The complexity of an interconnected world

Transcription

1 The complexity of an interconnected world How sustainability and corporate responsibility can help enhance stakeholder value in the beverage industry

2 Managing the web of interconnected issues The beverage sector is facing unprecedented global challenges, including: Soda taxes adopted in Mexico, US and parts of the UK Oceans expected to hold more plastic than fish by 2050 Bottled water expected to be the most consumed beverage worldwide by 2017 Consumer preferences moving from carbonated drinks to still beverages Required transparency with companies being held accountable for clear labeling, responsible marketing and responsible drinking How can a beverage company prosper while managing these challenges? Our perspective on material issues in the beverage value chain: Recently, the industry has converged on the material issues in the beverage sector those issues that can affect an organization s ability to create value over time. Experience has taught us that these issues should be managed using systems that explore the interconnected nature, impacts and value of each issue for your company, as well as your stakeholders and society. At EY, we consider this to be the Total Value approach. The approach to maximizing Total Value can come from multiple actions, including operational improvements, public policy and stakeholder engagement. 1

3 Leveraging Total Value to manage material issues EY s Total Value approach supports Integrated Reporting 1 and Long Term Value 2 reporting and decision making so companies can create more value for shareholders and society. Total Value aims to measure and value the most material aspects of value creation which are often hidden or go unmeasured. How would your organization answer these questions: Are you driving value for your most important stakeholders employees, customers, shareholders? Are you making decisions without understanding what you impact and what impacts your operations, such as global trends, stakeholder concerns and social results? Is your sustainability function executing the right initiatives? Are these initiatives yielding the results anticipated? Do any initiatives have unintended negative impacts? How do you measure environmental and social impacts internally and externally? How do you use that information to make better business decisions? Raw materials Packaging production Manufacturing and bottling Distribution Consumption End of life Energy and fleet fuel management* (and greenhouse gas emissions) Water management* Health and nutrition* Product labeling and marketing* Material issues Packaging life cycle* Environmental and social impacts in supply chain* Responsible drinking and marketing* Packaging life cycle* Food safety Corporate ethics Community investment Operational safety *Topics from Sustainability Accounting Standards Board (SASB) sector guidance,

4 Applying Total Value thinking Nutrition and climate Consumers worried about caloric intake moved to buying smaller containers. Beverage companies responded with mini sized cans and other small vanities. While this response fares well with consumers, the smaller packaging has a higher emissions profile than traditional larger packaging. Total Value example Value change the focus to Example of managing business decisions through Total Value thinking convey how the bottler Illustrative example: business decision to move toward smaller packaging would use the concept - of Total Value thinking + Economic Increased packaging cost per beverage (-) Increased margin per beverage (+) Increased revenue (+) Net increased margin Social Decreased calories per beverage increases better for you beverage options (+) Net increased social impact Environmental Increased packaging weight per beverage (-) Increased emissions intensity per beverage (+) Net decreased environmental impact Total value created Value created from this decision Economic + Social + Environmental = Total Value created 3

5 Applying Total Value thinking Safety and emissions Managing an organization s material issues often requires considering trade-offs; however, in some cases you can find a win-win. For example, as beverage companies focus on driving efficiency in their delivery network, for each mile taken out they may realize a reduction in emissions (fuel savings) and in potential accidents while driving increasing employee and community safety. Water and women The time-consuming task of collecting water frequently falls to women and girls, leaving them unable to finish their education or find other opportunities. One beverage organization is committed to tackling this issue through simultaneously empowering women and providing improved access to safe water to people in Africa. 4

6 Opportunities and challenges Realize cost savings and protect the environment WHY: Through innovative and strategic process improvements in energy and water management, companies can drive improvements in cost, efficiency, greenhouse gas emissions and water conservation. Communicate the economic, social and environmental value of your organization WHY: The beverage industry is frequently under scrutiny for water usage, responsible product use and a broad web of issues. Controlling your story helps protect your license to operate and increases trust. How we can help EY s Manufacturing Energy Management Solution (MEMS ) strategy* This strategy considers improvement opportunities across three dimensions price, volume and time for energy and water. MEMS connects energy and water consumption and the associated costs to products, equipment and processes, providing a detailed view of energy and water use across the enterprise and within each manufacturing site. With MEMS, companies can: Measure utility usage at each unit and assign it directly to a production bill of materials; managing energy and water as production materials permits manufacturers to treat utilities as a controllable cost rather than as fixed overhead Improve energy and water usage measurement information which can lead to changes that save money and reduce environmental impact EY s Total Value methodology Our Total Value approach helps companies gain a more complete picture of overall company operations and of the value being created to assist in decision-making and risk assessments. Total Value analysis can improve your ability to communicate your value to regulators and the communities in which you operate. *EY s Manufacturing Energy Management Solution (MEMS ) strategy is powered by GE Digital. 1 Environmental, health and safety. 5

7 Optimize grants and incentives WHY: Save direct costs of improvement programs by leveraging grants and tax incentives for environmental and social initiatives. Reduce risk by focusing on safety for both people and food WHY: As product portfolios change, new risks may be introduced to your value chain. Proactive health and safety management supports compliance and reduces risk, allowing companies to save direct costs and potentially reduce insurance costs. Sustainable sourcing and waste management WHY: Uncertainty of supply and volatility in sourcing costs for recycled content create direct operational challenges while external pressures from stakeholders and potential regulation increase. EY s tax credit advisory services EY s EHS 1 and food safety transformation services EY s Circular Economy team and approach EY can help identify grants and available tax incentives relevant across the beverage value chain: Distribution alternative fuel tax credits, grant funding to repower or replace diesel vehicles Manufacturing R&D tax credits for manufacturing process improvements Packaging recycling equipment tax credits Refrigeration utility rebates for energy efficiency; government grants for energy efficiency improvements We track changes in global incentives and carbon global markets to help our clients anticipate and prepare for changes. We perform health and safety assessments across the value chain, looking at both process and program elements. Identifying the risk points is the first step, then we assess changes in your portfolio and in local and national regulations to analyze whether your safety process and programs are mitigating new and anticipated risks. Efficient, consistent safety processes help organizations deliver products in a manner that is safe for workers and consumers. We can help you integrate safety and other sustainability risks into your overall company risk profile. We help to develop circular economy strategies and business models to control the cost of sourcing while meeting your stakeholder expectations. Our team keeps track of emerging compliance and regulation requirements allowing our clients to stay ahead of risks in this area. Our circular economy global team can help clients navigate the interconnection between sustainable sourcing, use of recycled content, packaging innovation, recycling and takeback. 6

8 Thought leadership Total Value helps enable better informed decision-making by measuring and valuing the most material aspects of value creation, which are usually hidden or go unmeasured. Contact us Maria Rey-Marston Principal, Ernst & Young LLP Advisory PI - Global Beverage Champion maria.reymarston@ey.com This report provides a strategic framework for proactive energy management, leading to cost savings, limiting energy market exposure and enabling the transition to clean energy. Christine Hagler Executive Director, Ernst & Young LLP Climate Change and Sustainability Services chris.hagler@ey.com Leading organizations have learned that proactive EHS management and sustainability programs can drive compliance and reduce risk and also make money and save money. Dr. Jane Carter Ingram Senior Manager, Ernst & Young LLP Natural and Social Capital jane.ingram@ey.com This report demonstrates why traditional reporting models for a growing number of business are being challenged to keep pace with a redefinition of value and a growing desire to see beyond conventional financial data. Dr. Maarten Dubois Senior Manager, EY Belgium Waste Management maarten.dubois@be.ey.com Click on image to access full report. EY Assurance Tax Transactions Advisory About EY EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US Ernst & Young LLP. All Rights Reserved. US SCORE no US ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice. Certain services and tools may be restricted for EY audit clients and their affiliates to comply with applicable independence standards. Please ask your EY contact for further information. ey.com