchase SABMiller (the second largest) for US$106 billion. The company that emerges from this takeover â€“ once brands are sold off and regulatory commissions give the OK â€“ will not only amount to the largest beverage company, but also the most profitable consumer goods company globally.
For the sake of this article, letâ€™s call this new entity New Beer Co (I know, I missed my calling in branding).
Iâ€™m not concerned with shares or markets, nor mergers and acquisitions; I care about water. While raw ingredients may not be top of mind to those cutting the deals, they shouldnâ€™t remain an afterthought for New Beer Co. Agricultural raw materials require most of the â€śtotalâ€ť water used by both companies, and they source those raw materials and have brewing operations in water scarce areas.
From Day 1, water should be top of mind as this new behemoth emerges onto the world stage and starts to contemplate its place â€“ and its responsibility â€“ in dealing with the resource that business agrees is the one that could hurt them the most financially and reputationally. New Beer Co will have a lot of work to do if it wants to avoid scrutiny and criticism for its vast use of this resource, never mind being a leader on sustainability issues and water stewardship in particular.
The cumulative volume of water this new company will consume, shift, bottle and trade will be larger than any water engineer ever dreamed of being able to move though weirs, pipes and canals. To all the shareholders patting themselves on the back for cutting such a great deal, donâ€™t forget the level of responsibility and dependence of your business on the worldâ€™s most precious resource. Donâ€™t forget the amount of water-related risk you just combined in places like Brazil, India, Zambia, China, El Salvador and Tanzania.
Is this risk real? Does it matter? These are very relevant questions, now that we have such rich evidence and examples of how water management, governance, regulations, perceptions and neglect can hit the bottom line. Business value loss from water incidents are growing in all sectors, including revoked water licenses, environmental fines, shareholder demands, brand issues and water conflicts. Companies can now quantify how much money is made and lost as a consequence of how water is managed and shared within economies â€“ making water not so much about the environment as a long-term social and business strategy issue.
I have had the great pleasure to work with teams in both Anheuser-Busch InBev and SABMiller over the last decade or so. In my opinion, they have represented some of the best thinking and initiatives in addressing water risk. And they have often done this out of the spotlight, in secondary business units, struggling for traction in the face of â€śrealâ€ť business issues. Conveying to leadership why the water issue must be considered beyond the corporate social responsibility/sustainability team has been harder than it should be.
But even in the face of these challenges, these two companies have been on the vanguard of water footprint analysis, water risk evaluation, local watershed partnerships, water-food-energy debates, setting targets and engaging outside the factory fence. They have done this without falling victim to the more brand-protection approaches out there, like â€śreplenishâ€ť or â€śnet positive impact.â€ť They have understood the enormity of their water use and challenges, and done their best to keep focused on operational risk and context-driven water strategies.
Whatâ€™s not clear to me is how this New Beer Co will not only maintain what these two companies have achieved â€“ leading the industry and, in many ways, overall business response to water â€“ but how they will step up to meet the scale of the combined challenge.
Will it be the kind of company that recognizes water is not only a key ingredient, but a significant business risk and opportunity? Or will short-term cost and profit considerations overshadow long-term planning and investment? Will the inevitable water crises be papered over, or tackled as if the business depends on finding a solution? Will the company dedicate the leadership and resources to deal with the deep water challenges at scale, or will it simply try to be efficient in dealing with the most high-profile cases.
A reactive response strategy would be a huge disappointment and a wasted opportunity, because we need to see more than just doing a little better than SABMiller and Anheuser-Busch InBev were doing individually. We are magnitudes larger in not only water use, dependency and impact, but in risk, responsibility and expectation. Thereâ€™s an opportunity here for the taking: a leadership position on an issue that is increasingly causing business financial pain, societal concern and environmental degradation. The new UN Sustainable Development Goals provide both a challenge and an opportunity for global corporations to demonstrate the contribution progressive companies can make.
Will the real New Beer Co please stand up?
Stuart Orr is Head of WWF International’s Water Stewardship Programme