In an era where climate change and resource scarcity are increasingly pressing concerns, water risk has emerged as one of the most significant challenges facing the global food industry. With agriculture accounting for approximately 70% of global freshwater withdrawals, food and beverage companies stand at the critical intersection of water security and food production. This blog explores the complex water risks threatening the food sector and examines how innovative approaches to water management are helping companies build resilience while securing sustainable growth.
Understanding Water Risks in the Food Industry
Water is the lifeblood of food production— from irrigation for crops to processing operations in manufacturing facilities, water is the essence of agriculture. However, the food industry's heavy dependence on this finite resource creates significant vulnerabilities in an increasingly water-stressed world. According to recent research, one-quarter of the world's crops are grown in areas with water supplies that are highly stressed, highly unreliable, or both. This statistic is particularly alarming considering the projected need to produce 56% more food calories by 2050 to feed an anticipated 10 billion people.
The Financial Impact of Water Risks on Food Companies
The financial implications of water risks for the food industry are substantial. According to CDP 2020 estimates, the food and beverage sector faces approximately $20 billion in value at risk due to water-related challenges. These risks can manifest in various ways:
Production Disruptions: Water scarcity can force processing facilities to reduce production or shut down entirely. In severe cases, this leads to supply shortages, higher prices, and inability to meet customer demand
Supply Chain Vulnerabilities: With two-thirds of rainfed crops vulnerable to unpredictable weather patterns and 60% of irrigated crops grown in areas facing high or extremely high levels of water stress, global food supply chains face increasing instability. Recent multi-year droughts in regions like California's Central Valley have slashed yields of key crops like almonds and tomatoes, disrupting entire supply chains
Increased Operational Costs: Water shortages often lead to higher water prices. Between 2010 and 2019, water prices in major U.S. cities rose by 60%—a trend seen globally as scarcity intensifies. Furthermore, companies may need to invest in alternative water sources, treatment facilities, or efficiency technologies to maintain operations in water-stressed areas.
Transforming Water Risk into Strategic Advantage
Food companies can transform water challenges into opportunities for innovation, efficiency, and competitive advantage. Here's how leading companies are addressing water risks:
Centralized Data Management
Water risk assessment requires consolidating information from diverse sources—satellites, IoT sensors, regulatory databases, and company records. AI-powered platforms can bring these datasets together, offering sustainability teams dynamic, site-specific risk dashboards that flag emerging threats before they escalate.
This centralized approach not only improves visibility but also unlocks operational efficiency and cost savings. Companies that optimize water use, fix leaks, or install recycling systems reduce exposure to water risks while cutting long-term costs.
Proactive Risk Framing and Prioritization
Leading food companies are reframing water as a material business risk—not just an environmental concern. By highlighting the potential financial impacts of droughts, floods, or supply disruption, sustainability leaders can make a compelling case for investment in water stewardship.
This shift in framing builds long-term resilience and competitive advantage. In a world of increasing water stress, companies that proactively secure water access and invest in local infrastructure are better positioned to withstand shocks. Their operations continue when competitors must shut down, and they often gain regulatory and community support.
Integration with Broader Sustainability Goals
Water risk management should be embedded into broader sustainability and risk architecture. When water performance is tracked alongside climate risk, supply chain resilience, and enterprise risk, it gains visibility with the C-suite and resonates with investor expectations.
This integration enhances access to capital and financing incentives. Increasingly, investors are rewarding strong water performance with inclusion in ESG indices, access to green bonds, or better loan terms through sustainability-linked financing.
Case Studies: How Leading Food Companies Are Addressing Water Risks
1) Citrus Processor Integrates Water Risk Management with Sustainable Financing
A leading global citrus processor, operating extensive lemon plantations and industrial processing facilities across Argentina, South Africa, and Uruguay, sought to address the agricultural sector’s significant water footprint. To align financial incentives with sustainability, the company issued sustainability-linked bonds with an initial value of $15 million (expandable to $50 million). The interest rate on these bonds was directly tied to achieving a 15% reduction in water consumption by 2025, making water efficiency a core business objective
The company faced several challenges in meeting these ambitious targets:
Collecting and consolidating water risk data from 13 sites in three countries was logistically complex and time-consuming, given the diversity of water sources and local conditions.
Extracting actionable insights from fragmented and highly localized data required significant water expertise, which was not always available internally.
Coordinating internal and external teams and centralizing risk data for both agricultural and industrial operations proved difficult, hindering strategic decision-making and stakeholder engagement
To overcome these hurdles, the company partnered with Waterplan, leveraging its AI-powered SaaS platform to centralize and analyze water risk data at scale. The platform integrated local and global datasets—including groundwater levels, dam and reservoir status, water quality, local regulations, satellite imagery, and weather patterns—to produce comprehensive risk profiles for each site. This enabled the company to:
Visualize and differentiate risks between agricultural sites (which struggled with irrigation efficiency) and industrial sites (which faced water availability and supply challenges).
Standardize and score water risk indicators such as scarcity, flooding, quality, regulatory, reputational, and infrastructure risks.
Continuously monitor progress toward water reduction targets, ensuring compliance with bond conditions and supporting data-driven decision-making for sustainable water management
By embedding water risk data into financial strategy and operational planning, the company not only improved its water stewardship but also secured favorable financing terms, demonstrating how robust water management can create tangible business value.
2) Global Berry Producer Builds Resilience through Data-Driven Water Risk Assessment
A major international producer of fresh berries, with operations spanning multiple continents, recognized the critical importance of water availability and quality for maintaining crop yields and product quality. The company’s expansion and production planning were hindered by insufficient understanding of site-specific water risks, particularly in regions with variable water supplies and regulatory environments.
Key challenges included:
Difficulty accessing and consolidating granular local data for each farm, as water risks are highly localized and data sources are often fragmented.
Uncertainty in production planning due to the complexity and time required to integrate water risk insights into site selection and operational decisions
To address these issues, the company partnered with Waterplan to implement a holistic, AI-driven approach to water risk management. Waterplan’s platform gathered and centralized farm-specific data on physical, regulatory, infrastructure, and reputational water risks. Waterplan’s team of agricultural and water experts analyzed this complex data to provide actionable, executive-level insights. These insights enabled the company to:
Develop risk profiles for each site, guiding decisions on site expansion, resource allocation, and operational sustainability.
Integrate water risk data into CAPEX planning, prioritizing investments based on quantifiable risks.
Establish a recurring, systematic process for water risk assessment, ensuring that water considerations are embedded in global production strategy and that the company remains resilient amid changing water conditions
This partnership exemplifies how advanced data integration and expert analysis can transform water risk from a barrier into a strategic advantage, supporting both operational continuity and long-term sustainability in the food sector.
The Path Forward: Building Water Resilience in the Food Industry
As water risks continue to intensify, food companies must take decisive action to ensure business continuity and contribute to global food security. Here are key recommendations:
Conduct comprehensive water risk assessments: Evaluate exposure to water risks across operations and supply chains, considering both current and future scenarios under climate change.
Set contextual water targets: Develop water stewardship goals that reflect the specific challenges of each watershed where you operate, rather than applying one-size-fits-all targets.
Integrate water into financial planning: Consider water risk in investment decisions, explore sustainability-linked financing, and quantify the potential financial impact of water-related disruptions.
Leverage technology for data-driven decisions: Implement advanced monitoring systems and AI-powered analytics to track water use, identify efficiency opportunities, and predict emerging risks.
Engage with watershed stakeholders: Collaborate with local communities, governments, and other businesses to address shared water challenges and develop collective solutions.
Water risk is no longer a peripheral concern for the food industry—it has become a central business challenge that threatens operations, supply chains, and long-term viability. With one-quarter of the world's crops grown in water-stressed areas and demand for food rising, the industry must transform how it manages water resources.
The time to act is now. The food companies that will thrive in the coming decades will be those that recognize water as a strategic resource and invest in the systems, partnerships, and innovations needed to ensure its sustainable use.
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