"How does a company respect local communities' right to water when operating production facilities that require high levels of water consumption and where the community suffers from an inadequate water supply by relevant government authorities, but where the business is welcome as a source of jobs and revenue?"

Access to water is one of the major challenges the world is facing today. The demand for water will continue to increase as the global population grows and exerts increasing pressure on supplies. This distorted relationship between demand for water and available resources is known as water scarcity. In addition to growing water demand, in certain areas on-going water pollution and climate change are likely to exacerbate water stress – which is a symptomatic consequence of scarcity – by reducing the amount of potable water available. As a result of these forecasted developments, access to water will, over time, become unreliable in many places, leading to water insecurity. Indeed, water crises due to failures to adapt to the effects of climate change was identified by the World Economic Forum's (WEF) 2017 Global Risks Report as one of the key risks that the world may face over the next 10 years.

Some countries may be more greatly affected by the problem of water scarcity than others. Drought prone countries with insufficient water resources, such as those in the Middle East and North Africa will present the greatest challenge. In turn, the balancing of competing demands for water may negatively impact on food and energy security, poverty reduction, and biodiversity, and may further fuel social conflicts. Other countries, such as Russia, may not face such large challenges, having sufficient water resources and expecting an 8% contraction in its population – from 144 million to 133 million – by 2050.

However, even where countries may have sufficient internal water supplies, safe water for personal and domestic use may not be accessible to everyone. The UN estimated in 2016 that some 783 million people lacked access to safe drinking water and more than 2.4 billion to basic sanitation. Furthermore, it was observed that 1.5 million children under five years old die each year because of water- and sanitation-borne diseases. This alarming situation helped lead the UN General Assembly to recognise access to clean water and sanitation as a human right.

Water scarcity will have implications for all business activities. However, heavily water-dependent businesses will face the greatest challenge. Examples of companies that may be affected the most include gold-mining companies that use high pressure jets of water to dislodge rock material or move sediment, the producers of biofuel crops and sugar-dependant soft drink companies, or other agribusinesses harvesting ‘thirsty crops', such as rice and wheat. Opting for alternatives to such business activities may sometimes be counterproductive, leading to other negative impacts on human rights.

Companies may come under pressure to reduce water use and waste and increase efficiency to win the ‘social licence' to operate where local communities already suffer from inadequate access to safe water for personal and domestic use, as well as for use in agriculture. This may be an issue despite clear benefits that business activities may offer to countries' economies in terms of new jobs created and revenue generated.

Environmental and Social Impact Assessments (ESIA) are a key tool for planning large-scale projects, and are intended to identify the impact a proposed project may have on the environment of a project hosting state and its population, especially the communities in the project's locality. As such, it is a widely recognised and utilised tool. Furthermore, it is a legal requirement in most countries. When the project hosting country does not legally impose such a requirement, companies incorporated in OECD countries are nevertheless advised to conduct an Environmental Impact Assessment (EIA). In addition, the application of such assessments is one of the conditions that must be met in order for companies to be eligible to receive financial support from the International Finance Corporation (IFC) and banks that apply the Equator Principles.

In most cases, an ESIA first involves gathering information on the environmental and social consequences of proposed activities and their alternatives. Based on anticipated project impacts, the ESIA provides measures to avoid, minimise or mitigate these impacts. It also provides a mechanism that ensures the participation of parties that may be affected by the proposed activities in the decision-making process, often through public meetings or consultation.

Despite in general being a very useful technique – including for addressing the impact of proposed business activities on water resources – the ESIA can sometimes become a ‘box-ticking' exercise, whereby the compliance of proposed project activities with certain rules and regulations is checked, but there is no meaningful involvement of relevant stakeholders. This is especially the case in countries that do not have strong enforcement of environmental laws. In addition, not all new project activities are subject to this requirement, but only those that are likely to have a significant impact owing to their nature, size or location. This can – and in fact does – create uncertainty as to when such analysis is required, an issue that is typically resolved through local government consultation.

Developing countries are not unique in facing water stress and restricted access to water. However, the lack of strong legal frameworks in developing countries translates into a higher risk in terms of human rights violations and abuses by state and non-state actors. As a result, the enforcement of equitable access to and sharing of available water resources, as well as provisions addressing water pollution, may be ineffective in developing countries. Weak critical infrastructures and state institutions for the delivery of water services are also major obstacles in these countries.

Considering this, where a state does not fulfil its duties to provide access to a sufficient, safe, physically accessible and affordable amount of water to its population, the positive role that business may play in this area will come to the fore. In such cases, the dilemma for a responsible company is how to ensure that it can successfully continue its business operations in water-scarce areas, whilst respecting the right of local communities to have access to water.

Although all businesses have responsibilities regarding responsible water use, the expectations of companies enabling access to water, such as manufacturers of drinking water or wastewater treatment equipment and utilities companies may be different. Therefore, the companies in these industries are not covered by this dilemma.

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All business activities depend on water to some degree. Some businesses require more water than others due to higher water requirements of a product or a process to produce an end-product (this concept is known as a ‘water footprint'). In addition, the production of the same product may have a different impact on water supplies depending on the country in which it is produced. The following examples illustrate the water footprint of a number of products and processes.

Coffee and tea: Water is used both for growing coffee beans and tea plants and for processing the crops into a final product. The Water Footprint Network (WFN) reports that it takes about 18,900 litres of water to produce 1kg of roasted coffee and 8,860 litres to produce 1kg of fresh tealeaves. The WFN has also estimated that approximately 85 billion m3 of water per year – or 3.7% of the global water use for crop production –is be required to sustain existing worldwide coffee consumption.

Thirty billion cubic metres of water per year is required to sustain the current worldwide tea consumption. Tea is commonly produced in rain-fed areas, which reduces the pressure of tea production on the world's water supplies. Only a small fraction of tea is produced in areas that require irrigation. The water footprint of growing coffee beans and tea leaves is significantly higher than that of post-harvest processing.

While it may have a lower water requirement than growing beans and leaves, the use of water in processing is still significant. For instance, on average, the conventional wet processing of coffee involving the removal of the outer pulp and mucilage, and transportation of the waste products uses between 1,200 litres of water per 50kg of green coffee.

Cotton: The impacts of cotton production on water are two-fold: production may lead to water depletion and adversely may also affect water quality. Both cotton cultivation and processing are water-intensive. It has been estimated that 3% of the world's total freshwater is withdrawn for cotton cultivation. The need for water is low during the early vegetative period of cotton cultivation (10% of total needs), and increases during the flowering period (50-60% of total needs). To produce 1kg of cotton lint, 6,000-22,000 litres of water are required.

Irrigation supplements precipitation quantities, where the latter are not enough to water the crop. Fifty-three per cent of cotton fields worldwide are irrigated, which is partly explained by a higher yield capacity of irrigated cotton. The most commonly used irrigation system – known as ‘the flood-or-furrow' irrigation system –has the lowest (40% at most) water efficiency, despite being the easiest to install. More efficient irrigation systems, such as drip irrigation, are more expensive to install. The countries where irrigated cotton is grown (such as Uzbekistan, Egypt and Pakistan, as well as those in the Mediterranean and other regions with warm climates) lack sufficient quantities of freshwater, have dry climates or suffer from both conditions.

The average volumes of water used at the processing stage (bleaching, dying and printing) and at the finishing stage are 360m3 and 136m3 per tonne of cotton textile, respectively.

The impact of cotton production on water quality at the growing stage depends on the types and volumes of fertilizers used in the cultivation of cotton. Furthermore, many of the pesticides used in cotton production are washed away into either groundwater or surface water bodies.

Biofuel production: Concerns about the negative contribution of fossil fuels to climate change, together with concerns related to energy security, have made biofuels an increasingly attractive alternative. Another advantage of biofuels relates to their potential to contribute to economic development in rural areas, especially in developing countries. However, the production of transport fuels from biomass (plant or animal matter) is water-intensive.

Water use is associated with two stages of biofuel production, which include feedstock production and biofuel refining. The main types of biofuel in use today are ethanol and biodiesel. Common ethanol feedstock include sugarcane and sugar beet, wheat, barley and corn (maize). Biodiesel can be manufactured from virgin or waste vegetable oils – commonly palm, rapeseed, soy(a) and sunflower oils.

The amount of water required for growing feedstock varies subject to the feedstock and where crops are grown. For instance, Europe accounts for the lowest use of irrigation water due to the use of rain-fed rapeseed as a biofuel feedstock. In contrast, in India, where yields and conversion efficiencies are lower and sugarcane is fully irrigated, the amount of irrigated water required to produce one litre of ethanol is 1,400 litres.

Aside from water needed to grow feedstock, the refining process also involves the use of water, the amounts varying subject to the process for fuel production. Generally, water consumption for refining is similar to that for oil refining. For example, ethanol distillation requires 10 litres of water for every litre of ethanol produced. Studies also indicate that the cultivation of biofuel feedstock and the refining of the final product may strain water resources in other ways – by polluting water sources due to use of pesticides and fertilizers.

A transition to the greater use of biofuels is expected to increase its global water footprint tenfold, to an estimated 970 km2 per year in 2030. This situation is likely to exacerbate water stress and make competition for water resources fiercer.

Mining operations: Minerals and precious metals from the mining industry are important for many countries, including many developing nations. Gold, hydrocarbons and iron, for example, are used in a vast range of industries, from energy production to construction and from pharmaceuticals to the production of hi-tech goods.

However, mining operations are also highly dependent on water. High pressure jets of water are used to dislodge rock material or move sediment in order to extract valuable minerals. Water is also important for cooling and lubricating cutting and drilling equipment, processing ore, managing waste tailings and suppressing dust. As a result, the mining industry needs significant volumes of water for mining operations.

According to the United States Geological Survey (USGS), an estimated 5.3 billion gallons of water per day were withdrawn for mining purposes in the United States in 2010. This represented about 1% of total withdrawals of water by the country.

The mining industry is also a significant source of water pollution. Discharges of mine effluent and seepage from tailings and waste rock impoundments affect the quality of fresh water. Sometimes effluents may contain cyanide and heavy metals, which, if discharged unnoticed into surface water and groundwater, may make water unusable and potentially poisonous. For example, research commissioned by Wacam, a Ghana-based NGO, shows that 250 rivers in the Obuasi and Tarkwa mining areas of Ghana have been polluted by cyanide and heavy metals as a result of gold mining operations, by companies including Golden Star Resources and AngloGold Ashanti.

Beverages: Although water makes up to 94% of the contents of beverages, their water footprint is determined by the water intensity of their ingredients and different processes used to produce a final product. For instance, the water footprint of a sugar-containing soft drink is in the range of 170 to 310 litres per 0.5 litre bottle, subject to whether the sugar for the drink comes from beet sugar from the Netherlands or cane sugar from Cuba, the latter being very water-intensive to grow.

For example, in Guatemala, it is alleged that water abstractions for irrigating sugar cane plantations has depleted the flow of major rivers, leaving local communities with insufficient water to support their households. Pollution of the remaining water resources threatens the health of indigenous populations who depended on them.

The growing of ingredients for soft drinks can also result in water pollution because of the use of fertilizers and pesticides. Production of sugarcane is a source of hazardous by-products that, if not carefully disposed of, can negatively impact on the quality of water. In the Guatemalan municipality of San Andres Villa Seca, for instance, it is alleged that waste from a sugar mill was accidentally discharged from a containment pond, contaminating the water sources of a local community. Consequently, many people were forced to move in search of sufficient clean and safe water.

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Real-world examples

Coca-Cola's production of soft drinks negatively affecting the right to water in India

The production of beverages is generally highly dependent on water. The production of sweetened drinks has a greater water impact as a result of the amount of water required to grow sugar. In addition, water requirements for growing sugar in one country are not the same as in other countries due to geography and climate, as will be shown below. Therefore, the virtual water value of a product (i.e. amount of water used in different stages of the production chain) depends on the source of feedstock.

The production of Coca-Cola's soft drinks is not an exception. Coca-Cola reports that it uses about 2 litres of water to produce one litre of soft drink. However, the water intensity of growing sugar, an important ingredient in Coca-Cola's drinks, is significant. Thus, if growing sugar is taken into account, the amount of water required to produce soft drinks increases, with estimates ranging between 340 and 620 litres of water per litre of soft drink.

Insufficient water for business operations risks halting production, thereby threatening job security and revenue generation. Drawing on the already scarce water resources may furthermore leave impoverished local communities with no access to clean, safe and affordable water for their personal, domestic and agricultural use.

Discontent with the operations of Coca-Cola first came to the fore in 2003, when local communities filed a charge against the company for causing severe drought conditions within a radius of 3km from their plant in Plachimada village, Kerala, India. The Coca-Cola plant in the area drew large amounts of groundwater on a daily basis, causing water scarcity that was exacerbated by poor rains in that same year. As a result, in 2004, the Kerala High Court issued an order prohibiting the Coca-Cola plant in Plachimada village from drawing underground water. The plant was subsequently shut down.

A community-led campaign in Mehdiganj, Varanasi, accused the company of exacerbating the water crisis in the area by over-abstracting groundwater for a bottling operation. The authorities ordered the plant to close in 2014 and remediate the damage it had caused. The company was also fined for violating land rights. Campaigns against the operations of the Coca-Cola bottling plants elsewhere in India continue. In 2017, more than a million traders in the state of Tamil Nadu boycotted soft drinks, including Coca-Cola and Pepsi, over concerns of excessive water consumption by large foreign companies.

In response to the continuing campaigns, Coca-Cola has undertaken water stewardship measures. In 2015, the company announced it has achieved its target of replenishing all the water it uses in its products by 2020. In that year, the company claimed to have returned 191.9 billion litres to the environment as treated wastewater in 248 projects across 71 counties; representing 115% of the water used in its global sales volume.

The company has also carried out Source Water Vulnerability Assessments and developed Source Water Protection Plans for every plant it operates. These require the mapping of water sources, assessing vulnerability of the source, and having management plans in place to protect water sources. To date over 3,700 mitigation actions have been identified globally.

This case demonstrates the challenge a highly water dependent business may face if it operates in arid zones where the government fails to impose limits on water use by businesses when granting an operational licence. Weak enforcement of provisions of local communities' right to water– once the business is up and running –further add to the challenges faced by companies. In such cases, good business practice entails securing access to water for local people who depended on that water before the business started operating in the country.

Production of soft drinks and bottled water by PepsiCo exacerbating water scarcity in India

PepsiCo faced a similar challenge to Coca-Cola in India. In 2000, PepsiCo acquired an operational licence to run a plant in the arid Palakkad district of Kerala. The company depends solely on groundwater for its soft drink and bottled water production. It requires around two litres of groundwater to produce one litre of the soft drink.

In response to complaints, the local village council cancelled the company's licence to operate in 2003. It cited as grounds for this decision the fact that over-exploitation of groundwater for the production of soft drinks by the company exacerbated water scarcity in the locality, allegedly leaving 45,000 people facing severe water shortage.

Although the Kerala High Court reversed the decision of the local council, and later in 2008 the Supreme Court of India upheld the decision of the Kerala High Court, the government argued against PepsiCo in the Supreme Court.

In June 2008, NorthStar Asset Management, Inc. and the Unitarian Universalist Service Committee (UUSC), an international human rights organisation based in the US, issued a resolution urging PepsiCo to recognise the human right to water, by adopting and following a policy respecting the right. The resolution received a strong (considering the difficulty of securing support for such resolutions among shareholders) 7% of the vote of shareholders. In response to the resolution, PepsiCo agreed to implement the relevant policy and asked for suggestions on the type of policy it should be implementing.

In 2009, NorthStar Asset Management withdrew the resolution addressing PepsiCo further to the company adopting the suggested policy.