My topic for this evening is 'Energy and Water'. We are here in the neighbourhood of Escher-Wyss and its turbines, and this is probably the first thing that comes to mind when reading the title. But there are other important links between water and energy that may not immediately be apparent. Every mode of water supply needs energy – whether in bottles or via municipal networks. Another connection appears to me to be a considerably greater cause for concern – namely the additional water that is required to cultivate food crops that are turned into so-called biofuels for our cars thanks to massive subsidies and compulsory blending rates.

The problem with these biofuels is not so much the amount of land available for cultivation but the water required for agricultural production. It takes approximately one litre of water to produce one calorie for food crops, the equivalent of around 3,000 litres a day and per capita on average globally. It takes up to 4,000 litres of water to produce one litre of so-called bioethanol, and up to 9,000 litres for a litre of biodiesel.

Here we should look beyond Switzerland. Even without biofuels, water is being overused throughout the world. I am convinced that if we carry on like this, water will run out long before oil does – water, the substance that is so vital to our everyday lives and so essential in the cultivation of our food.

You may well be a little puzzled to hear me talk about the risk of water shortage here in Switzerland, considering the wet spring we have behind us, with Lake Zurich currently at a level just 60 cm below flood-warning stage. The forecasts for the summer also leave a lot to be desired, with a good deal more humidity expected.

This is why I have to take a slightly broader approach for my argument, along a relatively long and unusual route. And the perspective, as just mentioned, is a global one, not one limited to within national borders. I will only be able to touch lightly on a series of aspects and hope that in the subsequent discussion we will be able to look more closely at, and perhaps even provide answers to, some outstanding questions.

I will also mention in passing a further point, namely bottled water. Recently it was reported in the press that a conservative parliamentarian in Berne wanted to submit a motion to ban mineral water. According to his plan, Eptinger, Passugger and our Hénniez would only be available via prescription from the pharmacy. He knows what’s right and wrong for the country’s citizens and would therefore like to prevent people from drinking “harmful” mineral water. In this context bottled water is being compared with tap water as main alternative. In reality, however, bottled water is a healthier alternative to soft drinks, and sometimes to alcoholic drinks as well. In 1965, we obtained on average just over 200 calories from our drinks – above all soft drinks – daily. This figure has now risen to well above 450 calories. With the widespread propaganda against bottled water this figure might well increase further still. The question is whether those behind this propaganda will also be prepared to accept responsibility for the consequences on public health?

In many respects, the debate surrounding bottled water bears the hallmarks of a witch-hunt. Of course, water is really a problem – water for agriculture, water for our cities, and I will refer to this in my presentation. Bottled water, however, has absolutely nothing to do with these increasing – and in some respects already acute – problems, not in the way in which it is produced and much less so in terms of volume. But it is a useful sitting target for the strong words of agitated politicians.

As I said, I will refer to individual aspects in connection with bottled water, but the main body of my presentation will be about real problems.

But first, a few facts about Nestlé. It is important to note that, both in terms of our brands and in the perception of our consumers; we lead but do not dominate. Our share of the global market is well below 2%. We have an extensive product range, a not inconsiderable proportion of which is made up of mineral water – but after all just one product group among many. Nestlé uses water not only for bottling but also for use in production processes, such as the gentle decaffeination of coffee.

Here we remain small fry in comparison with our competitors, and much more so in comparison with other sectors, with 1.8 litres of water per US dollar of turnover versus 120 litres and more in other areas of industry. The same applies to energy: 0.02 litres in oil equivalents per US dollar of turnover as opposed to 0.4 litres and more elsewhere.

We have been able to reduce energy consumption per US dollar of turnover by approximately 50%, and for water a reduction from almost 5 litres to today’s 1.8 litres. As an example of such savings, achieved thanks to our research, our bottles use ever smaller amounts of PET. Here the high oil price is an effective incentive, but so is our responsibility towards the environment. In the development and application of bottles that use less material we are ahead of the competition – in particular those who sell highly carbonated soft drinks, which require considerably thicker bottles due to their physical characteristics.

We are also committed to recycling. It is only logical that all beverage manufacturers work together, as it would be inefficient were the recycling process to be limited to bottles for water only. Even more important is the commitment of consumers, who here in Switzerland show that they also practice what they preach, with a PET recycling rate of 75%! Reduced dependence of the Nestlé Group on water and energy as well as oil not only helps the environment, but also strengthens the company itself.

But we work in context. Scarce and contaminated water and scarce and expensive oil have an impact on the farmers that cultivate our food, and this in turn has an impact on consumers. According to estimates by the World Bank, the recent increases in food prices – and I will highlight later on the part played by water and energy in this process – have forced 100 million people below the absolute poverty line – 1 US dollar per person per day. We must therefore look above and beyond the limits of our company when thinking about what is happening in the markets for energy and with regard to water.

First energy – and here above all oil, which now accounts for an ever-smaller proportion of total energy consumption. The current peak is not the only one over the years, but it appears to be the highest in history. In the 1860s peak prices of around 100 US dollars sparked efforts to find new sources and better extraction processes. The spike in oil prices at the end of the 1970s led to considerable efforts towards greater energy efficiency that have continued to this day. In the United States, for example, energy consumption fell from around 0.45 litres in oil equivalents per US dollar of gross national product to less than half this figure within 25 years.
 
European countries also increased their oil efficiency during this period, with Germany cutting the use of oil equivalents per US dollar of gross national product by approximately one-sixth to 0.17 litres and Switzerland’s figure falling by a quarter to just 0.14 litre in oil equivalents. Nestlé, incidentally, stands at 0.02 litres in oil equivalents per dollar turnover, as mentioned a moment ago – even if direct comparisons are not possible, this is still a very good level.

With price signals as they are today, we can be sure that efforts to save will be intensified – on a broad and sustained basis, even if the current excessive oil prices fall again slightly in the foreseeable future. With the technology currently available, the potential is huge. One can compare the energy productivity of Japan and Switzerland with the one of other countries. Energy productivity of the United States and China is 1/3 behind those two, Russia even 1/2. And the potential for further new ideas must also not be underestimated. Alternative sources of energy will suddenly become self-supporting and thereby also economically sustainable. Non-subsidised wind energy, for example, has an equivalent price of 135 US dollars per barrel of oil (provided the facilities are located in areas with consistently strong winds).

It is beyond debate that we have to look for alternatives to fossil fuels, and not only because of greenhouse gases. As with most problems, I believe there is not only one solution, but a wide range of possible directions. Solar and wind energy are some, as is improved use of hydroelectric power, as well as projects involving biogenic waste.

And now to water, and first something about its contradictory nature.Amongst all this water the greatest shortage is of water itself – drinking water. With free bottled water in an initial phase of the flood (in the US Mid-West) and the efficient organisation of the commercialisation of water, our US water company made a considerable contribution to ensuring that the shortage did not lead to a disease epidemic – and yet we are still criticised in some parts of the United States and also sometimes here in Switzerland, because we put water into bottles. What people forget is that water only appears to be a “standard” product, while it actually has a completely different value depending on when, where and how we as human beings happen to use it. One litre in the Sahara means something completely different to one litre here in Switzerland, and in India during monsoon time compared with the dry season.

A value that varies completely depending on when and where also applies to bottled water. It has to be available not only in disasters such as in Iowa, but every day, wherever, whenever and however consumers want it. It is to a large extent also this organisational and logistic service that determines the price of bottled water. And the consumer is then free to decide whether or not to buy it.

When you arrive thirsty at a mountain hut after a long hike, you want to rehydrate as quickly as possible. A beer would be nice, but only if you’re sleeping there afterwards, while a soft drink with its high sugar content would make you even thirstier. There are thousands of similar situations where you need something to drink, in summer as a spectator at a sporting event, or on the train, for example, where you may not feel comfortable using water from the tap.

We hope, therefore, that bottled mineral water won’t already have been banned, like some confused souls here in Switzerland would hope, and we can continue to provide it precisely where and when you need it.

Mineral water is not just about hydration at the right time and in the right place – it also has particular qualities. Let me mention a few examples. Eating lots of butter and cheese will help prevent osteoporosis. If you want to watch your weight at the same time, however, doctors would prefer to recommend a mineral water containing calcium. Different types of water vary greatly in taste. I am always taken aback when someone claims to be able to differentiate between a 1978 and a 1979 Mouton Rothschild. But this same person then comments that all water tastes the same and that he/she only drinks tap water – even when abroad.

One final point in favour of bottled water: It might sound strange, but it requires the least amount of water to bring the best quality liquid to consumers. Much more water is used for processing and cleaning in th ecase of beer and soft drinks production. And as a slightly provocative comparison, waterworks are also included. Leaking pipes are a growing problem worldwide; data for the European Union indicate 30% losses, while data for developing countries suggest that 70% and more of the water that is piped off and treated actually never reaches the consumer.

The water losses in leaking pipes of municipal water supplies add up to significant figures. This might be different in Switzerland; here the statistics are not available. The figures refer to very rough estimates on a global scale, and pipe losses affect above all places already suffering from acute water shortages. It is water that is scarce, and often water that has been treated with considerable effort to bring it up to drinking standard. Here, incidentally, is another problem: In developed countries, up to 500 litres of water per person are converted on a daily basis into drinking water that meets all the major safety standards (not including the water for industry) – but less than 2% of it is actually drunk or used in the preparation of food.

And also regarding your tap water: Nothing runs without energy! Looking a little closer, energy consumption is not so very different when water is drunk from a bottle. Because in order to compare the energy consumption of tap water versus bottled water, it might be necessary to combine the amount of water that is actually drunk with the amount of water that is unnecessarily processed to drinking quality and then used to flush our toilets, i.e., to re-calculate the energy consumption for the drinking water used for drinking on this new basis. This is of course more of a model calculation, but you see the result. Actually, only the operating energy for the waterworks in Switzerland is included here, but think about how much additional energy it takes, for instance, to constantly tear up roads and resurface them when pipes need repair.

Energy requirements for tap water are even higher in countries where water is scarce and salt water is treated. A simple calculation shows that it takes the equivalent of several litres of oil to treat one cubic metre of water, while a combined calculation – adding the energy to clean the part of tap water not actually required in drinking water quality to the actual tap water use for drinking and cooking, as I just described – shows that it takes considerably more.

But even without salt, the treatment of drinking water is becoming increasingly challenging, not least because of various ever more complex chemical residues in waste water that is treated for reuse, requiring the increasingly extensive use of chemicals and complex procedures. This causes not only energy but also investment requirements to increase. But, according to the OECD, municipal waterworks worldwide currently invest only just over half of what would actually be necessary for better water treatment and the upkeep of water distribution systems that in some cases date back to the 19th century. Given this state of affairs, the leakage problem is unlikely to go away so quickly.In many cases the money for maintenance is simply not there because the rates paid by consumers do not cover the costs.

The state intervenes and seeks social equality by means of low water prices that do not cover costs. But at the end of the day, those best off from this policy are the large-scale water consumers, the prosperous people with pools and lawns that need watering. But where are the problems really, and why the risk of shortage? Let me start with a somewhat broader view of the waterscape. You will remember that households worldwide use on average per capita approximately 200 litres, very little of which is drunk, more of which is used for hygiene, with the largest proportion being put to various uses, including sprinkling the lawn and filling the pool. In industry the figure is approximately 400 litres, also calculated on a per capita of world population and day basis, half of which is used for energy generation.

Calculated in a similar per capita and day basis, our bottled water, by the way, accounts for less than a thimble-full.
 
But the largest amount of water is consumed not by households but by farmers worldwide in the cultivation of our food. Each and every one of us 'eats' his way through an average of 3,000 litres of water that has been used in the agricultural production of food. 3000 litres are an average; meat, for instance, needs ten times as much water as equivalent amounts of calories/proteins from cereals and vegetables. The implications of these interconnections are that water consumption for agriculture increases with world population; and the increase is the steepest where more meat is eaten. As levels of affluence increase, people in developing countries want more than just a bowl of rice at each meal. We are coming close to the upper limit of 12,500 cubic kilometres of fresh water available worldwide for annual human consumption.

It is strange, but agricultural production and naturally self-renewing water would actually be model examples of sustainability, while oil is exactly the opposite. But when you look at both scenarios – in snippets, admittedly – the world seems to be upside down. Energy – with all the problems in usage – ultimately appears to be used more sustainably than water. In other words, I am convinced that if we carry on as we are, we will run out of water before we run out of oil. One of the reasons for this is that water, considered as it is to be common property, has no price and hence no value.

This became particularly clear in discussions we had with farmers in Moga, in northern India. They supply our factory there with milk – a secondary product, with their main income coming from irrigated fields. In the entire region, the water table is falling by around 1 metre per year. The farmers know full well that they are endangering their own future. But if asked individually, respond that if they don’t pump, their neighbours will continue to do so anyway. This is what is referred to in literature as the “tragedy of the commons”. So, this sets the scene. But enough about trends concerning energy and water separately. How do the two interconnect?

Some of the connections – new and increasingly threatening – are formed by biofuels. We know that agriculture needs on average one litre of water to produce one calorie for us to eat. If this food is used to produce fuel, 1,000 litres of water will be enough for 1.5 litres of ethanol in a best-case scenario, and 0.1 litres of biodiesel in the worst.  The calculations were made by the US Department for Energy, but never picked up in the political debate. In the United States and in Europe, these biofuels are being promoted by massive subsidies and compulsory fuel blending – but also outside Europe, in countries such as India and China that are already suffering from acute water shortages, similar policies form part of government programmes.

In an extreme scenario, the additional global cultivation of food and other crops for biofuels could add up to 1,900 cubic kilometres to fresh water withdrawals. This brings the water crisis closer still. And this brings me to my main point, which is that we must not look at the issue of biofuels in isolation and not only on the basis of an individual country – only by looking across borders can we see the problems caused by the current policy.

What is surprising about this policy is the minimal amount of preliminary investigation work that was carried out. In Switzerland, a developer hoping to open a new square-shaped shopping centre with a side length of just over 70 metres – a little longer than a standard swimming pool – is subjected to an extensive environmental impact assessment. The recent granting of massive subsidies in the form of tax relief for biofuels  in Switzerland and elsewhere was not preceded by an overall analysis of the environmental sustainability. Only in isolated cases – those involving imported biofuels in particular – does a relatively vague 'positive environmental balance' need to be proven. By the way, it is not that biofuels abroad are more damaging, as I mentioned even in Switzerland a global view is needed, it rather seems to be protectionist agricultural policy back to haunt us!

Another connection I have already briefly mentioned: countries with insufficient water supply that use considerable amounts of energy to desalinate seawater. The currently popular method of multi-stage flash evaporation needs 2-3 litres of oil to produce 1,000 litres of drinking water. When, on the other hand, water is used to cultivate biofuels, 1,000 litres produce between just 0.1 and 1.5 litres of fuel. Something just doesn’t add up.

But to make something clear, the absurd part of the equation is the top part. The problem is not caused by those who need the energy to supply people with water wherever and whenever they need it. The real problem is caused by those who use scarce water supplies to produce energy based on food crops.
Water is more valuable than oil, even if this is not reflected in the prices.

We meanwhile know one of the consequences of the cultivation of biofuels – rising food prices. I showed earlier how we could have much worse ahead of us when mentioning the risk of 30% shortfalls in global cereal production worldwide by 2025. The price increase over the last two years has perhaps been just an initial warning, albeit one with drastic implications of its own. Some point towards average indices in connection with the price increases, but these distort the picture: For us these increases in food prices are unpleasant but bearable, whereas in poorer countries they are catastrophic. For those who live on corn, prices have doubled within the space of just a couple of years.

Instead of moves to abolish the programmes aimed at subsidising biofuels, there have been lengthy debates surrounding the causes of these price increases.
There are admittedly other factors playing a role: pre-existing imbalances in food markets, slowed productivity growth (also due to lagging implementation of new technology), rising demand, energy prices, in some cases the weather. Depending how these factors are analysed, various results can be reached:

The various factors mentioned before such as weather, energy costs and increased demand have put pressure on the market for basic foodstuffs, but alone they would not have led to any massive price increases. It was not until the mass appearance of processors of biofuels and the associated huge subsidies and commitments to buy that the already listing boat was ultimately capsized. This created completely new expectations of which the speculators are a by-product, and as such form part of the '75% of the price increase due to biofuels' camp.

Again: water is in the background. And one of the factors of the increase in the price of basic foodstuffs – one that does not appear in any of the regressions – is the looming water crisis. Saudi Arabia has decided to stop using irreplaceable fossil water to irrigate fields in the desert in favour of importing the cereals it needs. The water problem as it stands is solvable, with one of the requirements being improved governance and price signals – however, with a few notable exceptions: Water for the poorest, water for nature.

Let’s assume water wasn’t just free or subsidised by the state, as it currently is in Europe and elsewhere. Given this scenario, would biofuels still be produced? I doubt it! Instead, most likely more use would be made of the energy-saving alternatives already known; and new technologies for higher productivity in agriculture – and here biotechnology also comes into play – would be implemented more quickly and research intensified.

My topic was 'Energy and Water', above all water for agriculture. This is about serious problems, not about grand gestures and attempts at attention-seeking by ageing politicians, as we have observed over the last few days with regard to bottled water. And about the specific problem of energy for bottles: Nothing runs without energy, not even your tap. Our perspective on water is global. It goes beyond taps, bottles and national borders. I hope I have been able to convince you that, despite the abundant water here in the lake and in the Limmattal, we are faced with problems that ultimately also concern Switzerland.

My reflections on the topics of energy and water have brought to light a few surprising facts. Energy is not by definition sustainable, but high prices set signals that encourage economisation and alternatives. Water for agriculture would by default be sustainable, but has stopped being so due to subsidies of all kinds and thoughtless overexploitation as a free good.

The emerging water shortage with its implications for the agricultural production of our food is the expression of this inversion of sustainability and overexploitation. I consider this to be one of the greatest challenges of the coming decades – I believe we will run out of water long before we run out of oil.

Solutions exist, provided the awareness is there and the signals are set correctly. We at Nestlé will also do all we can to contribute to the more efficient use of water.

All efforts by companies and consumers will be in vain, like a drop in the proverbial ocean, if governments contribute to the problems instead of solving them. For me, the priorities are clear: Farmland and ever scarcer water must not be used for the cultivation of raw materials for fuels – the price increases are a warning, with dramatic consequences for people in developing countries. In the discussion concerning agriculture and biofuels, Switzerland in particular and Central Europe in general should not be viewed as a rain-soaked island, but as a part of the common responsibility for water-efficient production of food for our planet and its inhabitants.

Our fertile land and our valuable water deserve better than to end up being puffed out of the exhausts of our cars, especially at a time when there are still people starving in the world.