View all newsletters
Receive our newsletter – data, insights and analysis delivered to you
  1. Analysis
August 26, 2021updated 22 Feb 2022 7:54am

Which beverage brand owners are ESG leaders or laggards? – focus

Environmental, social & governance (ESG) is the most important issue facing consumer goods companies over the next decade - and businesses that act now will reap the rewards in the future, says a new study.

By Richard Woodard

According to GlobalData’s ‘ESG (Environmental, Social & Governance) in Consumer Goods’ report, published last month, brand owners need to take a holistic approach to tackling the ESG issues facing them – because good work in one area can all too easily be overshadowed by poor performance in another.

Free Whitepaper
img

What is the impact of China’s Zero-COVID lockdowns on economic activity, consumer goods and the foodservice industry?

While wanting to protect the country from being overwhelmed by Omicron, China’s adherence to a Zero-COVID policy is resulting in a significant economic downturn. COVID outbreaks in Shanghai, Beijing and many other Chinese cities will impact 2022’s economic growth as consumers and businesses experience rolling lockdowns, leading to a slowdown in domestic and international supply chains. China’s Zero-COVID policy is having a demonstrable impact on consumer-facing industries. Access GlobalData’s new whitepaper, China in 2022: the impact of China’s Zero-COVID lockdowns on economic activity, consumer goods and the foodservice industry, to examine the current situation in Shanghai and other cities in China, to better understand the worst-affected industry sectors, foodservice in particular, and to explore potential growth opportunities as China recovers. The white paper covers:
  • Which multinational companies have been affected?
  • What is the effect of lockdowns on foodservice?
  • What is the effect of lockdowns on Chinese ports?
  • Spotlight on Shanghai: what is the situation there?
  • How have Chinese consumers reacted?
  • How might the Chinese government react?
  • What are the potential growth opportunities?
by GlobalData
Enter your details here to receive your free Whitepaper.

The fast-growing importance of ESG in business is based not only on the increasingly obvious climate emergency facing the planet, but also on increasing pressure from consumers: GlobalData’s Q1 2021 global consumer survey found that three-quarters of consumers now demand more ethical or environmentally-friendly products.

“Some CEOs have been reluctant to embrace sustainability principles because of the age-old view that it will hurt profits,” the report says. “However, stakeholders are becoming more conscious of ESG, and companies taking significant action now will be rewarded in the long term … Immediate ESG action will future-proof businesses and create tomorrow’s winners.”

GlobalData identifies a new market mechanism that is driving progress in ESG across consumer goods companies. “We call this the ESG action feedback loop,” the report explains. “Companies take action on climate, win stakeholder support (eg from customers, partners, employees and investors) that drives reputational and competitive advantage, incentivising further action and drawing more participation.”

It is vital that companies excel across all three aspects of ESG, the report says, since “being a laggard in one ESG area will taint brand image and influence consumer decisions, despite progress in other areas”.

GlobalData cites the example of BrewDog, which established its environmental leadership credentials by becoming the world’s first carbon-negative beer business in August 2020 – only to see this undermined by its reputation as a “social laggard”, with ex-employees accusing the business of having a “toxic” office culture in June 2021.

“Being a laggard in one area of ESG discredits the whole company’s image,” the report points out. “Consumers will judge FMCG businesses holistically when making purchasing decisions.”

To help businesses to take a comprehensive approach across all three aspects of sustainability, GlobalData has designed an ESG framework, which can be used to assess sustainability policies, performance and progress. The framework identifies a number of key areas across ESG, as follows:

  • Environmental – climate change, pollution, biodiversity, natural resources
  • Social – human rights, diversity & inclusion, health & safety, community impact
  • Governance – corporate structure, risk management, corruption & bribery, ethics

Businesses face a number of social and environmental issues within FMCG supply chains. Pleading ignorance of what happens at every stage of product sourcing and development is not acceptable to socially- and environmentally-conscious consumers, says the report.

“Lack of traceability is no longer an excuse, and FMCG companies will be judged based on supply chain ethics,” GlobalData says. “Real industry change must involve collaboration between players throughout the supply chain. Strategic player partnerships and technologies like blockchain and AI help with supply chain management and transparency … Supply chain management is the most important strategic initiative an FMCG company can take to avoid environmental or social scandal.”

The report also analyses the ESG reputations and performances of a number of leading FMCG businesses, identifying “leaders” and “laggards” in each ESG area – including the following beverage brand owners:

  • Environmental leaders – Diageo, Molson Coors, BrewDog
  • Social leaders – PepsiCo, Nestlé
  • Social laggards – BrewDog
  • Governance leaders – Anheuser-Busch InBev
  • Governance laggards – Diageo, Coca-Cola, Heineken, Danone

Particular praise is given to PepsiCo’s “prompt and comprehensive” response to the Black Lives Matter movement, including a US$400m, five-year investment in diversity and inclusion, focusing on initiatives such as expanding recruitment from historically black colleges and universities, funding scholarships and increasing the company’s black managerial population by 30%.

In governance, GlobalData examines A-B InBev’s use of AI to expose and eliminate corruption and fraud within the company. “Its analytics platform, called BrewRight, uses machine learning anomaly detection to track and identify compliance risks and money laundering within the organisation and related business partners,” the report says.

“The technology accesses data across the company’s enterprise resource planning (ERP) systems and identifies the patterns in regular transactions to spot anomalies and the risk of fraudulent activities.”

The report also highlights A-B InBev’s “local for local” business model, which reduces the emissions associated with lengthy global supply chains by producing most beer for local consumption, as well as its SmartBarley platform, launched in 2013, which uses data and analytics to help farmers and suppliers improve their productivity and environmental practices.

Diageo’s work as an environmental and social leader is praised – particularly the 25 goals identified in the company’s ‘Society 2030: Spirit of Progress’ report, a ten-year sustainability action plan, and its pledge to reach 1bn people with messages of alcohol moderation via its brands.

However, Diageo is also criticised over its history as a “governance laggard”. “In February 2020, it was fined US$5m after ‘materially misleading’ investors by concealing sales to distributors of unwanted stock,” the report says. “In 2017, Diageo was ordered to pay GBP106m (US$146m) by the UK tax authority as part of an investigation into the movement of profits between its global businesses.”

Click here for details on GlobalData’s Thematic Research paper entitled ‘Thematic Research: ESG in Consumer Goods’

Related Companies

Free Whitepaper
img

What is the impact of China’s Zero-COVID lockdowns on economic activity, consumer goods and the foodservice industry?

While wanting to protect the country from being overwhelmed by Omicron, China’s adherence to a Zero-COVID policy is resulting in a significant economic downturn. COVID outbreaks in Shanghai, Beijing and many other Chinese cities will impact 2022’s economic growth as consumers and businesses experience rolling lockdowns, leading to a slowdown in domestic and international supply chains. China’s Zero-COVID policy is having a demonstrable impact on consumer-facing industries. Access GlobalData’s new whitepaper, China in 2022: the impact of China’s Zero-COVID lockdowns on economic activity, consumer goods and the foodservice industry, to examine the current situation in Shanghai and other cities in China, to better understand the worst-affected industry sectors, foodservice in particular, and to explore potential growth opportunities as China recovers. The white paper covers:
  • Which multinational companies have been affected?
  • What is the effect of lockdowns on foodservice?
  • What is the effect of lockdowns on Chinese ports?
  • Spotlight on Shanghai: what is the situation there?
  • How have Chinese consumers reacted?
  • How might the Chinese government react?
  • What are the potential growth opportunities?
by GlobalData
Enter your details here to receive your free Whitepaper.

NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. The top stories of the day delivered to you every weekday. A weekly roundup of the latest news and analysis, sent every Monday. The industry's most comprehensive news and information delivered every quarter.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED

THANK YOU

Thank you for subscribing to Just Drinks