FIJI Water

supply chain case study and need an explanation and answer to help me learn.

Explain using calculations why shipping bottles to be sold on the East Coast of the United States via the Panama Canal to the Philadelphia port, rather than trucking them from Los Angeles, results in a reduction in GHG emissions.
Requirements: 1 page
9-611-049 REV: DECEMBER 18, 2013 ________________________________________________________________________________________________________________ Professors Francesca Gino and Michael W. Toffel and Research Associate Stephanie van Sice prepared this case. This case was developed from published sources. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2011, 2012, 2013 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. FRANCESCA GINO MICHAEL W. TOFFEL STEPHANIE VAN SICE FIJI Water: Carbon Negative? “We’d be happy if anyone chose to drink nothing but FIJI Water as a means to keep the sea levels down.” — Thomas Mooney, FIJI Water’s senior vice president for sustainable growth1 On December 20, 2010, FIJI Water Company LLC, a company that sold premium artesian bottled water, was named in a class action lawsuit filed in U.S. District Court. The lawsuit claimed that FIJI Water had profited from a “deceptive and misleading claim” that its products were 120% carbon negative, which implied that purchasing FIJI Water was beneficial to the environment. The lawsuit accused FIJI Water of using a “dubious” and “discredited” carbon accounting method and, as a result, of profiting from the “inflated” price of its water.2 FIJI Water had announced its carbon-negative campaign three years earlier, in November 2007, as part of an initiative to make the manufacturing, production, and distribution of its products more environmentally friendly. The company planned to achieve its carbon-negative goal through a combination of energy efficiency initiatives and the purchase of carbon offsets.3 What did this new lawsuit mean for the company, and what were the implications for its carbon-negative environmental program? How should FIJI respond? These were not the only difficult questions FIJI Water was facing in 2010. On November 26, 2010, the Fijian government decided to raise the water export tax to 15 cents a liter (45 times the previous amount) for companies extracting more than 3.5 million liters a month. FIJI Water was the only company affected by this tax increase and thus considered the change to be unfair. What position should the company take in reaction to this change? Was it time to start negotiations? FIJI Water The FIJI Water brand was founded in 1988 by David Gilmour, a Canadian businessman who owned a resort on Fiji’s largest island, Viti Levu, in the South Pacific. Seeking local sources of drinking water to provide to his guests, he struck an exclusive 99-year deal with the government of Fiji in 1990 to tap an aquifer discovered by government-contracted geologists.4 In 1995, Gilmour started selling the water, which he bottled under the FIJI Water brand name. The Fijian government granted the company a tax holiday—tax-free status on its corporate income—that would expire in 2008. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 2 In 2004, FIJI Water was acquired for a reported $50 million by Roll International Corporation, a private company based in Los Angeles, California, that already had large investments in Teleflora (the largest flower delivery service in the world), POM Wonderful (a popular pomegranate juice drink), and Paramount Farms (the world’s largest grower and processor of pistachios and almonds).5 Roll subsequently purchased SpringFresh, a company selling bottled water sourced in New Zealand. In the years following the acquisition of FIJI Water, Roll International established the Vatukaloko Natural Waters Trust Fund, through which it paid royalty and lease fees to the original landowners of FIJI Water’s aquifer. The trust also provided health, hygiene, sanitation, and education facilities for these villages.6 Operations and Distribution Fiji is an island nation in the South Pacific Ocean comprising an archipelago of more than 332 islands with unexploited tropical forests, surrounded by coral reefs. The islands received nearly 3,000 millimeters of rain each year. The country had been ruled by a military regime since 2006; its primary industries were tourism and sugar production. In 2008, FIJI Water’s operations represented 20% of the country’s exports and 3% of the country’s $3,900 per capita GDP.7 FIJI Water’s water source was a 17-mile-wide, 400-foot-deep aquifer below a volcano and tropical forest on the main Fijian island of Viti Levu, into which rainfall had filtered over centuries. The company boasted that the water’s high silica content and its distance and isolation from pollutants like acid rain, herbicides, and pesticides were what made its water so pure, healthy, and rich in taste, and why it required no filtration or chemical treatment before being bottled. In addition, FIJI Water’s state-of-the-art bottling facility used a completely sealed process, which prevented the water from being exposed to air or any other potential contaminants before it reached the consumer. FIJI Water’s 2-building, 110,000-square-foot facility produced 50,000 bottles per hour, 24-hours per day, and 5 days per week – a manufacturing process that relied on electricity from diesel generators.8 The company employed about 400 workers in Fiji and another 100 employees in 10 other countries.9 FIJI Water was distributed in 40 countries around the world, including the United States, Canada, Australia, Brazil, China, Hong Kong, Japan, Korea, Russia, Singapore, South Africa, Taiwan, and the United Kingdom (see Exhibits 1a and 1b for a map and approximate distances from Fiji). FIJI Water bottles were sold in four sizes—330 milliliters (11.2 oz.), 500 milliliters (16.9 oz.), 1 liter (33.8 oz.), and 1.5 liters (50.7 oz.)—and came in single-serve or multipacks. They were distributed through grocery stores, hotels, restaurants, and gourmet shops, and through home delivery. Marketing “Mineral waters are as different from each other as wine,” according to Tom Kissock, a FIJI Water spokesperson.10 FIJI Water was top-rated in bottled-water taste tests in magazines such as Chicago Magazine, Cook’s Illustrated Buying Guide, Men’s Health, and Every Day with Rachel Ray. FIJI Water was positioned at the intersection of “pop-culture glamour” and progressive politics.11 In order to brand FIJI Water as an “affordable luxury,” Roll International’s owners Lynda and Stewart Resnick leveraged their connections in the elite business and Hollywood realms. For example, they established relationships with chefs of leading restaurants, including Nobu Matsuhisa, the celebrity chef and restaurateur behind the famous sushi-based Nobu Restaurants, who began to advocate dipping lobster sashimi in FIJI Water. The Resnicks also built relationships with owners of resorts and spas, where bottles were served in signature silver and gold sleeves. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 3 Such business relationships were often based on personal connections; as Lynda Resnick once remarked, “I know everyone in the world, every mogul, every movie star.”12 Celebrities like Whoopi Goldberg, Pierce Brosnan, Vin Diesel, and Jessica Simpson were reported to love FIJI Water. The company also hired a Hollywood marketing consulting firm to help place its bottles in leading movies and television shows (such as The Sopranos, 24, The View, Brother and Sisters, and Desperate Housewives) and at high-profile events (like the Emmy Awards and the Avon Walk for Breast Cancer). FIJI Water also hosted golf tournaments and sailing regattas, and was featured in music fests including SXSW (South by Southwest) in Austin, Texas, and at Justin Timberlake’s Summer Love concert tour. Thousands of FIJI Water bottles were handed out at the 2008 Democratic National Convention. These connections and appearances helped create a sense of exclusivity around FIJI Water, despite the fact that the water bottles were available for purchase in supermarkets and convenience stores. According to Martin Roll, a brand consultant, FIJI Water demonstrated that “competent branding can elevate even the simplest commodity to celebrity status.”13 The Bottled Water Industry The commercial bottled water industry was established nearly 200 years ago.14 In the United States, Poland Spring was founded in 1845 to enable Maine’s summer visitors to return home with its famed spring water. Many renowned European bottled water companies, including Perrier and Evian in France, and San Pellegrino in Italy, were similarly established during the same period. By the twentieth century, bottled water was packaged in glass, plastic, aluminum, or steel bottles and cans for individual consumption and retail sales. In 2009, the bottled water market included still unflavored (65.8%), sparkling unflavored (29.2%), sparkling flavored (2.8%), and still flavored (2.2%) waters.15 Bottled water was sourced from glaciers, springs, natural wells, and municipal water systems, and brands often differentiated themselves by boasting of their water’s inherent characteristics, such as trace minerals and vitamins that provided immunity-like benefits. Some touted their sources as being secluded, exotic locations. Nearly half of all bottled water was distributed via supermarkets and hypermarkets, while another 20% was sold through independent retailers and another 17% was distributed in restaurants, cafés, and bars.16 Industry experts estimated that, for the typical $1.29 bottle of water, nearly half of the costs went to the retailer, about one-third to the distributor and transportation, 12 to 15 cents for the water, and 12 to 15 cents for the bottle and cap, which left approximately 10 cents in profit for the water producer—the equivalent of 2 cents per bottle for multipacks.17 Consumer Demand The bottled water market was among the most dynamic growth markets in the food and beverage industry.18 Consumers purchased bottled water for several reasons:  Convenience: bottled water was portable and did not require heating or refrigeration.  Taste: some consumers regarded bottled water as superior in taste to tap water, which could sometimes taste like the chlorine used to purify it.  Health: water was a zero-calorie alternative to sodas and alcoholic beverages, and some contained minerals like silica, calcium, and magnesium.  Status: drinking bottled water was a sign of an elevated social scale, particularly in the developing world. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 4  Safety: bottled water provided an alternative for the over one billion people without access to clean, drinkable tap water. In 2009, global sales of bottled water were about $80 billion and were forecasted to reach $100 billion by 2014.19 Sixty percent of the market was in Europe, followed by the Americas (30%) and Asia-Pacific (20%) (see Exhibits 2a and 2b for bottle water consumption in select countries).20 In the United States, annual per capita consumption of bottled water had grown from less than two gallons in 1976 to nearly 30 gallons in 2006—more than milk, coffee, or beer (see Exhibit 2c for U.S. consumption of bottled water). Only carbonated soft drinks outsold bottled water (see Exhibit 3 for global market trends in beverages).21 Major Industry Players Several types of companies were major producers of bottled water, including specialized companies such as FIJI Water and diversified consumer packaged goods companies such as PepsiCo and Vivendi. The leading players in the global bottled water market in 2009 were Coca-Cola, Groupe Danone, Nestlé S.A., and PepsiCo, which together accounted for about one third of global market share.22 Exhibit 4 provides information on several of FIJI Water’s competitors. The Environmental Impacts of Bottled Water In 2007, numerous environmental groups, including the Rainforest Action Network, the Pacific Institute, and Corporate Accountability International, attacked the bottled water industry for selling a single-use product that they deemed unnecessary and harmful to the environment. These critics argued that bottled water was by definition “simply not an environmentally-friendly product,” and that selling it was akin to “selling snow to Eskimos, especially in places like Britain that have almost constant rainfall.”23 According to Kath Dalmeny at the Food Commission, a nongovernmental organization (NGO) that campaigned for healthier, more sustainable food in the U.K., it was “ludicrous to bring water from the other side of the world when essentially the same product is available out of the tap.”24 Environmental critics were particularly concerned with the production and disposal of plastic bottles, the use of water in the production process, and the greenhouse gas (GHG) emissions associated with distribution. Petroleum Use in Plastic Bottles Plastic was the most commonly used bottled-water packaging material, preferred over aluminum and glass in almost every country. In 2005, 96% of water bottles sold in the United States were made of PET (polyethylene terephthalate) plastic, a petroleum product, and came in single-serve sizes of one liter or less.25 Most bottled water companies manufactured their own bottles at their bottling plants, just before filling them, utilizing an energy-intensive process. In 2007, bottled water in the U.S. was sold in nearly 30 billion plastic bottles, which required about 17 million barrels of oil to manufacture, enough to fuel more than a million cars for a year.26 The U.S. market represented about 20% of the global bottled water market.27 Solid Waste Water bottles also created a large disposal issue. Only 10% of noncarbonated drink bottles were recycled (approximately 15% of water bottles in the U.S.).28 It took up to 1,000 years for these bottles to biodegrade in landfills. Many empty bottles, including some shipped abroad for recycling, ended For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 5 up as pollution in oceans and elsewhere, sometimes posing a hazard to wildlife. In addition, bottled water sold in packs was wrapped in “overpackaging,” which produced additional waste. Water Extraction Millions of gallons of water were used in bottled water manufacturing processes, both as a cooling agent in the bottle molding phase and to rinse out finished bottles. It took an estimated seven liters of water, including power plant cooling water, to manufacture a one-liter bottle of water.29 It was inherently unsustainable to pump large quantities of water from underground aquifers at rates that exceeded their replenishment, and depleting aquifers could negatively affect local water supplies and aquatic wildlife. In 2007, for example, the 6,000-year-old aquifer at the Peats Ridge plant north of Sydney, Australia, where Coca-Cola held an extraction license, was reported to be dropping dangerously; as a result, springs were drying up and wetlands were disappearing.30 Similarly, water shortages had been reported near bottling plants in Texas and in the Great Lakes region of North America. Even companies that sold purified tap water required significant volumes of water; approximately two additional gallons were required to purify every gallon of bottled water.31 As many water sources around the world were under increasing pressure, critics called for better management and monitoring of freshwater supplies. Greenhouse Gas Emissions In addition to consuming large amounts of energy, oil, and water, bottled water also came under criticism for the GHG emissions emitted during manufacturing, travel, and consumer use and disposal. For example, the manufacture of all plastic water bottles sold in the U.S. in 2007 emitted over 2.5 million tons of carbon dioxide, or the equivalent of 400,000 passenger cars per year.32 Bottled water, particularly in the luxury segment, was often shipped around the world. More than 25% of bottled water was distributed across national borders,33 creating environmental impacts from the combustion of vehicles’ fossil fuels, which released GHG that contributed to global climate change. It was estimated that each week, nearly 38,000 18-wheeler trucks delivered water around the United States.34 Some bottled water was shipped on large ocean freight liners, which, despite being a relatively carbon-efficient transportation mode, were criticized for contributing to conventional air pollution from combusting bunker fuel (see Exhibit 5 for CO2 emissions from shipping). FIJI Water came under particularly harsh scrutiny by some environmental activists because it shipped its products far distances around the world. For example, the closest port in the United States from Fiji was in Los Angeles, more than 6,500 miles away. According to FIJI Water, nearly 75% of its product’s carbon footprint resulted from the operations of its supply chain partners, including the shipping companies that distributed its bottled water as well as the production and transportation of its plastic resin suppliers in Thailand and Taiwan.35 Alternatives Critics of bottled water turned their attention to tap water, which they praised as being much cheaper and environmentally friendlier. It cost only $0.002 per gallon to treat, filter, and deliver a gallon of tap water in the United States, which was about 750 to 2,700 times cheaper than purchasing the equivalent amount of bottled water.36 The energy required to produce tap water was estimated at around 0.005 megajoules (MJ) per liter, taking advantage of carefully placed pumps and gravity to move water more efficiently.37 By comparison, bottling one liter of water often required between 5.6 and 10.2 MJ.38 For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 6 Critics also noted that bottled water was not necessarily safer than tap water. The Natural Resources Defense Council, an environmental NGO, reported that one-third of the 103 bottled water brands it tested were contaminated with arsenic and E. coli.39 Some critics added that tap water was regulated in the United States by the Environmental Protection Agency (EPA), an agency often viewed as more rigorous than the Food and Drug Administration (FDA), which oversaw bottled water. In addition, while some of the most enduring bottled water companies were built on claims of providing superior health benefits, government and industry groups estimated that between 25% and 40% of bottled water sold was simply filtered tap water.40 Some critics believed that the billions of dollars spent annually around the world on bottled water could be better used to install and maintain a safe public water infrastructure everywhere. They argued that, for example, by investing one-fifth of what was currently spent on bottled water, the world could eradicate the 1.8 million child deaths each year due to waterborne illnesses.41 Some city mayors had urged residents to return to tap water. In 2007, for example, New York City launched a “Get Your Fill” campaign to persuade people to cut back on bottled water. The same year, San Francisco Mayor Gavin Newsom banned city employees from using public funds to purchase bottled water (saving nearly $500,000). Also in 2007, Chicago became the first city in the United States to impose a tax ($0.05) on bottled water sold in the city, seeking to reduce the strain on municipal waste systems. FIJI Water’s Environmental Initiatives FIJI Water attributed the “unique taste and mineral properties” of its water to the “pristine ecosystem of the Fijian islands,” and believed it therefore had a fundamental commitment to preserving the “purity and biological wealth” of the region.42 As a result, the company undertook various environmental initiatives to make its practices more sustainable, initiatives that were marketed under the slogan, “Every Drop Is Green.” Onsite Operations The FIJI Water bottling plant was certified as meeting the requirements of ISO 14001, a voluntary, international, environmental management standard that represented a best-practices approach to developing an environmental policy and procedures, setting priorities, organizing training, and conducting routine environmental auditing and periodic management reviews. Waste and recycling Between 2008 and 2010, FIJI Water committed to reducing production facility waste by 33%, as compared to a 2006 baseline.43 By 2010, FIJI Water reported reductions in its total waste generation through yield improvements, and announced that 95% of the waste generated by its plant was sorted and recycled.44 Water management FIJI Water hired expert hydrogeologists to ensure that it was drawing water from its aquifer in the Yaqara Valley at a sustainable rate, as well as to help protect the aquifer’s environment. According to the company, “The very livelihood of our company relies on the health and well-being of our source aquifer and the surrounding environment. The water is harvested to ensure that both the aquifer and FIJI Water as a company are sustainable. As part of our production standard, we ensure that we draw water at a rate well within the limits of the rainfall replenishment rate.”45 For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 7 Distribution Packaging Whereas most premium bottled water was produced in glass bottles, FIJI Water contended that its products were all packaged in plastic, which used less energy to produce, ship, and recycle, and that its square-bottle design allowed for tighter, more efficient packing. In 2008, FIJI Water undertook plans to reduce the plastic content in its bottles by an average of 20% over the next two years, as compared to a 2006 baseline.46 Such initiatives were common among some of its competitors; Coca-Cola, for example, was the first to commercialize a food or beverage bottle made of recycled plastic, and had taken measures to reduce its packaging weight. Similarly, Nestlé Water was working to reduce its packaging weight by 30% with its new Eco-Shape bottles. In 2010, FIJI Water began to use 100% recycled cartons to store and ship bottles. Offsite in Fiji Watershed protection In August 2007, FIJI Water launched the FIJI Water Foundation, through which it invested in protecting the Yaqara Valley watershed, where it extracted most of its water. Similarly, Coca-Cola partnered with the World Wildlife Fund to conserve several freshwater river basins, and Nestlé Water instituted land conservation projects. Tree planting FIJI Water joined the 1% for the Planet partnership, which consisted of more than 1,300 companies like Patagonia and Clif Bar that committed 1% of their sales to environmental organizations around the world. FIJI Water’s contributions went toward investing in high-quality, multiple-benefit, forest-restoration projects in Fiji. In December 2009, for example, FIJI Water invested $3 million to restore over 1,250 acres of abandoned sugar cane farms with fruit and spice trees, timber, and other native species. The reforestation effort would help stop erosion, improve water quality, protect wildlife, employ local Fijians, and mitigate GHG emissions. Expanding community water access FIJI Water also worked with its local community members to build a series of wells to provide residents with a consistent supply of high-quality water. It was reported that nearly one-third of Fiji’s population did not have access to safe, clean drinking water.47 Increased waste recycling FIJI Water cosponsored a national Fiji program to increase recycling rates beyond 40%, a rate higher than that in many developed countries. FIJI Water also partnered with local resort operators to develop recycling infrastructures on hotel and resort properties. Offsite Globally Tree planting Through the 1% for the Planet program, FIJI Water also extended its reach to the United States, Latin America, and other countries. In 2010, for example, FIJI Water partook in a tree-planting program organized by the nonprofit organization Million Trees LA. Increasing recycling FIJI Water supported recycling programs in several of its various markets. The company was in favor of legislative measures in the United States to expand curbside recycling programs and to encourage container deposit laws to include bottled water and other noncarbonated beverages. According to FIJI Water’s then-vice president of sustainable growth, Thomas Mooney, “Our industry and our elected leaders are missing a great opportunity to reduce the impact of our product.”48 It was estimated that, by recycling their plastic bottles, consumers could reduce their carbon footprint by at least 25%.49 For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 8 Carbon-Negative Campaign In 2007, FIJI Water announced its plans to go “carbon negative” starting in 2008 by offsetting 120% of its carbon footprint. As the company stated in a press release, “That means that we are not only mitigating our environmental impact but also making up for a little bit of someone else’s.”50 According to the company, purchasing a one-liter bottle of FIJI Water would result in 115 grams of carbon dioxide equivalent being removed from the atmosphere, which, when aggregated to all of its products, was equivalent to planting 500,000 trees or taking 3,500 cars off the road.51 Striving to be carbon negative went well beyond prevailing practice across the bottled water and other industries, where organizations typically announced GHG-reduction goals such as reducing emissions by a certain percentage over a several year period. A few organizations had boldly announced “climate neutral” goals, but that was quite rare. FIJI Water acknowledged it was a pursuing a leadership role. According to Mooney, “We are a small brand, but we are raising the bar for the entire industry on how we should operate.”52 To achieve its goal, the company calculated and publicly disclosed its carbon footprint to the Carbon Disclosure Project, the world’s largest investor coalition on climate change, becoming the first bottled water and the first privately held company to make such disclosures.53 As Mooney noted, the company “believes that consumers will make environmentally responsible purchasing decisions if they have the information they need.”54 FIJI Water also joined forces with ICF International, a global consulting firm that helped it verify and publically report its emissions-reduction progress, and with Conservation International, a nonprofit organization that counseled the company on its sustainability initiatives. In addition, FIJI Water took into account its emissions reductions through its operations and distribution optimization projects. Energy FIJI Water committed to sourcing half of the energy used in its production process from renewable sources by 2010.55 The company announced that it would construct a windmill to provide energy to its bottling plant and that it had installed lighting that was 70% more energy efficient throughout its facility.56 Logistics and shipping FIJI Water began switching to more fuel-efficient trucks to transport its products from its plant to the port, resulting in a 50% reduction in fuel usage, and also switched its trucks to biodiesel and other alternative fuels.57 FIJI began shipping bottles to be sold on the East Coast of the United States via the Panama Canal to the Philadelphia port, rather than trucking them from Los Angeles. Though this route took three times longer, it resulted in a 55% reduction in GHG emissions.58 FIJI also optimized its trucking routes in various markets, reducing truck miles from its warehouses to distributors by 26%.59 Purchasing carbon offsets FIJI Water announced that it would purchase carbon offsets, a financial instrument that represented the reduction or avoidance of GHG emissions from a particular project that was used to compensate for GHG emissions occurring elsewhere (see Exhibit 6 for critical aspects of carbon offsets). FIJI Water chose to purchase carbon offsets derived from afforestation and from renewable energy projects that it was developing with Conservation International. The company opted to purchase carbon offsets on a forward-crediting scheme, in essence calculating the carbon reductions projected to materialize over the subsequent three decades to achieve its present-day carbon-negative commitment. According to FIJI Water, “Investing in offsets allows us to take immediate responsibility for our emissions,” though the company intended to For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 9 eventually replace the purchase of offsets with carbon-reducing projects that it would develop directly.60 FIJI Water was not the only bottled water company to offset its carbon impacts. Icelandic Glacial had been operating as a carbon-neutral company since 2007, a status certified by CarbonNeutral, an organization that verified that companies were adhering to its protocol. Icelandic Glacial achieved its carbon-neutral status by relying on onsite hydroelectric power and low-emission shipping, and by purchasing carbon offsets from projects engaged in reforestation and methane capture. Challenges Carbon Negative or Greenwash? FIJI Water’s marketing activities sought to affiliate its product with the environmental movement. In 2006, for example, FIJI Water bottles were photographed between politician Al Gore and artist Mos Def during the MySpace “Artist on Artist” discussion on climate change. The next year, FIJI Water took out a full-page ad in Vanity Fair’s green issue. When the company announced its carbon-negative campaign, its press release stated, “We are the first and only major bottled water company to make this commitment.”61 However, because FIJI Water’s bottles traveled further than many other bottled water brands, it was blamed for being a “potent symbol of excess,”62 and its appearance in these contexts was highly questioned. Mother Jones magazine, for example, singled out FIJI Water in a cover story article that criticized the company for its environmental impacts, among other concerns (see Exhibit 7 for the magazine cover). Some critics also questioned the legitimacy of FIJI Water’s use of carbon offsets to ameliorate its environmental impacts, accusing the company of greenwashing and telling partial truths that sought to mislead consumers. “Bottled water is a business that is fundamentally, inherently and inalterably unconscionable,” argued Michael Brune, executive director of the Rainforest Action Network. “No side deals to protect forests or combat global warming can offset that reality.”63 Ultimately, FIJI Water faced a lawsuit filed in U.S. District Court in late 2010 that accused the company’s carbon-negative campaign of constituting misleading advertising. The lawsuit claimed that, by purchasing carbon offsets on a forward-crediting scheme, FIJI Water was using “a discredited carbon accounting method” that allowed the company to claim credit for “carbon removal that may or may not take place—up to several decades in the future.”64 “To a reasonable consumer,” the suit explained, “the ‘Carbon Negative’ claim means that the defendant’s current operations remove more carbon from the atmosphere than they release into it.” The plaintiff claimed that she would not have purchased the product had she known of FIJI Water’s forward-crediting accounting scheme, and that her purchases caused her to “suffer injury” and “lose money.” The suit also accused FIJI Water of engaging in “unfair competition,” which included “any unlawful, unfair or deceptive business act . . . or misleading advertising.” The suit concluded that, as a result of its carbon-negative campaign, FIJI Water was able to “capture a substantial segment of that market,” a move from which it “richly profited” by charging a premium above that of its competitors. Conflicts with the Fiji Government In addition to criticisms regarding its green initiatives, FIJI Water also faced some criticisms regarding its relationship with Fiji’s government and population. The company produced about 20% of Fiji’s export income and 3% of its gross domestic product (GDP); thus, developing a good For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 10 relationship with the local government was important. Though FIJI Water engaged in many environmental and charitable works on the islands of Fiji, environmental groups and other critics observed that the country’s repeated typhoid outbreaks and parasitic infections were a result of inadequate access to safe drinking water, and that their public water supply system was plagued by crumbling pipes, lack of adequate wells, and dysfunctional or flooded water treatment plants. FIJI Water avoided these problems by investing in its own piping infrastructure to directly access an artesian aquifer in the Yaqara Valley. A Mother Jones article provided a critical account of how the company originally obtained access to this aquifer: In the early 1990s, Gilmour got wind of a study done by the Fijian government and aid organizations that indicated an enormous aquifer, estimated at more than 17 miles long, near the main island’s north coast. He obtained a 99-year lease on land atop the aquifer, brought a former Fijian environment minister on board, and launched an international marketing blitz inviting consumers to sample water preserved since “before the Industrial Revolution.” To this day, FIJI Water has nearly exclusive access to the aquifer; the notoriously corrupt and chronically broke government has not been able to come up with the money or infrastructure to tap the water for its people.65 On November 26, 2010, FIJI Water came into conflict with the Fijian government when the latter announced that it would increase its water-extraction tax from one-third of a Fiji cent per liter to 15 Fiji cents per liter (that is, F$0.003 to F$0.15 per liter, or US$0.0018 to US$0.083 per liter) at locations where more than 920,000 gallons (3.5 million liters) were extracted each month.66 FIJI Water, the only bottled water company on the island to extract this much water, reacted by calling the move “discriminatory” and the tax “untenable.” The company threatened to leave the island, stating that it had “no choice but to close [its] facility in Fiji.”67 This was not the first time FIJI Water had battled the government on tax issues. On July 4, 2008, the Fijian government passed a measure to increase the national mineral-water export tax from F$0.003 to F$0.20 (i.e., US$0.0017 to US$0.11) per liter, which affected all mineral bottling companies on the island. FIJI Water reacted by calling the measure “draconian” and, along with nine other water companies, mounted a campaign against the government by closing its plants and laying off a large number of its workers.68 The group also enlisted the help of an industry lobby group, which disapproved of the government failure to negotiate with the water companies before imposing the tax measure,69 and helped to mount pressure on the country’s leaders. Ultimately, the government agreed to decrease the export tax back to F$0.003 per gallon.70 These standoffs created a media backlash against FIJI Water. Newspapers and environmental organizations reported that FIJI Water was not only trying to dodge a necessary increase in extraction taxes, but had also established tax havens for itself by registering its operations in Luxembourg and in the Cayman Islands, and questioned the company’s dedication to the local population. Echoing this sentiment, Fiji’s President Frank Bainimarama issued a public statement declaring that FIJI Water “has adopted tactics that demonstrate the company does not care about Fiji or Fijians.”71 Decisions Despite its leading position as a luxury brand, FIJI Water had to respond to the California lawsuit that questioned the legitimacy of its carbon-negative campaign. As it trudged through another wave of critical press coverage, FIJI Water had to consider whether to defend or alter its approach. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 11 In addition, the company had to contemplate its negotiation strategy with the Fijian government, whose actions risked substantially affecting the company’s profitability. FIJI Water could challenge the government by threatening to close its facilities and move operations elsewhere; for instance, FIJI Water could transfer operations to New Zealand where its parent company, Roll International, already owned the SpringFresh brand of bottled water. FIJI Water could also make a counteroffer and stress the importance of the company’s presence for the local economy. FIJI Water had to carefully examine all its options before entering negotiations. What strategies should the company adopt to create sustainable solutions to both of these issues? For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 12 Exhibit 1aShipping Routes from Fiji to Select Major Markets Source: Harvard Center for Geographical Analysis, April 2011, based on data from SeaRates.com, Port-to-Port Distances, SeaRates.com, http://www.searates.com/reference/portdistance, accessed March 2011. Exhibit 1bShipping Distances from Fiji City/Country Nautical Miles (Kilometers) Sydney, Australia 1,740 (3,222) Kaohsiung, Taiwan 4,411 (8,169) Singapore 4,608 (8,534) Pusan, South Korea 4,624 (8,564) Hong Kong 4,706 (8,716) Los Angeles, United States 6,677 (12,366) Rio de Janeiro, Brazil 7,616 (14,105) Cape Town, South Africa 7,670 (14,205) Philadelphia, United States 9,667 (17,903) London, United Kingdom 12,475 (23,104) Source: SeaRates.com, Port-to-Port Distances, SeaRates.com, http://www.searates.com/reference/portdistance, accessed March 2011. Note: Distances are from Fiji’s Suva port. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 13 Exhibit 2a Total Bottled Water Consumption in 2009, Select Countries Exhibit 2b Bottled Water Consumption Per Capita in 2009, Select Countries Exhibit 2c Bottled Water Consumption Trend in the United States, 2001–2009 Sources: Casewriter, compiled based on data from: John G. Rodwan Jr., “Challenging Circumstances Persist: Future Growth Anticipated, U.S. and International Developments and Statistics,” http://www.bottledwater.org/files/2009BW stats.pdf, accessed March 2011; and Population Reference Bureau, http://www.prb.org/, accessed March 2011. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 14 Exhibit 3Global Market Trends in Beverages, 2005–2009 Source: Casewriter, compiled using data from: Datamonitor, “Industry Profile: Global Bottled Water,” Datamonitor, April 2010, p. 9; Datamonitor, “Industry Profile: Global Juices,” Datamonitor, April 2010, p. 9; Datamonitor, “Industry Profile: Global Milk,” Datamonitor, April 2010, p. 9; and Euromonitor, 2010. Data retrieved April 6, 2011. Note: Soft Drinks include soda, sports and energy drinks, iced tea, and smoothies. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 15 Exhibit 4Bottled Water Market: FIJI Water and Select Competitors FIJI Water Coca-Cola Groupe Danone Nestlé S.A. Headquarters California, U.S. Georgia, U.S. France Switzerland Share of global bottled water market 1% 7.5% 12.8% 14.8% Revenues from water division $150 million (2007) Not available $3.6 billion (2009) $8.4 billion (2009) Major markets (countries) 40 200 120 130 Brands 1 brand: FIJI Water Approx. 50 brands, including Dasani, Ciel, Nature’s Own, Glacéau Smartwater, VIVA Approx. 5 brands, including Evian, Volvic, Badoit, Salvetat, Salus Approx. 64 brands, including Nestlé Pure Life, Perrier, Arrowhead, San Pellegrino, Poland Spring Price for 1 liter bottle1 $2.29: FIJI Water $1.00: Dasani $1.89: Smartwater $2.13: Evian $1.66: Volvic $1.37: Poland Spring $1.79: Perrier $2.13: San Pellegrino Source: Casewriter, using data from: Lynda Resnick and Francis Wilkinson, Rubies in the Orchard (New York: Broadway Books, 2010), p. 175; Datamonitor, “Industry Profile: Global Bottled Water,” Datamonitor, April 2010, p. 2; Claudia H. Deutsch, “FIJI Water Vows to Go Carbon Negative,” New York Times, November 7, 2007; Accenture, “Groupe Danone: Global Business Process Transformation,” Accenture, http://www.accenture.com/Global/Services/By_Industry/ Consumer_Goods_and_Services/Client_Successes/GroupeDANONE.htm, accessed January 2011; and FIJI Water, “Company History,” FIJI Water website, http://www.fijiwater.com/company/company-timeline/, accessed March 2011. 1Prices at Star Market grocery store in Boston, Massachusetts, on June 6, 2011. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 16 Exhibit 5CO2 Emissions from Shipping, from Source to San Francisco Brand Source Miles to San Francisco Bottle Weight (oz.) CO2 (Travel only) (lbs./1 liter bottle) Dasani (Coca-Cola) California 22 1.94 0.01 365 (Whole Foods) California 223 1.5 0.07 Fiji Water Fiji 5,470 4.15 0.49 Voss Norway 5,100 18.93 (glass) 0.57 Volvic (Danone) France 6,255 2.34 0.59 Evian (Danone) France 6,265 3.35 0.61 Perrier (Nestlé) France 5,900 17.61 (glass) 0.63 San Pellegrino (Nestlé) Italy 6,135 17.74 (glass) 0.80 Source: Jen Phillips, “How Far Did Voss and San Pellegrino Travel to My Whole Foods?” Mother Jones, September/October 2009 issue, http://motherjones.com/politics/2009/09/how-far-did-voss-and-san-pellegrino-travel-my-whole-foods, accessed May 2011. Calculations based on Carbonfund.org (personal communication with Jen Phillips, May 31, 2011). Note: Travel includes trucking to the nearest large port, shipping via cargo ship, and trucking to final destination. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 17 Exhibit 6Carbon Offsets Overview and Purchasing Schemes Carbon offsets could be created from investments in, for example, afforestation (planting trees), capturing landfill methane, installing biodigesters at dairy farms, increasing fuel efficiency, and, under some circumstances, subsidizing the development of wind and solar energy sources. Carbon offsets were typically measured in metric tons of carbon dioxide equivalent (MMTCO2Eq or MMTCDE), and their magnitude required comparison to a baseline scenario reflecting emissions levels that would have occurred in the absence of the project. To qualify as a legitimate carbon offset, the project had to be financially viable only due to the revenues earned from selling the offset. This concept, called additionality, helped distinguish projects that actually mitigated GHG emissions due to the carbon offset from those projects that would have occurred anyway (in which case sales of offsets would merely contribute to windfall profits). According to the Stockholm Environment Institute, “The topic of additionality is the most fundamental—and thus contentious—issue in the carbon offset market. In theory, additionality answers a very simple question: Would the emissions reductions have occurred, holding all else constant, if the activity were not implemented as an offset project? Or more simply: Would the project have happened anyway? If the answer to that is yes, the project is not additional.” Carbon offsets that met particular requirements could be sold to regulated markets in countries participating in the Kyoto Protocol. Carbon offsets could also be sold to organizations and individuals in voluntary markets. While offsets sold to voluntary markets did not have to meet regulatory requirements, some adhered to protocols such as the Climate Action Reserve (CAR), the America Carbon Registry (ACR), the Verified Carbon Standard (VCS), and the Gold Standard. Carbon offsets could be purchased on the basis of one of three schemes: 1. Prompt delivery of existing offsets: Providers invested in the technology, implementation, and operational costs to generate the GHG reduction before the offset was sold. Providers assumed all of the up-front risks for these projects, which eliminated buyer risk that the offset would fail to be actualized. As such, these offsets sold for a higher price than the other two forms. 2. Forward delivery of future offsets: Providers committed to delivering a set number of carbon offsets at a predefined time and price in the future, eliminating market price risk for the purchaser. These forward contracts were only executed if both parties still existed at the time of delivery. 3. Forward crediting of future offsets: Providers sold these carbon offsets before the emissions reductions were realized, and immediately issued a certificate to the purchaser confirming credit for the carbon offsets. With these contracts, the ultimate amount of emission reductions was uncertain, and providers were not contractually obligated to deliver credits in the case of a shortfall. Customers faced the risk that some (or all) of the reductions might not be realized, and the further risk that they might not be informed of this. Proponents like Conservation International claimed that projects pursued via forward-crediting schemes demonstrated clear additionality, since forward crediting provided critical upfront funding, “a major barrier for the development of carbon projects.” Critics such as the Stockholm Environmental Institute argued that this structure carried the most risk to purchasers. Source: Casewriter, based on information from: Anja Kollmuss and Benjamin Bowell, “Voluntary Offsets for Air Travel Carbon Emissions,” Tufts Climate Initiative, revised April 5, 2007, http://sustainability.tufts.edu/downloads/TCI_Carbon_Offsets_Paper_April-2-07.pdf, accessed February 2011; Carol Lane, “All About Forest Carbon Offsets,” Conservation International website, August 6, 2008, http://www.conservation.org/FMG/Articles/Pages/dell_forest_carbon_offsets_madagascar.aspx, accessed April 2011; Offset Quality Initiative, Ensuring Offset Quality: Integrating High Quality Greenhouse Gas Offsets into North American Cap-and-Trade Policy, July 2008, http://www.offsetqualityinitiative.org/briefings.html, accessed June 2011; Stockholm Environment Institute and Greenhouse Gas Management Institute, “Contract Terms,” CORE website, http://www.co2offsetresearch.org/consumer/contracts.html, accessed May 2011; and Stockholm Environment Institute and Greenhouse Gas Management Institute, “Additionality,” CORE website, http://www.co2offsetresearch.org/consumer/Additionality.html, accessed June 2011. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 18 Exhibit 7 Criticisms of FIJI Water’s Environmental Initiatives The New York Times magazine, June 2008: Mother Jones magazine, September/October 2009: Source: Anna Lenzer, “Fiji Water: Spin the Bottle,” Mother Jones, September/October 2009, http://motherjones.com/politics/ 2009/09/fiji-spin-bottle#, accessed January 2011; Rob Walker, “Water Proof,” The New York Times magazine, June 1, 2008, http://www.nytimes.com/2008/06/01/magazine/01wwln-consumed-t.html?_r=3&partner=rssnyt&emc =rss&oref=slogin, accessed April 2011. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 19 Endnotes 1 Anna Lenzer, “Fiji Water: Spin the Bottle,” Mother Jones, September/October 2009, http://motherjones. com/politics/2009/09/fiji-spin-bottle, accessed January 2011. 2 Environmental Leader, “Fiji Water Targeted in ‘Greenwashing’ Class Action Suit,” Environmental Leader: Energy & Environmental News for Business, December 29, 2010, http://www.environmentalleader.com/2010/ 12/29/fiji-water-targeted-in-greenwashing-class-action-suit/, accessed January 2011. 3 Environmental Leader, “Fiji Water to Go Carbon Negative,” Environmental Leader website, November 7, 2007, http://www.environmentalleader.com/2007/11/07/fiji-water-to-go-carbon-negative/, accessed January 2011; and Claudia H. Deutsch, “For Fiji Water, A Big List of Green Goals,” New York Times, November 7, 2007, http://www.nytimes.com/2007/11/07/business/07fiji.html?_r=2&ref=science, accessed April 2011. 4 Beverage World, “Fiji Water,” Beverage World website, November 14, 2007, www.beverageworld.com/ index.php?option=com_content&view=article&id=34007:fiji-water&catid=64&Itemid=176, accessed January 2011. 5 Beverage World, “Fiji Water.” 6“Hollywood Couple Buys Fiji Water for $63M,” Sydney Morning Herald, November 30, 2004, http://www. smh.com.au/news/Business/Hollywood-couple-buys-Fiji-Water-for-63m/2004/11/29/1101577419156.html, accessed March 2011. 7 Lenzer, “Fiji Water.” 8 Bottled Water Web, “Fiji Water,” Bottled Water Web, http://www.bottledwaterweb.com/bottlers detail.do?k=946, accessed March 2011; and Lenzer, “Fiji Water.” 9 FIJI Water, “Discriminatory Tax Forces Shutdown of FIJI Water Factory,” FIJI Water press release, November 29, 2010, http://www.fijiwater.com/2010/discriminatory-tax-forces-shutdown-of-fiji-water-factory/, accessed February 2011; and Roll Global, “FIJI Water,” Roll Global company website, http://www.roll.com/fiji-water.php, accessed March 2011. 10 FIJI Water, “The Water,” FIJI Water company website, http://www.fijiwater/com/water, accessed January 2011. 11 Lenzer, “Fiji Water.” 12 Andrew Purvis, “Her Latest Squeeze,” The Observer, December 11, 2005, http://www.guardian.co.uk/ lifeandstyle/2005/dec/11/foodanddrink3, accessed January 2011. 13 Martin Roll, “FIJI Water—The Exotic Water Brand,” Venture Republic, http://www.adoimagazine.com/ newhome/index.php?option=com_content&view=article&id=4634&catid=24, accessed January 2011. 14 Poland Spring, “Poland Spring. Learn Our History . . . ,” Poland Spring website, http://www.poland spring.com/AboutUs/Timeline.aspx, accessed March 2011; Nestlé Waters, “History of Bottled Water,” Nestlé Waters website, http://www.nestle-watersna.com/Menu/AboutUs/Heritage/History+of+Bottled+Water.htm, accessed March 2011; Evian, “An Extraordinary Saga of Health and Lifestyles,” Evian website, http://www.evian.com/#/en_US/169-An-extraordinary-saga-of-health-and-lifestyles, accessed March 2011; and Michael Mascha, “Short History of Bottled Water,” Fine Waters website, http://www.finewaters.com/ Bottled_Water_Etiquette/Bottled_Water_History/Short_History_of_Bottled_Water/4.asp, accessed March 2011. 15 Datamonitor, “Industry Profile: Global Bottled Water,” Datamonitor, April 2010, p. 3. 16 Datamonitor, “Industry Profile,”p. 30. 17 Charles Fishman, “Message in a Bottle,” FastCompany.com, July 1, 2007, http://www.fastcompany.com/ magazine/117/features-message-in-a-bottle.html, accessed January 2011. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 20 18 Catherine Ferrier, “Bottled Water: Understanding a Social Phenomenon,” commissioned by the World Wildlife Fund, April 2001, p. 3. 19 Datamonitor, “Industry Profile,” p. 2–3. 20 Datamonitor, “Industry Profile,” p. 2, 12. 21 P. H. Gleick and H. S. Cooley, “Energy Implications of Bottled Water,” Pacific Institute, Environmental Research Letters no. 4 (2009): 1–6. 22 Datamonitor, “Industry Profile,” p. 2. “Soft Drinks: Euromonitor from trade sources/national statistics. Brand Shares,” Euromonitor International (Jan. 2013) accessed via www.portal.euromonitor.com in December 2013. 23 Food & Water Watch, “Greenwashed: Fiji Water Bottles the Myth of Sustainability,” Food & Water Watch website, May 2, 2008, http://www.foodandwaterwatch.org/2008/05/greenwashed-fiji-water-bottles-the-myth-of-sustainability/, accessed January 2011; and David Derbyshire, “Bottle of water that has travelled the world: Source of latest fashion drink is Fiji in the Pacific,” Daily Telegraph, November 3, 2004. 24 Derbyshire, “Bottle of water.” 25 Responsible Purchasing Network, “Think Outside the Bottle: Responsible Purchasing Guide,” 2008, http://www.responsiblepurchasing.org/purchasing_guides/bottled_water/purchasing_guide.pdf, accessed January 2011. 26 Lucy Siegle, “It’s Just Water, Right? Wrong. Bottled Water is Set to Be the Last Battleground in the Eco War,” The Observer, February 10, 2008, http://www.guardian.co.uk/environment/2008/feb/10/water. foodanddrink, accessed January 2011; and Emily Arnold and Janet Larsen, “ Bottled Water: Pouring Resources Down the Drain,” Earth Policy Institute, February 2, 2006, http://www.earth-policy.org/index.php?/plan_b_ updates/2006/update51, accessed March 2011. 27 Euromonitor 2010 data, retrieved April 6, 2011; and John G. Rodwan Jr., “Challenging Circumstances Persist: Future Growth Anticipated, U.S. and International Developments and Statistics,” http://www.bottled water.org/files/2009BWstats.pdf, accessed March 2011. 28 Tim Elliott, “Disaster in a Bottle,” Sydney Morning Herald, April 24, 2007, http://www.smh.com.au/news/ environment/disaster-in-a-bottle/2007/04/23/1177180569554.html, accessed April 2011. 29 Siegle, “It’s Just Water, Right?” 30 Elliott, “Disaster in a Bottle.” 31 Responsible Purchasing Network, “Think Outside the Bottle.” 32 Responsible Purchasing Network, “Think Outside the Bottle.” 33 Datamonitor, “Industry Profile,” p. 14. 34 Fishman, “Message in a Bottle.” 35 FIJI Water, “FIJI Water to Reopen Plant,” comments section, November 11, 2010, http://www.fijiwater.com.au/2010/fiji-water-reopen-plant/, accessed February 2011; and BevNet.com, “Fiji Water Becomes First Bottled Water Company to Release Carbon Footprint of its Products,” BevNet.com, April 9, 2008, http://www.bevnet.com/news/2008/4-9-2008-Fijigreen.asp, accessed January 2011. 36 Responsible Purchasing Network, “Think Outside the Bottle.” 37 Eric Tawney, “Visualization of Construction of a Gravity-Fed Water Supply and Treatment System in Developing Countries,” Michigan Technological University, Working Paper, http://www.cee.mtu.edu/ sustainable_engineering/resources/technical/Visualizing_Gravity_Fed_Water_System_FINAL.pdf, accessed March 2011. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 21 38 F. L. Burton, “Water and Wastewater Industries: Characteristics and Energy Management Opportunities,” Burton Engineering, prepared for the Electric Power Research Institute, 1996. 39 Erik D. Olson, “Bottled Water: Pure Drink or Pure Hype?” Natural Resources Defense Council website, April 1999, http://www.nrdc.org/water/drinking/bw/chap3.asp, accessed January 2011. 40 Responsible Purchasing Network, “Think Outside the Bottle.” 41 Siegle, “It’s Just Water, Right?” 42 FIJI Water, “Environment,” FIJI Water website, http://www.fijiwater.com/giving-back/environment/, accessed May 2011. 43 Conservation International, “FIJI Water Announces Sustainable Growth Initiative with Commitment to Help Mitigate Global Climate Change,” Conservation International website, November 7, 2007, http://www.conservation.org/sites/celb/news/Pages/110707_fiji_water_announces_sustainable_growth_initiative.aspx, accessed April 2011. 44 FIJI Water, “Waste & Recycling,” FIJI Water website, http://www.fijiwater.com/givingback/ environment/sustainable-practices/waste-recycling/, accessed February 2011. 45 British Broadcasting Corporation, “Fiji Water’s Response,” BBC Panorama, February 18, 2008, http://news.bbc.co.uk/2/hi/programmes/panorama/7231169.stm, accessed April 2011. 46 Conservation International, “FIJI Water Announces Sustainable Growth Initiative.” 47 Tom Heap, “Bottled Water: Who Needs It?,” BBC Panorama, February 18, 2008, http://news.bbc.co.uk/ 2/hi/programmes/panorama/7247130.stm, accessed April 2011. 48 BevNet.com, “Fiji Water Becomes First.” 49 BevNet.com, “Fiji Water Becomes First.” 50 Leslie Guevarra, “FIJI Water Under Legal Fire,” Fiji Sun, January 7, 2011, http://www.fijisun.com.fj/ main_page/view.asp?id=51202, accessed March 2011. 51 Lynda Resnick and Francis Wilkinson, Rubies in the Orchard (New York: Broadway Books, 2010), p. 175; and BevNet.com, “Fiji Water Becomes First.” 52 Claudia H. Deutsch, “FIJI Water Vows to Go Carbon Negative,” New York Times, November 7, 2007. 53 Conservation International, “FIJI Water Announces Sustainable Growth Initiative”; and Resnick and Wilkinson, Rubies in the Orchard, p. 176. 54 BevNet.com, “Fiji Water Becomes First.” 55 Environmental Leader, “Fiji Water to Go Carbon Negative.” 56 Deutsch, “FIJI Water Vows to Go Carbon Negative”; and FIJI Water, “Energy,” FIJI Water website, http://www.fijiwater.com/giving-back/environment/sustainable-practices/energy/, accessed February 2011. 57 BevNet.com, “Fiji Water Becomes First.” 58 FIJI Water, “Logistics,” FIJI Water website, http://www.fijiwater.com/giving-back/environment/ sustainable-practices/logistics/, accessed February 2011. 59 BevNet.com, “Fiji Water Becomes First.” 60 FIJI Water, “FIJI Green,” FIJI Water website, http://www.fijiwater.sg/FAQ_green.aspx, accessed April 2011. 61 Leslie Guevarra, “FIJI Water Under Legal Fire,” Fiji Sun, January 7, 2011, http://www.fijisun.com.fj/ main_page/view.asp?id=51202, accessed March 2011. 62 Siegle, “It’s Just Water, Right?” For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 22 63 Deutsch, “FIJI Water Vows.” 64 State of California, “California Business and Professions Code,” http://www.leginfo.ca.gov/cgi-bin/displaycode?section=bpc&group=17001-18000&file=17200-17210, accessed February 2011. 65 Lenzer, “Fiji Water.” 66 FIJI Water, “Discriminatory Tax.” 67 Environmental Leader, “Fiji Water Targeted.” 68 Radio New Zealand International, “Fiji Water Shuts Down Business After Tax Hike,” November 29, 2010, http://www.rnzi.com/pages/news.php?op=read&id=57313, accessed April 2011. 69 Ice News, “Fiji Government Yields Bottled Water Company Pressure,” Ice News, July 26, 2008, http://www.icenews.is/index.php/2008/07/26/fiji-government-yields-to-bottled-water-company-pressure/, accessed April 2011. 70 Robert F. Kay, “The Fiji Water Saga—The Details and Legal Analysis by Scott Putnam—Part 1,” Fiji Guide website, December 18, 2010, http://www.fijiguide.com/profiles/blogs/the-fiji-water-saga-the, accessed April 2011. 71 Australia Network News, “Fiji Water Does Not Care About Fijians: Bainimarama,” Australia Network News, November 30, 2010, http://australianetworknews.com/stories/201011/3080695.htm, accessed February 2011. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
9-611-049 REV: DECEMBER 18, 2013 ________________________________________________________________________________________________________________ Professors Francesca Gino and Michael W. Toffel and Research Associate Stephanie van Sice prepared this case. This case was developed from published sources. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2011, 2012, 2013 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. FRANCESCA GINO MICHAEL W. TOFFEL STEPHANIE VAN SICE FIJI Water: Carbon Negative? “We’d be happy if anyone chose to drink nothing but FIJI Water as a means to keep the sea levels down.” — Thomas Mooney, FIJI Water’s senior vice president for sustainable growth1 On December 20, 2010, FIJI Water Company LLC, a company that sold premium artesian bottled water, was named in a class action lawsuit filed in U.S. District Court. The lawsuit claimed that FIJI Water had profited from a “deceptive and misleading claim” that its products were 120% carbon negative, which implied that purchasing FIJI Water was beneficial to the environment. The lawsuit accused FIJI Water of using a “dubious” and “discredited” carbon accounting method and, as a result, of profiting from the “inflated” price of its water.2 FIJI Water had announced its carbon-negative campaign three years earlier, in November 2007, as part of an initiative to make the manufacturing, production, and distribution of its products more environmentally friendly. The company planned to achieve its carbon-negative goal through a combination of energy efficiency initiatives and the purchase of carbon offsets.3 What did this new lawsuit mean for the company, and what were the implications for its carbon-negative environmental program? How should FIJI respond? These were not the only difficult questions FIJI Water was facing in 2010. On November 26, 2010, the Fijian government decided to raise the water export tax to 15 cents a liter (45 times the previous amount) for companies extracting more than 3.5 million liters a month. FIJI Water was the only company affected by this tax increase and thus considered the change to be unfair. What position should the company take in reaction to this change? Was it time to start negotiations? FIJI Water The FIJI Water brand was founded in 1988 by David Gilmour, a Canadian businessman who owned a resort on Fiji’s largest island, Viti Levu, in the South Pacific. Seeking local sources of drinking water to provide to his guests, he struck an exclusive 99-year deal with the government of Fiji in 1990 to tap an aquifer discovered by government-contracted geologists.4 In 1995, Gilmour started selling the water, which he bottled under the FIJI Water brand name. The Fijian government granted the company a tax holiday—tax-free status on its corporate income—that would expire in 2008. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 2 In 2004, FIJI Water was acquired for a reported $50 million by Roll International Corporation, a private company based in Los Angeles, California, that already had large investments in Teleflora (the largest flower delivery service in the world), POM Wonderful (a popular pomegranate juice drink), and Paramount Farms (the world’s largest grower and processor of pistachios and almonds).5 Roll subsequently purchased SpringFresh, a company selling bottled water sourced in New Zealand. In the years following the acquisition of FIJI Water, Roll International established the Vatukaloko Natural Waters Trust Fund, through which it paid royalty and lease fees to the original landowners of FIJI Water’s aquifer. The trust also provided health, hygiene, sanitation, and education facilities for these villages.6 Operations and Distribution Fiji is an island nation in the South Pacific Ocean comprising an archipelago of more than 332 islands with unexploited tropical forests, surrounded by coral reefs. The islands received nearly 3,000 millimeters of rain each year. The country had been ruled by a military regime since 2006; its primary industries were tourism and sugar production. In 2008, FIJI Water’s operations represented 20% of the country’s exports and 3% of the country’s $3,900 per capita GDP.7 FIJI Water’s water source was a 17-mile-wide, 400-foot-deep aquifer below a volcano and tropical forest on the main Fijian island of Viti Levu, into which rainfall had filtered over centuries. The company boasted that the water’s high silica content and its distance and isolation from pollutants like acid rain, herbicides, and pesticides were what made its water so pure, healthy, and rich in taste, and why it required no filtration or chemical treatment before being bottled. In addition, FIJI Water’s state-of-the-art bottling facility used a completely sealed process, which prevented the water from being exposed to air or any other potential contaminants before it reached the consumer. FIJI Water’s 2-building, 110,000-square-foot facility produced 50,000 bottles per hour, 24-hours per day, and 5 days per week – a manufacturing process that relied on electricity from diesel generators.8 The company employed about 400 workers in Fiji and another 100 employees in 10 other countries.9 FIJI Water was distributed in 40 countries around the world, including the United States, Canada, Australia, Brazil, China, Hong Kong, Japan, Korea, Russia, Singapore, South Africa, Taiwan, and the United Kingdom (see Exhibits 1a and 1b for a map and approximate distances from Fiji). FIJI Water bottles were sold in four sizes—330 milliliters (11.2 oz.), 500 milliliters (16.9 oz.), 1 liter (33.8 oz.), and 1.5 liters (50.7 oz.)—and came in single-serve or multipacks. They were distributed through grocery stores, hotels, restaurants, and gourmet shops, and through home delivery. Marketing “Mineral waters are as different from each other as wine,” according to Tom Kissock, a FIJI Water spokesperson.10 FIJI Water was top-rated in bottled-water taste tests in magazines such as Chicago Magazine, Cook’s Illustrated Buying Guide, Men’s Health, and Every Day with Rachel Ray. FIJI Water was positioned at the intersection of “pop-culture glamour” and progressive politics.11 In order to brand FIJI Water as an “affordable luxury,” Roll International’s owners Lynda and Stewart Resnick leveraged their connections in the elite business and Hollywood realms. For example, they established relationships with chefs of leading restaurants, including Nobu Matsuhisa, the celebrity chef and restaurateur behind the famous sushi-based Nobu Restaurants, who began to advocate dipping lobster sashimi in FIJI Water. The Resnicks also built relationships with owners of resorts and spas, where bottles were served in signature silver and gold sleeves. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 3 Such business relationships were often based on personal connections; as Lynda Resnick once remarked, “I know everyone in the world, every mogul, every movie star.”12 Celebrities like Whoopi Goldberg, Pierce Brosnan, Vin Diesel, and Jessica Simpson were reported to love FIJI Water. The company also hired a Hollywood marketing consulting firm to help place its bottles in leading movies and television shows (such as The Sopranos, 24, The View, Brother and Sisters, and Desperate Housewives) and at high-profile events (like the Emmy Awards and the Avon Walk for Breast Cancer). FIJI Water also hosted golf tournaments and sailing regattas, and was featured in music fests including SXSW (South by Southwest) in Austin, Texas, and at Justin Timberlake’s Summer Love concert tour. Thousands of FIJI Water bottles were handed out at the 2008 Democratic National Convention. These connections and appearances helped create a sense of exclusivity around FIJI Water, despite the fact that the water bottles were available for purchase in supermarkets and convenience stores. According to Martin Roll, a brand consultant, FIJI Water demonstrated that “competent branding can elevate even the simplest commodity to celebrity status.”13 The Bottled Water Industry The commercial bottled water industry was established nearly 200 years ago.14 In the United States, Poland Spring was founded in 1845 to enable Maine’s summer visitors to return home with its famed spring water. Many renowned European bottled water companies, including Perrier and Evian in France, and San Pellegrino in Italy, were similarly established during the same period. By the twentieth century, bottled water was packaged in glass, plastic, aluminum, or steel bottles and cans for individual consumption and retail sales. In 2009, the bottled water market included still unflavored (65.8%), sparkling unflavored (29.2%), sparkling flavored (2.8%), and still flavored (2.2%) waters.15 Bottled water was sourced from glaciers, springs, natural wells, and municipal water systems, and brands often differentiated themselves by boasting of their water’s inherent characteristics, such as trace minerals and vitamins that provided immunity-like benefits. Some touted their sources as being secluded, exotic locations. Nearly half of all bottled water was distributed via supermarkets and hypermarkets, while another 20% was sold through independent retailers and another 17% was distributed in restaurants, cafés, and bars.16 Industry experts estimated that, for the typical $1.29 bottle of water, nearly half of the costs went to the retailer, about one-third to the distributor and transportation, 12 to 15 cents for the water, and 12 to 15 cents for the bottle and cap, which left approximately 10 cents in profit for the water producer—the equivalent of 2 cents per bottle for multipacks.17 Consumer Demand The bottled water market was among the most dynamic growth markets in the food and beverage industry.18 Consumers purchased bottled water for several reasons:  Convenience: bottled water was portable and did not require heating or refrigeration.  Taste: some consumers regarded bottled water as superior in taste to tap water, which could sometimes taste like the chlorine used to purify it.  Health: water was a zero-calorie alternative to sodas and alcoholic beverages, and some contained minerals like silica, calcium, and magnesium.  Status: drinking bottled water was a sign of an elevated social scale, particularly in the developing world. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 4  Safety: bottled water provided an alternative for the over one billion people without access to clean, drinkable tap water. In 2009, global sales of bottled water were about $80 billion and were forecasted to reach $100 billion by 2014.19 Sixty percent of the market was in Europe, followed by the Americas (30%) and Asia-Pacific (20%) (see Exhibits 2a and 2b for bottle water consumption in select countries).20 In the United States, annual per capita consumption of bottled water had grown from less than two gallons in 1976 to nearly 30 gallons in 2006—more than milk, coffee, or beer (see Exhibit 2c for U.S. consumption of bottled water). Only carbonated soft drinks outsold bottled water (see Exhibit 3 for global market trends in beverages).21 Major Industry Players Several types of companies were major producers of bottled water, including specialized companies such as FIJI Water and diversified consumer packaged goods companies such as PepsiCo and Vivendi. The leading players in the global bottled water market in 2009 were Coca-Cola, Groupe Danone, Nestlé S.A., and PepsiCo, which together accounted for about one third of global market share.22 Exhibit 4 provides information on several of FIJI Water’s competitors. The Environmental Impacts of Bottled Water In 2007, numerous environmental groups, including the Rainforest Action Network, the Pacific Institute, and Corporate Accountability International, attacked the bottled water industry for selling a single-use product that they deemed unnecessary and harmful to the environment. These critics argued that bottled water was by definition “simply not an environmentally-friendly product,” and that selling it was akin to “selling snow to Eskimos, especially in places like Britain that have almost constant rainfall.”23 According to Kath Dalmeny at the Food Commission, a nongovernmental organization (NGO) that campaigned for healthier, more sustainable food in the U.K., it was “ludicrous to bring water from the other side of the world when essentially the same product is available out of the tap.”24 Environmental critics were particularly concerned with the production and disposal of plastic bottles, the use of water in the production process, and the greenhouse gas (GHG) emissions associated with distribution. Petroleum Use in Plastic Bottles Plastic was the most commonly used bottled-water packaging material, preferred over aluminum and glass in almost every country. In 2005, 96% of water bottles sold in the United States were made of PET (polyethylene terephthalate) plastic, a petroleum product, and came in single-serve sizes of one liter or less.25 Most bottled water companies manufactured their own bottles at their bottling plants, just before filling them, utilizing an energy-intensive process. In 2007, bottled water in the U.S. was sold in nearly 30 billion plastic bottles, which required about 17 million barrels of oil to manufacture, enough to fuel more than a million cars for a year.26 The U.S. market represented about 20% of the global bottled water market.27 Solid Waste Water bottles also created a large disposal issue. Only 10% of noncarbonated drink bottles were recycled (approximately 15% of water bottles in the U.S.).28 It took up to 1,000 years for these bottles to biodegrade in landfills. Many empty bottles, including some shipped abroad for recycling, ended For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 5 up as pollution in oceans and elsewhere, sometimes posing a hazard to wildlife. In addition, bottled water sold in packs was wrapped in “overpackaging,” which produced additional waste. Water Extraction Millions of gallons of water were used in bottled water manufacturing processes, both as a cooling agent in the bottle molding phase and to rinse out finished bottles. It took an estimated seven liters of water, including power plant cooling water, to manufacture a one-liter bottle of water.29 It was inherently unsustainable to pump large quantities of water from underground aquifers at rates that exceeded their replenishment, and depleting aquifers could negatively affect local water supplies and aquatic wildlife. In 2007, for example, the 6,000-year-old aquifer at the Peats Ridge plant north of Sydney, Australia, where Coca-Cola held an extraction license, was reported to be dropping dangerously; as a result, springs were drying up and wetlands were disappearing.30 Similarly, water shortages had been reported near bottling plants in Texas and in the Great Lakes region of North America. Even companies that sold purified tap water required significant volumes of water; approximately two additional gallons were required to purify every gallon of bottled water.31 As many water sources around the world were under increasing pressure, critics called for better management and monitoring of freshwater supplies. Greenhouse Gas Emissions In addition to consuming large amounts of energy, oil, and water, bottled water also came under criticism for the GHG emissions emitted during manufacturing, travel, and consumer use and disposal. For example, the manufacture of all plastic water bottles sold in the U.S. in 2007 emitted over 2.5 million tons of carbon dioxide, or the equivalent of 400,000 passenger cars per year.32 Bottled water, particularly in the luxury segment, was often shipped around the world. More than 25% of bottled water was distributed across national borders,33 creating environmental impacts from the combustion of vehicles’ fossil fuels, which released GHG that contributed to global climate change. It was estimated that each week, nearly 38,000 18-wheeler trucks delivered water around the United States.34 Some bottled water was shipped on large ocean freight liners, which, despite being a relatively carbon-efficient transportation mode, were criticized for contributing to conventional air pollution from combusting bunker fuel (see Exhibit 5 for CO2 emissions from shipping). FIJI Water came under particularly harsh scrutiny by some environmental activists because it shipped its products far distances around the world. For example, the closest port in the United States from Fiji was in Los Angeles, more than 6,500 miles away. According to FIJI Water, nearly 75% of its product’s carbon footprint resulted from the operations of its supply chain partners, including the shipping companies that distributed its bottled water as well as the production and transportation of its plastic resin suppliers in Thailand and Taiwan.35 Alternatives Critics of bottled water turned their attention to tap water, which they praised as being much cheaper and environmentally friendlier. It cost only $0.002 per gallon to treat, filter, and deliver a gallon of tap water in the United States, which was about 750 to 2,700 times cheaper than purchasing the equivalent amount of bottled water.36 The energy required to produce tap water was estimated at around 0.005 megajoules (MJ) per liter, taking advantage of carefully placed pumps and gravity to move water more efficiently.37 By comparison, bottling one liter of water often required between 5.6 and 10.2 MJ.38 For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 6 Critics also noted that bottled water was not necessarily safer than tap water. The Natural Resources Defense Council, an environmental NGO, reported that one-third of the 103 bottled water brands it tested were contaminated with arsenic and E. coli.39 Some critics added that tap water was regulated in the United States by the Environmental Protection Agency (EPA), an agency often viewed as more rigorous than the Food and Drug Administration (FDA), which oversaw bottled water. In addition, while some of the most enduring bottled water companies were built on claims of providing superior health benefits, government and industry groups estimated that between 25% and 40% of bottled water sold was simply filtered tap water.40 Some critics believed that the billions of dollars spent annually around the world on bottled water could be better used to install and maintain a safe public water infrastructure everywhere. They argued that, for example, by investing one-fifth of what was currently spent on bottled water, the world could eradicate the 1.8 million child deaths each year due to waterborne illnesses.41 Some city mayors had urged residents to return to tap water. In 2007, for example, New York City launched a “Get Your Fill” campaign to persuade people to cut back on bottled water. The same year, San Francisco Mayor Gavin Newsom banned city employees from using public funds to purchase bottled water (saving nearly $500,000). Also in 2007, Chicago became the first city in the United States to impose a tax ($0.05) on bottled water sold in the city, seeking to reduce the strain on municipal waste systems. FIJI Water’s Environmental Initiatives FIJI Water attributed the “unique taste and mineral properties” of its water to the “pristine ecosystem of the Fijian islands,” and believed it therefore had a fundamental commitment to preserving the “purity and biological wealth” of the region.42 As a result, the company undertook various environmental initiatives to make its practices more sustainable, initiatives that were marketed under the slogan, “Every Drop Is Green.” Onsite Operations The FIJI Water bottling plant was certified as meeting the requirements of ISO 14001, a voluntary, international, environmental management standard that represented a best-practices approach to developing an environmental policy and procedures, setting priorities, organizing training, and conducting routine environmental auditing and periodic management reviews. Waste and recycling Between 2008 and 2010, FIJI Water committed to reducing production facility waste by 33%, as compared to a 2006 baseline.43 By 2010, FIJI Water reported reductions in its total waste generation through yield improvements, and announced that 95% of the waste generated by its plant was sorted and recycled.44 Water management FIJI Water hired expert hydrogeologists to ensure that it was drawing water from its aquifer in the Yaqara Valley at a sustainable rate, as well as to help protect the aquifer’s environment. According to the company, “The very livelihood of our company relies on the health and well-being of our source aquifer and the surrounding environment. The water is harvested to ensure that both the aquifer and FIJI Water as a company are sustainable. As part of our production standard, we ensure that we draw water at a rate well within the limits of the rainfall replenishment rate.”45 For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 7 Distribution Packaging Whereas most premium bottled water was produced in glass bottles, FIJI Water contended that its products were all packaged in plastic, which used less energy to produce, ship, and recycle, and that its square-bottle design allowed for tighter, more efficient packing. In 2008, FIJI Water undertook plans to reduce the plastic content in its bottles by an average of 20% over the next two years, as compared to a 2006 baseline.46 Such initiatives were common among some of its competitors; Coca-Cola, for example, was the first to commercialize a food or beverage bottle made of recycled plastic, and had taken measures to reduce its packaging weight. Similarly, Nestlé Water was working to reduce its packaging weight by 30% with its new Eco-Shape bottles. In 2010, FIJI Water began to use 100% recycled cartons to store and ship bottles. Offsite in Fiji Watershed protection In August 2007, FIJI Water launched the FIJI Water Foundation, through which it invested in protecting the Yaqara Valley watershed, where it extracted most of its water. Similarly, Coca-Cola partnered with the World Wildlife Fund to conserve several freshwater river basins, and Nestlé Water instituted land conservation projects. Tree planting FIJI Water joined the 1% for the Planet partnership, which consisted of more than 1,300 companies like Patagonia and Clif Bar that committed 1% of their sales to environmental organizations around the world. FIJI Water’s contributions went toward investing in high-quality, multiple-benefit, forest-restoration projects in Fiji. In December 2009, for example, FIJI Water invested $3 million to restore over 1,250 acres of abandoned sugar cane farms with fruit and spice trees, timber, and other native species. The reforestation effort would help stop erosion, improve water quality, protect wildlife, employ local Fijians, and mitigate GHG emissions. Expanding community water access FIJI Water also worked with its local community members to build a series of wells to provide residents with a consistent supply of high-quality water. It was reported that nearly one-third of Fiji’s population did not have access to safe, clean drinking water.47 Increased waste recycling FIJI Water cosponsored a national Fiji program to increase recycling rates beyond 40%, a rate higher than that in many developed countries. FIJI Water also partnered with local resort operators to develop recycling infrastructures on hotel and resort properties. Offsite Globally Tree planting Through the 1% for the Planet program, FIJI Water also extended its reach to the United States, Latin America, and other countries. In 2010, for example, FIJI Water partook in a tree-planting program organized by the nonprofit organization Million Trees LA. Increasing recycling FIJI Water supported recycling programs in several of its various markets. The company was in favor of legislative measures in the United States to expand curbside recycling programs and to encourage container deposit laws to include bottled water and other noncarbonated beverages. According to FIJI Water’s then-vice president of sustainable growth, Thomas Mooney, “Our industry and our elected leaders are missing a great opportunity to reduce the impact of our product.”48 It was estimated that, by recycling their plastic bottles, consumers could reduce their carbon footprint by at least 25%.49 For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 8 Carbon-Negative Campaign In 2007, FIJI Water announced its plans to go “carbon negative” starting in 2008 by offsetting 120% of its carbon footprint. As the company stated in a press release, “That means that we are not only mitigating our environmental impact but also making up for a little bit of someone else’s.”50 According to the company, purchasing a one-liter bottle of FIJI Water would result in 115 grams of carbon dioxide equivalent being removed from the atmosphere, which, when aggregated to all of its products, was equivalent to planting 500,000 trees or taking 3,500 cars off the road.51 Striving to be carbon negative went well beyond prevailing practice across the bottled water and other industries, where organizations typically announced GHG-reduction goals such as reducing emissions by a certain percentage over a several year period. A few organizations had boldly announced “climate neutral” goals, but that was quite rare. FIJI Water acknowledged it was a pursuing a leadership role. According to Mooney, “We are a small brand, but we are raising the bar for the entire industry on how we should operate.”52 To achieve its goal, the company calculated and publicly disclosed its carbon footprint to the Carbon Disclosure Project, the world’s largest investor coalition on climate change, becoming the first bottled water and the first privately held company to make such disclosures.53 As Mooney noted, the company “believes that consumers will make environmentally responsible purchasing decisions if they have the information they need.”54 FIJI Water also joined forces with ICF International, a global consulting firm that helped it verify and publically report its emissions-reduction progress, and with Conservation International, a nonprofit organization that counseled the company on its sustainability initiatives. In addition, FIJI Water took into account its emissions reductions through its operations and distribution optimization projects. Energy FIJI Water committed to sourcing half of the energy used in its production process from renewable sources by 2010.55 The company announced that it would construct a windmill to provide energy to its bottling plant and that it had installed lighting that was 70% more energy efficient throughout its facility.56 Logistics and shipping FIJI Water began switching to more fuel-efficient trucks to transport its products from its plant to the port, resulting in a 50% reduction in fuel usage, and also switched its trucks to biodiesel and other alternative fuels.57 FIJI began shipping bottles to be sold on the East Coast of the United States via the Panama Canal to the Philadelphia port, rather than trucking them from Los Angeles. Though this route took three times longer, it resulted in a 55% reduction in GHG emissions.58 FIJI also optimized its trucking routes in various markets, reducing truck miles from its warehouses to distributors by 26%.59 Purchasing carbon offsets FIJI Water announced that it would purchase carbon offsets, a financial instrument that represented the reduction or avoidance of GHG emissions from a particular project that was used to compensate for GHG emissions occurring elsewhere (see Exhibit 6 for critical aspects of carbon offsets). FIJI Water chose to purchase carbon offsets derived from afforestation and from renewable energy projects that it was developing with Conservation International. The company opted to purchase carbon offsets on a forward-crediting scheme, in essence calculating the carbon reductions projected to materialize over the subsequent three decades to achieve its present-day carbon-negative commitment. According to FIJI Water, “Investing in offsets allows us to take immediate responsibility for our emissions,” though the company intended to For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 9 eventually replace the purchase of offsets with carbon-reducing projects that it would develop directly.60 FIJI Water was not the only bottled water company to offset its carbon impacts. Icelandic Glacial had been operating as a carbon-neutral company since 2007, a status certified by CarbonNeutral, an organization that verified that companies were adhering to its protocol. Icelandic Glacial achieved its carbon-neutral status by relying on onsite hydroelectric power and low-emission shipping, and by purchasing carbon offsets from projects engaged in reforestation and methane capture. Challenges Carbon Negative or Greenwash? FIJI Water’s marketing activities sought to affiliate its product with the environmental movement. In 2006, for example, FIJI Water bottles were photographed between politician Al Gore and artist Mos Def during the MySpace “Artist on Artist” discussion on climate change. The next year, FIJI Water took out a full-page ad in Vanity Fair’s green issue. When the company announced its carbon-negative campaign, its press release stated, “We are the first and only major bottled water company to make this commitment.”61 However, because FIJI Water’s bottles traveled further than many other bottled water brands, it was blamed for being a “potent symbol of excess,”62 and its appearance in these contexts was highly questioned. Mother Jones magazine, for example, singled out FIJI Water in a cover story article that criticized the company for its environmental impacts, among other concerns (see Exhibit 7 for the magazine cover). Some critics also questioned the legitimacy of FIJI Water’s use of carbon offsets to ameliorate its environmental impacts, accusing the company of greenwashing and telling partial truths that sought to mislead consumers. “Bottled water is a business that is fundamentally, inherently and inalterably unconscionable,” argued Michael Brune, executive director of the Rainforest Action Network. “No side deals to protect forests or combat global warming can offset that reality.”63 Ultimately, FIJI Water faced a lawsuit filed in U.S. District Court in late 2010 that accused the company’s carbon-negative campaign of constituting misleading advertising. The lawsuit claimed that, by purchasing carbon offsets on a forward-crediting scheme, FIJI Water was using “a discredited carbon accounting method” that allowed the company to claim credit for “carbon removal that may or may not take place—up to several decades in the future.”64 “To a reasonable consumer,” the suit explained, “the ‘Carbon Negative’ claim means that the defendant’s current operations remove more carbon from the atmosphere than they release into it.” The plaintiff claimed that she would not have purchased the product had she known of FIJI Water’s forward-crediting accounting scheme, and that her purchases caused her to “suffer injury” and “lose money.” The suit also accused FIJI Water of engaging in “unfair competition,” which included “any unlawful, unfair or deceptive business act . . . or misleading advertising.” The suit concluded that, as a result of its carbon-negative campaign, FIJI Water was able to “capture a substantial segment of that market,” a move from which it “richly profited” by charging a premium above that of its competitors. Conflicts with the Fiji Government In addition to criticisms regarding its green initiatives, FIJI Water also faced some criticisms regarding its relationship with Fiji’s government and population. The company produced about 20% of Fiji’s export income and 3% of its gross domestic product (GDP); thus, developing a good For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 10 relationship with the local government was important. Though FIJI Water engaged in many environmental and charitable works on the islands of Fiji, environmental groups and other critics observed that the country’s repeated typhoid outbreaks and parasitic infections were a result of inadequate access to safe drinking water, and that their public water supply system was plagued by crumbling pipes, lack of adequate wells, and dysfunctional or flooded water treatment plants. FIJI Water avoided these problems by investing in its own piping infrastructure to directly access an artesian aquifer in the Yaqara Valley. A Mother Jones article provided a critical account of how the company originally obtained access to this aquifer: In the early 1990s, Gilmour got wind of a study done by the Fijian government and aid organizations that indicated an enormous aquifer, estimated at more than 17 miles long, near the main island’s north coast. He obtained a 99-year lease on land atop the aquifer, brought a former Fijian environment minister on board, and launched an international marketing blitz inviting consumers to sample water preserved since “before the Industrial Revolution.” To this day, FIJI Water has nearly exclusive access to the aquifer; the notoriously corrupt and chronically broke government has not been able to come up with the money or infrastructure to tap the water for its people.65 On November 26, 2010, FIJI Water came into conflict with the Fijian government when the latter announced that it would increase its water-extraction tax from one-third of a Fiji cent per liter to 15 Fiji cents per liter (that is, F$0.003 to F$0.15 per liter, or US$0.0018 to US$0.083 per liter) at locations where more than 920,000 gallons (3.5 million liters) were extracted each month.66 FIJI Water, the only bottled water company on the island to extract this much water, reacted by calling the move “discriminatory” and the tax “untenable.” The company threatened to leave the island, stating that it had “no choice but to close [its] facility in Fiji.”67 This was not the first time FIJI Water had battled the government on tax issues. On July 4, 2008, the Fijian government passed a measure to increase the national mineral-water export tax from F$0.003 to F$0.20 (i.e., US$0.0017 to US$0.11) per liter, which affected all mineral bottling companies on the island. FIJI Water reacted by calling the measure “draconian” and, along with nine other water companies, mounted a campaign against the government by closing its plants and laying off a large number of its workers.68 The group also enlisted the help of an industry lobby group, which disapproved of the government failure to negotiate with the water companies before imposing the tax measure,69 and helped to mount pressure on the country’s leaders. Ultimately, the government agreed to decrease the export tax back to F$0.003 per gallon.70 These standoffs created a media backlash against FIJI Water. Newspapers and environmental organizations reported that FIJI Water was not only trying to dodge a necessary increase in extraction taxes, but had also established tax havens for itself by registering its operations in Luxembourg and in the Cayman Islands, and questioned the company’s dedication to the local population. Echoing this sentiment, Fiji’s President Frank Bainimarama issued a public statement declaring that FIJI Water “has adopted tactics that demonstrate the company does not care about Fiji or Fijians.”71 Decisions Despite its leading position as a luxury brand, FIJI Water had to respond to the California lawsuit that questioned the legitimacy of its carbon-negative campaign. As it trudged through another wave of critical press coverage, FIJI Water had to consider whether to defend or alter its approach. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 11 In addition, the company had to contemplate its negotiation strategy with the Fijian government, whose actions risked substantially affecting the company’s profitability. FIJI Water could challenge the government by threatening to close its facilities and move operations elsewhere; for instance, FIJI Water could transfer operations to New Zealand where its parent company, Roll International, already owned the SpringFresh brand of bottled water. FIJI Water could also make a counteroffer and stress the importance of the company’s presence for the local economy. FIJI Water had to carefully examine all its options before entering negotiations. What strategies should the company adopt to create sustainable solutions to both of these issues? For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 12 Exhibit 1aShipping Routes from Fiji to Select Major Markets Source: Harvard Center for Geographical Analysis, April 2011, based on data from SeaRates.com, Port-to-Port Distances, SeaRates.com, http://www.searates.com/reference/portdistance, accessed March 2011. Exhibit 1bShipping Distances from Fiji City/Country Nautical Miles (Kilometers) Sydney, Australia 1,740 (3,222) Kaohsiung, Taiwan 4,411 (8,169) Singapore 4,608 (8,534) Pusan, South Korea 4,624 (8,564) Hong Kong 4,706 (8,716) Los Angeles, United States 6,677 (12,366) Rio de Janeiro, Brazil 7,616 (14,105) Cape Town, South Africa 7,670 (14,205) Philadelphia, United States 9,667 (17,903) London, United Kingdom 12,475 (23,104) Source: SeaRates.com, Port-to-Port Distances, SeaRates.com, http://www.searates.com/reference/portdistance, accessed March 2011. Note: Distances are from Fiji’s Suva port. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 13 Exhibit 2a Total Bottled Water Consumption in 2009, Select Countries Exhibit 2b Bottled Water Consumption Per Capita in 2009, Select Countries Exhibit 2c Bottled Water Consumption Trend in the United States, 2001–2009 Sources: Casewriter, compiled based on data from: John G. Rodwan Jr., “Challenging Circumstances Persist: Future Growth Anticipated, U.S. and International Developments and Statistics,” http://www.bottledwater.org/files/2009BW stats.pdf, accessed March 2011; and Population Reference Bureau, http://www.prb.org/, accessed March 2011. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 14 Exhibit 3Global Market Trends in Beverages, 2005–2009 Source: Casewriter, compiled using data from: Datamonitor, “Industry Profile: Global Bottled Water,” Datamonitor, April 2010, p. 9; Datamonitor, “Industry Profile: Global Juices,” Datamonitor, April 2010, p. 9; Datamonitor, “Industry Profile: Global Milk,” Datamonitor, April 2010, p. 9; and Euromonitor, 2010. Data retrieved April 6, 2011. Note: Soft Drinks include soda, sports and energy drinks, iced tea, and smoothies. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 15 Exhibit 4Bottled Water Market: FIJI Water and Select Competitors FIJI Water Coca-Cola Groupe Danone Nestlé S.A. Headquarters California, U.S. Georgia, U.S. France Switzerland Share of global bottled water market 1% 7.5% 12.8% 14.8% Revenues from water division $150 million (2007) Not available $3.6 billion (2009) $8.4 billion (2009) Major markets (countries) 40 200 120 130 Brands 1 brand: FIJI Water Approx. 50 brands, including Dasani, Ciel, Nature’s Own, Glacéau Smartwater, VIVA Approx. 5 brands, including Evian, Volvic, Badoit, Salvetat, Salus Approx. 64 brands, including Nestlé Pure Life, Perrier, Arrowhead, San Pellegrino, Poland Spring Price for 1 liter bottle1 $2.29: FIJI Water $1.00: Dasani $1.89: Smartwater $2.13: Evian $1.66: Volvic $1.37: Poland Spring $1.79: Perrier $2.13: San Pellegrino Source: Casewriter, using data from: Lynda Resnick and Francis Wilkinson, Rubies in the Orchard (New York: Broadway Books, 2010), p. 175; Datamonitor, “Industry Profile: Global Bottled Water,” Datamonitor, April 2010, p. 2; Claudia H. Deutsch, “FIJI Water Vows to Go Carbon Negative,” New York Times, November 7, 2007; Accenture, “Groupe Danone: Global Business Process Transformation,” Accenture, http://www.accenture.com/Global/Services/By_Industry/ Consumer_Goods_and_Services/Client_Successes/GroupeDANONE.htm, accessed January 2011; and FIJI Water, “Company History,” FIJI Water website, http://www.fijiwater.com/company/company-timeline/, accessed March 2011. 1Prices at Star Market grocery store in Boston, Massachusetts, on June 6, 2011. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 16 Exhibit 5CO2 Emissions from Shipping, from Source to San Francisco Brand Source Miles to San Francisco Bottle Weight (oz.) CO2 (Travel only) (lbs./1 liter bottle) Dasani (Coca-Cola) California 22 1.94 0.01 365 (Whole Foods) California 223 1.5 0.07 Fiji Water Fiji 5,470 4.15 0.49 Voss Norway 5,100 18.93 (glass) 0.57 Volvic (Danone) France 6,255 2.34 0.59 Evian (Danone) France 6,265 3.35 0.61 Perrier (Nestlé) France 5,900 17.61 (glass) 0.63 San Pellegrino (Nestlé) Italy 6,135 17.74 (glass) 0.80 Source: Jen Phillips, “How Far Did Voss and San Pellegrino Travel to My Whole Foods?” Mother Jones, September/October 2009 issue, http://motherjones.com/politics/2009/09/how-far-did-voss-and-san-pellegrino-travel-my-whole-foods, accessed May 2011. Calculations based on Carbonfund.org (personal communication with Jen Phillips, May 31, 2011). Note: Travel includes trucking to the nearest large port, shipping via cargo ship, and trucking to final destination. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 17 Exhibit 6Carbon Offsets Overview and Purchasing Schemes Carbon offsets could be created from investments in, for example, afforestation (planting trees), capturing landfill methane, installing biodigesters at dairy farms, increasing fuel efficiency, and, under some circumstances, subsidizing the development of wind and solar energy sources. Carbon offsets were typically measured in metric tons of carbon dioxide equivalent (MMTCO2Eq or MMTCDE), and their magnitude required comparison to a baseline scenario reflecting emissions levels that would have occurred in the absence of the project. To qualify as a legitimate carbon offset, the project had to be financially viable only due to the revenues earned from selling the offset. This concept, called additionality, helped distinguish projects that actually mitigated GHG emissions due to the carbon offset from those projects that would have occurred anyway (in which case sales of offsets would merely contribute to windfall profits). According to the Stockholm Environment Institute, “The topic of additionality is the most fundamental—and thus contentious—issue in the carbon offset market. In theory, additionality answers a very simple question: Would the emissions reductions have occurred, holding all else constant, if the activity were not implemented as an offset project? Or more simply: Would the project have happened anyway? If the answer to that is yes, the project is not additional.” Carbon offsets that met particular requirements could be sold to regulated markets in countries participating in the Kyoto Protocol. Carbon offsets could also be sold to organizations and individuals in voluntary markets. While offsets sold to voluntary markets did not have to meet regulatory requirements, some adhered to protocols such as the Climate Action Reserve (CAR), the America Carbon Registry (ACR), the Verified Carbon Standard (VCS), and the Gold Standard. Carbon offsets could be purchased on the basis of one of three schemes: 1. Prompt delivery of existing offsets: Providers invested in the technology, implementation, and operational costs to generate the GHG reduction before the offset was sold. Providers assumed all of the up-front risks for these projects, which eliminated buyer risk that the offset would fail to be actualized. As such, these offsets sold for a higher price than the other two forms. 2. Forward delivery of future offsets: Providers committed to delivering a set number of carbon offsets at a predefined time and price in the future, eliminating market price risk for the purchaser. These forward contracts were only executed if both parties still existed at the time of delivery. 3. Forward crediting of future offsets: Providers sold these carbon offsets before the emissions reductions were realized, and immediately issued a certificate to the purchaser confirming credit for the carbon offsets. With these contracts, the ultimate amount of emission reductions was uncertain, and providers were not contractually obligated to deliver credits in the case of a shortfall. Customers faced the risk that some (or all) of the reductions might not be realized, and the further risk that they might not be informed of this. Proponents like Conservation International claimed that projects pursued via forward-crediting schemes demonstrated clear additionality, since forward crediting provided critical upfront funding, “a major barrier for the development of carbon projects.” Critics such as the Stockholm Environmental Institute argued that this structure carried the most risk to purchasers. Source: Casewriter, based on information from: Anja Kollmuss and Benjamin Bowell, “Voluntary Offsets for Air Travel Carbon Emissions,” Tufts Climate Initiative, revised April 5, 2007, http://sustainability.tufts.edu/downloads/TCI_Carbon_Offsets_Paper_April-2-07.pdf, accessed February 2011; Carol Lane, “All About Forest Carbon Offsets,” Conservation International website, August 6, 2008, http://www.conservation.org/FMG/Articles/Pages/dell_forest_carbon_offsets_madagascar.aspx, accessed April 2011; Offset Quality Initiative, Ensuring Offset Quality: Integrating High Quality Greenhouse Gas Offsets into North American Cap-and-Trade Policy, July 2008, http://www.offsetqualityinitiative.org/briefings.html, accessed June 2011; Stockholm Environment Institute and Greenhouse Gas Management Institute, “Contract Terms,” CORE website, http://www.co2offsetresearch.org/consumer/contracts.html, accessed May 2011; and Stockholm Environment Institute and Greenhouse Gas Management Institute, “Additionality,” CORE website, http://www.co2offsetresearch.org/consumer/Additionality.html, accessed June 2011. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 18 Exhibit 7 Criticisms of FIJI Water’s Environmental Initiatives The New York Times magazine, June 2008: Mother Jones magazine, September/October 2009: Source: Anna Lenzer, “Fiji Water: Spin the Bottle,” Mother Jones, September/October 2009, http://motherjones.com/politics/ 2009/09/fiji-spin-bottle#, accessed January 2011; Rob Walker, “Water Proof,” The New York Times magazine, June 1, 2008, http://www.nytimes.com/2008/06/01/magazine/01wwln-consumed-t.html?_r=3&partner=rssnyt&emc =rss&oref=slogin, accessed April 2011. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 19 Endnotes 1 Anna Lenzer, “Fiji Water: Spin the Bottle,” Mother Jones, September/October 2009, http://motherjones. com/politics/2009/09/fiji-spin-bottle, accessed January 2011. 2 Environmental Leader, “Fiji Water Targeted in ‘Greenwashing’ Class Action Suit,” Environmental Leader: Energy & Environmental News for Business, December 29, 2010, http://www.environmentalleader.com/2010/ 12/29/fiji-water-targeted-in-greenwashing-class-action-suit/, accessed January 2011. 3 Environmental Leader, “Fiji Water to Go Carbon Negative,” Environmental Leader website, November 7, 2007, http://www.environmentalleader.com/2007/11/07/fiji-water-to-go-carbon-negative/, accessed January 2011; and Claudia H. Deutsch, “For Fiji Water, A Big List of Green Goals,” New York Times, November 7, 2007, http://www.nytimes.com/2007/11/07/business/07fiji.html?_r=2&ref=science, accessed April 2011. 4 Beverage World, “Fiji Water,” Beverage World website, November 14, 2007, www.beverageworld.com/ index.php?option=com_content&view=article&id=34007:fiji-water&catid=64&Itemid=176, accessed January 2011. 5 Beverage World, “Fiji Water.” 6“Hollywood Couple Buys Fiji Water for $63M,” Sydney Morning Herald, November 30, 2004, http://www. smh.com.au/news/Business/Hollywood-couple-buys-Fiji-Water-for-63m/2004/11/29/1101577419156.html, accessed March 2011. 7 Lenzer, “Fiji Water.” 8 Bottled Water Web, “Fiji Water,” Bottled Water Web, http://www.bottledwaterweb.com/bottlers detail.do?k=946, accessed March 2011; and Lenzer, “Fiji Water.” 9 FIJI Water, “Discriminatory Tax Forces Shutdown of FIJI Water Factory,” FIJI Water press release, November 29, 2010, http://www.fijiwater.com/2010/discriminatory-tax-forces-shutdown-of-fiji-water-factory/, accessed February 2011; and Roll Global, “FIJI Water,” Roll Global company website, http://www.roll.com/fiji-water.php, accessed March 2011. 10 FIJI Water, “The Water,” FIJI Water company website, http://www.fijiwater/com/water, accessed January 2011. 11 Lenzer, “Fiji Water.” 12 Andrew Purvis, “Her Latest Squeeze,” The Observer, December 11, 2005, http://www.guardian.co.uk/ lifeandstyle/2005/dec/11/foodanddrink3, accessed January 2011. 13 Martin Roll, “FIJI Water—The Exotic Water Brand,” Venture Republic, http://www.adoimagazine.com/ newhome/index.php?option=com_content&view=article&id=4634&catid=24, accessed January 2011. 14 Poland Spring, “Poland Spring. Learn Our History . . . ,” Poland Spring website, http://www.poland spring.com/AboutUs/Timeline.aspx, accessed March 2011; Nestlé Waters, “History of Bottled Water,” Nestlé Waters website, http://www.nestle-watersna.com/Menu/AboutUs/Heritage/History+of+Bottled+Water.htm, accessed March 2011; Evian, “An Extraordinary Saga of Health and Lifestyles,” Evian website, http://www.evian.com/#/en_US/169-An-extraordinary-saga-of-health-and-lifestyles, accessed March 2011; and Michael Mascha, “Short History of Bottled Water,” Fine Waters website, http://www.finewaters.com/ Bottled_Water_Etiquette/Bottled_Water_History/Short_History_of_Bottled_Water/4.asp, accessed March 2011. 15 Datamonitor, “Industry Profile: Global Bottled Water,” Datamonitor, April 2010, p. 3. 16 Datamonitor, “Industry Profile,”p. 30. 17 Charles Fishman, “Message in a Bottle,” FastCompany.com, July 1, 2007, http://www.fastcompany.com/ magazine/117/features-message-in-a-bottle.html, accessed January 2011. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 20 18 Catherine Ferrier, “Bottled Water: Understanding a Social Phenomenon,” commissioned by the World Wildlife Fund, April 2001, p. 3. 19 Datamonitor, “Industry Profile,” p. 2–3. 20 Datamonitor, “Industry Profile,” p. 2, 12. 21 P. H. Gleick and H. S. Cooley, “Energy Implications of Bottled Water,” Pacific Institute, Environmental Research Letters no. 4 (2009): 1–6. 22 Datamonitor, “Industry Profile,” p. 2. “Soft Drinks: Euromonitor from trade sources/national statistics. Brand Shares,” Euromonitor International (Jan. 2013) accessed via www.portal.euromonitor.com in December 2013. 23 Food & Water Watch, “Greenwashed: Fiji Water Bottles the Myth of Sustainability,” Food & Water Watch website, May 2, 2008, http://www.foodandwaterwatch.org/2008/05/greenwashed-fiji-water-bottles-the-myth-of-sustainability/, accessed January 2011; and David Derbyshire, “Bottle of water that has travelled the world: Source of latest fashion drink is Fiji in the Pacific,” Daily Telegraph, November 3, 2004. 24 Derbyshire, “Bottle of water.” 25 Responsible Purchasing Network, “Think Outside the Bottle: Responsible Purchasing Guide,” 2008, http://www.responsiblepurchasing.org/purchasing_guides/bottled_water/purchasing_guide.pdf, accessed January 2011. 26 Lucy Siegle, “It’s Just Water, Right? Wrong. Bottled Water is Set to Be the Last Battleground in the Eco War,” The Observer, February 10, 2008, http://www.guardian.co.uk/environment/2008/feb/10/water. foodanddrink, accessed January 2011; and Emily Arnold and Janet Larsen, “ Bottled Water: Pouring Resources Down the Drain,” Earth Policy Institute, February 2, 2006, http://www.earth-policy.org/index.php?/plan_b_ updates/2006/update51, accessed March 2011. 27 Euromonitor 2010 data, retrieved April 6, 2011; and John G. Rodwan Jr., “Challenging Circumstances Persist: Future Growth Anticipated, U.S. and International Developments and Statistics,” http://www.bottled water.org/files/2009BWstats.pdf, accessed March 2011. 28 Tim Elliott, “Disaster in a Bottle,” Sydney Morning Herald, April 24, 2007, http://www.smh.com.au/news/ environment/disaster-in-a-bottle/2007/04/23/1177180569554.html, accessed April 2011. 29 Siegle, “It’s Just Water, Right?” 30 Elliott, “Disaster in a Bottle.” 31 Responsible Purchasing Network, “Think Outside the Bottle.” 32 Responsible Purchasing Network, “Think Outside the Bottle.” 33 Datamonitor, “Industry Profile,” p. 14. 34 Fishman, “Message in a Bottle.” 35 FIJI Water, “FIJI Water to Reopen Plant,” comments section, November 11, 2010, http://www.fijiwater.com.au/2010/fiji-water-reopen-plant/, accessed February 2011; and BevNet.com, “Fiji Water Becomes First Bottled Water Company to Release Carbon Footprint of its Products,” BevNet.com, April 9, 2008, http://www.bevnet.com/news/2008/4-9-2008-Fijigreen.asp, accessed January 2011. 36 Responsible Purchasing Network, “Think Outside the Bottle.” 37 Eric Tawney, “Visualization of Construction of a Gravity-Fed Water Supply and Treatment System in Developing Countries,” Michigan Technological University, Working Paper, http://www.cee.mtu.edu/ sustainable_engineering/resources/technical/Visualizing_Gravity_Fed_Water_System_FINAL.pdf, accessed March 2011. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 21 38 F. L. Burton, “Water and Wastewater Industries: Characteristics and Energy Management Opportunities,” Burton Engineering, prepared for the Electric Power Research Institute, 1996. 39 Erik D. Olson, “Bottled Water: Pure Drink or Pure Hype?” Natural Resources Defense Council website, April 1999, http://www.nrdc.org/water/drinking/bw/chap3.asp, accessed January 2011. 40 Responsible Purchasing Network, “Think Outside the Bottle.” 41 Siegle, “It’s Just Water, Right?” 42 FIJI Water, “Environment,” FIJI Water website, http://www.fijiwater.com/giving-back/environment/, accessed May 2011. 43 Conservation International, “FIJI Water Announces Sustainable Growth Initiative with Commitment to Help Mitigate Global Climate Change,” Conservation International website, November 7, 2007, http://www.conservation.org/sites/celb/news/Pages/110707_fiji_water_announces_sustainable_growth_initiative.aspx, accessed April 2011. 44 FIJI Water, “Waste & Recycling,” FIJI Water website, http://www.fijiwater.com/givingback/ environment/sustainable-practices/waste-recycling/, accessed February 2011. 45 British Broadcasting Corporation, “Fiji Water’s Response,” BBC Panorama, February 18, 2008, http://news.bbc.co.uk/2/hi/programmes/panorama/7231169.stm, accessed April 2011. 46 Conservation International, “FIJI Water Announces Sustainable Growth Initiative.” 47 Tom Heap, “Bottled Water: Who Needs It?,” BBC Panorama, February 18, 2008, http://news.bbc.co.uk/ 2/hi/programmes/panorama/7247130.stm, accessed April 2011. 48 BevNet.com, “Fiji Water Becomes First.” 49 BevNet.com, “Fiji Water Becomes First.” 50 Leslie Guevarra, “FIJI Water Under Legal Fire,” Fiji Sun, January 7, 2011, http://www.fijisun.com.fj/ main_page/view.asp?id=51202, accessed March 2011. 51 Lynda Resnick and Francis Wilkinson, Rubies in the Orchard (New York: Broadway Books, 2010), p. 175; and BevNet.com, “Fiji Water Becomes First.” 52 Claudia H. Deutsch, “FIJI Water Vows to Go Carbon Negative,” New York Times, November 7, 2007. 53 Conservation International, “FIJI Water Announces Sustainable Growth Initiative”; and Resnick and Wilkinson, Rubies in the Orchard, p. 176. 54 BevNet.com, “Fiji Water Becomes First.” 55 Environmental Leader, “Fiji Water to Go Carbon Negative.” 56 Deutsch, “FIJI Water Vows to Go Carbon Negative”; and FIJI Water, “Energy,” FIJI Water website, http://www.fijiwater.com/giving-back/environment/sustainable-practices/energy/, accessed February 2011. 57 BevNet.com, “Fiji Water Becomes First.” 58 FIJI Water, “Logistics,” FIJI Water website, http://www.fijiwater.com/giving-back/environment/ sustainable-practices/logistics/, accessed February 2011. 59 BevNet.com, “Fiji Water Becomes First.” 60 FIJI Water, “FIJI Green,” FIJI Water website, http://www.fijiwater.sg/FAQ_green.aspx, accessed April 2011. 61 Leslie Guevarra, “FIJI Water Under Legal Fire,” Fiji Sun, January 7, 2011, http://www.fijisun.com.fj/ main_page/view.asp?id=51202, accessed March 2011. 62 Siegle, “It’s Just Water, Right?” For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 22 63 Deutsch, “FIJI Water Vows.” 64 State of California, “California Business and Professions Code,” http://www.leginfo.ca.gov/cgi-bin/displaycode?section=bpc&group=17001-18000&file=17200-17210, accessed February 2011. 65 Lenzer, “Fiji Water.” 66 FIJI Water, “Discriminatory Tax.” 67 Environmental Leader, “Fiji Water Targeted.” 68 Radio New Zealand International, “Fiji Water Shuts Down Business After Tax Hike,” November 29, 2010, http://www.rnzi.com/pages/news.php?op=read&id=57313, accessed April 2011. 69 Ice News, “Fiji Government Yields Bottled Water Company Pressure,” Ice News, July 26, 2008, http://www.icenews.is/index.php/2008/07/26/fiji-government-yields-to-bottled-water-company-pressure/, accessed April 2011. 70 Robert F. Kay, “The Fiji Water Saga—The Details and Legal Analysis by Scott Putnam—Part 1,” Fiji Guide website, December 18, 2010, http://www.fijiguide.com/profiles/blogs/the-fiji-water-saga-the, accessed April 2011. 71 Australia Network News, “Fiji Water Does Not Care About Fijians: Bainimarama,” Australia Network News, November 30, 2010, http://australianetworknews.com/stories/201011/3080695.htm, accessed February 2011. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
9-611-049 REV: DECEMBER 18, 2013 ________________________________________________________________________________________________________________ Professors Francesca Gino and Michael W. Toffel and Research Associate Stephanie van Sice prepared this case. This case was developed from published sources. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2011, 2012, 2013 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. FRANCESCA GINO MICHAEL W. TOFFEL STEPHANIE VAN SICE FIJI Water: Carbon Negative? “We’d be happy if anyone chose to drink nothing but FIJI Water as a means to keep the sea levels down.” — Thomas Mooney, FIJI Water’s senior vice president for sustainable growth1 On December 20, 2010, FIJI Water Company LLC, a company that sold premium artesian bottled water, was named in a class action lawsuit filed in U.S. District Court. The lawsuit claimed that FIJI Water had profited from a “deceptive and misleading claim” that its products were 120% carbon negative, which implied that purchasing FIJI Water was beneficial to the environment. The lawsuit accused FIJI Water of using a “dubious” and “discredited” carbon accounting method and, as a result, of profiting from the “inflated” price of its water.2 FIJI Water had announced its carbon-negative campaign three years earlier, in November 2007, as part of an initiative to make the manufacturing, production, and distribution of its products more environmentally friendly. The company planned to achieve its carbon-negative goal through a combination of energy efficiency initiatives and the purchase of carbon offsets.3 What did this new lawsuit mean for the company, and what were the implications for its carbon-negative environmental program? How should FIJI respond? These were not the only difficult questions FIJI Water was facing in 2010. On November 26, 2010, the Fijian government decided to raise the water export tax to 15 cents a liter (45 times the previous amount) for companies extracting more than 3.5 million liters a month. FIJI Water was the only company affected by this tax increase and thus considered the change to be unfair. What position should the company take in reaction to this change? Was it time to start negotiations? FIJI Water The FIJI Water brand was founded in 1988 by David Gilmour, a Canadian businessman who owned a resort on Fiji’s largest island, Viti Levu, in the South Pacific. Seeking local sources of drinking water to provide to his guests, he struck an exclusive 99-year deal with the government of Fiji in 1990 to tap an aquifer discovered by government-contracted geologists.4 In 1995, Gilmour started selling the water, which he bottled under the FIJI Water brand name. The Fijian government granted the company a tax holiday—tax-free status on its corporate income—that would expire in 2008. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 2 In 2004, FIJI Water was acquired for a reported $50 million by Roll International Corporation, a private company based in Los Angeles, California, that already had large investments in Teleflora (the largest flower delivery service in the world), POM Wonderful (a popular pomegranate juice drink), and Paramount Farms (the world’s largest grower and processor of pistachios and almonds).5 Roll subsequently purchased SpringFresh, a company selling bottled water sourced in New Zealand. In the years following the acquisition of FIJI Water, Roll International established the Vatukaloko Natural Waters Trust Fund, through which it paid royalty and lease fees to the original landowners of FIJI Water’s aquifer. The trust also provided health, hygiene, sanitation, and education facilities for these villages.6 Operations and Distribution Fiji is an island nation in the South Pacific Ocean comprising an archipelago of more than 332 islands with unexploited tropical forests, surrounded by coral reefs. The islands received nearly 3,000 millimeters of rain each year. The country had been ruled by a military regime since 2006; its primary industries were tourism and sugar production. In 2008, FIJI Water’s operations represented 20% of the country’s exports and 3% of the country’s $3,900 per capita GDP.7 FIJI Water’s water source was a 17-mile-wide, 400-foot-deep aquifer below a volcano and tropical forest on the main Fijian island of Viti Levu, into which rainfall had filtered over centuries. The company boasted that the water’s high silica content and its distance and isolation from pollutants like acid rain, herbicides, and pesticides were what made its water so pure, healthy, and rich in taste, and why it required no filtration or chemical treatment before being bottled. In addition, FIJI Water’s state-of-the-art bottling facility used a completely sealed process, which prevented the water from being exposed to air or any other potential contaminants before it reached the consumer. FIJI Water’s 2-building, 110,000-square-foot facility produced 50,000 bottles per hour, 24-hours per day, and 5 days per week – a manufacturing process that relied on electricity from diesel generators.8 The company employed about 400 workers in Fiji and another 100 employees in 10 other countries.9 FIJI Water was distributed in 40 countries around the world, including the United States, Canada, Australia, Brazil, China, Hong Kong, Japan, Korea, Russia, Singapore, South Africa, Taiwan, and the United Kingdom (see Exhibits 1a and 1b for a map and approximate distances from Fiji). FIJI Water bottles were sold in four sizes—330 milliliters (11.2 oz.), 500 milliliters (16.9 oz.), 1 liter (33.8 oz.), and 1.5 liters (50.7 oz.)—and came in single-serve or multipacks. They were distributed through grocery stores, hotels, restaurants, and gourmet shops, and through home delivery. Marketing “Mineral waters are as different from each other as wine,” according to Tom Kissock, a FIJI Water spokesperson.10 FIJI Water was top-rated in bottled-water taste tests in magazines such as Chicago Magazine, Cook’s Illustrated Buying Guide, Men’s Health, and Every Day with Rachel Ray. FIJI Water was positioned at the intersection of “pop-culture glamour” and progressive politics.11 In order to brand FIJI Water as an “affordable luxury,” Roll International’s owners Lynda and Stewart Resnick leveraged their connections in the elite business and Hollywood realms. For example, they established relationships with chefs of leading restaurants, including Nobu Matsuhisa, the celebrity chef and restaurateur behind the famous sushi-based Nobu Restaurants, who began to advocate dipping lobster sashimi in FIJI Water. The Resnicks also built relationships with owners of resorts and spas, where bottles were served in signature silver and gold sleeves. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 3 Such business relationships were often based on personal connections; as Lynda Resnick once remarked, “I know everyone in the world, every mogul, every movie star.”12 Celebrities like Whoopi Goldberg, Pierce Brosnan, Vin Diesel, and Jessica Simpson were reported to love FIJI Water. The company also hired a Hollywood marketing consulting firm to help place its bottles in leading movies and television shows (such as The Sopranos, 24, The View, Brother and Sisters, and Desperate Housewives) and at high-profile events (like the Emmy Awards and the Avon Walk for Breast Cancer). FIJI Water also hosted golf tournaments and sailing regattas, and was featured in music fests including SXSW (South by Southwest) in Austin, Texas, and at Justin Timberlake’s Summer Love concert tour. Thousands of FIJI Water bottles were handed out at the 2008 Democratic National Convention. These connections and appearances helped create a sense of exclusivity around FIJI Water, despite the fact that the water bottles were available for purchase in supermarkets and convenience stores. According to Martin Roll, a brand consultant, FIJI Water demonstrated that “competent branding can elevate even the simplest commodity to celebrity status.”13 The Bottled Water Industry The commercial bottled water industry was established nearly 200 years ago.14 In the United States, Poland Spring was founded in 1845 to enable Maine’s summer visitors to return home with its famed spring water. Many renowned European bottled water companies, including Perrier and Evian in France, and San Pellegrino in Italy, were similarly established during the same period. By the twentieth century, bottled water was packaged in glass, plastic, aluminum, or steel bottles and cans for individual consumption and retail sales. In 2009, the bottled water market included still unflavored (65.8%), sparkling unflavored (29.2%), sparkling flavored (2.8%), and still flavored (2.2%) waters.15 Bottled water was sourced from glaciers, springs, natural wells, and municipal water systems, and brands often differentiated themselves by boasting of their water’s inherent characteristics, such as trace minerals and vitamins that provided immunity-like benefits. Some touted their sources as being secluded, exotic locations. Nearly half of all bottled water was distributed via supermarkets and hypermarkets, while another 20% was sold through independent retailers and another 17% was distributed in restaurants, cafés, and bars.16 Industry experts estimated that, for the typical $1.29 bottle of water, nearly half of the costs went to the retailer, about one-third to the distributor and transportation, 12 to 15 cents for the water, and 12 to 15 cents for the bottle and cap, which left approximately 10 cents in profit for the water producer—the equivalent of 2 cents per bottle for multipacks.17 Consumer Demand The bottled water market was among the most dynamic growth markets in the food and beverage industry.18 Consumers purchased bottled water for several reasons:  Convenience: bottled water was portable and did not require heating or refrigeration.  Taste: some consumers regarded bottled water as superior in taste to tap water, which could sometimes taste like the chlorine used to purify it.  Health: water was a zero-calorie alternative to sodas and alcoholic beverages, and some contained minerals like silica, calcium, and magnesium.  Status: drinking bottled water was a sign of an elevated social scale, particularly in the developing world. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 4  Safety: bottled water provided an alternative for the over one billion people without access to clean, drinkable tap water. In 2009, global sales of bottled water were about $80 billion and were forecasted to reach $100 billion by 2014.19 Sixty percent of the market was in Europe, followed by the Americas (30%) and Asia-Pacific (20%) (see Exhibits 2a and 2b for bottle water consumption in select countries).20 In the United States, annual per capita consumption of bottled water had grown from less than two gallons in 1976 to nearly 30 gallons in 2006—more than milk, coffee, or beer (see Exhibit 2c for U.S. consumption of bottled water). Only carbonated soft drinks outsold bottled water (see Exhibit 3 for global market trends in beverages).21 Major Industry Players Several types of companies were major producers of bottled water, including specialized companies such as FIJI Water and diversified consumer packaged goods companies such as PepsiCo and Vivendi. The leading players in the global bottled water market in 2009 were Coca-Cola, Groupe Danone, Nestlé S.A., and PepsiCo, which together accounted for about one third of global market share.22 Exhibit 4 provides information on several of FIJI Water’s competitors. The Environmental Impacts of Bottled Water In 2007, numerous environmental groups, including the Rainforest Action Network, the Pacific Institute, and Corporate Accountability International, attacked the bottled water industry for selling a single-use product that they deemed unnecessary and harmful to the environment. These critics argued that bottled water was by definition “simply not an environmentally-friendly product,” and that selling it was akin to “selling snow to Eskimos, especially in places like Britain that have almost constant rainfall.”23 According to Kath Dalmeny at the Food Commission, a nongovernmental organization (NGO) that campaigned for healthier, more sustainable food in the U.K., it was “ludicrous to bring water from the other side of the world when essentially the same product is available out of the tap.”24 Environmental critics were particularly concerned with the production and disposal of plastic bottles, the use of water in the production process, and the greenhouse gas (GHG) emissions associated with distribution. Petroleum Use in Plastic Bottles Plastic was the most commonly used bottled-water packaging material, preferred over aluminum and glass in almost every country. In 2005, 96% of water bottles sold in the United States were made of PET (polyethylene terephthalate) plastic, a petroleum product, and came in single-serve sizes of one liter or less.25 Most bottled water companies manufactured their own bottles at their bottling plants, just before filling them, utilizing an energy-intensive process. In 2007, bottled water in the U.S. was sold in nearly 30 billion plastic bottles, which required about 17 million barrels of oil to manufacture, enough to fuel more than a million cars for a year.26 The U.S. market represented about 20% of the global bottled water market.27 Solid Waste Water bottles also created a large disposal issue. Only 10% of noncarbonated drink bottles were recycled (approximately 15% of water bottles in the U.S.).28 It took up to 1,000 years for these bottles to biodegrade in landfills. Many empty bottles, including some shipped abroad for recycling, ended For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 5 up as pollution in oceans and elsewhere, sometimes posing a hazard to wildlife. In addition, bottled water sold in packs was wrapped in “overpackaging,” which produced additional waste. Water Extraction Millions of gallons of water were used in bottled water manufacturing processes, both as a cooling agent in the bottle molding phase and to rinse out finished bottles. It took an estimated seven liters of water, including power plant cooling water, to manufacture a one-liter bottle of water.29 It was inherently unsustainable to pump large quantities of water from underground aquifers at rates that exceeded their replenishment, and depleting aquifers could negatively affect local water supplies and aquatic wildlife. In 2007, for example, the 6,000-year-old aquifer at the Peats Ridge plant north of Sydney, Australia, where Coca-Cola held an extraction license, was reported to be dropping dangerously; as a result, springs were drying up and wetlands were disappearing.30 Similarly, water shortages had been reported near bottling plants in Texas and in the Great Lakes region of North America. Even companies that sold purified tap water required significant volumes of water; approximately two additional gallons were required to purify every gallon of bottled water.31 As many water sources around the world were under increasing pressure, critics called for better management and monitoring of freshwater supplies. Greenhouse Gas Emissions In addition to consuming large amounts of energy, oil, and water, bottled water also came under criticism for the GHG emissions emitted during manufacturing, travel, and consumer use and disposal. For example, the manufacture of all plastic water bottles sold in the U.S. in 2007 emitted over 2.5 million tons of carbon dioxide, or the equivalent of 400,000 passenger cars per year.32 Bottled water, particularly in the luxury segment, was often shipped around the world. More than 25% of bottled water was distributed across national borders,33 creating environmental impacts from the combustion of vehicles’ fossil fuels, which released GHG that contributed to global climate change. It was estimated that each week, nearly 38,000 18-wheeler trucks delivered water around the United States.34 Some bottled water was shipped on large ocean freight liners, which, despite being a relatively carbon-efficient transportation mode, were criticized for contributing to conventional air pollution from combusting bunker fuel (see Exhibit 5 for CO2 emissions from shipping). FIJI Water came under particularly harsh scrutiny by some environmental activists because it shipped its products far distances around the world. For example, the closest port in the United States from Fiji was in Los Angeles, more than 6,500 miles away. According to FIJI Water, nearly 75% of its product’s carbon footprint resulted from the operations of its supply chain partners, including the shipping companies that distributed its bottled water as well as the production and transportation of its plastic resin suppliers in Thailand and Taiwan.35 Alternatives Critics of bottled water turned their attention to tap water, which they praised as being much cheaper and environmentally friendlier. It cost only $0.002 per gallon to treat, filter, and deliver a gallon of tap water in the United States, which was about 750 to 2,700 times cheaper than purchasing the equivalent amount of bottled water.36 The energy required to produce tap water was estimated at around 0.005 megajoules (MJ) per liter, taking advantage of carefully placed pumps and gravity to move water more efficiently.37 By comparison, bottling one liter of water often required between 5.6 and 10.2 MJ.38 For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 6 Critics also noted that bottled water was not necessarily safer than tap water. The Natural Resources Defense Council, an environmental NGO, reported that one-third of the 103 bottled water brands it tested were contaminated with arsenic and E. coli.39 Some critics added that tap water was regulated in the United States by the Environmental Protection Agency (EPA), an agency often viewed as more rigorous than the Food and Drug Administration (FDA), which oversaw bottled water. In addition, while some of the most enduring bottled water companies were built on claims of providing superior health benefits, government and industry groups estimated that between 25% and 40% of bottled water sold was simply filtered tap water.40 Some critics believed that the billions of dollars spent annually around the world on bottled water could be better used to install and maintain a safe public water infrastructure everywhere. They argued that, for example, by investing one-fifth of what was currently spent on bottled water, the world could eradicate the 1.8 million child deaths each year due to waterborne illnesses.41 Some city mayors had urged residents to return to tap water. In 2007, for example, New York City launched a “Get Your Fill” campaign to persuade people to cut back on bottled water. The same year, San Francisco Mayor Gavin Newsom banned city employees from using public funds to purchase bottled water (saving nearly $500,000). Also in 2007, Chicago became the first city in the United States to impose a tax ($0.05) on bottled water sold in the city, seeking to reduce the strain on municipal waste systems. FIJI Water’s Environmental Initiatives FIJI Water attributed the “unique taste and mineral properties” of its water to the “pristine ecosystem of the Fijian islands,” and believed it therefore had a fundamental commitment to preserving the “purity and biological wealth” of the region.42 As a result, the company undertook various environmental initiatives to make its practices more sustainable, initiatives that were marketed under the slogan, “Every Drop Is Green.” Onsite Operations The FIJI Water bottling plant was certified as meeting the requirements of ISO 14001, a voluntary, international, environmental management standard that represented a best-practices approach to developing an environmental policy and procedures, setting priorities, organizing training, and conducting routine environmental auditing and periodic management reviews. Waste and recycling Between 2008 and 2010, FIJI Water committed to reducing production facility waste by 33%, as compared to a 2006 baseline.43 By 2010, FIJI Water reported reductions in its total waste generation through yield improvements, and announced that 95% of the waste generated by its plant was sorted and recycled.44 Water management FIJI Water hired expert hydrogeologists to ensure that it was drawing water from its aquifer in the Yaqara Valley at a sustainable rate, as well as to help protect the aquifer’s environment. According to the company, “The very livelihood of our company relies on the health and well-being of our source aquifer and the surrounding environment. The water is harvested to ensure that both the aquifer and FIJI Water as a company are sustainable. As part of our production standard, we ensure that we draw water at a rate well within the limits of the rainfall replenishment rate.”45 For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 7 Distribution Packaging Whereas most premium bottled water was produced in glass bottles, FIJI Water contended that its products were all packaged in plastic, which used less energy to produce, ship, and recycle, and that its square-bottle design allowed for tighter, more efficient packing. In 2008, FIJI Water undertook plans to reduce the plastic content in its bottles by an average of 20% over the next two years, as compared to a 2006 baseline.46 Such initiatives were common among some of its competitors; Coca-Cola, for example, was the first to commercialize a food or beverage bottle made of recycled plastic, and had taken measures to reduce its packaging weight. Similarly, Nestlé Water was working to reduce its packaging weight by 30% with its new Eco-Shape bottles. In 2010, FIJI Water began to use 100% recycled cartons to store and ship bottles. Offsite in Fiji Watershed protection In August 2007, FIJI Water launched the FIJI Water Foundation, through which it invested in protecting the Yaqara Valley watershed, where it extracted most of its water. Similarly, Coca-Cola partnered with the World Wildlife Fund to conserve several freshwater river basins, and Nestlé Water instituted land conservation projects. Tree planting FIJI Water joined the 1% for the Planet partnership, which consisted of more than 1,300 companies like Patagonia and Clif Bar that committed 1% of their sales to environmental organizations around the world. FIJI Water’s contributions went toward investing in high-quality, multiple-benefit, forest-restoration projects in Fiji. In December 2009, for example, FIJI Water invested $3 million to restore over 1,250 acres of abandoned sugar cane farms with fruit and spice trees, timber, and other native species. The reforestation effort would help stop erosion, improve water quality, protect wildlife, employ local Fijians, and mitigate GHG emissions. Expanding community water access FIJI Water also worked with its local community members to build a series of wells to provide residents with a consistent supply of high-quality water. It was reported that nearly one-third of Fiji’s population did not have access to safe, clean drinking water.47 Increased waste recycling FIJI Water cosponsored a national Fiji program to increase recycling rates beyond 40%, a rate higher than that in many developed countries. FIJI Water also partnered with local resort operators to develop recycling infrastructures on hotel and resort properties. Offsite Globally Tree planting Through the 1% for the Planet program, FIJI Water also extended its reach to the United States, Latin America, and other countries. In 2010, for example, FIJI Water partook in a tree-planting program organized by the nonprofit organization Million Trees LA. Increasing recycling FIJI Water supported recycling programs in several of its various markets. The company was in favor of legislative measures in the United States to expand curbside recycling programs and to encourage container deposit laws to include bottled water and other noncarbonated beverages. According to FIJI Water’s then-vice president of sustainable growth, Thomas Mooney, “Our industry and our elected leaders are missing a great opportunity to reduce the impact of our product.”48 It was estimated that, by recycling their plastic bottles, consumers could reduce their carbon footprint by at least 25%.49 For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 8 Carbon-Negative Campaign In 2007, FIJI Water announced its plans to go “carbon negative” starting in 2008 by offsetting 120% of its carbon footprint. As the company stated in a press release, “That means that we are not only mitigating our environmental impact but also making up for a little bit of someone else’s.”50 According to the company, purchasing a one-liter bottle of FIJI Water would result in 115 grams of carbon dioxide equivalent being removed from the atmosphere, which, when aggregated to all of its products, was equivalent to planting 500,000 trees or taking 3,500 cars off the road.51 Striving to be carbon negative went well beyond prevailing practice across the bottled water and other industries, where organizations typically announced GHG-reduction goals such as reducing emissions by a certain percentage over a several year period. A few organizations had boldly announced “climate neutral” goals, but that was quite rare. FIJI Water acknowledged it was a pursuing a leadership role. According to Mooney, “We are a small brand, but we are raising the bar for the entire industry on how we should operate.”52 To achieve its goal, the company calculated and publicly disclosed its carbon footprint to the Carbon Disclosure Project, the world’s largest investor coalition on climate change, becoming the first bottled water and the first privately held company to make such disclosures.53 As Mooney noted, the company “believes that consumers will make environmentally responsible purchasing decisions if they have the information they need.”54 FIJI Water also joined forces with ICF International, a global consulting firm that helped it verify and publically report its emissions-reduction progress, and with Conservation International, a nonprofit organization that counseled the company on its sustainability initiatives. In addition, FIJI Water took into account its emissions reductions through its operations and distribution optimization projects. Energy FIJI Water committed to sourcing half of the energy used in its production process from renewable sources by 2010.55 The company announced that it would construct a windmill to provide energy to its bottling plant and that it had installed lighting that was 70% more energy efficient throughout its facility.56 Logistics and shipping FIJI Water began switching to more fuel-efficient trucks to transport its products from its plant to the port, resulting in a 50% reduction in fuel usage, and also switched its trucks to biodiesel and other alternative fuels.57 FIJI began shipping bottles to be sold on the East Coast of the United States via the Panama Canal to the Philadelphia port, rather than trucking them from Los Angeles. Though this route took three times longer, it resulted in a 55% reduction in GHG emissions.58 FIJI also optimized its trucking routes in various markets, reducing truck miles from its warehouses to distributors by 26%.59 Purchasing carbon offsets FIJI Water announced that it would purchase carbon offsets, a financial instrument that represented the reduction or avoidance of GHG emissions from a particular project that was used to compensate for GHG emissions occurring elsewhere (see Exhibit 6 for critical aspects of carbon offsets). FIJI Water chose to purchase carbon offsets derived from afforestation and from renewable energy projects that it was developing with Conservation International. The company opted to purchase carbon offsets on a forward-crediting scheme, in essence calculating the carbon reductions projected to materialize over the subsequent three decades to achieve its present-day carbon-negative commitment. According to FIJI Water, “Investing in offsets allows us to take immediate responsibility for our emissions,” though the company intended to For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 9 eventually replace the purchase of offsets with carbon-reducing projects that it would develop directly.60 FIJI Water was not the only bottled water company to offset its carbon impacts. Icelandic Glacial had been operating as a carbon-neutral company since 2007, a status certified by CarbonNeutral, an organization that verified that companies were adhering to its protocol. Icelandic Glacial achieved its carbon-neutral status by relying on onsite hydroelectric power and low-emission shipping, and by purchasing carbon offsets from projects engaged in reforestation and methane capture. Challenges Carbon Negative or Greenwash? FIJI Water’s marketing activities sought to affiliate its product with the environmental movement. In 2006, for example, FIJI Water bottles were photographed between politician Al Gore and artist Mos Def during the MySpace “Artist on Artist” discussion on climate change. The next year, FIJI Water took out a full-page ad in Vanity Fair’s green issue. When the company announced its carbon-negative campaign, its press release stated, “We are the first and only major bottled water company to make this commitment.”61 However, because FIJI Water’s bottles traveled further than many other bottled water brands, it was blamed for being a “potent symbol of excess,”62 and its appearance in these contexts was highly questioned. Mother Jones magazine, for example, singled out FIJI Water in a cover story article that criticized the company for its environmental impacts, among other concerns (see Exhibit 7 for the magazine cover). Some critics also questioned the legitimacy of FIJI Water’s use of carbon offsets to ameliorate its environmental impacts, accusing the company of greenwashing and telling partial truths that sought to mislead consumers. “Bottled water is a business that is fundamentally, inherently and inalterably unconscionable,” argued Michael Brune, executive director of the Rainforest Action Network. “No side deals to protect forests or combat global warming can offset that reality.”63 Ultimately, FIJI Water faced a lawsuit filed in U.S. District Court in late 2010 that accused the company’s carbon-negative campaign of constituting misleading advertising. The lawsuit claimed that, by purchasing carbon offsets on a forward-crediting scheme, FIJI Water was using “a discredited carbon accounting method” that allowed the company to claim credit for “carbon removal that may or may not take place—up to several decades in the future.”64 “To a reasonable consumer,” the suit explained, “the ‘Carbon Negative’ claim means that the defendant’s current operations remove more carbon from the atmosphere than they release into it.” The plaintiff claimed that she would not have purchased the product had she known of FIJI Water’s forward-crediting accounting scheme, and that her purchases caused her to “suffer injury” and “lose money.” The suit also accused FIJI Water of engaging in “unfair competition,” which included “any unlawful, unfair or deceptive business act . . . or misleading advertising.” The suit concluded that, as a result of its carbon-negative campaign, FIJI Water was able to “capture a substantial segment of that market,” a move from which it “richly profited” by charging a premium above that of its competitors. Conflicts with the Fiji Government In addition to criticisms regarding its green initiatives, FIJI Water also faced some criticisms regarding its relationship with Fiji’s government and population. The company produced about 20% of Fiji’s export income and 3% of its gross domestic product (GDP); thus, developing a good For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 10 relationship with the local government was important. Though FIJI Water engaged in many environmental and charitable works on the islands of Fiji, environmental groups and other critics observed that the country’s repeated typhoid outbreaks and parasitic infections were a result of inadequate access to safe drinking water, and that their public water supply system was plagued by crumbling pipes, lack of adequate wells, and dysfunctional or flooded water treatment plants. FIJI Water avoided these problems by investing in its own piping infrastructure to directly access an artesian aquifer in the Yaqara Valley. A Mother Jones article provided a critical account of how the company originally obtained access to this aquifer: In the early 1990s, Gilmour got wind of a study done by the Fijian government and aid organizations that indicated an enormous aquifer, estimated at more than 17 miles long, near the main island’s north coast. He obtained a 99-year lease on land atop the aquifer, brought a former Fijian environment minister on board, and launched an international marketing blitz inviting consumers to sample water preserved since “before the Industrial Revolution.” To this day, FIJI Water has nearly exclusive access to the aquifer; the notoriously corrupt and chronically broke government has not been able to come up with the money or infrastructure to tap the water for its people.65 On November 26, 2010, FIJI Water came into conflict with the Fijian government when the latter announced that it would increase its water-extraction tax from one-third of a Fiji cent per liter to 15 Fiji cents per liter (that is, F$0.003 to F$0.15 per liter, or US$0.0018 to US$0.083 per liter) at locations where more than 920,000 gallons (3.5 million liters) were extracted each month.66 FIJI Water, the only bottled water company on the island to extract this much water, reacted by calling the move “discriminatory” and the tax “untenable.” The company threatened to leave the island, stating that it had “no choice but to close [its] facility in Fiji.”67 This was not the first time FIJI Water had battled the government on tax issues. On July 4, 2008, the Fijian government passed a measure to increase the national mineral-water export tax from F$0.003 to F$0.20 (i.e., US$0.0017 to US$0.11) per liter, which affected all mineral bottling companies on the island. FIJI Water reacted by calling the measure “draconian” and, along with nine other water companies, mounted a campaign against the government by closing its plants and laying off a large number of its workers.68 The group also enlisted the help of an industry lobby group, which disapproved of the government failure to negotiate with the water companies before imposing the tax measure,69 and helped to mount pressure on the country’s leaders. Ultimately, the government agreed to decrease the export tax back to F$0.003 per gallon.70 These standoffs created a media backlash against FIJI Water. Newspapers and environmental organizations reported that FIJI Water was not only trying to dodge a necessary increase in extraction taxes, but had also established tax havens for itself by registering its operations in Luxembourg and in the Cayman Islands, and questioned the company’s dedication to the local population. Echoing this sentiment, Fiji’s President Frank Bainimarama issued a public statement declaring that FIJI Water “has adopted tactics that demonstrate the company does not care about Fiji or Fijians.”71 Decisions Despite its leading position as a luxury brand, FIJI Water had to respond to the California lawsuit that questioned the legitimacy of its carbon-negative campaign. As it trudged through another wave of critical press coverage, FIJI Water had to consider whether to defend or alter its approach. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 11 In addition, the company had to contemplate its negotiation strategy with the Fijian government, whose actions risked substantially affecting the company’s profitability. FIJI Water could challenge the government by threatening to close its facilities and move operations elsewhere; for instance, FIJI Water could transfer operations to New Zealand where its parent company, Roll International, already owned the SpringFresh brand of bottled water. FIJI Water could also make a counteroffer and stress the importance of the company’s presence for the local economy. FIJI Water had to carefully examine all its options before entering negotiations. What strategies should the company adopt to create sustainable solutions to both of these issues? For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 12 Exhibit 1aShipping Routes from Fiji to Select Major Markets Source: Harvard Center for Geographical Analysis, April 2011, based on data from SeaRates.com, Port-to-Port Distances, SeaRates.com, http://www.searates.com/reference/portdistance, accessed March 2011. Exhibit 1bShipping Distances from Fiji City/Country Nautical Miles (Kilometers) Sydney, Australia 1,740 (3,222) Kaohsiung, Taiwan 4,411 (8,169) Singapore 4,608 (8,534) Pusan, South Korea 4,624 (8,564) Hong Kong 4,706 (8,716) Los Angeles, United States 6,677 (12,366) Rio de Janeiro, Brazil 7,616 (14,105) Cape Town, South Africa 7,670 (14,205) Philadelphia, United States 9,667 (17,903) London, United Kingdom 12,475 (23,104) Source: SeaRates.com, Port-to-Port Distances, SeaRates.com, http://www.searates.com/reference/portdistance, accessed March 2011. Note: Distances are from Fiji’s Suva port. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 13 Exhibit 2a Total Bottled Water Consumption in 2009, Select Countries Exhibit 2b Bottled Water Consumption Per Capita in 2009, Select Countries Exhibit 2c Bottled Water Consumption Trend in the United States, 2001–2009 Sources: Casewriter, compiled based on data from: John G. Rodwan Jr., “Challenging Circumstances Persist: Future Growth Anticipated, U.S. and International Developments and Statistics,” http://www.bottledwater.org/files/2009BW stats.pdf, accessed March 2011; and Population Reference Bureau, http://www.prb.org/, accessed March 2011. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 14 Exhibit 3Global Market Trends in Beverages, 2005–2009 Source: Casewriter, compiled using data from: Datamonitor, “Industry Profile: Global Bottled Water,” Datamonitor, April 2010, p. 9; Datamonitor, “Industry Profile: Global Juices,” Datamonitor, April 2010, p. 9; Datamonitor, “Industry Profile: Global Milk,” Datamonitor, April 2010, p. 9; and Euromonitor, 2010. Data retrieved April 6, 2011. Note: Soft Drinks include soda, sports and energy drinks, iced tea, and smoothies. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 15 Exhibit 4Bottled Water Market: FIJI Water and Select Competitors FIJI Water Coca-Cola Groupe Danone Nestlé S.A. Headquarters California, U.S. Georgia, U.S. France Switzerland Share of global bottled water market 1% 7.5% 12.8% 14.8% Revenues from water division $150 million (2007) Not available $3.6 billion (2009) $8.4 billion (2009) Major markets (countries) 40 200 120 130 Brands 1 brand: FIJI Water Approx. 50 brands, including Dasani, Ciel, Nature’s Own, Glacéau Smartwater, VIVA Approx. 5 brands, including Evian, Volvic, Badoit, Salvetat, Salus Approx. 64 brands, including Nestlé Pure Life, Perrier, Arrowhead, San Pellegrino, Poland Spring Price for 1 liter bottle1 $2.29: FIJI Water $1.00: Dasani $1.89: Smartwater $2.13: Evian $1.66: Volvic $1.37: Poland Spring $1.79: Perrier $2.13: San Pellegrino Source: Casewriter, using data from: Lynda Resnick and Francis Wilkinson, Rubies in the Orchard (New York: Broadway Books, 2010), p. 175; Datamonitor, “Industry Profile: Global Bottled Water,” Datamonitor, April 2010, p. 2; Claudia H. Deutsch, “FIJI Water Vows to Go Carbon Negative,” New York Times, November 7, 2007; Accenture, “Groupe Danone: Global Business Process Transformation,” Accenture, http://www.accenture.com/Global/Services/By_Industry/ Consumer_Goods_and_Services/Client_Successes/GroupeDANONE.htm, accessed January 2011; and FIJI Water, “Company History,” FIJI Water website, http://www.fijiwater.com/company/company-timeline/, accessed March 2011. 1Prices at Star Market grocery store in Boston, Massachusetts, on June 6, 2011. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 16 Exhibit 5CO2 Emissions from Shipping, from Source to San Francisco Brand Source Miles to San Francisco Bottle Weight (oz.) CO2 (Travel only) (lbs./1 liter bottle) Dasani (Coca-Cola) California 22 1.94 0.01 365 (Whole Foods) California 223 1.5 0.07 Fiji Water Fiji 5,470 4.15 0.49 Voss Norway 5,100 18.93 (glass) 0.57 Volvic (Danone) France 6,255 2.34 0.59 Evian (Danone) France 6,265 3.35 0.61 Perrier (Nestlé) France 5,900 17.61 (glass) 0.63 San Pellegrino (Nestlé) Italy 6,135 17.74 (glass) 0.80 Source: Jen Phillips, “How Far Did Voss and San Pellegrino Travel to My Whole Foods?” Mother Jones, September/October 2009 issue, http://motherjones.com/politics/2009/09/how-far-did-voss-and-san-pellegrino-travel-my-whole-foods, accessed May 2011. Calculations based on Carbonfund.org (personal communication with Jen Phillips, May 31, 2011). Note: Travel includes trucking to the nearest large port, shipping via cargo ship, and trucking to final destination. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 17 Exhibit 6Carbon Offsets Overview and Purchasing Schemes Carbon offsets could be created from investments in, for example, afforestation (planting trees), capturing landfill methane, installing biodigesters at dairy farms, increasing fuel efficiency, and, under some circumstances, subsidizing the development of wind and solar energy sources. Carbon offsets were typically measured in metric tons of carbon dioxide equivalent (MMTCO2Eq or MMTCDE), and their magnitude required comparison to a baseline scenario reflecting emissions levels that would have occurred in the absence of the project. To qualify as a legitimate carbon offset, the project had to be financially viable only due to the revenues earned from selling the offset. This concept, called additionality, helped distinguish projects that actually mitigated GHG emissions due to the carbon offset from those projects that would have occurred anyway (in which case sales of offsets would merely contribute to windfall profits). According to the Stockholm Environment Institute, “The topic of additionality is the most fundamental—and thus contentious—issue in the carbon offset market. In theory, additionality answers a very simple question: Would the emissions reductions have occurred, holding all else constant, if the activity were not implemented as an offset project? Or more simply: Would the project have happened anyway? If the answer to that is yes, the project is not additional.” Carbon offsets that met particular requirements could be sold to regulated markets in countries participating in the Kyoto Protocol. Carbon offsets could also be sold to organizations and individuals in voluntary markets. While offsets sold to voluntary markets did not have to meet regulatory requirements, some adhered to protocols such as the Climate Action Reserve (CAR), the America Carbon Registry (ACR), the Verified Carbon Standard (VCS), and the Gold Standard. Carbon offsets could be purchased on the basis of one of three schemes: 1. Prompt delivery of existing offsets: Providers invested in the technology, implementation, and operational costs to generate the GHG reduction before the offset was sold. Providers assumed all of the up-front risks for these projects, which eliminated buyer risk that the offset would fail to be actualized. As such, these offsets sold for a higher price than the other two forms. 2. Forward delivery of future offsets: Providers committed to delivering a set number of carbon offsets at a predefined time and price in the future, eliminating market price risk for the purchaser. These forward contracts were only executed if both parties still existed at the time of delivery. 3. Forward crediting of future offsets: Providers sold these carbon offsets before the emissions reductions were realized, and immediately issued a certificate to the purchaser confirming credit for the carbon offsets. With these contracts, the ultimate amount of emission reductions was uncertain, and providers were not contractually obligated to deliver credits in the case of a shortfall. Customers faced the risk that some (or all) of the reductions might not be realized, and the further risk that they might not be informed of this. Proponents like Conservation International claimed that projects pursued via forward-crediting schemes demonstrated clear additionality, since forward crediting provided critical upfront funding, “a major barrier for the development of carbon projects.” Critics such as the Stockholm Environmental Institute argued that this structure carried the most risk to purchasers. Source: Casewriter, based on information from: Anja Kollmuss and Benjamin Bowell, “Voluntary Offsets for Air Travel Carbon Emissions,” Tufts Climate Initiative, revised April 5, 2007, http://sustainability.tufts.edu/downloads/TCI_Carbon_Offsets_Paper_April-2-07.pdf, accessed February 2011; Carol Lane, “All About Forest Carbon Offsets,” Conservation International website, August 6, 2008, http://www.conservation.org/FMG/Articles/Pages/dell_forest_carbon_offsets_madagascar.aspx, accessed April 2011; Offset Quality Initiative, Ensuring Offset Quality: Integrating High Quality Greenhouse Gas Offsets into North American Cap-and-Trade Policy, July 2008, http://www.offsetqualityinitiative.org/briefings.html, accessed June 2011; Stockholm Environment Institute and Greenhouse Gas Management Institute, “Contract Terms,” CORE website, http://www.co2offsetresearch.org/consumer/contracts.html, accessed May 2011; and Stockholm Environment Institute and Greenhouse Gas Management Institute, “Additionality,” CORE website, http://www.co2offsetresearch.org/consumer/Additionality.html, accessed June 2011. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 18 Exhibit 7 Criticisms of FIJI Water’s Environmental Initiatives The New York Times magazine, June 2008: Mother Jones magazine, September/October 2009: Source: Anna Lenzer, “Fiji Water: Spin the Bottle,” Mother Jones, September/October 2009, http://motherjones.com/politics/ 2009/09/fiji-spin-bottle#, accessed January 2011; Rob Walker, “Water Proof,” The New York Times magazine, June 1, 2008, http://www.nytimes.com/2008/06/01/magazine/01wwln-consumed-t.html?_r=3&partner=rssnyt&emc =rss&oref=slogin, accessed April 2011. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 19 Endnotes 1 Anna Lenzer, “Fiji Water: Spin the Bottle,” Mother Jones, September/October 2009, http://motherjones. com/politics/2009/09/fiji-spin-bottle, accessed January 2011. 2 Environmental Leader, “Fiji Water Targeted in ‘Greenwashing’ Class Action Suit,” Environmental Leader: Energy & Environmental News for Business, December 29, 2010, http://www.environmentalleader.com/2010/ 12/29/fiji-water-targeted-in-greenwashing-class-action-suit/, accessed January 2011. 3 Environmental Leader, “Fiji Water to Go Carbon Negative,” Environmental Leader website, November 7, 2007, http://www.environmentalleader.com/2007/11/07/fiji-water-to-go-carbon-negative/, accessed January 2011; and Claudia H. Deutsch, “For Fiji Water, A Big List of Green Goals,” New York Times, November 7, 2007, http://www.nytimes.com/2007/11/07/business/07fiji.html?_r=2&ref=science, accessed April 2011. 4 Beverage World, “Fiji Water,” Beverage World website, November 14, 2007, www.beverageworld.com/ index.php?option=com_content&view=article&id=34007:fiji-water&catid=64&Itemid=176, accessed January 2011. 5 Beverage World, “Fiji Water.” 6“Hollywood Couple Buys Fiji Water for $63M,” Sydney Morning Herald, November 30, 2004, http://www. smh.com.au/news/Business/Hollywood-couple-buys-Fiji-Water-for-63m/2004/11/29/1101577419156.html, accessed March 2011. 7 Lenzer, “Fiji Water.” 8 Bottled Water Web, “Fiji Water,” Bottled Water Web, http://www.bottledwaterweb.com/bottlers detail.do?k=946, accessed March 2011; and Lenzer, “Fiji Water.” 9 FIJI Water, “Discriminatory Tax Forces Shutdown of FIJI Water Factory,” FIJI Water press release, November 29, 2010, http://www.fijiwater.com/2010/discriminatory-tax-forces-shutdown-of-fiji-water-factory/, accessed February 2011; and Roll Global, “FIJI Water,” Roll Global company website, http://www.roll.com/fiji-water.php, accessed March 2011. 10 FIJI Water, “The Water,” FIJI Water company website, http://www.fijiwater/com/water, accessed January 2011. 11 Lenzer, “Fiji Water.” 12 Andrew Purvis, “Her Latest Squeeze,” The Observer, December 11, 2005, http://www.guardian.co.uk/ lifeandstyle/2005/dec/11/foodanddrink3, accessed January 2011. 13 Martin Roll, “FIJI Water—The Exotic Water Brand,” Venture Republic, http://www.adoimagazine.com/ newhome/index.php?option=com_content&view=article&id=4634&catid=24, accessed January 2011. 14 Poland Spring, “Poland Spring. Learn Our History . . . ,” Poland Spring website, http://www.poland spring.com/AboutUs/Timeline.aspx, accessed March 2011; Nestlé Waters, “History of Bottled Water,” Nestlé Waters website, http://www.nestle-watersna.com/Menu/AboutUs/Heritage/History+of+Bottled+Water.htm, accessed March 2011; Evian, “An Extraordinary Saga of Health and Lifestyles,” Evian website, http://www.evian.com/#/en_US/169-An-extraordinary-saga-of-health-and-lifestyles, accessed March 2011; and Michael Mascha, “Short History of Bottled Water,” Fine Waters website, http://www.finewaters.com/ Bottled_Water_Etiquette/Bottled_Water_History/Short_History_of_Bottled_Water/4.asp, accessed March 2011. 15 Datamonitor, “Industry Profile: Global Bottled Water,” Datamonitor, April 2010, p. 3. 16 Datamonitor, “Industry Profile,”p. 30. 17 Charles Fishman, “Message in a Bottle,” FastCompany.com, July 1, 2007, http://www.fastcompany.com/ magazine/117/features-message-in-a-bottle.html, accessed January 2011. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 20 18 Catherine Ferrier, “Bottled Water: Understanding a Social Phenomenon,” commissioned by the World Wildlife Fund, April 2001, p. 3. 19 Datamonitor, “Industry Profile,” p. 2–3. 20 Datamonitor, “Industry Profile,” p. 2, 12. 21 P. H. Gleick and H. S. Cooley, “Energy Implications of Bottled Water,” Pacific Institute, Environmental Research Letters no. 4 (2009): 1–6. 22 Datamonitor, “Industry Profile,” p. 2. “Soft Drinks: Euromonitor from trade sources/national statistics. Brand Shares,” Euromonitor International (Jan. 2013) accessed via www.portal.euromonitor.com in December 2013. 23 Food & Water Watch, “Greenwashed: Fiji Water Bottles the Myth of Sustainability,” Food & Water Watch website, May 2, 2008, http://www.foodandwaterwatch.org/2008/05/greenwashed-fiji-water-bottles-the-myth-of-sustainability/, accessed January 2011; and David Derbyshire, “Bottle of water that has travelled the world: Source of latest fashion drink is Fiji in the Pacific,” Daily Telegraph, November 3, 2004. 24 Derbyshire, “Bottle of water.” 25 Responsible Purchasing Network, “Think Outside the Bottle: Responsible Purchasing Guide,” 2008, http://www.responsiblepurchasing.org/purchasing_guides/bottled_water/purchasing_guide.pdf, accessed January 2011. 26 Lucy Siegle, “It’s Just Water, Right? Wrong. Bottled Water is Set to Be the Last Battleground in the Eco War,” The Observer, February 10, 2008, http://www.guardian.co.uk/environment/2008/feb/10/water. foodanddrink, accessed January 2011; and Emily Arnold and Janet Larsen, “ Bottled Water: Pouring Resources Down the Drain,” Earth Policy Institute, February 2, 2006, http://www.earth-policy.org/index.php?/plan_b_ updates/2006/update51, accessed March 2011. 27 Euromonitor 2010 data, retrieved April 6, 2011; and John G. Rodwan Jr., “Challenging Circumstances Persist: Future Growth Anticipated, U.S. and International Developments and Statistics,” http://www.bottled water.org/files/2009BWstats.pdf, accessed March 2011. 28 Tim Elliott, “Disaster in a Bottle,” Sydney Morning Herald, April 24, 2007, http://www.smh.com.au/news/ environment/disaster-in-a-bottle/2007/04/23/1177180569554.html, accessed April 2011. 29 Siegle, “It’s Just Water, Right?” 30 Elliott, “Disaster in a Bottle.” 31 Responsible Purchasing Network, “Think Outside the Bottle.” 32 Responsible Purchasing Network, “Think Outside the Bottle.” 33 Datamonitor, “Industry Profile,” p. 14. 34 Fishman, “Message in a Bottle.” 35 FIJI Water, “FIJI Water to Reopen Plant,” comments section, November 11, 2010, http://www.fijiwater.com.au/2010/fiji-water-reopen-plant/, accessed February 2011; and BevNet.com, “Fiji Water Becomes First Bottled Water Company to Release Carbon Footprint of its Products,” BevNet.com, April 9, 2008, http://www.bevnet.com/news/2008/4-9-2008-Fijigreen.asp, accessed January 2011. 36 Responsible Purchasing Network, “Think Outside the Bottle.” 37 Eric Tawney, “Visualization of Construction of a Gravity-Fed Water Supply and Treatment System in Developing Countries,” Michigan Technological University, Working Paper, http://www.cee.mtu.edu/ sustainable_engineering/resources/technical/Visualizing_Gravity_Fed_Water_System_FINAL.pdf, accessed March 2011. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
FIJI Water: Carbon Negative? 611-049 21 38 F. L. Burton, “Water and Wastewater Industries: Characteristics and Energy Management Opportunities,” Burton Engineering, prepared for the Electric Power Research Institute, 1996. 39 Erik D. Olson, “Bottled Water: Pure Drink or Pure Hype?” Natural Resources Defense Council website, April 1999, http://www.nrdc.org/water/drinking/bw/chap3.asp, accessed January 2011. 40 Responsible Purchasing Network, “Think Outside the Bottle.” 41 Siegle, “It’s Just Water, Right?” 42 FIJI Water, “Environment,” FIJI Water website, http://www.fijiwater.com/giving-back/environment/, accessed May 2011. 43 Conservation International, “FIJI Water Announces Sustainable Growth Initiative with Commitment to Help Mitigate Global Climate Change,” Conservation International website, November 7, 2007, http://www.conservation.org/sites/celb/news/Pages/110707_fiji_water_announces_sustainable_growth_initiative.aspx, accessed April 2011. 44 FIJI Water, “Waste & Recycling,” FIJI Water website, http://www.fijiwater.com/givingback/ environment/sustainable-practices/waste-recycling/, accessed February 2011. 45 British Broadcasting Corporation, “Fiji Water’s Response,” BBC Panorama, February 18, 2008, http://news.bbc.co.uk/2/hi/programmes/panorama/7231169.stm, accessed April 2011. 46 Conservation International, “FIJI Water Announces Sustainable Growth Initiative.” 47 Tom Heap, “Bottled Water: Who Needs It?,” BBC Panorama, February 18, 2008, http://news.bbc.co.uk/ 2/hi/programmes/panorama/7247130.stm, accessed April 2011. 48 BevNet.com, “Fiji Water Becomes First.” 49 BevNet.com, “Fiji Water Becomes First.” 50 Leslie Guevarra, “FIJI Water Under Legal Fire,” Fiji Sun, January 7, 2011, http://www.fijisun.com.fj/ main_page/view.asp?id=51202, accessed March 2011. 51 Lynda Resnick and Francis Wilkinson, Rubies in the Orchard (New York: Broadway Books, 2010), p. 175; and BevNet.com, “Fiji Water Becomes First.” 52 Claudia H. Deutsch, “FIJI Water Vows to Go Carbon Negative,” New York Times, November 7, 2007. 53 Conservation International, “FIJI Water Announces Sustainable Growth Initiative”; and Resnick and Wilkinson, Rubies in the Orchard, p. 176. 54 BevNet.com, “Fiji Water Becomes First.” 55 Environmental Leader, “Fiji Water to Go Carbon Negative.” 56 Deutsch, “FIJI Water Vows to Go Carbon Negative”; and FIJI Water, “Energy,” FIJI Water website, http://www.fijiwater.com/giving-back/environment/sustainable-practices/energy/, accessed February 2011. 57 BevNet.com, “Fiji Water Becomes First.” 58 FIJI Water, “Logistics,” FIJI Water website, http://www.fijiwater.com/giving-back/environment/ sustainable-practices/logistics/, accessed February 2011. 59 BevNet.com, “Fiji Water Becomes First.” 60 FIJI Water, “FIJI Green,” FIJI Water website, http://www.fijiwater.sg/FAQ_green.aspx, accessed April 2011. 61 Leslie Guevarra, “FIJI Water Under Legal Fire,” Fiji Sun, January 7, 2011, http://www.fijisun.com.fj/ main_page/view.asp?id=51202, accessed March 2011. 62 Siegle, “It’s Just Water, Right?” For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.
611-049 FIJI Water: Carbon Negative? 22 63 Deutsch, “FIJI Water Vows.” 64 State of California, “California Business and Professions Code,” http://www.leginfo.ca.gov/cgi-bin/displaycode?section=bpc&group=17001-18000&file=17200-17210, accessed February 2011. 65 Lenzer, “Fiji Water.” 66 FIJI Water, “Discriminatory Tax.” 67 Environmental Leader, “Fiji Water Targeted.” 68 Radio New Zealand International, “Fiji Water Shuts Down Business After Tax Hike,” November 29, 2010, http://www.rnzi.com/pages/news.php?op=read&id=57313, accessed April 2011. 69 Ice News, “Fiji Government Yields Bottled Water Company Pressure,” Ice News, July 26, 2008, http://www.icenews.is/index.php/2008/07/26/fiji-government-yields-to-bottled-water-company-pressure/, accessed April 2011. 70 Robert F. Kay, “The Fiji Water Saga—The Details and Legal Analysis by Scott Putnam—Part 1,” Fiji Guide website, December 18, 2010, http://www.fijiguide.com/profiles/blogs/the-fiji-water-saga-the, accessed April 2011. 71 Australia Network News, “Fiji Water Does Not Care About Fijians: Bainimarama,” Australia Network News, November 30, 2010, http://australianetworknews.com/stories/201011/3080695.htm, accessed February 2011. For the exclusive use of A. Beirão da Veiga, 2023.This document is authorized for use only by Alexia Beirão da Veiga in 2023 OPIM 271- Environmentally Sustainable Operations and Business Models taught by VISHAL AGRAWAL, Georgetown University from Jan 2023 to May 2023.