Sustainability in Beer - Part IV: Company by Company - Heineken, Molson Coors and SABMiller
The fourth and final part of this month's management briefing, which looks at the efforts of the brewing world in the environmental sustainability arena, considers the work of Heineken, Molson Coors and SABMiller.
Among Heineken's stated environmental targets is to increase local sourcing in Africa to 60% of production by 2020 with the dual aim of reducing its carbon footprint and developing the local economy. In 2010, the company sourced 48% of its raw materials for African production from within Africa.
In its most recent sustainability report, Heineken states that in 2011 it continued to expand local sourcing projects in sub-Saharan Africa, with projects now up and running in eight countries.
With regard to local sourcing, Heineken global sustainable development Vera Zandbergen highlights notable initiatives in Ethiopia and the Democratic Republic of Congo (DRC), where the company is producing a beer made from rice.
Zandbergen says the rice initiative - rice is a water-intensive crop but the DRC is one of the most water-rich countries in the world - has delivered some "fantastic results" and helped local communities.
"In Ethiopia we have been working closely with local NGOs and the Dutch government to improve the barley growing potential and the sustainability of these crops by introducing more modern and higher yield barley varieties to the region," Zandbergen continues. "We are still in the testing phase of this project, with a first crop expected to be harvested later in the year, but we are very excited about the potential of being able to do this at scale."
Heineken has been using sorghum, which requires less water than other crops traditionally used in beer production, in its Nigerian unit since 1987 when a national ban on the import of malted barley was introduced. It has now expanded this to a number of other countries including Sierra Leone and Burundi.
The brewer's sustainable agriculture and local sourcing programme is by no means limited to Africa, however. "We don't make a distinction between Africa and the rest of the world," says Zandbergen. "The idea is to really look at sustainable standards globally for all areas where we source from."
Two further sustainable agriculture programmes highlighted in the Heineken Sustainability Report relate to the cultivation of cider apples in the UK and barley in Greece.
Since 2008, Heineken's Greek subsidiary has been working with farmers to increase the proportion of barley sourced locally, successfully boosting this from zero to 23% of its needs in 2011. The long-term aim is to increase this to 100%.
In its home market, the company is also an active supporter of the Skylark Foundation, a sustainable agriculture initiative comprising farmers and their industrial partners, focusing on what the organisation has identified as ten core indicators of sustainable agriculture, namely soil fertility, soil preservation, biodiversity, water, energy, crop protection, local economy, human capital, product value and nutrients.
Another important step, Zandbergen highlights, is Heineken's decision in 2010 to join the Sustainable Agriculture Initiative Platform (SAI), an organisation comprising major multinational companies working towards shared aims on sustainable agriculture and setting common standards and benchmarks. The company was the first brewer to join SAI.
The principle that mitigating environmental impacts must go beyond what a brewer does within the brewery is reflected in the Molson Coors sustainability lexicon.
The company, which was named in the top 10% of the Dow Jones Sustainability World Index (DJSI) in 2012 and took over from PepsiCo as beverage sector leader, includes in its sustainability platform the concept of its 'Beer Print' which comprises the impacts its products have on communities, people and the environment along the value chain.
Speaking to just-drinks last year, Molson Coors chief corporate responsibility officer Bart Alexander candidly conceded that the company was not as far along the sustainable agriculture journey as some of its peers. This may in part be explained by the company's geographical profile. While Molson Coors has breweries in India and China, it does not have the exposure to developing countries - notably in Africa - of some of its peers.
However, the Molson Coors sustainable agriculture strategy appears to underline that there is plenty of positive collaborative work that can be undertaken with agricultural suppliers in developed economies with a view to creating more sustainable supply chains.
"Partnering with agricultural suppliers is very important to Molson Coors," says Debbie Read, corporate responsibility business partner at Molson Coors, citing the example of the Molson Coors Growers Group (MCGG). The MCGG was set up in 2008 in partnership with the grain merchant, Frontier Agriculture, and facilitated by English Farming and Food Partnerships (EFFP).
"The MCGG enables Molson Coors to implement best practice and innovation in the supply chain and secure a sustainable supply of high quality malting barley from local and important barley growing regions of the UK," says Read.
Last year, Read continues, Molson Coors explored opportunities to push the MCGG remit further, placing a greater focus on biodiversity and ecosystems, resource efficiency and education. The MCGG membership has grown to 137 members and is expected to supply 35,000 tonnes of barley to Molson Coors this year out of the company's total barley demand in the UK and Ireland of around 150,000 tonnes.
"The increase has come from seeking to recruit new farmers in different parts of the UK, to continue to minimise supply risks and maximise quality and best practice opportunities," says Read. However, there are no plans to expand significantly in 2013.
Another notable initiative in the UK has been Molson Coors' collaboration with LEAF (Linking Environment And Farming) in the development of the 'Simply Sustainable Water' initiative, which includes a free online resource available to all farmers.
Launched last month, the Simply Sustainable Water programme outlines six simple steps to help farmers manage water more sustainably, based on LEAF’s Integrated Farm Management (IFM) approach. The resource covers areas such as saving water, protecting water sources, soil management and drainage, and also provides checklists to enable farmers to assess their progress and identify areas for improvement.
This initiative follows an earlier collaboration between LEAF and Molson Coors in 2011 when an online Water Management Tool was developed for use by LEAF members and the Molson Coors Growers Group. Read describes this as "a complete health check for water use" for farmers, helping them to find ways "to save money and to manage water in a holistic way".
Looking beyond the UK, Read points to the "significant sustainable agricultural activities" undertaken by MillerCoors in the US, in which Molson Coors owns a 42% stake. Read says the company is also looking at how knowledge and experience gained in the UK and the US might be applied in Canada. "As our operations in Europe are being understood this is something we plan to explore."
With its large footprint in developing countries, it is no surprise to find that SABMiller was at the forefront of water footprinting research and has a developed sustainable agriculture programme extending across many African countries, India and South America.
As with other companies, the SABMiller sustainable agriculture programme is closely linked to its aspirations around local sourcing.
As SABMiller's senior VP of sustainable development, Andy Wales, makes clear, increasing local sourcing brings both environmental and economic benefits for all parties.
"Where it makes sense, we seek to source locally to maximise the economic benefit, as well as reduce import and distribution costs of raw materials," Wales says. "By sourcing locally we can make a contribution to the health and economic development of the markets in which we operate. In certain geographies, sourcing raw materials from smallholder farmers is therefore an increasingly important element of SABMiller’s sourcing approach."
Wales continues: "We also help farmers to improve agricultural productivity and expertise, and we would expect farmers to not only grow crops for us but also improve their own food security."
SABMiller pioneered its smallholder sourcing approach with the launch of Eagle Lager in Uganda as far back as 2002. Made using locally grown sorghum, Eagle now accounts for 30% of the Ugandan market and its production supports some 9,000 smallholder farmers.
The brand's success underlines the benefits of sourcing sorghum in terms of economic sustainability, for both the local communities and the brewer. As a less water-intensive crop, it has undeniable environmental benefits too and its increasing use, not only by SABMiller but also by its peers, represents the convergence of two sustainability goals, to reduce the water footprint in water-stressed regions and increase local sourcing.
In Mozambique in 2011, SABMiller launched Impala, a beer produced using 70% cassava. As detailed earlier in this briefing the environmental and economic benefits of harnessing cassava for beer production in Africa are significant and the launch of Impala attracted considerable attention worldwide.
The development of Impala also underlines how projects aimed at boosting local agricultural economies are welcomed and supported by national governments. In recognition of the long-term benefits the brand could bring, the Mozambique government agreed to reduce the excise rate for Impala. This, coupled with the reduced input costs resulting from using a locally grown abundant crop, allows Impala to hit a price point equivalent to 70% of a standard lager. A further social benefit is that this is low enough to attract consumers away from illicit alcohol.
SABMiller currently has local sourcing projects in train to grow sorghum or cassava in Uganda, Zambia, Zimbabwe, Botswana, Southern Sudan, Tanzania and Mozambique. In addition, it has developed initiatives in Tanzania, Uganda and Zambia to grow barley, while a number of smallholder projects underway in India and in South America.
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