Reference no: EM132737685

CASE: Arrowhead Mountain Spring Water

The top selling bottled water companies in the United States are PepsiCo, the Coca-Cola Company, and the Swiss multinational beverage company, Nestlé. In 2015, Nestlé operated five facilities in California, which bottled approximately 2.6 billion liters of water. One of these was Arrowhead Mountain Spring Water, located in the Millard Canyon, about 135 kilometers east of Los Angeles. The Arrowhead facility collected water using a gravity-fed system of two water tunnels drilled deep into the mountainside. The water flowed downhill through a pipeline to a tank, 2 where it was pumped into trucks and hauled to the bottling plant. For over ten years, Arrowhead had been bottling spring water for export outside of California. Annually, it pumped out 750 million liters of groundwater, enough water for about 400 California homes for one year. The Arrowhead spring is in a Mojave Desert oasis, where just three inches of rain falls annually. Any reduction in the groundwater that is extracted from the spring prevents water from seeping downhill to fill the aquifers of the nearby towns. Since 2011, these towns struggled for water during the severe drought that occurred in California.

• In April 2015, California Governor Jerry Brown enacted an emergency regulation that required a mandatory 25% reduction in water use throughout the state. The Arrowhead spring, however, was located on land owned by the Morongo Band of Mission Indians. Because this is an Indian reservation, the land is considered a sovereign nation and therefore is not required to comply with California laws and regulations. Protesters objected to the Arrowhead operation. "If you had the same bottling plant in a water-rich area, then the amount of water bottled and diverted would be a small fraction of the total water available. But this is a desert ecosystem. Surface water in the desert is exceedingly rare and has a much higher environmental value than the same amount of water somewhere else." Local residents said that the bottling plant provided badly needed jobs in the area and was helping the local economy. The Morongo Band of Mission Indians contended that they were "responsible stewards of the environment" and that they were monitoring the bottling plant's operation "to ensure that the water resources remained healthy and reliable for future generations." Critics, however, noted that neither the Morongo Band nor Arrowhead management provided reports on exactly how much water had been extracted from the spring. Because the spring was located on land that was considered a sovereign nation, the Morongo Indians were not required to report water consumption information.
• As such, critics contended that it was difficult to assess the impact of this operation on the area's water supply. For its part, Arrowhead management maintained that it complied with regulations and operated its business in a transparent manner. In a 2015 interview, the Arrowhead CEO, Tim Brown, noted that "people need to drink water ... If I stop bottling water tomorrow, people would buy a different brand of bottled water.

Problem 1: Is it socially responsible for the Arrowhead Mountain Spring Water company to drain groundwater during a drought?

Problem 2: Should consumers be concerned about where bottled water comes from?

Problem 3: Does Arrowhead have an ethical obligation to disclose proprietary information, such as the amount of groundwater extracted and the water levels in the spring? Or, does Arrowhead have the right to privacy and therefore need not disclose water consumption information?