WATER CONSERVATION IN SCARCITY CONDITIONS: CORPORATE SUSTAINABILITY AT MEXICO'S FEMSA GROUP

Roger Nion Conaway and Francisco Gabriel Rodríguez González

Abstract

FEMSA Group, a beverage and retail company headquartered in Monterrey, Mexico, has incorporated sustainability into its core business strategy with a special focus on water resource management. This case explores how a multinational corporation relying heavily on water resources can operate in a water-scarce region, advancing conservation and securing a "social license to operate." It also examines the range of water conservation measures the company has instituted and maps out how FEMSA has created economic, social, and environmental value for the communities where the business operates. This success has emerged, in part, through partnerships with like-minded nongovernmental organizations and other for-profit companies. The FEMSA experience thus demonstrates that corporations working in concert with other stakeholders will often improve sustainability performance and business results.

Introduction

FEMSA Group (Fomento Económico Mexicano, S.A.B. de C.V) began operations in 1890 and has since emerged as a major beverage and retail company with its base in Monterrey, Mexico. FEMSA now operates in 12 countries, registers annual revenues of over US$18 billion, and employs more than 260,000 people. Its conservation and sustainability efforts serve as a beacon of corporate social responsibility in Mexico.

FEMSA's emphasis on sustainability has emerged partly out of necessity. As the operator of the world's largest independent Coca-Cola bottling enterprise, as well as a stakeholder in Heineken, FEMSA Group must steward the most vital ingredient in its beverages — water. To that end, the company created the nonprofit FEMSA Foundation in 2008 to balance environmental protection, social responsibility, and economic growth. The FEMSA Foundation not only works to conserve water resources, but also delivers a broad array of social benefits to the local communities around FEMSA facilities, including nutrition training, clean water, and sanitation infrastructure. Our discussions with FEMSA and FEMSA Foundation employees have shown that the corporate value of sustainable water commitments extends beyond just securing a company's supply of a key resource.

This case study highlights the water conservation activities of the FEMSA Foundation and the closely related Monterrey Water Fund, known in Spanish as Fondo de Agua Metropolitano de Monterrey. Our findings come from three sources: (1) interviews with FEMSA Foundation directors in Monterrey, who oversee activities in the Río San Juan watershed and build partnerships with nongovernmental organizations (NGOs) and funding organizations; (2) notes from firsthand observations during a visit to the watershed in the mountains above Monterrey; and (3) secondary sources accessed through online databases and websites, including FEMSA vision and mission statements.

This chapter explains the evolution of sustainability thinking at FEMSA, then describes the water fund and analyzes its water conservation work in the Monterrey watershed. It details the reforestation efforts, soil restoration activities, and social programs that support families living within the watershed. The chapter also highlights FEMSA's collaboration with other companies, NGOs, and community groups to protect water resources.

FEMSA's Best Practices

FEMSA's commitment to a broad range of social and environmental programs beyond its core business operations is a best practice in corporate sustainability. The company illustrates the benefits of collaborating with public and private partners to deliver such programs. Inaction by the Mexican government led FEMSA to begin addressing critical community water management needs, both as a corporation and through its corporate foundation. For FEMSA and a number of other businesses, acting in the place of underperforming government entities has become a fundamental necessity — and a critical dimension of corporate social responsibility, especially in a developing country setting.

A number of scholars have highlighted the necessity of creating a "stakeholder framework for analyzing and evaluating corporate social performance." Indeed, inclusively creating value for all stakeholders helps develop intangible assets. These assets provide competitive advantage and increase shareholder wealth. FEMSA's sustainability strategy reflects such a "stakeholder" framework by integrating economic goals with social and environmental activities. This approach secures the company's social license to operate. In a 2007 article, John Campbell of Dartmouth College and Copenhagen Business School asked, "Why would corporations behave in socially responsible ways?" The answer, he wrote, is that the financial health of an individual corporation depends on the success of the economy as a whole. FEMSA's sustainability strategy and the efforts of the FEMSA Foundation provide a vivid example of Campbell's argument in action.

Sustainability at FEMSA

The FEMSA Group published its first sustainability report in 2005. These reports are published separately from the company's annual report and are publicly available online. This outreach has proven to be an effective communications strategy, signaling a commitment to transparency and building community trust.

The group's sustainability reports conform to Global Reporting Initiative G4 guidelines, an internationally accepted framework for measuring triple bottom line...