Sustainability in Beer - Part I: Looking Beyond the Brewery
Environmental sustainability remains one of the most active areas for the global drinks industry. This year, just-drinks returns to the subject with four separate management briefings, one per sector. Here's the first part of the briefing on the beer sector, in which Ben Cooper steps outside the brewery.
Like their peers in other food and beverage sectors, the world's major brewers began their sustainability journeys by addressing the environmental impacts of their operations.
Significant progress has been made in areas such as water and energy efficiency, carbon emissions and waste at their own production sites. However, as their sustainability strategies have matured, brewers have had to take increasing account of the large proportion of the environmental footprint lying in the wider value chain, notably in agriculture.
Achievements within the brewery are only part of the story. A viable sustainability strategy also has to look to mitigate impacts throughout the value chain and the first step is to identify where the environmental 'hotspots' are.
Measuring beer's environmental footprint
A significant amount of footprinting research has been undertaken by major brewers during recent years to ascertain where the greatest environmental impacts lie. These have shown that by far the largest component of beer's overall water footprint lies in its agricultural supply chain.
SABMiller, for example, has conducted water footprint studies across a number of developed and developing countries. While the net water footprint, that is the amount of water used to produce one litre of beer, varies significantly from country to country the proportion represented by the agricultural supply chain remains fairly consistent at around 90%.
"We have now very clearly established that, wherever you are, the vast majority of the water footprint is in agriculture, so we are now able to focus our attention on that element of our value chains," says SABMiller senior vice president sustainable development Andy Wales.
There is also significant embedded carbon in the agricultural supply chain, but it is a lower proportion than that for water. According to research published last June by the Beverage Industry Environmental Roundtable (BIER), a technical coalition which includes all the major global brewers, the agricultural supply chain on average accounts for around 39% of the embedded carbon in a 33cl can of beer in Europe and 33% of the carbon emissions for a 35.5cl can of beer in North America.
However, the estimates of agriculture's contribution to beer's carbon footprint vary considerably. Carlsberg calculates that agriculture represents no more than 11%, while Heineken puts the proportion at below 15%.
While this is not insignificant, there are clearly other important areas of the value chain that can be addressed to achieve significant GHG emissions reductions, notably packaging, distribution, refrigeration and disposal. These are not only larger contributors but they are also areas that the brewers feel they can more readily influence.
Focus on agriculture
With regard to water stewardship, agriculture is by far the dominant component and its importance cannot be overstated. BIER includes supply chain engagement as one of the five principles defining World Class Water Stewardship in the Beverage Industry.
In fact, given that the total water footprint in a beer supply chain can be as high as 155 litres per litre of product, as is the case for SABMiller in South Africa, and the ratio in the brewing process is about 4 litres per litre of beer, one could posit that driving down water efficiency in the brewery is an irrelevance.
However, Michael Alexander, head of environment communications and policy at Diageo, there is a question of credibility here. "To focus on our own operations to begin with, get our own house in order, gives us the licence to go out and start influencing our supply chains," he says. "And that's what we're now doing and I think we would be less credible as an organisation to go out to our supply chains without having set ourselves our own targets."
However, broadening the focus to supply chains presents some stern challenges. Large companies thrive by identifying best practice and extending it over massive organisations. They can be systematic and apply water reduction techniques or technology across their entire operation where appropriate.
Working with agricultural supply chains by definition demands a more tailored approach as the characteristics of each supply chain and the challenges they represent are so different. There may be general principles of supply chain management that might be applied broadly but in the main companies are developing unique, bespoke initiatives to meet environmental or social needs related to specific supply chains and partnering with different government and non-government organisations across different countries. "What we need to do is actually understand the specific risks country by country and then engage and build partnerships to protect water supply and that’s what we’re doing," Andy Wales adds.
The importance of partnership and collaboration, identified as key by all the brewers, is explored further in the second section of this briefing.
Given the increasing attention being paid to how large multinational companies interact with their agricultural supply chains and the lead role they are being expected to play in meeting the global challenges of food security and climate change, it is little wonder that most of the major brewers expect their sustainable agriculture programmes to expand considerably over the coming years.
As worthy and creditable as much of the sustainable agriculture work undertaken by food and drinks companies may be, such activity is as much about risk management as it is about the pursuit of a more ethical business model. The dual challenges of food security and climate change, now often discussed as the food-energy-water nexus, do not just provide ethical questions. They represent genuine risks to crucial raw material supply chains.
Sustainable agriculture initiatives may therefore be presented as part of a brewer's corporate responsibility platform but this work is 'sustainability' writ large. These companies require these supply chains to supply and keep supplying; their economic sustainability is entirely dependent upon it.
In fact, if one wanted an area of operation which most cogently speaks to the 'people, profit, planet' triple bottom line, it might well be the protection of agricultural supply chains. And such interventions are perhaps more credible when they can clearly be seen as a company acting in its own interest, albeit whilst mutually benefiting co-dependent stakeholders, in this instance their agricultural suppliers.
Not only is addressing agricultural supply chains a complex task. Tracking and reporting quantifiable progress on environmental metrics is not possible in the same way a company might track water intensity or waste output in a brewery.
Companies can put in place programmes aimed at achieving certain desirable economic, environmental or social outcomes but they will not be able to set targets on water use and demonstrate progress against those targets on a year-by-year basis. In itself, the task of completing one water footprinting study for one supply chain is huge. With so many variables, monitoring progress would be hugely complex. Indeed, several of the major brewers say candidly that having gained a sufficient general idea of the composition of their water footprint for a number of supply chains they are conducting further footprinting studies at this stage.
Setting targets for water use reduction in agricultural supply chains "may come later", says Alessandro Sperotto, director global procurement, raw materials at Anheuser-Busch InBev, but for now A-B InBev is "focused on continuing our work with growers on sustainable practices and to better understand the risks, opportunities, best practices and potential metrics".
Vera Zandbergen, global sustainable development manager at Heineken, adds: "In the end we should not drown in numbers, we should really deliver results. So that's where we prefer to put our focus instead of having really detailed targets of every individual farmer, because that's not going to be workable; it's more about how do we have the right practices in place to make them sustainable."
However, the lack of ongoing measurement means that, with regard to water certainly, brewers can report frequently and in great detail on an area of the value chain where there is a comparatively low water impact - namely in the brewery - but in much less detail on an area of the value chain where the largest impacts are to be found.
Michael Alexander points out that Diageo's supply chain initiatives will not be aimed specifically at reducing water use.
"Strategically we don't look at it [water] in isolation. We're not directly going out to an agricultural supply chain and say we want to reduce the water in that agricultural supply chain," Alexander says. Diageo takes an "holistic approach" to supply chain programmes, seeking benefits to agricultural communities, business advantage for the company and environmental benefits including using less water. "It's an integrated strategy rather than a one-objective strategy to reduce water in the supply chain."
As supply chain interventions are often multi-faceted, with environmental, economic and social aims, there are other ways positive impacts might be observed. A notable example would be progress on local sourcing.
The close links between the local sourcing agenda and sustainability, and how progress on local sourcing brings environmental benefits, are discussed in the next section of this briefing.
For the second part of this briefing, click here.
For the contents page, click here.
Wuliangye Yibin has warned China's spirits market is going though an adjustment after it posted a slowdown in profits growth in first-half results, according to local reports. ...
- Can craft breweries compete in lager arena?
- Remy Cointreau's Q1 performance by brand, region
- SABMiller's Q1 2017 results - Preview
- A Wild Geese, Pernod Ricard conspiracy theory?
- A snapshot of the UK spirits market - Focus
- New Hendrick's Gin would have to be "unusual"
- AB InBev faces US$7bn price rise for SABMiller
- Brown-Forman takes distribution in Spain in-house
- Diageo starts formal talks over UK pension cuts
- AB InBev halts VAIP incentive plan
- Adultifying Soft Drinks; Capitalizing on rising adult demand for non-alcoholic beverages
- Global RTD insights - market forecasts, product innovation and consumer trends
- Global travel retail insights - market forecasts, product innovation and consumer trends
- Global non-Scotch whiskies insights - market forecasts, product innovation and consumer trends
- Global Scotch whisky insights - market forecasts, product innovation and consumer trends