Sustainability in Beer - Part I: Living and Breathing Sustainability
As we start our annual series of management briefings that focus on environmental sustainability, Ben Cooper looks at the importance of integrating the issue into all aspect of a company's operations and thinking.
The latest report from the UN Intergovernmental Panel on Climate Change (IPCC), published last week, shone the global media spotlight once again on environmental sustainability and the response to climate change.
This was the fifth assessment report from the IPCC, which was set up by the Unite Nations Environment Programme (UNEP) and the World Meteorological Organization (WMO) as far back as 1988 to "provide the world with a clear scientific view on the current state of knowledge in climate change and its potential environmental and socio-economic impacts".
While campaigners argue that governments and companies reacted too slowly and are still not doing enough, it is undeniable that the way environmental stewardship is viewed has been transformed during those intervening 26 years.
Of course, concern over natural resources and pollution already has a bearing on companies, but it was the alarm over climate change that precipitated the step-change in how companies approach environmental stewardship, and was a critical catalyst in the establishment of "sustainability" as a business priority.
How sustainability sits as a function within major corporations today is unrecognisable from even a decade ago, as large multinational corporations, such as the six brewers featured in this report, seek to play an active role in the global movement to address climate change. This briefing looks at how sustainability has become integrated into their operations and strategy.
The more integrated a sustainability strategy is into a company's business model and operations, the more effective it will be, whether in reducing greenhouse gas (GHG) emissions and other environmental and social impacts, or in providing direct efficiency and other business benefits to the company itself. By the same token, the more aligned a sustainability strategy is with a company's commercial interests, the more credible it will be.
Leading companies often attribute success in driving progress on sustainability to that integration, engaging staff throughout the business and ensuring that systems and processes at an operational level are informed in the fullest sense by the company's overall sustainability goals.
"Anyone who is leading sustainability in a big business will tell you that the real opportunity is when it becomes integrated into the strategies, the culture and the passion of those people running the core functions of the business, whether it's marketing, procurement, operations, technical or whatever," says Andy Wales, senior VP of sustainable development at SABMiller. "I think the most effective way to drive change in business is to put [sustainability] right at the core of the business strategy."
Meanwhile, Carol Clark, global VP of 'Beer & Better World' at Anheuser-Busch InBev, speaks of the importance of sustainability goals being "owned by the functions and individuals who can have the greatest impact on them".
Integrating sustainability into core operations and strategy also enhances the opportunities for synergies between different sustainability issues. "What's interesting on sustainability is you see some good connections and synergies between the different sustainability issues," Wales says.
There is clear synergy, for example, between water and energy/emissions efficiency. "Because so much of the brewing process is heating and cooling liquids, if you become more water-efficient, you become more energy-efficient," Wales says. "And, if you can use your waste, biological material in your waste water and your spent grains for renewable energy, then of course you drive even more carbon reductions."
Wales sees the brewery as a "microcosm" of the way sustainability issues inter-connect at a wider level. Along with a number of leading companies, SABMiller is at the forefront of discussion of the water-food-energy nexus. However, some question whether governments are as in-tune as they could be with the inter-connectedness of sustainability issues. "One of the things that increasingly concerns us around the world is that how public policy on those three issues isn't necessarily that well-connected," says Wales.
In fact, SABMiller launched a report with WWF at the Annual Meeting of the World Economic Forum in Davos, entitled 'The Water-Food-Energy Nexus – Insights into Resilient Development', which looks at ways in which governments can develop integrated sustainability policies.
There are also significant synergies to be realised with regard to waste. Brewing produces a high volume of organic waste, so the potential for waste-to-energy initiatives, which boost the proportion of energy derived from renewable sources and reduce greenhouse gas emissions, is significant.
Within its Efficient Brewery Programme, Carlsberg places emphasis on renewable energy, and waste-to-energy features prominently in its sustainability strategy. "Our research shows that, by turning waste and by-products into energy, we can, in theory, make our breweries almost independent of fossil fuel. That will reduce both our environmental impact and our energy bill," says Morten Nielsen, director of group CSR at Carlsberg. "These are the main reasons for investing more resources in this area."
Clark points out that waste-to-energy may not be the highest value re-use option for organic waste, but energy recovery from waste remains an option when higher-value possibilities are not available. "For materials that are generated from our processes,” he says, “we try to find the highest-value, most beneficial use for them, such as making bricks with organic materials in Brazil. We have some breweries that send remaining materials for energy recovery, but only after higher-value options are considered."
Arguably the most attractive synergy a company seeks is the direct correlation between a sustainability initiative and a cost efficiency and commercial or financial performance. "What's been very interesting in the last five years and I hope that we are, alongside Unilever and others, at the forefront of it, is the realisation of how big the win-wins can be between business and commercial success and achieving sustainability goals," says Wales.
A-B InBev, which last year unveiled a new set of global sustainability goals, reported US$80m and $10m in energy and water savings respectively for its previous review period which are, says Clark, "very significant numbers".
Debbie Read, corporate responsibility manager at Molson Coors, stresses the motivational importance of realising cost savings. She says that being able to quantify cost savings the company has achieved through sustainability initiatives, of $10m per year between 2008 to 2012, "starts to really move the business in the right direction and put some motivation behind some of the work that's underway". Molson Coors believes that projected resource efficiencies will lead to further savings of $16m per year through to 2020.
Cost reduction is not the only driver of staff engagement, Read adds. "You need to recognise that there are many people that make up a business, and those people will be motivated by different things: Some people will be motivated by cost far more, some people will be motivated by the planet element far more. I think what we've tried to do is certainly use cost as a driver but, under our sustainability agenda particularly, we've also used the risk lever."
Nielsen also stresses the correlation between driving cost efficiencies and staff engagement. Using resources efficiently, he says, "is clearly good for the planet and for business, as it also reduces costs and is something that our employees can take pride in".
Commercial opportunities arise from sustainability initiatives too. For example, as part of their moves to source more products locally in Africa, brewers such as SABMiller and Diageo are marketing beers made from local crops such as cassava and sorghum. These are competitively-priced offerings that attract consumers from the illicit alcohol market. So, in addition to helping the companies reach local-sourcing targets, they are also growth drivers.
While the term 'win-win' has been popular in the sustainability arena for many years and, evidently, is still commonly used to describe compelling initiatives, it could be said that under today's 'people, profit, planet' rationalisation of corporate sustainability, where companies seek to pursue strategies that are environmentally-, socially- and economically-sustainable for the business, all sustainability initiatives should be win-wins.
Nevertheless, clearly some areas of sustainability will matter more than others to a particular company and establishing their relative materiality is a key aspect of sustainability strategy. How the world's leading brewers make those judgements, and, in particular, how they engage stakeholders in the process, is examined in the next section of this report.
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