Sustainability scores for the largest food and beverage companies
Company/Tomorrow's Value Score
Source: Two Tomorrows, October 2010
Caring for the environment is no longer just the right thing to do; it's essential that food and beverage companies commit to a long-term strategy of sustainable business practices. From internal operations and packaging, backwards to your supply chain and forward to your consumer marketing and public relations efforts, sustainability is a huge and complex but essential subject.
In this global and transparent economy, governments legislate and regulate sustainable practices, consumers increasingly demand it and watchdog organizations vigorously monitor and challenge corporate behavior on this front.
Defining sustainability is difficult. It means different things to different companies. In the story that follows this one, our annual Green Plant of the Year feature, ConAgra defines it as much in terms of maintaining the company and jobs in the community as in saving the Earth. And that's an increasingly common definition.
"Acting sustainably means maintaining a balance and not depleting your available resources," according to Brad Scott, senior director of Landor Associates, a brand consulting business. "In business this often translates into balancing costs against a product's impact on the community in which you operate. Some refer to this as the triple bottom line – profit, people and the planet."
So for this story, we've looked at how sustainability is defined by two of the world's biggest food and consumer products companies – Unilever and Nestle – who are universally regarded as leaders in sustainability. We also look at how smaller companies -- Naked Juice and Sunny Delight -- are doing their part to save the Earth.
To paraphrase the introduction to the following story, our Green Plant of the Year, green or sustainable plants have to be more than tree-huggingly Earth friendly. They have to sustain their companies as well.
Two companies that made major investments in "green" plants a year or two ago wound up in bankruptcy early this year, and both cited as contributing factors lower-than-expected savings from their showcase new plants.
Contessa Premium Foods was one of our Green Plant of the Year nominees last year. Officials claimed their Commerce, Calif., facility, completed in 2007, was the world's first "green" frozen foods plant, certified as gold by the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) program. (This year's winner, ConAgra's Delhi, La., frozen food plant, achieved LEED's higher platinum certification early this year.)
Contessa officials ticked off a list of energy efficient accomplishments and summarized them all by saying, "Using the same amount of energy, the Contessa Green Cuisine plant produces three times more product than a conventional plant."
In January of this year, Contessa filed for bankruptcy court protection. The company noted the plant "was built in anticipation of future market demand for products produced using environmentally responsible methods" but market conditions made Contessa "unable to profitably utilize the full capacity of the Commerce plant."
Contessa was sold in June to an affiliate of Sun Capital Partners for $51 million. The Commerce plant reportedly cost somewhere in excess of $40 million.
The story is much the same for Philadelphia's fabled Tasty Baking Co., better known by its brand Tastykake. That 96-year-old icon reportedly used about $100 million to build and move into a super-efficient new plant. Savings amounted to about $3 million in the fourth quarter of 2010, instead of the expected $10 million, a year, according to filings, and the company could not meet its debt obligations. So Flowers Foods Inc. bought the company in April for $34 million plus the assumption of considerable debt.
-Dave Fusaro, Editor in Chief
Unilever's double/half challenge
Two Tomorrows Group Ltd., a UK-based international corporate sustainability agency, conducts an annual assessment of corporate sustainability practices of the world's largest food & beverage companies, following the Fortune Global 500 list, which ranks the world's largest companies by revenue. It ranked Unilever as the top sustainable food & beverage company in its most recent list, which was based on 2010 research.
In 2010, sustainability efforts were driven by consumers' social and environmental concerns as well as companies' fears that climate change and water scarcity put the security of supplies at risk, according to Two Tomorrows.
Potential customers in emerging markets was another strong incentive to develop new products and distribution models that work in challenging socio-economic circumstances and address special nutritional needs, according to the rating agency. While leaders such as Unilever, Nestlé and Danone demonstrated strong initiatives across these areas, all companies in the sector faced significant challenges, particularly within their supply chains.
Unilever, which topped the list, has a comprehensive sustainability strategy based on stakeholder feedback, governed by the company's senior leaders and underpinned by solid management systems. Its performance on important variables such as carbon emissions and water usage has shown marked improvements over the years. It has also shown leadership by co-founding initiatives such as the Marine Stewardship Council and the Roundtable on Sustainable Palm Oil. It was an early supporter of fair trade and started rolling out nutritional labeling practices earlier than most.
Last year, CEO Paul Polman unveiled Unilever's Sustainable Living Plan, which seeks to halve the company's environmental footprint by 2020 while expecting to double sales.
Major goals of this aspirational, albeit challenging, initiative involve greenhouse gas (GHG), water, waste and sustainable sourcing. Specific goals are:
- Reduce GHG emissions by 15 percent by 2012, and reduce carbon emissions to at or below 2008 levels by 2020, a 63 percent reduction per ton of production and a 43 percent absolute reduction.
- Reduce water use by its factories to at or below 2008 levels, a 78 percent reduction per ton of production and a 65 percent absolute reduction.
- Reduce packaging weight by a third by 2020, increase recycling and recovery rates on average by five percent by 2015, and 15 percent by 2020 in all its top 14 countrie. Also key is to increase recycled material content in packaging to maximum possible levels by 2020, and reduce total waste sent for disposal to at or below 2008 levels, an 80 percent reduction per ton of production and a 70 percent absolute reduction. In addition, Unilever plans to eliminate PVC from all its packaging by 2012.
- Source 100 percent of agricultural raw materials sustainably by 2020 – but ease into the goal with a 30 percent reduction by 2012 and a 50 percent reduction by 2015. To achieve the goal, Unilever will first focus on its top 10 agricultural raw material groups: palm oil, paper and board, soy, tea, fruits and vegetables, cocoa, sugar, sunflower oil, rapeseed oil and dairy. And the company plans to move to 100 percent cage-free eggs for all its products.
Unilever suggests to suppliers its 16-page booket, "Responsible and Sustainable Sourcing: Standards Guide for Our Supply Partners. " "We have an important message we want to share with valued suppliers around the world," Polman writes in his introduction to the booklet. "Our suppliers must play a critical role in helping to deliver this ambition, to help us buy responsibly and enable us to source sustainably."
To that end, Unilever urges its suppliers to join non-for-profit Supplier Ethical Data Exchange (Sedex) as a way of sharing sustainability data, such as audits and self assessments. This allows information and best practice to be shared while reducing the compliance overheads of suppliers. And the company is also keen on collaboration. "While Sedex helps us to understand our supply base, it is incomplete without the engagement and training of both our procurement teams and our suppliers. We are inviting suppliers to attend workshops to increase involvement, understanding and ultimately compliance with our standards."
Nestle's 'Shared Value'
Nestlé has applied the term "Creating Shared Value" as an umbrella for its sustainability efforts. "Creating Shared Value is the basic way we do business, which states that in order to create long-term value for shareholders, we have to create value for society," the company's website states. Part of the definition talks about the company's various business principles, but adds: "Beyond that, how we do business is based on sustainability – ensuring that our activities preserve the environment for future generations. In line with the Brundtland Commission's definition, sustainable development to Nestlé means 'development that meets the needs of the present without compromising the ability of future generations to meet their own needs.' "
As we say in this story, sustainability means different things to different companies. Here's what it means to us and our parent firm, Putman Media.
SustainablePlant.com is an online information resource and community dedicated to improving the sustainability of manufacturing and other industrial operations to the long-term benefit of society.
A confluence of social, economic and environmental trends has contributed to the rise of sustainability as a key organizational performance metric of today and for the future. From a resource perspective, a growing global population and rising standard of living point to the need to produce more energy and yet use it more efficiently. These same demographic pressures apply to the optimal use and re-use of raw materials and water as well as the reduction of polluting emissions and waste. Further, growing evidence of climate change has raised awareness of the importance of reducing the production of greenhouse gases, notably carbon dioxide.
Sustainable Plant offers actionable advice and resources to help make industrial facilities:
- Clean (non-polluting and carbon neutral)
- Safe (for its workers and neighbors)
- Efficient (in its use of raw materials, water and energy)
- Profitable (for its stakeholders)
- Compliant (with regulatory requirements and customer standards)
- Closed-loop (wastes are recycled, and responsibility is taken for production assets and products throughout their lifecycle)
In short, Sustainable Plant supports the triple bottom line of economic growth, environmental stewardship and social progress, summarized as, "Operating our business in ways that meet the needs of the present without compromising the world we leave to the future."
So visit the website and sign up for its daily newsletter at www.SustainablePlant.com.
-Paul Studebaker, Editor in Chief, Sustainable Plant ([email protected])
Key areas for Nestle are water, nutrition and rural development.
Nestlé was crowned winner of the 27th World Environment Center (WEC) Gold Medal award, presented annually to a global company that demonstrates a unique example of sustainability in business practice. In accepting the award, Bulcke said, "In committing to long-term sustainable practices which are integral to our business, for example, we have built approximately 290 water treatment plants to date – significantly in developing countries where national and municipal waste water treatment infrastructure does not exist, or does not yet meet the international environmental standards that Nestlé supports."
Water is Nestlé's major environmental challenge, both in its own direct operations and in its value chain. But the company has reduced water consumption over the past decade by 33 percent, while increasing its food and beverage production volume by 63 percent, or a reduction of 59 percent per kilogram of product. In the same time period, it has reduced the quantity of water discharged from its factories into the ecosystem – after treatment and removal of pollutants – by 42 percent, or 65 percent per kilo of product.
In June of this year, Nestlé was awarded another prize -- the 2011 Stockholm Industry Water Award for improving water management in its supply chain. The Stockholm International Water Institute also praised Nestlé's work with farmers. Nestlé employs 1,000 agronomists and water experts who work directly with farmers to help them reduce their water requirements, increase crop yields and minimize pollution.
Nestle purchases most of its dairy, coffee and cocoa directly from more than 660,000 suppliers. Taking intermediaries out of the picture results in financial benefits, better traceability and enhanced long-term security of supplies, according to the company, and improves Nestlé's ability to influence suppliers' farming practices and working conditions.
The company works with partners such as the Rainforest Alliance and national authorities on improving farmers' use of water resources and on strengthening rural access to clean water and sanitation.
Nestlé launched The Cocoa Plan in Indonesia in 2009, as part of its commitment to a sustainable supply chain for cocoa production. The project will impact the lives of 10,000 Indonesian cocoa farmers and their communities by 2015 and increase cocoa productivity at farmer level by 30 percent.
Indonesia is the third largest cocoa producing country in the world, and Nestle plans to invest $4 million over four years to train farmers, provide plant expertise, and support supply chain transparency. Led by Nestlé Indonesia and backed by the Nestlé Research and Development Center in Tours, France, the launch is in collaboration with the provincial Government of West Sulawesi and South Sulawesi in Indonesia, Petra Foods Ltd., and the Indonesian Coffee and Cocoa Research Institute.
Nestlé is also increasing the proportion of energy derived from renewable resources by recycling coffee grounds as fuel. At its Bugalagrande factory in Colombia, a boiler uses spent coffee grounds as fuel. It provides 13 percent of the total energy required in the factory and has 95 percent lower CO2 emissions than the fossil fuel it replaces. Nestlé has implemented this technology for the past 30 years, and 21 of its 27 coffee factories are equipped with the technology.
Reincarnated and Naked
You don't have to be a multibillion-dollar multinational to help save the Earth. But when your marketing strategy is all-natural products, your target audience expects sustainability. Naked Juice Co., Monrovia, Calif, announced last November it would start filling its 10-, 15.2- and 64-oz. juice and juice smoothies into the reNEWabottle, which is made from 100 percent post-consumer recycled polyethylene terephthalate (rPET).
The bottle is used, recycled and reincarnated, so to speak, into a new bottle. According to the company, switching to rPET bottles will reduce Naked Juice's virgin plastic consumption by 7.4 million lbs. per year, save more than 12,000 cubic meters of space in landfills and reduce the company's packaging-related greenhouse gas (GHG) emissions by 35 percent.
In contrast to the old, opaque HDPE bottles, the rPET bottles offer a clear view of the brightly colored Naked Juice products. The company prides itself on being "transparent" about the ingredients it uses in its products, and the high-clarity bottle reinforces that message. Using rPET packaging also aligns well with the company's brand mission of making superior products while minimizing environmental impact.
By early 2010, all six of Sunny Delight's manufacturing sites achieved their goal of zero waste to landfill -- three years ahead of what the company anticipated. During the past three years, the sites diverted 26 million lbs of waste from landfills. The amount of plastic and packaging of company's products has been reduced by 10 million lbs., and more than 90 percent of its volume is shipped in full truckloads to reduce its carbon footprint.
Earlier this year, the company designed and introduced the more environmentally friendly one-gallon Quad SunnyD square bottle. "Our new one-gallon packaging is a more environmentally friendly square bottle versus SunnyD's iconic round bottle," said Iobst. "We hope to prove that it's 'hip to be square' because this new bottle is manufactured and distributed using less corrugateD, energy, water and waste. It even fits better on store shelves and refrigerator doors and it is easier to pour. It represents a win-win for everyone."