{"id":11074,"date":"2016-11-04T07:04:08","date_gmt":"2016-11-04T11:04:08","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/wasted-water\/"},"modified":"2016-11-04T17:17:02","modified_gmt":"2016-11-04T21:17:02","slug":"wasted-water-an-inside-look-at-ab-inbevs-water-risk-approach","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/wasted-water-an-inside-look-at-ab-inbevs-water-risk-approach\/","title":{"rendered":"Wasted Water: An Inside Look at AB InBev\u2019s Water Risk Approach"},"content":{"rendered":"

Current Water Scarcity Crisis<\/u><\/strong><\/p>\n

As an environmental science and public policy major at 性视界 College, I\u2019ve studied the real and growing water scarcity threat. Globally, 1.2 billion people do not have access to clean, potable water and over 4,000 children die from water-borne diseases every day.[1]<\/a> Looking ahead, the Water Resources Group predicts a 40 percent freshwater supply gap by 2030.[2]<\/sup><\/a> One of the greatest contributors to the growing water scarcity crisis is climate change<\/strong>.<\/p>\n

Climate change is altering the water cycle, affecting where, when, and how water is available, which has led to endemic natural disasters (e.g. floods and droughts), regional and international debates of water usage and quality, and rising water costs. [3]<\/a> With exponential population growth and more water-stressed regions globally (see map below) [4]<\/a>, water-based businesses like Anheuser-Busch InBev (AB InBev), are under increased pressure to anticipate and mitigate their internal and supply chain water risk. This research assesses AB InBev\u2019s, albeit limited, water risk approach and proposes recommendations for the firm moving forward.<\/strong><\/p>\n

\"7857068_orig\"<\/a><\/p>\n

Why AB InBev?<\/u><\/strong><\/p>\n

\u201cBeer is the world\u2019s oldest and most widely consumed alcoholic beverage and the third most popular drink overall after water and tea.\u201d[5]<\/a> While the beer supply chain is a long, involved process, the greatest input is water.[6]<\/a> The average beer contains approximately 90 percent water.<\/strong>[7]<\/sup><\/a> In other words, it takes roughly 20 gallons of water to make a pint of beer.\u201d[8]<\/a><\/p>\n

Given that beer is mostly composed of water and water scarcity is a looming issue due to climate change,[9]<\/a> it is more important than ever for companies like AB InBev, the largest brewer in the world, to understand how a brewery can mitigate water risk. [10]<\/a><\/p>\n

Assessing AB InBev\u2019s Water Risk Approach<\/u><\/strong><\/p>\n

Water risks exist within a beverage company\u2019s internal operations and supply chain. The figure below\u00a0depicts AB InBev\u2019s water and carbon footprint from upstream to downstream. As exhibited, over 90% of water use occurs outside of brewery walls through the sourcing process.<\/strong><\/p>\n

\"picture1\"<\/a><\/p>\n

AB InBev closely monitors its manufacturing water use and has met progressive targets through an assortment of technological improvements, operational innovations, and awareness campaigns. For example, AB InBev\u2019s system-wide approach to optimize efficiency is called Voyager Plant Optimization management system, standardizes processes and measurable standards for operations, quality, safe, and the environment in every AB InBev facility.<\/p>\n

While most of AB InBev\u2019s water use is upstream in the supply chain, the majority of the firm\u2019s water risk mitigation efforts are focused on reducing their in-house manufacturing water use. [11]<\/a> Looking outside the brewery\u2019s walls, AB InBev is beginning to reduce its water footprint in supply chain operations by increasing communication and engagement with suppliers like barley farmers. Currently, AB InBev\u2019s smallholder barley farmers in water-stressed regions like India and Mexico, operate in low infrastructure environments because they lack the economic incentive to invest in sustainable technologies. With a focus on the agro-business value chain, AB InBev management has started to measure the water footprint of farmers and malting plants to assess potential water conservation strategies. However, significant water stewardship efforts have not been implemented in upstream supply chain processes yet, which causes great risk to the company, especially in the light of climate change.<\/p>\n

One reason why a market leader like AB InBev is not currently minimizing its total water risk across the supply chain, is potentially the tradeoff between the impact<\/em> of the risk response and the control<\/em> the company has over the response \u2013 see matrix below. Though breweries have full control over water use reductions in internal operations, these reductions have a low impact since only five percent of a brewery\u2019s total water use occurs in-house.<\/p>\n

Corporate social responsibility efforts, like awareness campaigns, have a fundamentally weak impact on the problem. Water stewardship in supply chains are high impact water risk responses, since 95 percent of a AB InBev\u2019s water footprint is in the supply chain. However, AB InBev has less, direct control over the outcome of these responses. My recommendation is for AB InBev to pursue a high impact, high control water risk strategy which views its water input as a collective asset and risk across stakeholders.<\/p>\n

\"picture2\"<\/a><\/p>\n

Moving Forward<\/strong><\/p>\n

Breweries \u2013 like AB InBev \u2013 have an opportunity to lead the beverage industry in global water stewardship. In an era of increasing water stress and industry demands, breweries need to re-evaluate and distill their water practices internally and in supply chains.<\/p>\n

Looking ahead, AB InBev should view water as a shared value and risk across the supply chain. While an individual actor, like AB InBev, might not see the \u2018business case\u2019 for addressing water risk in supply chains, that actor may have more leverage and impact if the risk of action is shared with other stakeholders in the supply chain.<\/p>\n

 <\/p>\n

(787 words)<\/p>\n

[1]<\/a> “Water for Life: Making It Happen.” World Health Organization<\/em>. 2016. Web.<\/p>\n

[2]<\/a> Giulio Boccaletti, Sudeep Maitra, and Martin Stuchtey, \u201cTransforming Water Economies,\u201d McKinsey & Company, 2012, p. 1 https:\/\/www.mckinsey.com\/~\/media\/McKinsey\/dotcom\/client_service\/Sustainability\/PDFs\/McK%20on%20SRP\/SRP_09 _Water.ashx<\/a>. 2016. Web.<\/p>\n

[3]<\/a> \u201cWater Resources.\u201d United States Global Change Research Program http:\/\/www.globalchange.gov\/publications\/reports\/scientific-assessments\/us-impacts\/climate-change-impacts-by-sector\/water-resources<\/a>. 2016. Web.<\/p>\n

[4]<\/a> “Vital Graphics.”\u00a0Global Water Stress and Scarcity<\/em>. United Nations Environmental Program (UNEP). 2016. Web.<\/p>\n

[5]<\/a> Nelson, Max. The Barbarian’s Beverage: A History of Beer in Ancient Europe<\/em>. London: Routledge, 2005. 1-2.<\/p>\n

[6]<\/a> “Water Use: Thirsty Work.” The Economist<\/em>. Web.<\/p>\n

[7]<\/a> “Beer Brewing; The Art and Science – Water.” Biochemical Engineering Department. Rensselaer Polytechnic Institute. Web.<\/p>\n

[8]<\/a> Alter, Alexandra. “Yet Another ‘Footprint’ to Worry About: Water.” The Wall Street Journal<\/em>. Web.<\/p>\n

[9]<\/a> “It’s in the Water.” Energy & Resources<\/em>. Geotimes. Web.<\/p>\n

[10]<\/a> Anheuser-Busch InBev Annual Report<\/em>. Rep. AB InBev. 2016. Web.<\/p>\n

[11]<\/a> Global Citizenship Report 2015<\/em>. AB InBev. 2016. Web<\/p>\n","protected":false},"excerpt":{"rendered":"

Increased global water scarcity due to climate change poses a real threat to beverage businesses like AB InBev, who are under increased pressure to anticipate and mitigate their water risk in internal operations and supply chain<\/p>\n","protected":false},"author":1923,"featured_media":11082,"comment_status":"open","ping_status":"closed","template":"","categories":[62,64,66,44,1691],"class_list":["post-11074","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-ab-inbev","category-beer","category-brewery","category-supply-chain-management","category-water-risk"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/climate-change-challenge-2016\/","yoast_head":"\nWasted Water: An Inside Look at AB InBev\u2019s Water Risk Approach - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/wasted-water-an-inside-look-at-ab-inbevs-water-risk-approach\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Wasted Water: An Inside Look at AB InBev\u2019s Water Risk Approach - 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