3 posts categorized "Step Change series"

28 December 2012

Adnams brews long-term value through resource efficiency

Andy Wood, ceo at Adnams, a modern brewing company built around a heritage brand, shares the story how his company has placed resource efficiency front and centre of its sustainability drive. The Adnams story is an excellent example of a mid-sized business willing to explore how to create and sustain value from a long-term perspective. The Andy Woods interview was conducted by Jyoti Banerjee.

Adnams is a family business that has been brewing beer in the south-east of England for over  125 years. At the turn of the millennium, the company felt that the competitive landscape was shifting and it needed to change its approach. "We were a small, slow-moving, top-down autocracy," recalls Andy Wood, CEO at Adnams.

The review of the business environment pointed to some massive changes:

  • There was a lot of consolidation taking place at the top-end of the market, while the specialist end of the market was fragmenting.
  • The big international brewers put their ale brands to one side and focused on lager, while a host of new micro-brewers came into the market, focusing on local production. Adnams sat right in the middle of this, being about thirty times the size of the largest micro-brewer but a long way from the scale of the multi-national beer companies.
  • Fossil fuels were going up in price. The company modelled a number of alternative scenarios pointing to an urgent need to re-engineer how the company used energy in its operations.

While preparing for the long-term changes they could see coming, the company sought to introduce a cultural values programme. "We wanted our values to be real and tangible," said Wood. "We challenged ourselves to move the business forward. We looked at how carbon pricing would impact our business model, the ways in which we managed people, the level of customer service we provide, and our brand positioning."

The outcome of the long-term thinking work continues to drive the business forward today. The company sought to improve its operational efficiency through focus on carbon emissions, which helped uncover inefficiencies, but also opportunities to do things in a new way. "We encouraged our architect firm to push sustainability ideas into the new distribution centre they were designing for us. The innovation in the new centre created a raft of interest for us in the market," Wood recalls.

Adnams learned how to apply sustainable thinking to its product lines when it co-created East Green, a low-carbon beer, alongside retailer Tesco.  A raft of efficiency changes were introduced by careful examination of carbon emissions in the company’s supply chain.

  • Adnams picked the twelve farms closest to the brewery (out of 40 farm suppliers) to supply the hops in order to lower carbon miles
  • It used a bottle that was a third lighter than the normal Adnams bottle
  • The beer was lightly malted in order to save energy
  • The brewhouse is energy efficient, and the storage facility has a natural roof that takes 100 tonnes of carbon out of the atmosphere annually, and needs no artificial heating or cooling to maintain temperature to within 2 degrees centigrade

It was not just carbon and energy savings that came into focus through the initiative. Adnams found that gray water recycling enables the company to deliver a water consumption ratio per pint of beer produced of 3.1, versus an industry average of 8.

The current efficiency journey in Adnams is focused on waste streams. The company produces a waste/moisture/yeast waste stream, known as ullage, which used to be thrown away, and the company had to pay a third party to do it. Instead, it built an anaerobic digester that turns the nutrient-rich waste stream into energy.  The ullage waste stream at Adnams amounts to 5000 tonnes a year, but the anaerobic digester can consume 12,000 tonnes annually. So Adnams now works with local pubs, hotels, retailers and factories to put their food waste into the digester in order to generate bio methane.

The learnings from East Green beer were deeply impactful on the working of Adnams. Today, every beer the company makes benefits from the lessons learned in creating a low-carbon beer.  Plus, the company has a new-found confidence in what it can and cannot do. In 2009, 4% of its beer volume came from new products. In 2012, new products contribute nearly a quarter of company volumes. In the context of a dynamic market where the consumer seeks out products that are new and different, Adnams has a new-found ability to offer innovative products that are differentiated from its core brands.

"We put a big focus on local sourcing," says Wood. "This has given us reputational enhancement in the local community."

The company needed a way to tie together its various long-term programmes, and decided to define a brand that could tell the story of the company. As Wood points out, "We are a heritage brand but we are a modern company." The company’s products reflect that. It has core products that have been in place for decades, while a host of new products reflect the changing trends in the market. "The consumer has become interested in the new and different. Our new and different products showcase what we can do. We are, undoubtedly, in the fashion business," says Wood.

Andy Wood is absolutely clear that the new-look Adnams fits the aspirations of its stakeholders: its customers, suppliers, staff, shareholders and local communities. As he points out, "Trust has been eroded greatly in business. People are very cynical about business. But they are not cynical about businesses where there is provenance and a story to match." The last point resonates with Adnams as a company today.

10 September 2012

Puma seeks a material edge in its supply chain

Puma, the German sports goods company, is searching for alternative materials it can make its products from, shifting from its traditional use of virgin raw materials like leather and rubber. In doing this, it is one of many companies in its industry seeking to find more sustainable ways to source and sell its products. But the journey Puma has taken may well have given it an innovation advantage over its competitors.

The genesis of Puma’s sustainability efforts came from the attacks sports goods companies were receiving from activists regarding their use of Asian sweatshops. The company’s initial attempts to engage with its supply chain were based on the industry playbook, auditing its key suppliers and putting good practice standards in place. But Puma went further than its competition in one respect: it sought to create a single model by which all of the company’s external social and environmental impacts can be compared.

Puma chose to denominate its external environmental, social and economic impacts in monetary terms. As a result, the business is able to make comparisons of these impacts in a holistic way across the organisation. Plus, it gained insights on how to make business decisions, as it was looking at a much wider set of data than it had before.

One of its early lessons from the analysis was that its biggest environmental impacts were in its tier-four suppliers – those who source raw materials from nature. For a company that makes its sports shoes from virgin leather and rubber, this was pretty bad news. Both its key raw materials were competing for scarce planetary resources on many different fronts: land use, water, the greenhouse gas emissions of cattle, deforestation in order to grow cultivated raw materials, food versus non-food cultivation and so on. The list is potentially endless.

Puma’s first attempt at using alternative raw materials resulted in the re-tooling of one of the company’s most iconic products, the “Suede” shoe dating back to the 1970s. What Puma did was to dump the virgin leather and rubber used in the original. Instead, the rubber came from recycled tyres and the shoe’s uppers were made from rice husk, a waste product from rice processing. The result was the Puma “Re-Suede”.

The lessons from the Re-Suede were extensive. Every part of the Puma shoe-making process was impacted. Designers had to learn to work with new materials, which had to be sourced from different suppliers to the ones that Puma usually works with. The rice husk uppers made for a lighter shoe, compared to a leather shoe. As a result, shipping costs were lower, which Puma emphasised with new lightweight packaging for the Re-Suede. Overall, Puma estimates a savings of fifteen tonnes of carbon emissions for every ten thousand pairs shipped. And the consumer needed to be told a different marketing story. Thanks to the shoe’s sustainability credentials, a shoe made from waste materials and which cost less to ship had a higher selling price than the traditional shoe, and consumers were happy to pay that because they were buying the overall story of how the shoe came about.

But the changes could go even deeper. What Puma has done through its environmental analysis is create an environmental profit and loss account, which monetises the impacts that Puma makes on a number of different factors, such as greenhouse gas emissions, water consumption, acid rain and smog precursors, waste and impacts on land use. In effect, these are all going to be negative on a profit and loss statement. By publishing its environmental P&L, Puma is simply stating what had been left unsaid before: most environmental impacts are free to the company, but if these externalities were to be valued, they would reduce the profits of a company in monetary terms.  Puma's intention is to extend this environmental P&L to cover its social and economic impacts as well, some of which will be negative in monetary terms, while others could be positive.

Puma's work on its environmental, social and economic profit and loss statement has been done with assistance from PwC, the consultant, and Trucost, the environmental data specialist (and a Fronesys partner).

Will the world care about Puma's disclosures? Currently, companies are judged on financial profit alone. Many financial analysts have neither the understanding or the tools to know what to do with the depth and breadth of information on offer from Puma. In many instances, the investment horizon for decision-making is the quarterly report. One study found that of all the shares traded on the London Stock Exchange, 40% were held for less than 24 hours. Such short-termism is diametrically opposite to the long-term changes that a company like Puma is seeking to bring in place. 

Many companies are seeking to find alternatives to their raw materials, as Puma is. But Puma has the advantage of a wholistic model that enables it to understand and value its decisions across financial, social environmental and economic dimensions.  Of this stuff will capitalism be crafted in the next hundred years

08 October 2011

Fronesys to conduct deep-dive study on materiality determination

Having recently launched Materiality Futures, a report based on publicly available sustainability impact information from 31 companies, Fronesys is announcing a "deep-dive" shared learning process on the current state-of-the-art in materiality determination. Fronesys globe

The objectives of the study are to:

  • assess the main processes for materiality determination in a company
  • compare materiality rankings from participating companies against published data for 50 separate sustainability issues
  • analyse what sort of metrics can be tracked to improve the process of materiality determination in a company
  • explore how externalities can be measured and incorporated into the risk and materiality determination processes of a business
  • define the state-of-the-art in materiality determination

Interested? Want to talk further about this? Do get in touch: info@fronesys.com