Strategy & Leadership

Coca-Cola case study - For want of natural resources

March 11, 2009

North America

March 11, 2009

North America
Our Editors

The Economist Intelligence Unit

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Companies in North America, as in other regions of the world, tend to place risks related to water, such as floods and drought, and more general risks related to climate change, near the bottom of their priority list. Some organisations, however, are starting to consider one of the potential issues arising from climate change - water scarcity - more carefully. One company that takes this very seriously is Coca-Cola. It is hardly surprising that scarcity and poor quality of water” is reported as a strategic risk by the company. Water is the main ingredient in most of its products, but it is only since 2003 that the issue of water quality and availability has become a significant enough risk to hit the corporate radar at a strategic level.

This risk is now addressed systematically by the company. In 2004, Coca-Cola launched a comprehensive water initiative, assessing availability at plant-level operations in the 200 countries in which it operates and across its almost 1,000 franchised bottling plants.

The risks that the company has identified go beyond physical water scarcity. “Whether it’s aging infrastructure in the US or the lack of municipal water and sanitation services, you can have a water scarcity issue that might have nothing to do with the physical amount of water available,” explains Greg Koch, head of the global water stewardship programme at Coca-Cola.

The company has developed modelling tools to help it forecast a variety of water-risk scenarios and tackle its water use more effectively. Part of this has meant continuing efforts to reduce consumption, treat and reuse water where possible and ensure that waste-water is safe and clean.

Although these measures have helped Coca-Cola to manage its own water consumption more efficiently, they have also highlighted the importance of considering external factors, such as the health of global watersheds and conservation of the world’s freshwater resources. “What really came out of the risk assessment was that it was no longer enough to focus on the four walls of the plant,” says Jeff Seabright, head of environment and water resources at Coca-Cola.

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