Water Stewardship

To be responsible stewards of the water we use, we are becoming more efficient in our water use by reducing the amount we use per liter of product, even as we increase our production volume. We are recycling wastewater, sometimes returning it cleaner than we found it. And we are replenishing, or offsetting, the water used in our finished beverages—an estimated 23 percent¹ so far.

We believe the world contains enough water to meet individual, ecological, agricultural and business needs, but only if everyone works to better manage water resources. As a consumer of water and as a company with a presence that is at once global and local, we have a particular obligation—and a unique opportunity—to be a responsible steward of this most precious of resources. Here is how we are working to do our part.

¹As part of our verification process, we learned that the benefits for two projects had to be adjusted to reflect in-the-field construction decisions and the overall percentage of The Coca-Cola Company cost share of the project.

Communities and ecosystems need plenty of clean, accessible water to thrive, and so does our business. We regularly invest in multimillion-dollar bottling plants whose production capabilities are dependent on local water sources. As demand for water increases and water stress intensifies, the communities that host our facilities may face serious health and economic challenges, and we may face challenges to our growth.

To mitigate water-related risks to our system and to the communities we serve, we have required every one of our bottling plants to conduct a local source vulnerability assessment. These assessments inventory risks to water resources supplying both our facilities and the surrounding communities. Once their assessments are complete, our bottling partners must then develop a locally relevant water resource sustainability program detailing specific risk mitigation actions and deadlines for completing them. Their programs address water challenges at the watershed level, from hydrological vulnerabilities to local government management. Often, the plans include partnerships with local governments and communities, water agencies and nongovernmental organizations (NGOs).

All of our bottling partners are required to implement their source water protection plans by the end of 2012.

In addition to improving our water use efficiency, we are also reducing our impact on local water systems and contributing to improved water quality by recycling wastewater—treating it and returning it to the environment. We have established a stringent process to ensure that the wastewater we discharge meets, and in many cases exceeds, standards set by local regulations. In fact, in some countries, we have introduced the very first wastewater treatment facility. With statistics showing that 90 percent of wastewater in the developing world is being discharged into the environment without treatment, we are committed to ongoing improvements within our own operations and hoping to inspire others to help make significant improvements in this area.

At this time, approximately 86 production facilities across The Coca-Cola Company (39 percent of overall facilities) have indicated that they reuse water before or after treatment, or use collected rainwater, and 49 facilities (22 percent of our overall facilities) have entered some statistics for the amount of collected rainwater or water reused after treatment. Although we do not have data at this time for the amount of water reused prior to treatment, our reporting indicates more than 2,294,000 kiloliters of rainwater or treated wastewater has been recycled or reused.

In 2010, we released 164 billion liters of treated wastewater across our system, including 33 billion liters of treated wastewater for our Company-owned plants. By the end of 2010, 100 percent of the 200 Company-owned plants achieved compliance with our wastewater treatment and discharge standards and now use on-site, municipal or government-approved wastewater treatment plants with secondary treatment. Additionally, 93 percent of our bottling facilities achieved compliance with our wastewater treatment and discharge standards. That number fell short of our goal to have 100 percent of the Coca-Cola system’s facilities compliant by the end of 2010. By the end of 2012, we expect 100 percent of our plants to meet our requirements. Because of delays in construction, government permitting and financing, as well as civil unrest, in some cases, we estimate that 31 of our bottling plants will not meet our requirements until sometime in 2012.

In addition to reducing our water use ratio and recycling wastewater, we are also working to replenish an amount of water equivalent to what we use in our finished products. Our facilities around the world are developing strategies and targets to balance their water use by replenishing how much they use, with a focus on local needs and specific source vulnerabilities.

With the help of The Nature Conservancy, academics and other key water stakeholders, we have developed a methodology to quantify how much water we have replenished through our community water projects. While our most recent analysis has not yet been peer-reviewed, we estimate 23 percent of the water used in our finished beverages (based on 2009 unit case volume) was replenished through projects we conducted between 2005 and 2010—up from the 22 percent we reported in our last sustainability report,⁵ the 2009/2010 Sustainability Review.

⁵We freely acknowledge that the science and methodology governing quantification of water benefits and/or achieving water neutrality are new and developing. We hope the assessment and methodology discussed in this report will contribute positively to the ongoing exploration of this emerging discipline. Our objective in reporting our efforts to calculate the water benefits associated with our “replenish” work is to show how we are doing. But, it also is for the purpose of continuing an open and transparent dialogue on the appropriate science and methodology to be used to quantify water benefits and, ultimately, water neutrality. We do not intend to say through this report that we have everything correct, although we believe that our estimation(s) of water benefits and the underlying methodology that we used are sound. We expressly acknowledge that it may be premature to rely on our water benefit calculations as hard fact.

Calculating the Replenish Target for Coca-Cola Projects⁶

Includes new, ongoing and completed projects

⁶We define “replenish” as the Coca-Cola system providing support for healthy watersheds and sustainable community water programs to balance or offset the water used in our finished beverages.

Around the world, our bottling partners are engaging in community water projects as a way to achieve their replenish targets and build connections with local residents, governments and NGOs. To date, we have engaged in 320 community water projects in 86 countries, which includes 96 education and awareness programs.

The projects we engage in have at least one of four objectives: to improve access to water and sanitation; to protect watersheds; to provide water for productive use; and/or to educate and raise awareness about water issues. In many cases, projects provide additional benefits, such as improving local livelihoods, helping communities adapt to climate change, improving water quality and enhancing biodiversity.

Of the projects we have launched, just over half are complete. Since our last sustainability report, our partnership teams have completed 166 projects and initiated 64 new ones—including Safe Water for Africa and the Latin American Water Funds Partnership—joining another 90 ongoing projects.

Safe Water for Africa

As part of Replenish Africa Initiative (RAIN)—our six-year, $30 million commitment to provide access to safe drinking water for communities in Africa—we joined Diageo plc, WaterHealth International and the International Finance Corporation in launching the Safe Water for Africa program in May 2011.

Safe Water for Africa will bring WaterHealth International’s WaterHealth Centers, already in use in several African countries, to more communities. The centers are small, modular structures containing equipment that treats locally available water to World Health Organization standards. Water is then made available to residents for a nominal usage fee. WaterHealth International provides operations, maintenance and water-quality services for 10 years or more to help ensure each center’s viability. Over time, the affordable usage fees that residents pay for the service cover the cost of the center’s operation and maintenance, enabling the community to become sustainable.

Safe Water for Africa will first focus on countries in West Africa, where fewer residents have access to water today than 20 years ago. By the end of 2011, WaterHealth Centers will be built in communities in Ghana, Liberia and Nigeria.

Also as part of RAIN, we announced in March 2011 a $6 million program to create water and sanitation partnerships aimed at improving the lives of an estimated quarter million women and girls in Algeria, Kenya, Liberia, Morocco, Nigeria, Rwanda, Sierra Leone, South Africa, Swaziland, Tanzania, Tunisia and Uganda. The lack of water and sanitation facilities in African nations affects billions of people every day and has a particular impact on women and girls, who collectively spend billions of hours fetching water each year.

The Latin American Water Funds Partnership

In May 2011, Fundación FEMSA (FEMSA Foundation)—the philanthropic arm of our largest bottling partner in Latin America—joined The Nature Conservancy and the Inter-American Development Bank in creating the Latin American Water Funds Partnership, which will manage all water funds in Latin America.

Based on the idea of environmental services payments, in which landowners are paid to implement conservation strategies, water funds are trust funds dedicated in perpetuity to the conservation of watersheds. Through the funds, water users downstream—typically governments, businesses and individuals in urban areas—invest to help keep resources in rural areas upstream healthy and productive.

Water funds can be powerful tools for conservation funding. In 2011, FEMSA Foundation, The Nature Conservancy and Inter-American Development Bank created The Latin American Water Funds Partnership based on one of the first water funds in Quito, Ecuador (known as FONAG). FONAG started with an investment of $21,000 that grew up to $10 million in just a decade, with more than $900,000 in annual interest invested in conservation efforts. FEMSA Foundation and its partners are working today to have 32 Water Funds working in Latin America in the next decade.

Through stewardship of 32 water funds, the Latin American Water Funds Partnership intends to conserve at least 800,000 hectares of protected natural areas, plus an additional 20,000 hectares of key ecosystems. Water fund proceeds will also be used to introduce conservation and sustainability practices in areas encompassing more than 50,000 hectares. The partnership projects that by 2015, more than 12 million people will have better access to water, and at least 1,200 rural families will increase their annual income.

Ongoing partnerships: WWF and UNDP

Two of the partners we work with most closely on water stewardship are World Wildlife Fund (WWF) and the United Nations Development Programme (UNDP).

We launched a transformational partnership with WWF in 2007 that included a joint commitment to conserve seven of the most important river basins spanning Asia, Europe, Africa and the Americas. In each basin, we address four central conservation challenges: better governance and management; resource protection; conservation in balance with development; and biodiversity protection. We have made notable progress in these efforts since our last sustainability report. The partnership’s achievements include:

• In the Yangtze River region, improved water quality through the restoration of 547 yards of original river course; installed biogas digesters and constructed wetlands; and improved agricultural practices and irrigation techniques to reduce water pollution while improving local incomes and livelihoods
• In the Mekong River region, helped pass a new statute that allows for park management in accordance with particular ecosystems, resulting in restored water flows and grassland habitat and the return of two critically endangered bird species—the Sarus crane and Bengal florican
• In the Danube River region, helped purchase and restore Liberty Island, a side branch of the Danube located in southern Hungary, restoring water flow and habitat while maintaining local livelihoods; facilitated the formation of the Danube Network of Protected Areas to improve wetlands management practices in eight countries
• In the Rio Grande/Rio Bravo region, trained residents to perform soil conservation and habitat restoration work to improve 10,000 hectares of upland forest; worked with local citizens to improve the river’s flow by removing highly invasive plant species, salt cedar and giant cane, from sites along more than 70 miles of the river
• In Lake Niassa, established the Lake Niassa Reserve; created 12 community fishing councils and 10 fishery associations that have improved fishing yields and created economic and health benefits by helping communities sustainably manage the lake and its resources
• In the Mesoamerican Reef, helped develop sustainable production methods for higher-value agricultural products like cardamom, coffee and honey, which have reduced water use and pesticide impacts to the watershed. The new revenue streams have increased family incomes benefitting more than 500 families involved in the community-based enterprises.
• In the U.S. Southeast rivers and streams, bottling partners donated more than 4,000 syrup containers for conversion to rain barrels allowing for an estimated 220,000 gallons of rainwater to be collected for reuse. The rain barrel program has gone national with the potential to capture nearly 10 million gallons of stormwater each year.

In addition to our work with WWF, we have also had a long-standing partnership with UNDP. In 2006, we joined UNDP in launching Every Drop Matters^TM, an effort to address water-related challenges in communities across Eastern Europe and Eurasia. The program helps improve sanitation and water quality, install rainwater harvesting systems and educate residents about water stewardship. In all, we have made a $23.75 million commitment to support the project through 2014. The achievements of Every Drop Matters in 2010 included:

• Promotion of “Black Sea Action Day,” which raised awareness of the urgent need to clean up and protect that vital body of water
• Implementation of rooftop water harvesting and water supply systems along with other improvements in two communities in Turkey
• Development of water and waste management strategies for small rural communities in Romania
• Improved access to drinking water in Kazakhstan
• Improvement of wastewater treatment and environmental conditions on the Dilijan River in Armenia
• Enlistment of local residents across Ukraine to rehabilitate natural springs, which are often a significant source of local drinking water
• Pilot projects aimed at cleaning up Russia’s Lake Baikal and promoting tourism in the area

In partnership with other businesses and governmental organizations, we helped form the 2030 Water Resources Group (WRG) in 2007 to contribute new insights to the increasingly urgent issue of water scarcity. Between 2007 and 2010, WRG offered leading thinking on the availability of water between now and 2030 and on the economics of various solutions. It focused on raising awareness about the challenge of managing future water needs and piloting partnerships for reform. As a result of the group’s work, several governments facing severe water shortages, including India, Jordan and Mexico, have engaged in more substantive dialogue on water security, water management and policy reform.

WRG is now entering the second phase of its work. Its new goal is to support governments as they engage in water analysis, convene multistakeholder collaborations and undertake public-private partnerships. First, WRG intends to help countries perform an initial diagnostic of gaps in their water supplies and consider the economics of various solutions. Then WRG will offer multidisciplinary expertise to help governments develop and test solutions. The ultimate objective is to improve water resources management in specific geographical areas.

In addition to our work with the Water Resources Group, we have also joined the Aqueduct Alliance, a consortium of leading water experts from the private and public sectors, NGOs and academia. Aqueduct Alliance is a program of the World Resources Institute seeking to measure, map and report on global water risk. At the heart of the initiative is a global database of water risk information that will enable companies, investors, governments and others to create water risk maps with an unprecedented level of detail. We will support Aqueduct Alliance’s work by providing our own extensive global database of water risk information.

Our current water stewardship strategy mainly involves our direct operations and the water sources near them. To better understand how we use water indirectly through our supply chain, we are investing in water footprint assessments.

Water footprinting is a young science whose methods are still evolving. Done properly, it can tell us a great deal about our indirect water use, particularly as it relates to sustainable agriculture.

We have been a partner of the Water Footprint Network since 2008, supporting the development of the organization and its methodology. And over the past two years, we have collaborated with The Nature Conservancy on three water footprint studies:

• Coca-Cola® in a 0.5-liter PET bottle produced by Coca-Cola Enterprises, Inc. in the Netherlands
• Beet sugar supplied to Coca-Cola bottling plants in Europe
• Minute Maid® orange juice and Simply Orange® produced for North America

As important as what we discovered about our water use is, the studies told us about footprinting itself. The lessons we have learned include:

• The value of water footprinting is in its ability to break out water use by component and demonstrate how each component affects the watershed from which it came.
• The largest portions of the water footprints we assessed involve thefarm, not the factory.
• Supplier information is critical, and the water footprints we assessed were highly sensitive to specific data from farms we use to source ingredients.
• Though the amount of the footprint attributed to operations is relatively small, it is still important for us to manage our direct impacts, especially with regard to wastewater treatment.
• To understand the true impact of water use, consumption must be considered within the cumulative context of all water uses in a watershed. When properly managed, even large volumes of water use can be sustainable in locations where the resource is sufficient to support the use.
• Water footprints are an excellent tool for companies to begin to understand their water use. But numeric footprints alone do not provide sufficient information for consumers to make informed product choices. Where water is used, when it is used and issues affecting quality are all equally important.

Please visit our Company website to read the September 2010 water footprint report and the water footprint sustainability assessment, “Towards Sustainable Sugar Sourcing in Europe.”

In some parts of the world where water is acutely stressed, we have encountered opposition to our operations because of perceptions that we are using more than our fair share of water and depleting local water sources to the detriment of local farmers and residents.

We have worked hard to provide data that show we use water responsibly and to make the case that it would be contrary to our own business interests to damage water sources and harm residents in the process. In doing so, we have gained ground in the courts and among regulators. We have been successful in securing the “technical” and “regulatory” licenses for using the water we need. But where we have sometimes been challenged is in securing the “social license” for our operations among the communities that host us.

For us to do business—and to be part of the solutions addressing water stress—it is essential for us to secure the trust and goodwill of the people in the communities where we are located. And that can only come from candid, continual dialogue—an ongoing conversation in which we show residents how much water we are using and how we are using it. It comes from telling residents how we are managing water resources and what we are doing to improve them. And it comes from helping to address residents’ specific concerns about water.

We are implementing an increasingly holistic approach to water stewardship, recognizing that water must be considered in the greater context of political, societal and ecological dynamics. As we broaden our focus to look beyond water sources directly connected to our operations, we will be looking more at the stewardship of water in our agricultural supply chain and, even more broadly, at the nexus where water, food, energy and climate—perhaps the most pressing issues of this century—connect.

To learn more about training we have developed and our efforts to understand local needs and build plans to address them, please see our 2011 Water Stewardship and Replenish Report and Partnership 2010 Annual Review.