In the second part of this month's just-drinks management briefing, looking at environmental sustainability in the spirits industry, Ben Cooper highlights the need to work closely with suppliers.

As the environmental sustainability missions of spirits companies have developed from simply mitigating environmental impacts within their own operations to addressing the environmental footprint of the entire value chain, partnership with all stakeholders has become ever more critical and none more so than engagement with suppliers. 

"A lot of companies are moving this way," says Joe Maguire, sustainability manager, global procurement at Diageo. "The focus on supply chains is becoming increasingly important and within Diageo we recognise that."

One of the key supply chain sustainability initiatives at Diageo, Maguire explains, has been the company's entry into the Carbon Disclosure Project (CDP) Supply Chain programme. Diageo has reported its carbon emissions to the CDP since 2006 and through the CDP Supply Chain programme is now asking its suppliers to do the same.

Maguire says that, while it was appropriate at first to "focus on our four walls and get that in order first", there is now a move to look at impacts in the supply chain in more detail. "Around two-thirds of the emissions sit within the supply chain, so last year we decided to extend our relationship with the CDP to join the CDP supply chain."

As part of that process, Diageo contacted some 125 of its suppliers, focusing on where its research had indicated the greatest environmental impacts lie, in particular packaging, logistics and raw materials. Maguire says the fact that Diageo had itself been disclosing to the CDP since 2006 made it easier to go to suppliers to ask them to do the same. In fact, he adds, Diageo could also point out that it had disclosed to the CDP Supply Chain programme, having been asked to do so by one of its customers. "It helps that conversation go a lot easier if we can say "we're not asking you to do anything we won't do ourselves"."

The CDP is not only the world's largest database of corporate climate change data, but is itself a collaborative platform which Maguire says is a further advantage, providing synergies for suppliers and reducing duplication of work.

The company achieved a response rate in the first year of 66%, which CDP says is "very good", comparing favourably with an average year one response rate of 39%. Diageo contacted some 146 suppliers in the second year of participation, and is confident that it will achieve an improved response rate in year two. 

Interestingly, the company received the best response, both in terms of proportion of suppliers responding and in the quality and robustness of data provided from its packaging suppliers. "In many ways, that wasn't surprising to us," Maguire tells just-drinks. "Energy is a large input into packaging suppliers' cost base, so you'd expect them to be managing it. But, it gave us a degree of insight and a level of comfort that our packaging suppliers, who are heavy users of energy, are very switched on to this."

One critical aspect of the collaborative process stressed by Maguire is the opportunity to share learning. Diageo's moves to strengthen dialogue with suppliers, or similar moves taken by other spirits companies, should not be seen as imposing standards on suppliers, though there may, of course, be instances where a client company buying products and services can prompt a supplier to raise environmental standards. Equally, he says, it can be an opportunity to learn from suppliers.

"It is a learning experience for everyone involved," Maguire says. "There is opportunity for us to learn from our suppliers and collaborate. I have had quite a few discussions with suppliers this year and I actually find the more you engage with your suppliers and the more you have a positive dialogue with them the better response rate you get, but from that as well you can really understand some of the best practice work that is going in the supply chain."

This point is also stressed by Dave Howson, Bacardi's global sustainability director. "The suppliers we are working with, the packaging suppliers especially, have been doing this as long as or even longer than we have, and are very good at it. They have a lot of expertise in their field and are very innovative."

Like Diageo, Bacardi is increasingly looking to work closely with suppliers to mitigate environmental impacts along the value chain. In its most recent Corporate Responsibility Report, it states: "With these global environmental challenges in mind, we need to ensure that Bacardi Limited is part of the solution, not only in our direct operations but also across all stages of our value chain. Considered more broadly, we recognise that all stakeholders need to work together to tackle these challenges."

As part of that process, Bacardi has joined AIM-PROGRESS, a forum where consumer goods manufacturers work together to foster and promote responsible sourcing practices and sustainable production systems. AIM-PROGRESS was set up by AIM, the European Brands Association, and the Grocery Manufacturers Association, the US-based trade association representing food and grocery producers.

In particular, Howson highlights how the membership of the AIM-PROGRESS taskforce focusing on responsible and sustainable sourcing is evolving to include more supplier partners. "Now we are getting more and more suppliers joining that forum because they want to share their experiences with regard to their own responsible and sustainable supply chains. It is becoming more and more obvious that suppliers are seeing the benefit of joining that as well as the brand manufacturers."

And Howson expects more suppliers to engage in the forum going forward. "I can definitely see that increasing so that suppliers are talking to one another and their customers in a very open forum where the supply chain becomes more and more transparent. It's not a 'them and us' situation; it's everyone all in it together."

Moreover, he believes the closer collaboration with suppliers on sustainability speaks to a "cultural shift" towards a less adversarial supplier-customer relationship.

"There are no winners and losers in this," Howson continues. "We are either all winners or we are all going to be losers. And that is really something that is coming to the fore, and everyone should be behind that because yes we all want to make money, we all want to grow, but there are subjects that we do need to tackle and we can only tackle them effectively if we tackle them together in an open environment."

In 2011, Pernod Ricard introduced a Responsible Procurement Policy for products and services supported by a commitment charter for suppliers. The company followed this up in the first half of 2012 with the pilot testing of a CSR Assessment Tool for suppliers and subcontractors, developed by EcoVadis, a collaborative platform which aims to help companies monitor the sustainability performance of their suppliers. 

In its Registration Document 2012-2013, an extensive annual report providing quantitative data on sustainability and information on specific initiatives undertaken, released last month, Pernod Ricard sets out how supplier engagement on sustainability has been stepped up.

"Pernod Ricard has made a formal commitment to include environmental factors in supply chain management in its Responsible Procurement Policy and its Procurement Code of Ethics. This commitment applies throughout the group, and is supported by senior management. The managing director of each subsidiary is responsible for implementing this policy."

The company details specific measures it has put in place to enable the inclusion of environmental factors in supply chain management, namely:

  • the integration of environmental issues into contractual clauses;
  • supplier questionnaires;
  • supplier support, for example through training and technical assistance;
  • training and awareness-raising for employees in charge of procurement. The company's principal suppliers have completed a questionnaire regarding environmental issues and buyers must acknowledge and respect ethical guidelines which include environmental issues.
  • In the supplier selection process, Pernod Ricard has integrated environmental issues into its calls for tender. 

Examples of how spirits companies are collaborating with agricultural and packaging suppliers are included in the next two sections of this management briefing.

Part three of this briefing can be found here. For full details, click here.