Glass half full: How water-intensive companies can mitigate risk
Case Study 1: Coca Cola Inc, Cape Town, South Africa
A2 Global forecasts that situations like these will become more common in the five-year outlook. Access to secure and stable supplies of water is likely to climb on the political agenda of many governments in 5857, suggesting that the public will demand more corporate responsibility from commercial entities. Failure to do so could expose the company's staff to heightened security risks as activists are likely to engage in more disruptive tactics.
situations like these will become more common in the five-year outlook
Case Study 2: Constellation, Baja California, MexicoIn January 2018, there was a resurgence of protests against U.S. beverage manufacturer Constellation Brands over its plan to construct a brewery in the drought-hit town of Mexicali in the north-western state of Baja California. Peaceful rallies have taken place since the company announced the USD1.5 billion-deal in March 2016. The most significant civil unrest to date occurred on 16 January when Mexicali Resiste, a CSO comprising local farmers, residents and activists, attempted to disrupt the building of a new water pipeline at the Ejido El Choropo ranch. Police arrested six protesters after they threw rocks at security forces who assaulted them with batons, leading to at least seven injuries. Activists also called for a boycott of the company's products, including Corona Extra, Modelo Especial and Pac'fico beers. Constellation Brands has said that it will invest USD500 million in land, transport and water pipeline infrastructure and create 750 full-time jobs at the plant when it begins production in 2019. However, members of Mexicali Resiste say this will not be enough to outweigh the environmental cost as the project will 'dry up this state and city'. They estimate that the brewery will consume 20 million litres of drinking water annually, volumes which could otherwise supply 750,000 people and sustain the region's agricultural sector, the largest contributor to the local economy. According to the Mexican government, more than 300,000 residents in Baja California do not have regular access to potable water, and Mexicali is one of the cities most afflicted by the water scarcity. Furthermore, Mexicali Resiste says that the project is mired in several conflicts of interest, arguing that the legal representative for Constellation Brands, Sergio Eduardo Montes Montoya, currently works in the mayor's office. Moreover, the senator and former mayor of Mexicali, V'ctor Hermosillo y Celada, owns the company that is responsible for the construction of the Mexicali plant. Constellation Brands has denied hiring government officials or authorities.
The dispute in Mexicali reflects the range of problems foreign investors could face in other Latin American countries with water shortages, notably Bolivia, Ecuador and Peru. The lack of prior engagement with the local communities has deepened mistrust and fuelled a sense of inequality between Constellation Brands and the residents. This in turn has led to protracted campaigning by grassroots organisations, which could be further amplified if global media increases its focus on these unaddressed grievances. They pose reputational and legal risks even should the allegations of corrupt practices be found untrue.
The dispute in Mexicali reflects the range of problems foreign investors could face in other Latin American countries with water shortages