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Maturity and Challenges of Water Sustainability across the Supply Chain Emily Spear Gary Gereffi, Duke University, Advisor May 2011

Master’s Project submitted in partial fulfillment of the requirements for the Master of Environmental Management degree in the Nicholas School of the Environment of Duke University 2011 Emily Spear

Table of Contents
ABSTRACT INTRODUCTION BACKGROUND OBJECTIVE METHODS LITERATURE REVIEW: PRIOR CONTRIBUTIONS TO WATER SUSTAINABILITY CORPORATE ENGAGEMENT AND INITIATIVES NESTLÉ WATERS NORTH AMERICA PEPSICO, INC. THE COCA-COLA COMPANY SUSTAINABLE VALUE CHAIN COLLABORATION INDEX INDEX OBSERVATIONS INDEX RECOMMENDATIONS LEADING PRACTICES OVERARCHING THEMES AND CONCLUSIONS RECOMMENDATIONS LITERARY CITATIONS SOURCE AND AMOUNT OF SUPPORT FACULTY AND SUPPORTING MEMBERS APPENDIX 3 4 5 6 8 10 15 16 22 29 36 38 42 43 47 55 60 64 64 65

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Abstract
Corporate engagement in water sustainability from a supply chain perspective is limited but growing, as a clear business case is manifesting. Increasingly, water is becoming a serious risk for companies with global operations, since water stress and water access problems are growing. To date, companies have cited water as a sustainability priority but often fall short of reporting sufficient data and progress on goals. However, the food and beverage industry has been active in this space, because water is an integral part of their business and touches most aspects of the supply chain. This project attempts to map the current landscape where companies are engaging in water sustainability across their supply chains and to identify various types of engagement, in order to draw out leading practices that will help companies better understand ways of advancing their level of engagement. Three companies were chosen for analysis – Nestlé Waters North America, PepsiCo, Inc., and The Coca-Cola Company – as they met the criteria of being engaged for two or more years, were within the food and beverage industry, and were willing to be interviewed. I created my own Sustainable Value Chain Collaboration Index to map out the companies’ maturity levels based on my own research and corporate interviews. The Index encompasses four key indicators (“Corporate,” “Internal Practices & Policies,” “Value Chain Collaboration,” and “External Stakeholder Collaboration”) with five stages of collaboration. The results from the Index indicate that there are some leading practices upstream with suppliers but still no standardization for best practices (i.e., none reached stage 5) and downstream engagement with customers is very limited. In addition, no company has incentives and accountability for desired behavior for their suppliers when looking at

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“Value Chain Collaboration.” I then conclude with some recommendations on ways companies can employ the Index and improve their level of collaboration with the value chain.

Introduction
Sustainable supply chain has become a buzzword for forward-thinking companies. In the past, the focus has typically been on greenhouse gas emissions, but water is now emerging as a new focal point by which companies can improve their sustainability efforts. It appears that certain companies and industries, which rely heavily on water, are beginning to realize that water is a finite resource with social, environmental, economic, and political implications. A clear business case is presently manifesting for companies to invest resources in incorporating water sustainability across their supply chains in a genuine way. Since water sustainability across the supply chain is an emerging issue, there is not a clear consensus on its meaning, objectives, appropriate level of engagement, approach, implementation, measurement, drivers, and challenges. Thus, this project will take a company perspective to map the current landscape and to identify various types of engagement, in order to draw out leading practices that will help...
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