In part two of this month's management briefing, which focuses on the soft drinks category, Ben Cooper highlights the importance of listening to external stakeholders, even if you don't like what they're saying.

As mentioned in the first part of this briefing, companies will not readily join a war of words with respected external organisations such as Oxfam. They do not wish sustainability to become a battleground, particularly given the generally-accepted view that many sustainability challenges can only be addressed effectively through partnership and collaboration.

Nevertheless, seeking candid views from others on sustainability issues as part of the materiality assessment process is bound to throw up differing opinions and outlooks. The more a company is viewed to be "listening" - where the perspectives of external stakeholders are reflected in the company's priorities - arguably the more credible the sustainability strategy will be.

At the same time, decisions around many sustainability criteria reflect tangible risks and opportunities for a company, with a direct bearing on commercial viability and long-term business success, so to honour its commitments to its shareholders, senior executives must ultimately shape sustainability strategy to fit with the company's own self-interest. It is a delicate balance to strike, and the materiality assessment process is a more nuanced process than it first appears.

Seeking divergent views

Robert ter Kuile, senior director, public policy at PepsiCo, says the company deliberately seeks divergent views. "We seek out groups that even think quite differently than we do," he tells just-drinks. This speaks to a key aspect to the stakeholder consultation process. Not only will the consultation process have less credibility but it may also fail in its objective of moving a company's sustainability mission forward, if the suggestions made by external stakeholders are entirely consistent with the outlook of the company. To a degree, its purpose is to challenge. While he says ultimately PepsiCo has to "reserve the right to be smarter", ter Kuile believes there is "huge value in somebody approaching things from different ways". 

While Joe Franses, director of corporate responsibility & sustainability at Coca-Cola Enterprises (CCE), says that stakeholder consultation "shouldn't throw up surprises to companies with an active radar screen", he says CCE has no problem with being challenged by the engagement process.

"We are continually challenged by our stakeholders and they are challenging us to address a wide range of issues," Franses says. However, he adds that there "has to be an acknowledgment that, with a business like ours, we can't act on everything. We do need to prioritise."

Sometimes the experience can be revelatory, according to ter Kuile. There have been occasions with some groups, he says, "where we've explained our position, they explain theirs and we say 'maybe we hadn't thought of it that way, that's a great point, let's take that into consideration'. In the end, what we're looking for are long-term, strategic and implementable solutions that not only address the issue but enhance the business."

As for when differences in outlook arise, ter Kuile says: "I think the truly collaborative organisations get it. They understand that everybody has differing ways of approaching the same challenge." He adds that PepsiCo takes a strategic approach to seeking convergence between concerns raised by external stakeholders and the company's broader business strategy, "so that we can find a truly, strategic, implementable pathway".

New directions

Franses cites CCE's increasing focus on sustainable agriculture as an example of where stakeholder consultation has helped the company to develop its sustainability mission. 

"We've substantially moved on our response to sustainable agriculture, largely as a result of ongoing dialogue with our stakeholders," Franses explains. He adds that sustainable agriculture will be one of the company's sustainability focus areas when its new Sustainability Plan is unveiled.

The fact that sustainable agriculture was not a focus area for CCE as little as three years ago illustrates how quickly the importance of addressing impacts in agricultural supply chains has risen up the agenda. Indeed, Franses identifies the formation of a Sustainable Agriculture Steering Group and the launch of its Sustainable Agriculture Guiding Principles as being among CCE's key sustainability achievements in 2013. The enhanced outreach to suppliers included a webinar, held jointly with the Coca-Cola Co, specifically focused on its Sustainable Agriculture programme.

Organising sustainability

While the formation of CCE's Agriculture Steering Group reflects how sustainable agriculture has become a more important feature within the sustainability strategies of major soft drinks companies, it also speaks to the way in which key sustainability issues are addressed by large corporations and integrated into management systems.

Coca-Cola Enterprises, for example, already has corresponding steering groups for seven other sustainability areas:

  • energy and climate change
  • water stewardship
  • sustainable packaging and recycling
  • product portfolio
  • workplace
  • community, and
  • healthy living

Franses emphasises that the steering groups are not just led by sustainability experts. They are "genuinely cross-cutting", involving people working in the business on the ground "to ensure ownership for those issues is transferred into the business". Above the eight steering groups is the company's Corporate Responsibility & Sustainability Committee which is also cross-functional and meets five times a year.

While embedding sustainability in core operational functions is seen as key, particularly in gaining employee engagement, buy-in from the most senior management is seen as equally important. Boston-based sustainability think tank Ceres ranks management accountability for sustainability at major US corporations in its report, 'Gaining Ground: Corporate Progress on the Ceres Roadmap for Sustainability'. Included in its report are assessments of four major soft drinks producers, the Coca-Cola Co, PepsiCo, Coca-Cola Enterprises and Dr Pepper Snapple Group.

While Andrea Moffat, VP of the corporate programme at Ceres and author of the Gaining Ground report, notes "some variability" in the level of board oversight of sustainability among the soft drinks companies, she says they have all recognised that leadership "from the top" is critical in driving the required performance changes across criteria such as greenhouse gas emissions, water stewardship or supply chain sustainability.

Coca-Cola is in Tier 2 (Making progress') for overall sustainability governance, but in Tier 1 ('Setting the pace') for board oversight of sustainability. On management accountability for sustainability, Coca-Cola is also in Tier 2.

Surprisingly perhaps, given the emphasis placed on sustainability issues by its CEO, Indra Nooyi, and her prominence in global sustainability debates, PepsiCo does not score as highly on board oversight, achieving only Tier 4 ('Starting out') for board oversight of sustainability in its 2014 scorecard. However, PepsiCo is in Tier 1 for management accountability of sustainability.

On overall sustainability governance, PepsiCo is in Tier 3 ('Getting on track') Coca-Cola Enterprises is in Tier 1 for board oversight, in Tier 2 for sustainability governance overall and in Tier 3 for management accountability. Dr Pepper Snapple Group, meanwhile, is in Tier 1 for both board oversight and management accountability and in Tier 2 for sustainability governance overall.

For full details on this management briefing, click here.