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Friday, July 4

California can learn from Ford Motor Company's smart water scarcity strategy: Water Crisis Gordian Knot, Part 4

The strategy is twice smart because the water crisis is rushing toward us faster than most supposed 15 years ago.(1)  Coca-Cola, despite the fact that it bottles its beverages in countries with big water issues, didn't even have a water scarcity strategy, and it's already paying for that. (See the GreenBiz report below.)  As early as 2000 far-sighted folks at Ford did realize the importance of developing such a strategy for their globalized plant operations, and the strategy is now right on time, as region after region around the world falls prey to severe water scarcity.

The inspiring part is that when Ford executives saw the crisis on the horizon, they embraced the challenges of dealing with it with gusto. Bravo, Ford!

Yet Ford's strategy can be applied to water crises here in the USA.  I was struck by this remark from a Ford executive:  "The first part of anything is getting the usage measurement and then relating it to something."

This is exactly what California's government hasn't been doing as it attempts to field solutions to drought conditions. The state doesn't know how much water it uses, and guesstimates have been shown to be wildly off. (See the AP report I quoted in the previous post at item #2 on the list.)   Now to passages from the report:
How Ford is motoring ahead with a water scarcity strategy

By Matthias B. Krause
June 23, 2014
GreenBiz.com

For many companies, the cost of water — compared to the overall cost of production — hardly makes a blip on the radar screen. Yet clean water, or lack thereof, can cause a whole factory to suddenly have to shut down or, even worse, lead to a company losing its social license.  In mid-June, Coca-Cola had to learn that the hard way when one of its bottling plants in India got shut down by the authorities because it was extracting too much groundwater.

“The price of the water is not significant at the moment, but it is getting a little more noticeable as an operating expense,” said Will Sarni, director and practice leader for enterprise water strategy at Deloitte Consulting in a recent GreenBiz Group webcast titled "Manufacturing in an Age of Water Scarcity." [see report for link]

“But what happens if you don't have water?” Sarni asked. “What does it mean if you don't have water for a week and you cannot make automobiles?” Sudden regulatory changes can be equally as challenging for companies.

As a result, some are starting to recognize water supply as a fundamental business risk that has to be part of a growth strategy. “How does water – no pun intended – fuel that growth strategy? That is really the right way to think about it,” said Sarni, who urged managers to get in front of the issue as opposed to being defensive about it.  Ford Motor Company is one example of an entity that has recognized the risk early on and took on the challenge.

“Water scarcity and water quality degradation rank among the biggest threats facing our planet,” said Ford's John Fleming, executive vice president of global manufacturing & labor affairs. “Some of our facilities are located in regions where water supplies are already scarce.”

As early as 2000, Ford began to set year-over-year reduction targets and developed a corporate water strategy, building on the success of a manufacturing water strategy. “We've moved beyond merely reducing the water footprint of our facilities,” Fleming said. “We are addressing water concerns in our supply chain and in our broader communities.”

According to Fleming, Ford reduced its global water use by 61 percent, which equals more than 10 billion gallons. Its most recent sustainability report also reveals that Ford reached its target for water use per produced vehicle two years early. Instead of reducing it by 30 percent until 2015 (2009 being the baseline), the target was achieved last year. The new target set this year is going to be minus 2 percent per vehicle produced compared to 2013.

To illustrate how it can be done, Fleming used the example of the Ford factory in Cuautitlán, Mexico. It was built in 1964 in a region where water was already scarce. Since then, many other international corporations established factories there too. Today the underground water table is dropping by 3 to 4 meters per year, according to Fleming, and water has to be pumped in from other regions. Since the 1990s there have been limits on water withdrawal.

Ford adapted to the situation by reducing the water use per vehicle by 58 percent from 2000 to 2013. “The plant developed many creative ways to save water,” Fleming said, citing as examples:
The ecological concrete is a good example for implementing a win-win technology. By letting rain water pass, it recharges 9.700 square meters, allowing 7.5 million liters to penetrate the ground.

At the same time, the concrete is less expensive and easier to maintain, which saves Ford $40,000 in maintenance per year. But Fleming stresses that the problem is too big to be tackled just by one company.
As a result, Ford collaborates with other organizations, both public and private.

"What we're doing really illustrates how water is now becoming more and more a business issue within other industry sectors,” said Sarni, and cited oil and gas, power and utilities, heavy manufacturing and semiconductor manufacturing.

In his view, thinking about water should not just be a management issue, but should result in thinking about stewardship.

One of the big challenges is how to implement the right strategy given that at the moment the price for water does not reflects its real value.

“We are addressing water not from a pure price standpoint but as a scarce resource,” said John Viera, Ford's global director of sustainability & vehicle environmental matters in the webcast.

“A resource that we absolutely need, and if we don't embed the proper and efficient use of water now, it will cause a big problem in the future.”

Fleming stressed that many improvements can be made with relatively small investments: “The first part of anything is getting the usage measurement and then relating it to something. What we are able to measure today is easier than it ever was before.”
  And things are progressing fast.
[...]
Matthias B. Krause is a Berkeley, Calif.-based journalist covering energy, technology, business and the environment. Previously he served as executive editor for the solar power magazine PHOTON USA. His work also has appeared in a wide variety of publications in the U.S. and in Germany such as Green Tech Media, Vanity Fair Germany and Frankfurter Allgemeine Zeitung.
[END REPORT]
 
A big thanks to Matthias Krause and GreenBiz for their informative reporting on the company's strategy.
 
1)  A handful of recent reports grabbed from Google News:
  Is climate change destabilizing Iraq?
Slate Magazine
Drought is becoming a fixture in the parched landscape, due to a drying trend of the Mediterranean and Middle East region fueled by global ...
  Is Water Scarcity Dampening Growth Prospects in the Middle East ...
Brookings Institution
Today, countries in the Middle East and North Africa (MENA) are the most water scarce globally, with per capita freshwater supplies well ...
  Iran's water crisis the product of decades of bad planning
Washington Post
TEHRAN — Iran is headed for a water shortage of epic proportions, and ... Changes in the global climate, a century of rampant development ...
  More people, less water mean rising food imports for Egypt
Reuters
But farms soak up 85 percent of the country's water [it's about 80 percent for California's water usage: Pundita note], above global ... warn that global food security is threatened by water scarcity, with Egypt ...

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