Management Briefing

Sustainability in Soft Drinks - Part I: Engaging with External Stakeholders

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The first part of our management briefing on environmental sustainability in soft drinks sees Ben Cooper look at the need to keep your friends close but your so-called 'enemies' closer.

A report published by Oxfam in May, entitled 'Standing on the Sidelines', attracted considerable media attention for two principal reasons.

First and foremost, in urging ten major food and beverage manufacturers, including the Coca-Cola Co and PepsiCo, to do more to reduce greenhouse gas emissions in their agricultural supply chains, it spoke to one of the most pressing sustainability issues facing the food and beverage sector. Secondly, the organisation meting out the criticism - while also giving companies some credit where it considered it to be due - was a highly respected NGO with a global profile. Oxfam is the type of organisation whose opinions are attended to and generally taken extremely seriously.

An intervention such as Oxfam's in May can be a public relations headache for major international companies. They have to respond to the criticisms and, as they look to counter a campaign group's views by setting out their environmental achievements, there is a risk that sustainability becomes an adversarial battleground.

Companies would much rather their sustainability strategies be characterised by a spirit of consensus, collaboration and partnership. Therefore, ironically, there are many instances when the views of such independent organisations are actively sought by major companies to help them define their sustainability priorities, ensure they have identified all the challenges and are meeting those challenges appropriately.

Stakeholder consultation

The world's largest soft drinks manufacturers are no exception to this. For example, when Coca-Cola Enterprises (CCE) carried out a review of its corporate responsibility and sustainability strategy in 2011, the company purposely solicited the views of both internal and external stakeholders in determining the seven focus areas which eventually comprised the company's Sustainability Plan.

CCE's Sustainability Plan "was built by listening to our stakeholders", says director of corporate responsibility & sustainability Joe Franses. "We had a formal process back in 2011 and that was really the process that identified the seven material focus areas that make up the basis of the plan. We set stretched goals which addressed all of the concerns that they talked to us about."

Coca-Cola Enterprises is in the midst of reviewing its Sustainability Plan, and once again stakeholder engagement will play a critical role. "We will shortly be holding a number of stakeholder roundtables in different geographies to continue that process, to again check in with our stakeholders, to check their expectations, to see where sustainability in their eyes has moved on," Franses continues. "This whole thing evolves incredibly quickly. We know sustainability leadership is different today than it was three years ago, so that process is absolutely key."

PepsiCo also prides itself on listening to external stakeholders. In its most recent sustainability report, PepsiCo states: "We are committed to continued engagement with our stakeholders, whose insights have helped shape our thinking and actions."

Robert ter Kuile, senior director, public policy at PepsiCo, characterises such consultation as "very valuable conversations". He says PepsiCo consults with external organisations on sustainability "to ensure that we are taking in the latest thinking. So, as new issues emerge, and as other groups have new ideas, we seek them out actively and incorporate those into our planning processes."

Engaging stakeholders in determining materiality

According to research undertaken by the Boston-based sustainability think-tank, Ceres, in collaboration with sustainable and responsible investment analysts Sustainalytics, this form of developed stakeholder consultation is becoming more common among food and beverage companies. 

In the report, 'Gaining Ground: Corporate Progress on the Ceres Roadmap for Sustainability', Ceres evaluates how well some 613 of the largest, publicly-traded US companies, including 24 food and beverage groups, are integrating sustainability into their business systems and decision-making.

The report rates the companies according to criteria within four key areas:

  • governance for sustainability
  • stakeholder engagement
  • disclosure, and
  • performance

The rating system comprises four tiers:

  • Tier 1 - Setting the pace
  • Tier 2 - Making progress
  • Tier 3 - Getting on track, and
  • Tier 4 - Starting out

Within Stakeholder Engagement, there are three separate indicators, one of which, Focused Engagement Activity, looks at the degree to which companies not only engage with stakeholders but have the necessary procedures and systems in place to allow that input to feed into the materiality assessment processes which define their sustainability priorities.

"One thing we're finding is more companies are engaging external stakeholders on how they can figure out what are the priorities or the material sustainability issues for their business," says Andrea Moffat, VP of the corporate programme and author of the Gaining Ground report.

Ceres found that 75% of companies in the food and beverage sector showed some evidence of engaging stakeholders, compared with 58% in 2012. The number of food and beverage companies in Tier 1 for Focused Stakeholder Engagement increased from zero in 2012 to six in 2014, with 46% in either Tier 1 or 2.

Among the 24 food and beverage companies analysed in the Ceres report are four major soft drinks producers: the Coca-Cola Co, PepsiCo, Coca-Cola Enterprises and Dr Pepper Snapple Group  (DPSG).

Coca-Cola, Coca-Cola Enterprises and PepsiCo are in Tier 2 for Focused Engagement Activity. Coca-Cola and PepsiCo are both in Tier 1 for Stakeholder Engagement overall, whereas Coca-Cola Enterprises is in Tier 2. DPSG remains in Tier 3 for all stakeholder engagement criteria.

A spokesperson for sustainability at Coca-Cola adds: "We proactively engage internal and external stakeholders across the business to strengthen our programmes, address headwinds we face, discuss opportunities and issues and learn. We find great value in the opinions and insights we receive from our stakeholders and rely on them to help shape our programmes and practices." 

While clearly formal stakeholder consultation processes take place at critical junctures, Franses stresses that the stakeholder engagement process is continuous. "It's not a distinct, time-bound process," Franses says. "We have ongoing dialogue with a whole range of stakeholders."

Coca-Cola, meanwhile, says it also gathers feedback through "regular interactions with governments, partners, customers, consumers, bottling partners, suppliers, non-profit organisations, and many others who have an interest in our business". The company says it also engages with several different stakeholders and groups when it establishes new projects and programmes. In particular, when Coca-Cola set its most recent sustainability goals in 2013, it "sought feedback from several third-party organisations, partners and respected voices in the areas of environment, health, and community development".

Sustained and meaningful engagement with external stakeholders is possible not least because of the greater prevalence of partnership and collaboration between food and drinks companies and key independent organisations on sustainability issues. For example, Coca-Cola highlights the renewal of its link-up with its "long-time conservation partner", the World Wildlife Fund (WWF), as one of its key sustainability achievements over the past year. With that renewal, the company announced new sustainability goals for the Coca-Cola system to be achieved in partnership with WWF, namely

  • to improve water efficiency by 25% from a 2010 baseline, building on the 21% improvement from 2004 to 2012
  • reduce the carbon footprint of "the drink in your hand" by 25%
  • sustainably source key agricultural ingredients
  • sustainably source PET, and 
  • protect and conserve 11 freshwater basins across five continents.

However, in the sustainability arena, where some highly-contentious debates are played out, there will be times when external stakeholders may take a substantially different view on what a company's priorities should be. How those differences of opinion are reconciled, and the value of diverging views, are discussed in the following section of this briefing.

For full details on this management briefing, click here.


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