The 2023 Footprint Drinks ESG Trends Report identifies key trends and opportunities to help drinks industry leaders build their businesses, develop proactive strategies, benchmark good practice and identify issues in need of greater attention.
These are challenging times for the drinks manufacturers. Skyrocketing energy costs, soaring food prices and a squeeze on household incomes have combined to create a perfect storm of difficult trading conditions.
Download the The 2023 Footprint Drinks ESG Trends Report.
For many businesses that have so far survived the combination of punches thrown first by the pandemic and then the cost of living crisis, profitability is in peril. In this context, it’s tempting to conclude that the development and execution of ESG strategies could take a back seat as businesses try to ride out the economic storm and their customers deprioritise sustainability in their purchasing decisions.
Yet there is evidence that sustainability is now too embedded to be side-lined. The landscape has shifted amid the growing realisation among businesses that sustainability and cost efficiency are two sides of the same coin.
Whether it is brewers generating their own renewable energy; drinks suppliers innovating to reduce or remove packaging; or bar owners using cutting edge technology to monitor their water usage, the dominant trend identified in the Footprint Drinks ESG Trends Report 2023 is for businesses to channel their ESG ambitions into reducing costs and driving efficiencies.
Prior to the report’s publication a keynote and panel session featuring a number of the report’s contributors and key individuals from the drinks industry, gathered to discuss the report’s findings across the following key topic areas – strategy and culture; energy emissions; clients and consumers; waste, raw materials, the environment and water; social impact and employees.
Chair: Amy Fetzer, Head of Research and Analysis, Footprint Intelligence
Julian Hunt, Vice President of Public Affairs, Communications and Sustainability, Coca-Cola Europacific Partners (CCEP)
Danielle Bekker, Founder, Good Living Brew
Tim Moerman, Sustainability and ESG Director Europe, AB InBev
Andy Dyson, Business Development Director, Revolution Bars Groups
Strategy and culture
AF: The vast majority of leading brands in the drinks industry have clear sustainability strategies and targets. However, the onus is now on the specifics of how these targets are going to be achieved, and then reporting on that progress.
In the 2023 Footprint Drinks ESG Trends Report, Timiko Cranwell, from Budweiser Brewing Group, spoke about “the plethora” of net zero pledges following COP26. The challenge of course is the more granular details of implementing them.
There is a lot of scrutiny between targets, action and the needs of the climate. Businesses, therefore, need to ensure emissions reduction is happening at the required pace to limit dangerous climate change.
JH: One of the key takeaways from COP26 was that all businesses were unified on the need for action against the climate crisis. Like many good businesses we put in place a strategy for the short-term (what we do in the next ten years, aiming for a 30% reduction in greenhouse gas emissions), and then how we transition to net zero by 2040 across the whole value chain i.e., Scope 1, 2 and 3 emissions. Key to this is understanding what projects deliver the biggest impact against your carbon footprint and the impact on the climate.
For us that means our transport, factories, ingredients, the equipment we put on the market and critically our packaging (which is the single biggest component of our carbon footprint in this country). These are some quick examples of how we’re taking action as opposed to merely setting strategies.
We’re working with our haulers to switch from diesel to HVO fuels to allow us to reduce carbon in our logistics and distribution, and switching a large chunk of our shipping from road to rail. In addition, we’re also looking more closely at our factories; we recently announced that our Morpeth site in Northumberland has become carbon neutral.
TM: As brewers we depend very much on natural ingredients and local supply chains, which makes it paramount for us to protect the environment against climate change.
We’re on track for a net zero target for 2040, and we’ve also set ourselves a number of interim goals for 2025. We divided targets across the next couple of years while having one eye on the longer-term horizon; it’s important to track progress on an interim basis because 2040 is still a long way off.
What that means is that we have set a number of production targets for 2025 – we want to reduce 25% of emissions in terms of the intensity per hectare litre of beer. That will include packaging, cooling, transportation and brewing.
The most important element of that is packaging; it’s not only the emissions in the brewing that matter. Therefore, sustainable packaging, moving to more returnable packaging and having high levels of recycled contents are key for our emissions reduction. We’re well on track to be above 65% for recycled content in our primary packaging across Western Europe; we have a global target of 50% as some markets are tougher than others.
And then of course, we work together with our suppliers to actually lower emissions in their supply chains, because their Scope 1 and 2 is our Scope 3. In turn, we are the Scope 3 of the retailers and consumers. It’s a whole supply chain project.
There’s also plenty we can do ourselves. In terms of logistics, we reduced our transportation emissions in the UK by 25% last year, which relied a lot on footprint efficiency and HVO solutions. In the long-term we’re fully aware that discussions will be had around electric and hydrogen, and as such we’re already looking to scale in a number of markets.
Within the breweries themselves we also have big ambitions. We’re aiming for our five largest breweries in Europe (two of which are in the UK) to be net zero by 2028. That will mean decarbonising the heating element of the brewing process, and in terms of electricity, we have already been brewing with 100% renewable electricity for years using solar and wind farms.
AD: We’ve set an ambition across our group for net zero by 2030. Our biggest challenge around that is most of our emissions occur in our 69 sites around the country. So, by far our biggest single initiative that we’ve put in place to give us the best results is the ‘zero heroes’ in each of our sites.
They help drive engagement through each site, so we work hard to educate those people and ask them to carry out initiatives and link them with new technology. As an example, via cellar cooling and electrifying some of our kitchens, we’ve managed to see some real efficiencies come through on energy and waste.
It’s taken a lot of engagement, but it’s also been relatively easy, as most of the staff in our bars are young and they really get this agenda. They’re keen to be involved and to be supported by the managers in making reductions.
Most of our best ideas have come through these people because they are at the coalface every day; they see packaging coming in for example, and they ask questions around systems and processes. That means ideas come back to us which have driven some of the best initiatives we’ve rolled out as a business.
DB: Younger people in particular want to work for a company where they feel they have a purpose. When we’re interviewing it’s always surprising just how many cite the ethos of the company and that our main product, Binary Botanical, uses a waste product (hop leaves), as one of the main reasons they applied for the role.
More than ever before, potential employees need to see that sustainability is embedded in the values of the company. When you’re making decisions that will impact the value chain, if sustainability is one of the lenses through which you make those choices, people will feel like they can buy into the solution. If everybody does their bit, it can actually end up making a big difference.
Energy and emissions
AF: The results of consumer research found that 40% of people said they will choose a drinks venue whose signage said it was committed to net zero by 2030, despite the cost of living crisis.
The research has also shown that 71% of businesses in the industry have set Scope 1 and 2 targets while 57% have set goals around Scope 3. There has been a huge increase in collaboration and there are now initiatives such as Net Zero Now, which has been developed in partnership with CCEP and Pernod Ricard. The initiative has been rolled out by the Sustainable Restaurant Association (SRA), which helps businesses of all sizes access carbon reduction and footprinting tools.
There is various assistance on offer for businesses who want to address their energy emissions in a free or cost-effective manner, whatever their size. Progress is also being made on linking carbon reduction targets to the Science Based Targets initiative (SBTi). In some areas there is still an over-reliance on offsetting, which serves as a reminder that the industry needs to use them with caution.
TM: Offsetting principles, guidelines and standards are critical. However, offsetting will become more important as we move towards 2040 and is not something we’re looking at currently. In the spirit of net zero we are fully focused on reducing emissions and on improving energy efficiency in the supply chain. That’s the focus that we have at the moment and where our priorities lie.
A sustainability strategy should not be about keeping your emissions at their current levels and then offsetting that with certificates. Rather, it should focus on the maximum amount of emissions reduction and improving energy efficiency.
Then if there’s anything left by (in our case) 2040 that is hard to abate for, manage or is impossible to decarbonise, that’s the point at which you should be looking at high quality, trustworthy, compliance and offsetting.
JH: When we look at the end-to-end value chain and each component of our carbon footprint, the reality is that the supply chain will account for around 90% of where we need to take action.
Therefore, reducing emissions has to be done in partnership and through collaboration, and quite often changes will have to happen at an industry-wide level. In the near-term, we’re talking to our strategic suppliers – that’s approximately 150 businesses – and we’re asking them to start measuring and tracking reporting, for example. That’s really important; we all know how complex it is, but it needs to start now.
There are also standard and approved carbon reduction strategies, such as the SBTi, that we can all work within and use to aid delivery. A key element of that is to start committing to and using energy from renewable sources.
We’ve had a fantastic response from our suppliers but, it’s when we look at the total supply chain that we see the scale of what’s required. As mentioned, packaging, for the vast majority of beverage producers, will be the single largest element of total carbon footprint. For meaningful reduction to take place it will require work across a variety of different industries, such as with our suppliers in the aluminium sector to produce greener, more sustainable cans.
We’re also working with governments to make sure we get the right recovery systems in place to improve circularity and recycling support. Ultimately carbon reduction is about partnerships and collaboration across the supply chain and we’ve got to work as a total industry to achieve the real progress that’s required.
DB: One of the advantages of working at a small business is you get to talk to many of your consumers directly. An issue we’ve discovered is that consumers still find the language used around sustainability and carbon reduction very confusing.
While there’s certainly a belief and a desire to want to support more sustainable businesses, the messaging around net zero, Scope 1, 2 and 3 etc needs more clarity. Therefore, one strategy that all players in the industry, both large and small, could align on is how to communicate with consumers more simply so people have more understanding of what they’re buying into. It’s currently a very murky space in terms of communication, which means it’s difficult for people to separate the good actors from the bad.
There’s undoubtedly a large number of small businesses doing some real innovation around looking at ingredients in the supply chain, packaging or finding novel ways to use waste. However, the real scale in the supply chain comes from the big players. Therefore, there’s an opportunity for collaboration in terms of bringing that innovative, entrepreneurial approach to finding novel solutions offered by the smaller players, but then working with bigger businesses to provide the scale that is needed to have a real impact on the value chain.
Clients and consumers
AF: Research has demonstrated that consumers’ purchasing decisions are increasingly influenced by their perception of brands and their commitment to sustainability. However, research has shown that there is a lack of information getting to people for them to make those decisions.
For example, UK consumers were asked to rate their issues of concern. Climate change came fifth after the cost of living, energy, food costs and the economy – 31% of those surveyed said they preferred to choose a venue with eco accreditation, while 59% said they consider a brand’s eco credentials when choosing what to drink.
JH: There’s been long-standing pressure coming from consumers, and we only expect it to grow despite the short-term challenges around the cost of living crisis. Sustainability will play a much bigger part of the retail scene going forwards.
There is a real issue in how we communicate these very complex issues to consumers in a way that doesn’t open us up to accusations of greenwashing. We are all challenged by that and in finding the right way forward so we can help educate consumers to understand the issues in a comprehensible way.
Interestingly, and conversely, there is a current risk, particularly with larger corporations, of ‘green hushing’. We’re all getting on with the work, but we’re actually struggling to find ways of communicating it properly and appropriately to consumers. We don’t want to get tarred with accusations of greenwashing and so that is a real challenge.
We’re doing some simple things as a business to make sure we communicate around, for instance, recycled content. We just launched our attached cap and we’re using that to actually explain the reasoning behind it and the fact it can be recycled along with the bottle.
TM: From an alcoholic beverage and beer company perspective, there are two sides to the ESG platform – a social parameter around smart drinking and responsible alcohol consumption, and the environmental sustainability of our products.
With regards to the latter, we have been working with European brewers on product environmental footprint (PEF) category rules for beer that are actually endorsed by the European Commission, and are recognised across Europe, including in the UK. This constitutes one standard sets of rules to conduct lifecycle assessments of products.
That’s ultimately where we need to get to. When thinking about what messaging to put on packaging and how you calculate and prove those claims, it’s important that there’s standardisation and a level playing field of how people measure projects and impacts. In a specific case, for instance, we have been talking about the adoption of 100% renewable electricity in our operations with Budweiser.
In addition, this year there will be a lot of messaging around the Corona brand in the UK, in relation to natural ingredients and the work we’re doing with farmers and the local supply chain. They are campaigns that stick with consumers and have clear, simple, provable messages.
DB: We have seen a link between people who are interested in sustainability and those interested in healthier living, i.e., healthier for me and healthier for the planet. The two messages can work together very well because you’re targeting the same consumer. So, the low/no alcohol space gives brands who are doing work around sustainability an opportunity to combine those messages together and amplify them.
Waste, raw materials, environment and water
AF: Although reducing waste is a win-win opportunity for businesses, there’s actually very little evidence being shared in people’s external reporting about what work has been done to reduce waste in operations and throughout the supply chain; and to know that this work is happening at scale.
Government delays on new legislation is also hindering progress and making it hard for brands to make any headway. Research has shown that plastic is still a hot consumer topic; 46% said it was a major concern, even above housing and education.
People want to hear about what the industry is doing to tackle packaging and plastics waste; 69% said they wanted to hear more about the work being done. There is an opportunity for the industry to be clearer as there is work going on behind the scenes which isn’t being shared.
The other area where the industry does need to take action is to make sure that work is being done to eliminate packaging in all areas, including secondary packaging used in transit and logistics. And of course, to keep pushing on recyclability and to use the influence of the industry to keep pushing for well designed deposit return schemes (DRS).
JH: DRS are probably not where we’d like them to be. We’ve finally had clarity from the governments of England, Wales and Northern Ireland, that they’re going to press ahead with DRS in 2025. And at the moment, we’re still expecting the Scottish scheme to go live this summer.
However, there’s still major challenges around getting what all of us in the industry want, which is a scheme that’s easy for consumers to use, is focused on reducing complexity for businesses and is absolutely committed and ambitious in terms of getting high recovery rates.
The key difference here will be around whether glass is in or out. At the moment, it will be in for Scotland and Wales but out for England, which is the biggest market in Great Britain. We’ve also got the prospect of different scheme administrators being established.
There’s still a lot for us to keep discussing with government. Our goal has always been simple; for this to work, it’s got to be a pragmatic, practical system, that’s really interoperable across the whole of the UK. The good news is we do have more clarity than we had this time last year.
DRS is a version of extended producer responsibility. And if it’s done well, it will get us higher recovery rates for our packaging which will support better, higher levels of recycling.
TM: There’s more waste streams across the supply chain that we are tackling, such as saved grains from the brewing process. We use barley, hops and other ingredients when we brew beer, which create a waste product, and so we have built a complete spin-off of AB InBev called Evergrain.
That waste from the brewing process can actually be a co- or by-product stream. The team has developed technology that can capture proteins for human consumption from the saved grains from the brewing process and put it back into products like pasta, energy bars etc. That’s where we find the combination between sustainability and future business potential for the company. That’s where we want to be as a group, an industry and as a society.
Social impact and employees
AF: A lot of progress has been made on social issues, although there’s still a lack of reporting on key metrics such as workforce diversity and ethnic pay gaps. Employee health and wellbeing are recognised as critical issues but continue to need support.
JH: We have a strategy that looks at what we think are the key areas of focus for our business to achieve an inclusive workforce. That’s culture, heritage, disability, gender, LGBT+ and multi-generational issues.
Underpinning that are colleagues right across the business from factory or field sales to head office and sales teams, who really embrace one or more of those pillars and drive the engagement across the business.
From that we get not only a strategy, but also a cultural shift and change happening within the business from the grassroots up, which is really powerful. And it’s driving fantastic, positive change within the business and opening up more conversations and dialogue on many of the issues.
As I think about the year ahead and beyond, one element we’re looking at that cuts across quite a few of those pillars, is how we interact as a business to encourage social mobility. That means making sure we’re reaching out and being a good business in our communities and helping people who are less advantaged than others, to get into the world of work and making it easier for them to build a career in a business like ours.
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