2012-05-11

Co.Exist

Oil, Water, And Food: How Our Largest Companies Are Managing Our Most Important Resources

Businesses need natural resources to make products to sell. But the spiraling path of commercialism we’re currently on will lead to disaster without a major shift in direction. Are there any companies willing to make that happen?

It’s not all that often that executives of some of the world’s largest companies make themselves available to talk about their environmental record. At the recent New York Times/Shell Oil 2012 Energy Summit called “Earth 2050: The Food Water Energy Nexus," some of the people using large amounts of the world’s resources talked about their policies.

One could not possibly listen to the abundance of facts and figures without thinking of how desperately we’ve abused our planet and the resources we’re rapidly running out of:

Oil

Central to the conversation, and it’s most challenging aspect, is the pace at which large companies should change their business models to reduce the negative externalities of their operations. This will most likely reduce short-term revenue and profits, even if the long-term financial benefits provide significant gains. But getting them to do that is incredibly hard.

When I asked Russ Ford, Shell’s executive vice president for onshore gas in the Americas, to quantify Shell’s capital investments in renewables as compared to oil and gas, I could not get an answer. But he unequivocally stated: “it’s small.” When I pressed him on why Shell didn’t invest more, given the negative planetary impact of burning oil and gas, the answer was that Shell needed to meet its obligations to shareholders.

Ford is an exceptionally bright and articulate promoter of the ways in which natural gas will make the world a better place, despite the reality that, as it burns, it sends us ever closer to the perils of global climate change.

What’s more dangerous is the pattern of belief that it’s more harmful to disappoint shareholders than to face the consequences of climate change and the balance sheet. Globally, oil and gas companies have trillions of dollars of oil and gas reserves on their balance sheet. They make money by moving those reserves off the balance sheet and using them to generate revenue. If they left them in the ground, the company (and it’s shareholders) would lose money in the short term, but the benefits to all of humanity could far outweigh those losses.

Water

In Houston, the cost of water over the last five years has skyrocketed from $.50-$1 to $5–$6. That’s a 500% to 600% increase. Yesterday, at the airport I paid $4 for a bottle of water. That’s more than I pay for a gallon of gas. Joe Rozza, Global Water Resource Sustainability Manager for the Coca-Cola Company, projects that the cost of water will increase globally by 200% to 300% over the next decade.

Coke has made water rights one of their signature issues. The company writes that: “We have a role to play in helping the communities we rely upon. We know that to make a meaningful difference, we must focus our efforts beyond the confines of our own bottling plants. Today, nearly one-sixth of the world’s population--more than 1 billion people--don’t have access to safe drinking water. Approximately 2.6 billion don’t have adequate sanitation. Due to the issues surrounding water, billions of people are vulnerable to disease and food insecurity.”

Yet Coke pays nothing for the water it extracts in many parts of the world. What is the "meaningful difference" to local citizens whose aquifer gets depleted as Coke turns their water into an expensive sugary drink? Rozza says that, in many cases, there was simply no one around to collect a fee. What might it cost if Coke had to pay for all the water it uses? Rozza had no idea.

Food

Of the 1 billion people who are chronically hungry, 70% are farmers, as reported by FoodFirst Institute for Food and Development Policy. Among other reasons, food grown in developed countries that heavily subsidize costs creates such a distorted market that small-scale farmers in developing countries can’t sell the food they grow for what it costs them to grow it. Prices are set at levels that are devastatingly low for local growers.

Despite the onslaught of industrial farming, there are pockets of traditional, small-scale agriculture that have stood the test of time, and can still be found, almost untouched over a period of 4,000 years, in South and Central America, Southeast Asia, and parts of Africa. They offer promising models of sustainability that promote biodiversity that thrive without agrochemicals and sustain year-round yields even under marginal environmental conditions.

Contrast that to the state of food and food consumption in America, where 40% of the energy used in production goes to fertilizers, pesticides, and herbicides and 80% of antibiotics sold are used for animals. A change is needed.

What We Need

We need braver leaders like Paul Polman, Unilever’s CEO, who declares unequivocally that if your concern is short-term profits, you should invest your money in another company. Shareholder value needs to start meaning something different.

I give Shell a lot of credit for facilitating the conversation we had. Dialogue always precedes change. At the end of the day, I am fearful that history will judge them and us quite harshly. We know there’s a brick wall in front of our car. We devote endless hours debating how to apply the brakes. Do we tap them? Do we ease off the gas while we tap on the brakes? As the wall approaches, there remains certainty that we will crash. The only question is how fast we’ll be going when we hit the wall. Collectively, we just don’t seem to have the will to turn the car around.

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4 Comments

  • Caroline Clarke

    Look my friend, honestly its like  you are kidding me arn't ya - I cannot believe the misinformation - I wish we debated over as much I mean maaaaaaaaaaaaaattttttttttttttteeeeeeeeeeee we talking 2.5 cents on a six pack - is this really that frightening?  This is a light hearted translation on a conversation I had with a gentlemen coming out of the Australian Institute of Management last week

  • Caroline Clarke

    On a more serious note, engaging together in open forams fosters positive tiple bottom line action - the iterative clearly demonstrates an understanding on normative OH & S - stakeholders are also shareholders and it would be remiss given the implications on risk failures - organisations are realising values upstream and downstream - and gaining from these associations.
    Kind regards
    Caroline

  • Paul B.

    These are all great points.  We need more dialogue about the life cycle assessment of different products we consume, because the impact is often hidden.  Ignorance is bliss for many consumers, which is a many dilemma in the global economy.
    http://mindfulstew.wordpress.c...