Assessing the impacts of water on industry–the case of Asia Pacific Breweries (APB)

Industrial water use accounts for 22% of global water consumption and for as much as 60% in high-income countries. Thus, it is a considerable factor when dealing with global water issues. This paper assesses the impacts of water on the brewing industry using the case example Asia Pacific Breweries (APB). By deriving a true cost of water (TCW) via a three-step approach involving (1) desalination, (2) secondary treatment and (3) reclamation, it reflects all water-related risks from physical availability to reputational, environmental, and legal risks in the context of a value-based management framework that embeds sustainability in the company's operational conduct. An excel-based sensitivity model takes into consideration all relevant drivers allowing for a detailed cost breakdown for each of the three steps. The resulting transparency of what drives the TCW yielded that the main components are energy, carbon, and capital costs. As derivatives on all three components exist, they were used to feign a hypothetical water option by replicating its pay-off as a weighted average of energy and carbon derivatives. At APB water accounted for merely 0.4% of total operating costs, but drove 335 times its cost in revenues. The resulting biomass from secondary treatment was also considered for energy recovery through anaerobic digestion and thermal hydrolysis. As a result, secondary treatment energy costs were subsequently reduced by 56%. As a result, the application of discriminatory pricing for industrial end-users of water was, therefore, concluded a viable option. Still, the demand-price elasticity of the company's products needs to be considered when applying said option to avoid the passing on of costs to consumers. A practical approach is considered involving a revenues per m3 of water over the TCW metric to determine the extent of discriminatory pricing and temporary tax breaks to avoid the passing on of costs to consumers.