Livestock Companies Underreport Water Exposure as Scarcity Costs Reach $6.4 Billion

Some of the world’s largest livestock companies may be substantially underestimating their exposure to water scarcity, creating a significant gap between reported water use and the financial risks embedded across their supply chains.

New research from the FAIRR Initiative estimates that 18 major publicly listed livestock companies collectively withdraw as much freshwater each year as Brazil or Egypt, yet disclose only around 1% of their estimated blue water use across the value chain. Five of the companies assessed provide no water-use information covering either their operations or supply chains.

FAIRR’s analysis covers livestock businesses in Australia, Brazil, China, France and the United States. Together, the companies generated approximately $354 billion in revenue in 2024 and represent around 20% of the global livestock market. The findings were produced using FAIRR’s Water Risk Monitor, which estimates water consumption and financial exposure across feed production, animal raising, processing and packaging.

The Sustainable Views report highlighting the findings notes that the companies withdrew freshwater equivalent to Brazil’s annual consumption in 2024 while publicly reporting only a small proportion of this exposure.

Water Scarcity is Already Creating Measurable Costs

FAIRR estimates that chronic water stress generated $6.4 billion in hidden costs for the 18 companies during the 2024 baseline year. That represents about 2% of their combined revenues on average.

These costs do not necessarily appear as a specific water charge. Instead, water scarcity can increase spending across multiple parts of a livestock company’s operations. Businesses may need to secure alternative water sources, pay higher prices for animal feed grown in water-stressed regions, invest in additional infrastructure, or absorb higher livestock procurement costs when drought reduces agricultural productivity.

The financial exposure is unevenly distributed. According to FAIRR, Chinese livestock groups currently face some of the highest proportional costs. WH Group and Muyuan Foods could experience water-related costs equivalent to as much as 8% of revenue.

Brazilian companies face particularly significant exposure to severe drought. FAIRR estimates that JBS alone could suffer losses of up to $4 billion during a severe drought event under its 2050 modelling.

Under the most pessimistic scenario assessed by FAIRR, chronic water scarcity costs across the 18 companies could rise from $6.4 billion today to $9 billion annually by 2050. A one-in-ten-year drought occurring in 2050 could result in combined losses of as much as $17 billion.

Feed Production Dominates Livestock Water Demand

Understanding livestock water exposure requires looking beyond the water animals drink or the water used in slaughterhouses and processing facilities.

Much of the sector’s water dependency is located further upstream, particularly in the production of crops used for animal feed. A 2024 global analysis of livestock food systems found that feed production accounted for more than 90% of livestock-related water withdrawals worldwide.

This creates an important challenge for corporate reporting because feed can pass through several stages of the supply chain before reaching livestock producers. Companies may therefore report water consumed at their own facilities without fully accounting for irrigation and other water requirements associated with feed ingredients.

FAIRR estimates that, among companies providing disclosures, actual value-chain blue water exposure is on average 132 times higher than the amount publicly reported. Blue water refers to freshwater drawn from surface and groundwater resources, including rivers, lakes, reservoirs and aquifers.

The wider agricultural sector already places substantial pressure on freshwater resources. The UN Food and Agriculture Organization says agriculture accounts for around 72% of global freshwater withdrawals, while approximately 1.2 billion people live in agricultural areas experiencing severe water constraints.

Climate change adds another layer of risk. Higher temperatures can increase evaporation and crop water requirements, while longer droughts and shifting rainfall patterns can reduce available surface water and soil moisture.

Technology Can Reduce Exposure but not Eliminate It

FAIRR also assessed measures that livestock companies could use to improve water resilience, including drip irrigation and water recycling.

If investments in these technologies began today, the organization estimates they could generate between $14 billion and $20 billion in cumulative savings by 2050. However, after implementation costs are included, technological interventions alone would reduce the financial burden associated with chronic water stress by only around 9%.

The findings suggest that improving efficiency at individual facilities will need to be combined with broader interventions across agricultural landscapes and watersheds.

Potential approaches include improving soil water retention, restoring natural ecosystems, expanding efficient irrigation practices, developing wastewater reuse systems, and improving groundwater management. FAIRR also argues that public policies such as agricultural subsidy reform and better integration of water-related financial risks into investment decisions may be required.

For companies, another priority is improving the quality and geographic detail of water reporting. Water risk is highly location-specific. Using one cubic metre of water in a region with abundant supplies has very different environmental and financial implications from using the same quantity in a severely stressed watershed.

FAO guidance on livestock water assessment therefore recommends evaluating both water consumption and the scarcity conditions associated with the source of that water, alongside monitoring water productivity throughout livestock supply chains.

Water Risk Becomes an Investor Issue

For investors, incomplete water disclosure can make it difficult to assess operational resilience, procurement risk and future capital requirements across food and agriculture portfolios.

FAIRR, whose investor membership represents approximately $95 trillion in assets under management, developed the Water Risk Monitor partly to allow investors to compare exposure across companies and climate scenarios. Its modelling evaluates company water footprints, identifies how much production occurs in water-stressed areas and estimates the resulting impact on profitability through 2030 and 2050.

As water scarcity becomes more closely linked with climate risk, food security and ecosystem degradation, water management is likely to become a more prominent component of corporate resilience strategies.

For livestock producers in particular, the findings indicate that measuring water only within company-owned facilities can significantly understate overall exposure. More complete supply-chain accounting, combined with investment in efficiency and watershed resilience, could become increasingly important for companies seeking to manage both physical climate risks and their associated financial impacts.

Source:

• www.fairr.org

• www.sustainableviews.com