Please note: this blog was published in August 2020 and its content is based on what was correct at the time of writing. As a result, some of the facts and opinions may no longer be current or relevant.
There is a reason that when searching space for signs of life, scientists focus on planets where there is a likelihood of finding water. Water is the key to life. Our blue planet’s surface is covered by 71% water, which makes it easy to take a constant supply of fresh water for granted, especially for the wealthier among us. But water scarcity is increasingly becoming a problem for everyone, rich and poor. The effects of climate change and runaway population growth have the combined potential to put unprecedented pressure on the most important pillar of our existence. Cities have increasingly come to the brink of running out of water, a scary situation I personally lived through in Cape Town in 20181. Ecolab, among other things, is at the forefront of fighting the battle against water wastage and is therefore a key player in protecting the basic human right of having access to fresh water.
Our Ethical Investment Plans include Ecolab, which is held in the Liontrust Sustainable Future Global Growth Fund.
The finance stuff 📈
Company value: £42.8bn
Share price: £150.0
2019 Profits: £1.2bn
What does Ecolab do? 🤷
Ecolab, as it was renamed to in 1986, was founded in 1923 by Merritt J. Osborne as Economics Laboratory in St Paul, Minnesota. The company, which started off in the cleaning and detergents business, has evolved over the years through many acquisitions that have seen it steer a strong course in favour of sustainability. Today, the company is involved in water management, hygiene, and food safety across a range of industries, from healthcare to hospitality.
The 2011 merger with Nalco is arguably the company’s most defining moment and paved the way for Ecolab to become a global leader in industrial water management. The company works with a wide range of clients, including large hotel groups and global industrial companies, such as Mondelez International, and helped its clients save 206 billion gallons of water in 20192. Microsoft co-founder, Bill Gates, has increased his stake in the company over the years and now owns approximately 13.9% of its shares through Cascade Investment LLC and the Bill and Melinda Gates Foundation3.
What positive impact is Ecolab having? 🌱
The company has both an inward and outward focus on sustainability as it seeks to drive positive and truly sustainable business results. It was ranked 7th in the Best Corporate Citizens List for 2020, thereby maintaining a top 10 ranking over the past 7 years4.
Ecolab has recently launched its 2030 Impact Goals which clearly defines what the business wants to achieve for its customers and within their own operations by the year 2030.
For its customers, Ecolab is focused on making an impact across four broad areas: Water, Climate, Health and Food. Some of the more notable goals are:
- Water: Conserve 300 billion gallons of water annually which is equivalent to drinking water needs for 1 billion people
- Climate: Reduce emissions of green house gasses by 4.6 million metric tonnes.
- Health: Clean 50 billion hands and provide safe healthcare for 116 million people annually.
- Food: Give 1.8 billion people access to clean food, thereby preventing 11 million food-related illnesses.
Closer to home, Ecolab’s goals are similarly specific in the areas of water impact, carbon emissions, workforce diversity and workplace safety for its 50,200 employees5. The company’s goals in these areas are governed by the high standards of the UN Sustainable Development Goals. In this sense, Ecolab is a company that walks the talk when it comes to its own backyard!
What Ecolab has to say 📣
“Ecolab has always operated where sustainability and economic benefits align, helping our customers do more with less and living up to our responsibilities in our own operations. That’s why, in this report, we are announcing a new set of sustainability goals for 2030, focused on water, climate, food, diversity and health. With these new goals, we will increase our positive impact through our work with our customers, accelerate our efforts within our own operations, expand our approach to product sustainability, support diversity and inclusion and live our values in the workplace and the community. These goals won’t be easy to achieve, but we know you achieve more when you aim high. We’ve always pushed ourselves to innovate and do better. Partnering around the world, in virtually every industry, we work with our customers to develop solutions that save water, energy, waste and money. This report includes several examples of the exponential savings and sustainable value creation that are made possible through these collaborations.”
Douglas M. Baker, Jr.
CEO and Chairman, Ecolab
Corporate Responsibility Report, 2019
What Liontrust think… 🤓
“Ecolab’s business is a good example of a company that benefits from, and helps to deliver solutions, for different themes in its business. The primary theme it is exposed to is Improving the management of water. Across its different segments, it helps to conserve water and reuse water, and is the global leader in the provision of technology which does this. Its Institutional business that helps kitchens in restaurants and hotels across the world to reduce their water usage. Its Industrial business is the global leader in helping Industrial clients reduce water usage in boilers, in fact in 2018 Ecolab report that it helped its customers save 1.1 trillion gallons of drinking water, and conserves drinking water for 650 million people.
It is also exposed to theme of improving Sanitation, as it’s the global leader in sanitary products for kitchens and hospitals. This is an increasingly important part of its business post COVID-19. It also has a pest business that helps ensure sanitation for its customers with kitchens across the world. Ecolab reports it cleaned more than 40 billion hands in 2018 and helps safely produce 44% of the global milk supply.”
To wrap up 🎁
The number of water scarce regions are on the rise around the world. We have already seen entire cities at risk of running out of water as populations become denser and climate change becomes a reality. According to global consultancy firm, McKinsey, the world will experience shortfall of 40% in overall freshwater supply by 20302. Undoubtedly, the lack of availability and access of water in certain regions has the potential to put the existence of a rising numbers of communities at risk. Ecolab is committed to driving the dual success of business and sustainability. The company has a strong track record in developing innovative solutions, in not only water management, that seek to preserve increasingly scarce resources, provide safe access to basic needs, and lower carbon footprints.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.