How will we feed an additional 3 billion people?April 17, 2012: 8:39 PM ET
Cargill CEO Greg Page says industry leaders will need to re-think the cost of water to sustainably feed the world's growing population. Could natural gas help the water pricing problem?
FORTUNE -- Cargill CEO Greg Page is going to ask us all to think about doing something we hate: pay more for some stuff. "We try to get people to think about price as one of the real necessary elements for sustainability," he tells attendees at Fortune's Brainstorm Green conference on April 17.
One of the main resources that leaders need to re-price is water, says another panelist, Nature Conservancy CEO Mark Tercek: "Because water has been free, we've had some crazy uses of water in the agriculture space where the wrong things have been grown in the wrong places."
Yet opportunities for investment in what is now a free resource could come from an unexpected area: drilling for natural gas. "In my mind, shale gas is the thing that will make water investable," says Dickon Pinner, a principal at McKinsey & Co.
Drilling for gas requires an enormous amount of water, used in a well-stimulation method known as hydraulic fracturing or "fracking." The method is controversial for several reasons, but one primary reason has to do with the potential contamination of water used in the process. It is an urgent problem, and the fact that companies will have a financial stake in clean water could help fix it, Pinner says.
"We're doing quite a bit of investment," admits Siemens Corp. president and CEO Eric Spiegel. "A lot of the drillers are looking for ways to recycle 100% of that water, and that is huge opportunity."
Agriculture companies will have to revamp other aspects of their pricing model as well. The challenge the industry faces is huge – it will have to help feed a world whose population is only growing. According to estimates from McKinsey, the planet will have to support more than 3 billion middle-class consumers over the next 20 years.
Those people are going to use a tremendous amount of resources and demand a greater degree of corporate transparency. "In a world where nothing can be hidden, you better have nothing to hide," says Page.
The greater need for transparency has already affected the way Cargill approaches growth in new markets. For instance, many companies will need to ramp up the development of arable land in Africa to meet the food demands of the future population, Page says. "So, is the whole goal to raise as many calories as cheaply as possible, or is it to do it in a manner that engages the maximum share of the indigenous population?" he asks. Like the true cost of clean water, the value of engaging local people is something that Big Ag must figure out how to calculate.