Management Briefing

Sustainability in Spirits - Part II - Greater focus on agriculture supply chains

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Agricultural supply chains are an increasing area of focus for spirits companies, owing to the high proportion of the environmental footprint they represent and an increasing need to address pressing social issues, notably relating to living and working conditions among agricultural communities in the developing world.

Promoting sustainable agriculture and helping to improve the productivity and livelihoods of their agricultural suppliers has become increasingly important to major spirits producers in recent years, which is reflected in their sustainability strategies and targets. Diageo's new sustainability targets for 2020, for example, reflect "an increased focus on managing our social and environmental impacts in our supply chain", says the company's global sustainable development director, David Croft.

Working with agricultural suppliers

The emphasis on partnership with suppliers mirrors the trend seen across the food and drink sector and across many different agricultural commodities, particularly those that are heavily reliant on smallholders, such as sugar cane. Croft continues: "Our commitment to partnerships with farmers remains a core part of our business and we are proud of the progress that we have made so far."

Diageo plans to expand its 'Partners for Growth' programme for sugar farmers four-fold over the next five years. The scheme creates opportunities for farmers to grow through financing at zero interest and without a need for guarantors. The company has also partnered with its primary cream supplier for Baileys in Ireland on a sustainable agriculture programme aimed at addressing quality assurance, animal health and welfare, carbon, biodiversity, water, and health and safety

Sustainable agriculture is also "a fundamental aspect" of Bacardi's 'Responsible Sourcing' strategy, says Rodolfo Nervi, global quality, health, environment & safety director - operations, with engagement with external partners seen as critical in achieving its aims. "In order to ensure an effective positive impact, Bacardi has actively engaged with several partners to support the creation, application and control of sustainable standards," Nervi says, citing participation in collective initiatives, such as Bonsucro, Sedex, AIM Progress.

Last year, the company also signed up to the Sustainable Agriculture Initiative (SAI) Platform. As Bacardi's objective is to "go beyond just being part of these associations, but to play an active role", Nervi says it is in the process of reviewing its engagement to identify activities that can be directly supported by the company's own people.

Rob Frederick, VP, director of corporate responsibility at Brown-Forman, says the company is "engaging in more agricultural work than in previous years". Last year was notable in this regard, with Brown-Forman joining the 'Field To Market Alliance For Sustainable Agriculture', a multi-stakeholder organisation that aims "to create opportunities across the agricultural supply chain for continuous improvements in productivity, environmental quality, and human well-being". Frederick says participating in collective initiatives is critical to the company's approach to sustainable agriculture. "The agricultural commodity that has the largest impact for Brown-Forman is corn, of which we are a very small purchaser when looking at the whole US corn crop. Engaging in a platform like Field to Market allows us to combine our efforts with others - industry, academics, and non-profits - so that collectively we can have a larger impact on the sustainability of the commodity."

Pernod Ricard has engaged in "very close partnerships with a number of suppliers and farmers" across numerous commodity supply chains, group director of sustainable performance Jean-François Roucou tells just-drinks, including wheat, aniseed, sugar beet and sugar cane and fennel, as well as agave in Mexico. "We intend to continue in this area, and will carry a systematic mapping of all the supply chains related to the various products we source across the globe, in order to identify sustainability challenges, engage with partners and have a positive action towards positive transformation," Roucou says. The company's work agricultural supply chains forms part of its 'Blue Source' sustainable sourcing programme, which is aimed at promoting sustainable procurement for all the company's raw materials.

While pointing to the work Pernod is undertaking in its sugar cane supply chains, particularly for the Havana Club and Malibu brands, Roucou stresses the particular challenges inherent in these supply chains. "Cane is sometimes grown in countries with low health and safety and environmental standards, and for instance there are very serious health consequences of low labour practices in some central America countries."

Sugarcane supply chain particular cause for concern

Indeed, the sugar cane supply chain has become a particular area of concern for spirits companies in recent years and pressure on end-users to engage more actively in issues such as smallholder poverty, working conditions and child labour in the sugarcane supply chain is likely to increase further in the coming few years.

The issue of poor working conditions was highlighted last month with the publication of a report from Fairfood International, CNV Internationaal and the Central American Institute for Social Studies looking at the high prevalence of chronic kidney disease of non-traditional causes (CKDnT) among workers in sugar cane production in Central America. Moreover, the report singled out rum producers for particular criticism, citing Bacardi and Diageo specifically, suggesting that while they "can make a major difference by ensuring safe and healthy working conditions through their sourcing policies and practices", the companies had been "unwilling to accept responsibility for the rise of CKDnT among workers in their supply chains".

David Croft says Diageo had responded to the authors' inquiries, "providing clear information on our global health and safety standards" and had "requested further dialogue relating to any specific areas of concern, which they [the authors] were not able to provide". Croft adds that Diageo is "very committed to safe working conditions in our supply chain, including working with NGOs and other stakeholders to promote improved supply chain transparency".

Bacardi, meanwhile, issued a comprehensive rebuttal. The company said it took exception to "the inaccuracies in the allegations", adding that it takes the "unsubstantiated allegations" made about its supply chain and human rights initiatives seriously as it "operates in full compliance with all trade regulations and laws in each of the countries it does business in".

Certification drives change and lends credibility

In particular, Bacardi said it was "disappointed" that the report had singled out for criticism a participant in the Bonsucro multi-stakeholder certification body for sustainable sugar cane. Bacardi is in fact a founder member of Bonsucro and last year supported the revision of Bonsucro's standard to include clauses specifically to address CKDnT.

A Bacardi spokesperson adds: "Bacardi supported the creation of Bonsucro with financial resources and the participation of senior management. We remain committed to the success of Bonsucro as the gold standard for sustainable production in the sugarcane sector. Following best practice, Bacardi has also insisted that our suppliers commit to improvements in sustainability practices, on occasion switching supply from organisations that do not show any willingness to take sustainability issues seriously."

Bacardi's detailed response to the report suggests confidence that its rhetoric on improving sustainability standards in its sugar supply chain is reflected in its actions. Membership of Bonsucro, recognised by industry and non-industry stakeholders alike to be a critical force for change in the global sugar cane sector, undoubtedly adds credibility to its case.

Asked whether more spirits producers should follow Bacardi's lead and sign up to Bonsucro, the organisation's CEO, Simon Usher, says: "Bonsucro was created by leading players across the cane supply chain working with civil society, recognising that we could achieve more collectively in a pre-competitive space than we can individually. The standard is comprehensive and credible. The more of our peers work through the same platform the more collective impact we will have."

Diageo's Bundaberg Distilling Co (BDC) currently sources all of its molasses from the Millaquin Mill, a Bonsucro member which achieved Bonsucro accreditation in January 2015. David Croft says the company is "considering the wider use of the [Bonsucro] standard or its equivalent within our sustainable agriculture strategy and supply network" but adds that "as others are finding certification may not always be necessary to deliver effective standards".

Simon Usher himself concedes that "transformational change" in the sugar supply chain will not be achieved by certification alone. Last month's report vividly illustrates the negative publicity that "naming and shaming" can generate, even if a company feels it has evidence subsequently to refute the allegations made. What certification undoubtedly does provide is the capability for companies to "know and show" that their supply chains are sustainable or that they are working proactively towards that goal.

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