Dive Brief:
- A report published by Morningstar said 60% of packaged food companies have weak or no comprehensive water management practices in their direct operations and 43% in their supply chain. The financial services firm analyzed the practices of 114 packaged food companies around the world.
- The report singled out General Mills and Tyson Foods as two CPGs managing water risks and contributing to solutions above the industry standard through their operations and supply chains.
- The food industry uses more than 70% of the world’s freshwater supply, according to Ceres. Water challenges such as drought are posing a significant risk to the future of food production, with investors and other stakeholders putting pressure on CPGs to curtail their use.
Dive Insight:
The impact of drought on food production has been especially prevalent this year on agriculture in the western U.S. It has contributed to a poor growing season for crops such as lettuce and apples, leading to rising produce prices during the fall.
The Morningstar report singles out one of the largest groundwater sources in the U.S., the Ogallala Aquifer — which spans South Dakota, Wyoming, Nebraska, Colorado, Kansas, Oklahoma, Texas and New Mexico. It is currently expected to be 70% depleted by 2070, according to the report. Crops grown in the Great Plains region, which the aquifer sits beneath, produce a quarter of crops in the U.S., including wheat and corn.
Food companies are largely unprepared to handle shortages in these growing regions and need to provide more targeted plans to address the shortages, according to the report. The authors urged stakeholders involved with food companies to push for a more comprehensive approach to water management that takes into account all types of physical and regulatory risks.
“Water requires multiple stakeholders’ joint action to steward resources in any given watershed that serves and benefits them all,” Morningstar said in its report. “When water users recognize that their individual water security hinges on stakeholder engagement and others’ actions, then transformational change is possible in each watershed.”
Morningstar graded food companies on how they handle water risks out of 100.
The average score for food companies was 43 for their own operations and 46 for how they handle water risks in their supply chains. General Mills scored 76 for its operations and 82 for its supply chain. Tyson received a 61 for its own operations and a 70 for its supply chain. The report did not name the other companies it assessed.
General Mills’ partnership with the National Fish and Wildlife Foundation to advance regenerative agriculture efforts was highlighted as a useful example for conserving water in its supply chain, the report said. The report said both General Mills and Tyson currently lack sustainability requirements for the production of specific products, which it said would improve how water is managed in their supply chains.
