Professional Documents
Culture Documents
Aileen Ionescu-Somers
Research Manager, CSM Project
Forum for Corporate Sustainability Management
International Institute for Management Development (IMD)
23, ch. de Bellerive, P.O. Box 915, CH-1001 Lausanne
Tel: +41 21 618 0389
Fax: +41 21 618 0641
E-mail: aileen.ionescu-somers@imd.ch
TABLE OF CONTENTS
LIST OF FIGURES .............................................................................................................................. 4
1
1.2
2.2
2.3
2.4
2.5
3.1.1
3.1.2
3.1.3
3.1.4
3.1.5
Trade Barriers................................................................................................................. 9
3.2
3.3
3.3.1
3.3.2
3.4
STAKEHOLDERS ..................................................................................................................... 11
3.4.1
3.4.2
2/30
3.5
3.5.1
3.5.2
3.5.3
3.5.4
4.1.1
4.1.2
4.2
4.3
4.3.1
Structure ........................................................................................................................ 17
4.3.2
Functions ....................................................................................................................... 18
4.4
4.4.1
4.4.2
4.4.3
4.4.4
4.4.5
NO RESOURCE = NO BUSINESS........................................................................................... 27
5.2
5.3
5.4
5.5
3/30
LIST OF FIGURES
Figure 3.1 The Main Food and Beverage Industry Barriers to Success in Sustainability Initiatives .... 12
Figure 4.2: Strongest Opposition to Implementing Sustainability Initiatives ....................................... 19
Figure 4.3: Business Functions that Can Most Effectively Promote Sustainability Performance ........ 19
Figure 4.4: Level of Collaboration of General Managers with Sustainability Officers or Departments .... 20
Figure 4.5: Potential for More Collaboration to Contribute to More Sustainable Business Practices....... 20
Figure 4.6: Sustainable Development Tools Used in Food and Beverage Companies ......................... 25
4/30
drive to take market share away from competitors in slow growth areas such as developed
countries. Larger companies devote considerable resources and energy to increasing their
market share in developing countries, their main opportunity for growth. Given the
importance of these markets, sensitivity to sustainable development criteria in business
strategy development will increasingly be significant in the sector.
The industry is using options such as product differentiation, creative use of distribution
channels and exploitation of relationships with suppliers in order to move away from a
commodity-type market where no competing firm has a differentiation advantage. This
presents an opportunity to put sustainability, with the product differentiation advantages it
offers, more firmly on the agenda of food and beverage companies (refer to section 3.5.2 for
more details on brand differentiation and innovation).
Retailers thus have considerable influence on both the product and its price. However, there
are alternative sources of supply and the costs of switching to other products are low. Thus
retailers can shop around to obtain the lowest price, especially when raw material costs are a
high percentage of total costs (fresh foods). This leads to a significant trend to discount at
retail level. All of these factors can increase the power of retailers significantly over the
industry and producers. In developing countries, buyer power tends to be weaker as retailers
are generally more fragmented, although this is changing as European companies move to
expansion in these areas. The significance of retailers in promoting the business case for
sustainability is discussed in section 3.4.1.
threats to some natural resources, such as fish stocks, are having a major economic impact on
certain industries in the sector. Pressure on natural resources therefore affects the economic
sustainability of the industry as a whole. This pressure has forced some companies to
actively seek raw materials that have been produced in a more sustainable way in order to
ensure their continued availability in the future.
challenge to the sector, but companies are nevertheless determined to achieve this
transparency as far as they can, since consumers are increasingly demanding it.
9/30
Obesity: Preventing and Managing the Global Epidemic. World Health Organization Technical
10/30
facing the tobacco industry. As a result, some managers interviewed stated that obesity is the
single biggest sustainability issue on their corporate radar screens.
3.4 Stakeholders
A range of stakeholders have a vested interest in the initiatives of food and beverage
companies, including NGOs, consumers, producers, suppliers, retailers, community
organizations, local communities, central and local governments, other multinationals,
shareholders and trade associations. Here, we focus on those stakeholders that, according to
managers interviewed, play the most deterring and promoting roles when it comes to
sustainability action in companies.
11/30
Lack of interest
from customers
20.0%
Other
1.7% Managers' mindset
15.0%
Managers' lack of
knowledge/
expertise
18.3%
Opposition or lack
of interest from
investors
11.7%
Organizational
culture
10.0%
Absence of
appropriate tools
and processes
18.3%
Regulation (e.g.
subsidies, low
environmental/
social standing)
5.0%
N = 60
Figure 3.1 The Main Food and Beverage Industry Barriers to Success in Sustainability
Initiatives
European managers interviewed felt that US consumers are complacent about environmental
and social practices, count mainly on federal and state agencies to look adequately after their
interests and have a certain inherent faith in corporations. In their view, US agencies are
largely concerned with food safety, and US corporations with risk reduction; therefore few
comprehensive approaches to sustainability exist.
According to those interviewed, the overall focus on the ethical behaviour and social
responsibility of companies will increase in the future. The momentum for this will be
transmitted through retailers as they gradually become more aware of the power they have to
induce suppliers to change.
Progressive companies involved in our research see sustainability as an opportunity to add
value while maintaining value for shareholders, and thus not reducing their capacity to
compete. Managers do not perceive the role of capital markets in driving sustainability as
significant, although according to our survey, 28.6 per cent of food and beverage managers
expect this to increase very much in the future, while 52 per cent expect that the markets will
react a little more positively. The current lack of shareholder interest constitutes a major
barrier to getting issues on the sustainability agenda, particularly of less progressive
companies, in spite of new trends to include standards of corporate ethical and
environmental governance. Financial managers interviewed felt that the interest of
institutional investors in sustainability has shifted positively over the last 10 years, but has
again slowed down due to current economic difficulties. Overall, sustainability officers
interviewed believed that the potential for showing shareholders that the economic bottom
line is enhanced due to sustainability has not yet been fully exploited.
in the field. Companies take the view that as long as all players conform to legal
requirements, regulation does not put them at a competitive disadvantage. We deduct from
our research that in future, legal requirements related to food safety, particularly in the
European Community, will intensify and remain an important driver of sustainability action,
particularly for the laggards in the industry. According to our survey, sustainability officers
generally consider regulators as relatively proactive when it comes to pushing the
sustainability agenda in companies. The survey also indicated that managers in food and
beverage companies generally have a more positive view of the role of regulators than
managers in other industries. Leading companies are applying a conscious beyond
compliance approach.
NGOs and the media are often responsible for damaging the reputation of companies. In fact,
our survey revealed that, according to managers, NGOs or media campaigns that support
them exposed over two-thirds of the cases that damaged their company reputation in the
previous three years. NGOs are particularly effective at creating a sense of urgency about an
issue, by forcing it on the company agenda and thus prompting companies to act earlier than
they otherwise would. Companies will generally take rapid action when strong brands, on
which their image relies, are exposed. Food and beverage multinationals are thus strong
strategic attack points for NGOs. When confronted by NGOs, many of the leaders in the
sector have gone from a defensive stance to a proactive stance of dialogue and sometimes
partnership, depending on the issues. There are examples of very effective partnerships
between companies and NGOs that are further developed in the toolset that resulted from
this research.
In dealing with NGOs, companies come up against a number of obstacles. There are many
NGOs to interface with on the diversity of issues included under the label sustainability.
NGOs are perceived as being better equipped to deal with sustainability issues because of
their ability to speak with one voice and focus on single issues, whereas food and beverage
multinationals find sustainability issues a challenge to manage because of the fragmented
and decentralized nature of the industry and the sheer number of issues that can be brought
to their attention. Companies find the nature of activism difficult to understand; in cases
where cross-sector partnerships have been put in place with NGOs, it is sometimes difficult
for managers to accept that the NGO may work with the company on some agendas and go
against it on others. The sector perceives the media as siding with NGOs and being
imbalanced and sensationalist in its approach to the issues.
Employees can play an active role in promoting sustainability action. The level of influence
in developing countries can depend on how much support the government of the country
gives to unions. This stakeholder group is increasingly important in emerging markets,
precisely where food companies see the future growth of their markets. In general,
employees have a major impact on how society perceives a company, since job losses and
the way employees are treated are often highly newsworthy subjects that expose the
company to a loss of reputation.
Sustainability officers surveyed generally gave a positive assessment of the industrys own
contribution to sustainability. Competitors have increasingly adopted a united front on the
issues facing the food and beverage industry today (GMOs, water, obesity). Leading
companies view sustainability activities as giving them a certain degree of first mover
advantage, which enables them to distinguish themselves from other companies, thus giving
them an economic advantage. NGOs interviewed, however, seemed less convinced of this
dynamic. Our research indicates that companies that have taken the decision to be more
sustainable look at the leaders in the industry and learn from them. As an example, many
bilateral initiatives exist through industry associations. In terms of sustainability issues, the
leading companies in the industry compare themselves to peers generally in other industries
rather than looking at their competitors.
13/30
environment is strongly in the economic interest of any company: hiring and keeping top
quality staff adds value to the company. However, interviewees described this as a weak
value driver because when jobs are no longer abundant in the marketplace, fewer employees
can make choices based on these criteria.
15/30
16/30
bottom of the pyramid (see Hart and Prahalad2 who illustrated this potential in one of the
reference articles on this subject).
This represents a huge business opportunity for the sector. But how can it strategically be
exploited? It requires new and creative ways of thinking and acting in companies. The
research identified a few extremely innovative efforts in the sector to build new business
models based on serving the poor, but in general, the growth strategies of even the leading
food and beverage companies are only beginning to focus on rethinking ways of creating,
manufacturing, distributing and marketing new products (disruptive technologies) in
emerging economies. Managers in the sector say that developing countries are much more
attuned to the concept of sustainable development, given their level of development. This
provides a remarkable opportunity to get sustainable development objectives increasingly on
the agenda.
Comment from a sustainability officer at a leading company:
The focus for design of our sustainability strategy was to ascertain how the businesses could best contribute to
sustainable development. Strategically, this led the company to create a focus in its sustainability actions on a
number of areas of global importance upon which it could have most influence and around which the company
could build some long-term initiatives.
In difficult economic times, sustainability action is scrutinized, as is every other factor that
impacts the company bottom line. Sustainability managers interviewed felt strongly that if
companies have integrated sustainability programmes into their strategic plans, it is less
likely that they will be removed from the strategic agenda, given the credibility risk to the
company of withdrawing them.
Hart, Stuart L. and C.K. Prahalad. The Fortune at the Bottom of the Pyramid. Strategy and
17/30
business and strategy groups. For example, in some companies, strategy groups inform the
sustainability or corporate responsibility committee on issues and vice versa.
Companies have chosen various ways of locating responsibilities for sustainability issues in
their organizations and this can also be very company-specific. Sometimes the sustainability
function is located in the public relations department, sometimes in innovation departments.
A very interesting trend is to see the sustainability champions in the supply chain
departments being responsible for pushing the key sustainability agenda in the company
this is occurring in more than one leading company. In general, companies tend to appoint a
strategic coordinating committee to lead from the centre, with overall responsibility for the
identification of issues. The group is usually cross-functional, with the involvement of
different business units and unions, and with an appropriate geographical representation.
This group decides whether issues should be addressed at a group or business unit level.
The strategic coordinating committee nominates issue groups or owners of the most
important issues (for example for human rights or ethical trading). Like the coordinating
committee, these issue groups also have a diverse membership. In this way, companies
create nets and goalkeepers for these nets as appropriate. Through the creation of teams,
companies can work in a matrix structure that allows, for example, staff in the markets to
talk to global functions, thus ensuring a cross-pollination of issues and agendas. Information
gathered in one market is thus transferred to another more easily, facilitating maximum use
of knowledge in the organization; one leading company referred to this process as search
and spin.
To optimize the application of a sustainability strategy, some companies have set themselves
an objective of having an organizational structure that makes it easy for information to flow
across the enterprise and around the world. This makes it more possible to put in place an
early awareness system to learn directly from stakeholders and consumers as early as
possible, and to commercialize good ideas and innovations quickly. The company culture
thus provides an opportunity for individuals to pick up issues at market level and elevate
them to the appropriate level. In order to avoid some issues being kept at a national level too
long, radar mechanisms are can be put in place to ensure that issue identification at market
level is channelled up and out quickly enough.
On the operational level, some companies have concentrated on building a network of
sustainability champions at senior level scattered throughout the organization but
positioned in the business units. This increases ownership of any initiatives by the business
units and ensures that questions such as budget and resources for sustainability initiatives are
addressed in the context of business strategy.
4.3.2 Functions
Most sustainability officers interviewed felt that for a business case for sustainability to be
successful, the CEO and members of the executive board needed to take distinctly proactive
roles on sustainability issues. As the driving force behind the sustainability strategy, the
CEOs of the leading companies are often publicly vocal on a number of the sustainability
issues that their company is focusing on. One manager commented, Without top
management support, it would not be possible to drive a sustainability strategy throughout
the organization, but this in itself is not enough for success.
Support for sustainability initiatives varies widely among different business groups,
commercial activities and individuals in the sector. Functions that are focused to a large
extent on the business margin (sales and profits targets) generally see sustainability as a
high-risk strategy. Even in the most progressive companies, a significant barrier identified is
what was often referred to as the second layer of business managers under the CEO who
18/30
are oriented towards profitable growth first and foremost. Then, throughout the organization,
the old guard, a community of hard-line sceptics can often delay the roll-out of the business
case for sustainability. Translating the difficult concept of sustainability into the language of
such managers is often the greatest challenge.
Senior managers interviewed felt that since younger executives often grew up with
sustainability concepts in their everyday lives, they were more prepared to take on the
integrative aspects implied by sustainability in their work. Women were also seen as being
generally more open to these concepts.
Some business groups or profit centres in the companies are difficult to access. According to
our survey, nearly 30 per cent of managers felt that finance and control functions present the
most opposition to implementing sustainability initiatives, followed closely by marketing
and sales (25 per cent) and manufacturing operations (over 15 per cent). The last group often
reacts to initiative overload and finds fitting sustainability actions into its tough target setting
a burden, and yet this business group is regarded as the one that can most effectively
promote sustainability performance.
Other
0.5%
Other
11.1%
Finance/Control
6.0%
R&D
6.9%
Manufacturing
15.3%
Finance/Control
29.2%
Corp Staff
5.6%
Top Management
2.0%
R&D
21.1%
Marketing/Sales
16.6%
HR
0.0%
Manufacturing
22.6%
Corp Staff
15.1%
HR
8.0%
Marketing/Sales
25.0%
N = 72
According to our survey and interviews, sustainability officers in the food and beverage
industry perceive R&D, marketing/sales executives and buyers of raw and semi-processed
materials as key functions to be convinced of the business case for sustainability, as they
have considerable influence over product design and sourcing, important aspects affecting
sustainability strategy. Currently, however, these functions do not have sustainability on
their agenda and to a large degree do not realize the extent to which their work can impact
the sustainability model of the company; therefore lack of knowledge is a significant barrier
in these cases. Raising awareness of the business case for sustainability potential in these
functions can go a long way towards ensuring its ultimate implementation.
Marketing and sales executives generally do not yet see ways of using sustainability in brand
communication and other functions identify them as having set approaches to their way of
doing business that make it difficult to move forward with a progressive and innovative
sustainability agenda. Sustainability officers see the development of an understanding of the
corporate reputation value driver as something that may help to bridge this current reality.
However, developing this understanding is a time-consuming process, and marketing
managers have a swift turnaround time in their positions (three years on average), with
tightly set deadlines and objectives. This is often a barrier to a change of mindset.
19/30
Problems arise with including sales and marketing executives in strategic coordination
groups in charge of overseeing sustainability strategies. The reason given for this was that
since the industry does not associate specific brands with specific issues, marketing
executives easily drop out of the equation because of their direct association and
preoccupation with brand. This is clearly a problem that needs to be addressed in the sector
in order to promote a business case for sustainability downstream.
According to sustainability officers, any sustainability strategy that is not accompanied by a
comprehensive communications strategy will almost certainly fail. The communications or
external relations director can take the role of coordinating the communication effort and
roll-out and is thus viewed by sustainability officers as a key element to success in driving
the business case for sustainability through the organization.
Employees can be encouraged by their line managers to participate in sustainable
development initiatives. However, often the direct supervisor constitutes a barrier to change.
In these cases, a solution is to educate line managers about the behaviours that the company
prefers. Leading by example is one of the most important forms of managerial support for
managers in any company.
According to our survey, there is considerable scope for sustainability officers to work more
closely with various management functions, and to use these opportunities to promote the
business case for sustainability internally. Overall, 56.5 per cent of managers felt that there is
a certain level of ad hoc collaboration with the sustainability department in their company,
while 29 per cent felt that they worked with this unit on a day-to-day basis. However, 57 per
cent felt that more collaboration with the companys environmental or sustainability officers
would contribute positively to sustainable business practices in the company.
N/A
0.0%
Very much
5.2%
Not at all
10.3%
A little
27.6%
N/A
0.0%
Yes, on an ad-hoc
basis
56.5%
Much
29.3%
Fairly
27.6%
N = 58
N = 62
report back on their issues does not work and is unrealistic; requests have to be structured
and specific, for example, asking all sites how they collaborate or interact with local
stakeholders. To be effective, leaders in the industry say that every market should have its
own responsibility to look after the corporate affairs agenda and identify whether strategic
issues need to be addressed, thus allowing a continuous strategic action agenda based on
value creation to be set up.
Comment from a strategy executive:
We looked at the corporate affairs strategy, starting with identifying issues common to all markets and then
going on to the big issues that prevent managers from reaching financial targets. We asked, What would ease the
licence to operate? of each strategic area head. In the last year, every market looked at public policy,
stakeholder dialogue and how it is addressing corporate citizenship. The benefits? Greater awareness of the
positive things being done within the company people have addressed corporate responsibility differently. In
this way, we build strategic alternatives to reach our goals.
Managers felt that more resources need to be dedicated to defining a best-practice framework
to flag the status of issues at an early stage, and to developing issue-tracking tools. Issue
tracking is currently carried out at different levels in companies, using a variety of
approaches such as stakeholder dialogue, networking, accessing external expertise and
holding risk management reviews. Using tools such as print and visual media, the Internet,
surveys and database mechanisms are also increasingly part of this process.
21/30
prioritize their efforts. Business units submit these to the corporate function, which assesses
them in terms of a more holistic and long-term big picture. Risk assessment tools include:
The review of risks results in a prioritization leading to a risk register, which later operates
as a tracking tool.
Auditing systems look at already identified critical risk issues and establish whether action
plans are in place and are being implemented, sometimes leading to a reprioritization of
efforts with regard to the identified risk.
Priority issues identified are integrated into strategic decision-making processes. Managers
interviewed generally felt that the way issues are tracked, mapped and prioritized needs to be
more transparent and more thoroughly understood in their companies. Managers indicated
that the industry is not quick enough in identifying the real issues and that there should be
more anticipation, leading to early action being taken to develop strategies to deal with
issues.
Managers also felt they were not sufficiently aware of how issues are being mapped and
prioritized on the agendas of peer groups and competitors. Some managers perceived this as
a threat that could eventually disadvantage the competitiveness of their company.
benefits, but in an incomplete way. Quantification is subject to doubts and criticisms and,
managers felt, sometimes provokes more debate than it resolves.
Measurement tools to increase transparency are regarded as powerful support tools, since
they allow for a quantifiable argument for the business case for sustainability. Few today
would dispute the efficiencies achieved and costs saved by quantifying environmental
compliance, applying targets and then measuring continuous improvement; these tools are
extensively used by the industry. However, measuring the social dimensions of sustainability
is considered much more of a challenge. Managers felt that expressing a value for some
issues, such as child labour, should not even be tolerated by a corporate responsibility
approach.
The following points illustrate the view of managers in the industry with regard to
quantification:
The more it is measured over time, the more sustainability means to people within the
company.
Although the same rigorous assessment procedures should be applied to sustainability
projects as to other projects, both tangible (economic impact) and intangible
(relationships with stakeholders), sources of value have to be looked at.
Measurement without the belief is not compelling. The added value of sustainability
action is not always economic; there are issues that are not measurable in money
terms, and justification for involvement is not always quantifiable it is often simply
the right thing to do, based on best practice and pending legislation. Making the link
between the investment and the return on investment is thus exceedingly difficult.
Quantification makes decision-makers go by short-term numbers, whereas in fact the
benefits of sustainability are much greater in the longer term. Thus, measurements in
the same short-term snapshot as financial performance will never be equal and be able
to tip the balance.
In a ten-year perspective, there is never a single reason for a given sustainability
action, but a network of reasons.
Sustainability officers in the sector nevertheless believe that if they can show, with numbers,
that sustainability action is having an impact on profitability, there is a powerful argument to
promote a business case for sustainability. However, it is interesting to note that once senior
business managers are convinced of the business case for sustainability based on the
reputation and licence to operate value drivers, they are less convinced of the need for
quantification than the sustainability officers themselves.
Leading companies in the sector push issues into strategic decision-making primarily by
using the following methods:
Scenario building helps to build momentum around an issue, by making strategic
decision-makers face the consequences of doing nothing about a given issue (for
example by showing the impact on share price of NGO activism around a given issue).
Success stories and pilot projects show strategic decision-makers the relevance of an
issue to the business and can be very instrumental as learning tools to prove business
case potential. In the food and beverage industry, pilot projects for cash crops in the
supply chain are proving to be the most effective way of showing decision-makers the
business case for sustainable sourcing and that sustainability can be integrated into the
business without cost and still produce benefits.
23/30
If a single issue is very significant, then a focused strategy is articulated and a strategic
action plan related to the issue is developed as a matter of priority. Position papers are
established on the most important issues. Traceability is an example of an issue that gathered
so much momentum that it quickly became integrated into the strategy of many companies.
Generally speaking, the way corporations apply sustainability is seen as being a matter of
stages of cultural and economic development, as affluent nations are perceived as being
more interested in meeting corporate responsibility standards while the less affluent are
mainly striving for rapid growth. However, if multinationals establish a principle in one
country, it is applicable in another. Dual standards are perceived as a risk for the company.
Therefore, the way a business case for sustainability is built for a company does not vary
from country to country. However, there are significant national differences in the way the
business case for sustainability is implemented locally. Issues in developing countries are
interpreted differently to those in the developed world.
Europeans are motivated to urge corporations to act in a sustainable manner. In Europe, there
is a fairly uniform desire to meet certain standards, but when it comes to implementation,
there are again differences. Northern European and Scandinavian countries are seen by most
players in the industry as being the strongest when it comes to implementation.
4.4.5.1 The Framework
For successful issue integration into operations, most companies work within an agreed set
of policies and management systems. Central to this are statements of principles, and values
that provide a framework within which to operate. According to our survey research, 26 per
cent of managers perceived the most important tools related to sustainable development as
being documents laying out corporate values, policies and standards that take account of
sustainable development issues. This shows the importance the industry accords to having
the right corporate mindset and values in order for sustainability initiatives to be successful;
these create an operational framework within which the business case for sustainability can
be promoted throughout the organization, rolling it out to every manager and employee
around the world.
24/30
Other
2%
No initiatives whatsoever
0%
Coordination committee
discussing and pushing
strategic decisions at
corporate level
11%
Management
development
11%
Reward and punishment
systems
1%
Corporate values,
policies and standards
that take account of these
issues
26%
Measurement tools to
increase transparancey
20%
N = 218
Figure 4.5: Sustainable Development Tools Used in Food and Beverage Companies
Most sustainability officers felt that the message on the business case for sustainability must
come from top management first and foremost, before being pushed through to all levels of
the organization. However, they also felt that employees should first have a basic
understanding of the concepts before trying to reach them. Developing this understanding
takes time. One strategy officer remarked, A corporate message on sustainability has
general themes but the message has to be received in a way that is relevant and modified
based on region or country; otherwise it is not going to be effective. Operational units have
an important role in developing and transmitting this message.
In the early stages of development of a corporate sustainability strategy, some companies
rely on the attitude and persuasive power of the senior staff member responsible for
sustainability or corporate responsibility to drive the business case for sustainability. Having
this function report directly to the CEO gives the entire organization the message that
sustainability is being taken seriously. This also gives sustainability exposure at the highest
level (shareholder and board meetings, for example).
However, leading companies do not view this as sufficient for successful implementation in
business operations. One experienced manager put forward the view that building and
implementing the business case for sustainability cannot be separated; sustainability is a
matter of learning by doing, through a process of iteration and interaction. The most
innovative examples of learning by doing can be found deep in the supply chains of global
companies. One of the most effective ways of creating a network of sustainability
champions is to use pilot demonstration projects and to get people in the company working
on sustainability issues in their businesses. In this way, it becomes possible to speak the
language of the business to engage in the process. Pilot projects or focused actions
effectively introduce the concepts of sustainability in a hands-on way, so that people can
better understand how they can personally contribute. By being able to point to success
stories, the business case for sustainability is immeasurably enhanced on an operational
level.
4.4.5.2 Sustainable Agriculture
The leaders in the industry have recognized the need for a change of mindset and for the
food industry to speak out on the challenges posed by agricultural production systems. They
are currently experimenting with pilot sustainable agriculture projects using key crops such
as tea, coffee, palm oil and other cash crops. By using local partners know-how to jointly
25/30
develop sustainable agriculture best-practice guidelines for farmers, and by then providing
information to those who shape the market (such as other producers, buyers, processors and
consumers), the objective is to gradually create market mechanisms that favour sustainable
practice. Analysing the business case for sustainable agriculture initiatives, and creating the
right tools and instruments to implement them and roll them out to pilot markets, is a timeconsuming initiative for those championing the cause. One officer said that he had been
engaged in a two-year process of promoting the business case for sustainable agriculture and
gaining buy-in from a network of identified future champions throughout the business.
However, this time investment pays dividends in terms of gaining buy-in to the business
relevance of sustainability in organizations.
Companies running pilot projects say that it is necessary to ensure ownership by a project
leader, who later becomes an ambassador of sustainability in the organization, and to
devote adequate budget and resources to these initiatives. By setting up pilot projects, it is
possible to introduce and test the key performance indicators necessary to define the relevant
sustainability issues and measure the success of the pilot initiatives.
Case Study
One company has encouraged purchasing managers to use value chain analysis to examine what values for
consumers and other stakeholders are being created in the supply chain and at what cost. The focus is on how the
creation of these values can help differentiate the product from other products. This has given valuable insights
into redesigning the value chain in order to decrease costs and source materials in a more sustainable manner.
Purchasing managers participating in hands-on workshops realized that redesigning the value chain provides
more cost saving possibilities than cost increases. There is a significant pay-off from these initiatives; buyers
generally have a good understanding of local issues and once they are engaged and convinced of the concepts
and their application, they can ensure that these principles are communicated and applied throughout the value
chain.
By sharing best practices like these through initiatives such as the Sustainable Agriculture Initiative (SAI) a
food industry platform to support the development of sustainable agriculture companies are reaching a
common understanding of threats to the future of the industry and are putting together synergies on supply chain
management on a non-competitive level. In this way, overall standards will improve and a set of international
standards for sustainable agriculture can eventually be introduced. This will not happen unless leading
international companies share their experience and knowledge in open and transparent dialogue.
thus ensuring that sustainability action plans become an integrated part of the business
model.
Sustainability managers pointed to the importance of focusing on concrete activities with
measurable objectives. Some companies include goals based on sustainable development in
their goal setting and management appraisal process (MAP). In others, sustainability is part
of the managers balanced scorecard. Incentive and reward systems are thus linked to
performance in sustainability or corporate responsibility just like other business areas.
However, although there is an awareness of the value of doing this in the sector, few
companies, including leading companies, have moved towards such an integrated approach.
Managers say that this is due to the decentralized character of management structures in the
sector. However, leading companies consider that this issue has to be further addressed as a
matter of priority in future management reviews.
Case Study Into the Mainstream
One company designed a tool that defines 130 observable, measurable practices in areas of company or group
responsibility covering a wide range of criteria, including a mix of true business practices and social issues.
Operating units evaluate themselves in relation to these practices. The programme tracks progress in practice,
encouraging cooperation and cross-functional initiatives within and across operational teams. The sustainability
officer commented, Mainstreaming the practices by doing simple things every day is the key to business
integration. The tool helps in the identification of the values and links them to the business, thus making them
accessible to everyone in the company. The system works because it is integrated into the business. Managers feel
that it is a performance tool.
time perspective of five years, which is well within the time horizon of most business
managers. Such immediate threats can be used as models to analyse similar risk with bigger
bottom-line effects such as agriculture. However, in areas such as sustainable agriculture or
social performance, the time horizon expands again, and benefits are less easily perceived by
managers unless they are defined more succinctly by sustainability officers.
Consumers in the developed world are more concerned than ever before about how their
food is produced. Food and beverage companies can only connect with the consumer if they
pursue sound environmental and social practices that take account of the way raw materials
are grown, while preserving biodiversity and protecting water supplies. The challenge will
lie in the balancing act between sustainability action and sustained economic growth.
Leading companies feel that sustainability can be achieved in some areas without any impact
on profitability, and in other cases by saving costs. However, there appear to be limits to the
business case for sustainability in the sector without substantial external political and
economic pressure being applied on the industry, as it is currently simply not in the
immediate economic interest of companies to move towards sustainability more rapidly.
argument in itself. Raising awareness in the company that sustainability can be about gaining
major reputation and brand value benefits from little or no additional investment needs to be
a key part of the communication strategy around the business case for sustainability. While
work being done in these areas will greatly enhance the business case, there is no doubt that
the most progressive companies in the sector are themselves in a research and development
phase with the pilot projects and value analysis; it remains to be seen whether the
experimental practices in the industry will move into the mainstream, although current
indications are positive.
29/30
30/30