Coming to a Head

 
 

RM0914_drybeerFrom January through May, drought in the western states  caused more than $4 billion in economic losses, according to Aon’s July Global Catastrophe Recap.

The effects of this drought could be far-reaching. The National Climate Assessment identifies particularly critical changes already underway for agriculture, energy production and public health throughout the Southwest. “The projected decline in snowpack and stream flow will lead to the decrease in recharge and water supply for human and ecological consumption,” the University of Arizona’s Water Resources Research Center explained. “The report presents evidence of irrigation dependence, and the vulnerability of high value specialty crops to extremes of moisture, cold and heat.”

Major agricultural corporations in the region have already had to face the immediate consequences of persistent drought and a longer, more destructive wildfire season. But those downstream are also seeing cause to act, most notably though proactive sustainability planning.

Many of the country’s breweries are being forced to take notice. Drought and wildfire threaten the watersheds from which they draw billions of gallons of water annually for brewing and processing beer, while the hops and barley used to make that beer demand more water for irrigation as temperatures rise.

Beer and a Better World
America’s largest brewer, Anheuser-Busch, has made conservation a top priority, reporting in early June that it cut water use in the United States by 45% over the last 10 years-32% since instituting a rigorous global goals program in 2009. “Our strategy has really shifted a bit to think about the supply chain and where we can have an impact in reducing risk and reducing costs, not for ourselves, but really for the whole value chain,” said Senior Global Director of Beer & Better World Burt Share.

The company estimates that 90% of its water use is agricultural, so it sponsors preservation initiatives in critical water basins near its breweries and suppliers’ farms. After an extensive risk assessment process, staff members including Angie Slaughter, manager of water and wastewater initiatives in North America, went into the field to engage with primary stakeholders and determine the most impactful projects to foster long-term sustainability. As a result, Anheuser-Busch formed a partnership with the Bureau of Reclamation, the University of Idaho and Washington State University to advance the bureau’s AgriMet program.

“AgriMet has been around since the ’80s and basically provides growers with weather and climate data to aid in their irrigation scheduling so that they can use a data-driven approach to decide how much water they really need instead of it being more subjective,” Slaughter explained. “There is currently an online irrigation scheduling system that is very easy to use and very user-friendly for the grower. Now, we are working with them to develop a smartphone application.”

Anheuser-Busch has provided funding up front for farmers to adopt the software and donated money to construct six different data reporting stations that are now online and operational. To further this data-driven approach, case study work is underway in conjunction with the University of Idaho to try to quantify water savings. “That is the missing piece-the details of how much you can save using this, versus what the grower may have historically been doing,” Slaughter said. “That data will help prove to growers the financial benefit, that quality won’t be harmed, and that their yield will be better or at least maintained.”

Integrating Risk Management Technology
Anheuser-Busch found that custom technology helped with every part of the process in improving sustainability. Their comprehensive water risk assessment process begins with a high-level look at each facility, from farms to factories. “If we see an initial level of risk, we dive pretty deep into physical, regulatory and reputation risk with a proprietary tool that we developed on our own,” Share explained.

To operate more effectively, the company uses a management system called Voyager Plant Optimization (VPO). “Think of it as a standard operating procedures and a guidebook for how to operate a brewery,” he said. “It’s got pillars for the environment, safety, logistics, maintenance, quality and people.”

VPO includes more than 500 best practices that can be looked up any time, so a brewery in Europe that has the same equipment as a brewery in the United States can implement the same best practices for how to start, operate and shut down a piece of equipment, ensuring optimal savings at all facilities.

“There’s no silver bullet to sustainability. It’s really about the management system and commitment to discipline every single day because the little things add up,” Share said. “All of this really depends on our people. We are very proud of the progress we have made by sharing best practices, optimizing information, and looking at our performance on a daily basis to know when we are out of control, examine why we are using higher amounts of water and energy, and correct behavior.”

The tides of change are not solely powered by the influence of Anheuser-Busch’s considerable market share-the need to adapt for greater sustainability is abundantly clear at every link in the supply chain. “In water-stressed areas, people get it, stakeholders get it,” Share said. “NGOs that we talk with, community groups, government groups, they all get it because water is all local. Just like our barley-growers, a lot of other groups are very eager to work with us because, when you live in a water-stressed community like that, the need to take action is a very easy concept to understand.”

The company has reduced its water-to-beer ratio to 3.35 barrels of water to make a barrel of beer (relative to an industry average of about six barrels), and aims to hit 3.2 by 2017. It is not so easy, however, to benchmark success on a company-wide challenge as big and ever-changing as adapting to water scarcity and maximizing sustainability. To a degree, according to Share, the company is content to accept that. “It’s really tricky to quantify the impact of sustainability efforts when many of the efforts are outside of our walls, because the benefits are out there, but harder to measure,” he said. “We also think of those projects as a little bit beyond our lives. Think of them as managing risks-we choose to ensure that we’re managing the risks for everybody, not just our business.”

Indeed, the company’s water-saving measures have made an impact on the bottom line for everyone involved. Anheuser-Busch’s annual water risk assessments concluded that 10% of its breweries were high risk in 2013. A 5.4% reduction in use that year helped preserve resources in drought-ridden communities while saving the company $2.5 million on water alone, according to its 2013 Global Citizenship Report.

Tightening the Tap for a Better Bottom Line
Three of MillerCoors’ eight breweries rely on stressed watersheds. The company’s massive brewery in Fort Worth, Texas, for example, draws 770 million gallons every year from the Trinity River Basin, where persistent drought has caused tensions among ?private landowners, municipalities and other stakeholders.

“Water is just critical to us,” MillerCoors sustainability chief Kim Marotta told the Associated Press. “Looking ahead, we needed to find a way to brew more beer but use less water.”

Making that priority clear throughout the organization has been key in maximizing the impact of changes from the fields to the factory floor. “Clear, focused leadership at all levels was the catalyst for the step-change improvement we experienced,” said Fernando Palacios, executive vice president and chief integrated supply chain officer. “We fostered a collective mindset that saving water was the right thing to do, not just for the environment but for our business.”

So the company has undertaken significant sustainability efforts, reducing water use by 9.2% from 2012, according to a new report. MillerCoors is now down to 3.4 barrels of water per barrel of beer produced, and as low as 3.2 at the most water-stressed plant in Fort Worth. That amounts to a total savings of 1.1 billion barrels of water-enough water to meet the needs of more than 11,500 average American households or the entire nation of Belgium for a year, the report points out.

The company’s efforts include using water sensors to release only enough water for irrigation, planting native grass to reduce erosion and runoff, and monitoring machinery for any leaks or excess water use. Engineers and staff have come up with more creative ways to conserve in the plants. For example, the kettles that heat the barley produce so much steam that the condensation can be reused. Later, rather than propel bottles down the assembly line using a cascade of soapy water, sustainability engineers have introduced a dry lube to keep the bottles from clanking and cracking.

MillerCoors is also investing in sustainability from the ground up by participating in research on sustainable barley production and developing new breeds of barley that require less water. Further, uniting their suppliers with water conservation groups has helped implement best practices for sustainable farming upstream.

“Our strategy is to focus on people and processes as our major levers for improvement, with technology as an enabler,” Palacios explained.

Smaller Breweries Feel the Pressure
Independent breweries are feeling the strain of water scarcity even more acutely, but size and location dictate how quickly they can hop into change.

“In Colorado, we have always had a water shortage, so it is not a particularly new challenge, we are just having to change things a little bit more as we go,” said Corey Odell, sustainability coordinator at Fort Collins-based Odell Brewing Company. “It has been a constant process for us since the very beginning to limit our water usage, because brewing is a pretty high water-use activity.”

In its 25 years of operation, the brewery has learned to adapt to drought in Colorado, building room in the budget for rising water prices and better technology for sustainability. A side effect of more severe drought, however, had an impact that many other businesses may not have considered. “With the wildfires that were happening in the area, a lot of ash was coming down the river,” she explained. “Fortunately, the city was able to work with us and other breweries in the area to maintain the water quality that we are looking for.”

Buying water from the city ensured that flavor quality was not impacted, but it does increase the company’s need to account for every ounce as the region endures severe scarcity. Further, Odell pays more for city water, as the price is subject to change based on availability and because it must be treated by the city.

Odell has elected to invest in better technology to maximize sustainability and tighten the tap on water use. Their new “Cleaning in Place” technology halves the amount of water used to rinse out tanks, and a circular pump system on the bottling line reduced water use by 14%, saving 1.25 million gallons used to cool, rinse and clean bottles during production. “We were at 4.3 barrels of water used per barrel packaged,” Odell reported. “After implementation of that pump, we went down to 3.7-it made that immediate and huge a difference.”

The company has already made most of its money back, and estimates it will fully recoup on the investment after three years. “Sustainability is an integral part of our company. It is not just about reducing for the planet, though. That is a big part of it, but it is also a very good thing to focus on economically,” she said. “I think a lot of businesses do not see that aspect of it, because it does imply more cost up front.”

Water savings come with a hefty initial price tag and, while the gains are often two-fold for bigger breweries, so are the challenges for small businesses. Texas-based Cedar Creek Brewery gets its water from the local Cedar Creek Lake, which has been down as much as seven feet over the past few years due to drought. While there are no restrictions on water use for businesses in the area, the main ingredient does cost significantly more, and penalties are imposed at certain usage levels, proving something of a catch-22 as a company tries to stay afloat or expand. “We’re probably paying 20% more in water than we were last year,” said owner Jim Elliott.

Unlike the Odell Brewing Company, Cedar Creek does not get assistance from the state to source or save water. It also produces far fewer barrels of beer than Odell. Even in states like Colorado, smaller breweries often do not qualify for funding toward sustainability initiatives, and may even face penalties if, for example, they enroll in a wastewater recycling program but do not produce enough waste.

Nevertheless, the Great American Beer Festival gold medalist tries to recycle some of the water from the brewing process. But for a small business like Cedar Creek, which has only been around since 2010, most of the technology to make a big difference is just too expensive, and Texas authorities do not offer financial assistance. “It seems like, when you try to do the right thing for the planet, it costs more,” Elliott said. “We’re doing it because it’s the right thing to do-certainly not because it’s easier.”

 
Hilary Tuttle

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About the Author

Hilary Tuttle is senior editor of Risk Management.

 
 
 

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