Sony Semiconductor is investing in aquifers. The brewers of Miller beer are financing conservation agriculture. Companies whose environmental concerns once stopped at the factory gates are now getting into the conservation business–and saving boatloads of money, too.
Halting environmental deterioration before it hits the bottom line is becoming standard at a few influential companies, according to the non-profit Ecosystem Marketplace.
Companies are assuming a role once reserved for governments and paying for environmental protection, especially around water resources. Almost every multinational firm is now facing water stress and degraded ecosystems that can undermine profit margins. The investor group CDP reports about three-quarters of Global 500 firms they’ve surveyed cited water as a major business risk that will continue to get worse. Annual impacts are expected to grow, hitting as much as $1 billion for some companies within the next five years, says CDP.
One defining moment for the concept of investing in “ecosystem services” came in the 1990s when New York City decided to purchase millions of acres of upstate land to preserve its watershed rather than build new purification plants, saving an estimated $9.5 billion. Now companies, not just governments, are investing in the same type of projects to protect their water supplies, Ecosystem Marketplace‘s reports say.
In Japan, Sony’s plan for a semiconductor plant in a water-stressed area sparked local resistance. Rather than fight, the company paid farmers roughly $110 per hectare to flood their fallow fields, recharge the aquifer, and then purchased crops in the local community to offset the plant’s water demand. The plant was built and groundwater levels now appear to be rising again.
In Colombia, Bavaria Breweries, a subsidiary of SABMiller, was faced with a rocketing water bill. Vegetation in the high-altitude grasslands above Bogotá had been killed by cattle-ranching and farming, which caused massive erosion into the rivers. Treating the water was costing downstream users millions of dollars. A fund was set up with $240,000 from Bavaria, as well as public money, for agricultural producers to move cattle off of steep slopes, improve farming practices, and monitor protected lands. Bavaria estimates Bogota now saves about $3.5 million annually with the brewer’s water treatment costs falling by $458,000 annually. SABMiller says it’s now rolling out its “beyond-the-breweries” approach to other areas including Peru, Tanzania, South Africa, Ukraine, Colombia, Honduras, India, and the USA.
The model may work around the world. “There’s an opportunity to think about a natural infrastructure solution–instead of trying to engineer ourselves out of every problem, which can very expensive and doesn’t really address the root cause,” Genevieve Bennett, senior associate at the Ecoystem Marketplace, wrote in an email.
But there’s still a long way to go. Of the $8.2 billion spent each year to preserve and rehabilitate forests, wetlands, and water-rich landscapes, only 1% comes from the private sector. Most remains public money. The CDP also reports that while two-thirds of surveyed companies have set their own internal water targets, only 5% are formally investing beyond the factory gates.
The breakdown for companies is often going beyond “business as usual.” Scientific environmental studies, stakeholder meetings, and restoration projects are often new and unfamiliar, says Bennett, along with partnering with local organizations. But it can be done.
“Any sector with a lot of exposure to water risk should be thinking about managing that risk broadly–in other words not just at the level of their operations,” says Bennett. “[And] we find that where companies partner with other organizations in the community, projects are more likely to happen.”