Embedding Sustainable Sourcing in Corporate Strategies: Unilever Tea

Transcription

1 Embedding Sustainable Sourcing in Corporate Strategies: Unilever Tea Professor Ralf W. Seifert IMD IMD Institute for Management Development. Not to be used or reproduced without permission.

2 Sustainable development has been talked about for 30 years: Timeline on the attention to environmental issues The Brundtland Our Common Global Commission Future warming. (WCED) Montreal Protocol Scientists agreement sustainable (ozone depletion) development 1991 NGGIP (guidelines national GHG inventories) Earth Summit (UNCED, Rio de Janeiro) UNFCCC WBCSD (involve business in sustainability issues) Triple Bottom Line (TBL) (Elkington) 1995, Nestlé: 1 st envir. report ISO 14001, ISO st version GRI: organization Kyoto Protocol adoption (global warming) 1998 ISO GHG Protocol Initiative 1999 DJSI launch 1998, Dell: 1 st envir. report 2000 GRI: 1 st standards Life Cycle Initiative (UNEP &SETAC) ISO World Summit on Waste Electrical UN World GHG Prot. REACH, PAS 2050 Copenhagen Sustainable ISO 14001, ISO &Electronic Summit (NY) Corporate EU directive (assessment Summit Development Equipment 2 nd version MDGs Std. 1 st ed on chemicals LC GHG) (Johannesburg) (WEEE Directive Kyoto Protocol life cycle thinking into force GRI: 2 nd version EU Restrictions on Hazardous Substances (RoHS) Directive 2004, Dell: Sustainability report EU ETS 1 st trading period 2006 GRI G3: 3 rd version 2007, Nestlé: Creating Shared Value report 2008 EU ETS 2 nd period 2013 EU ETS 3 rd period 2

3 And public awareness as well as reporting is increasing 3 Media Incidence of the phrase climate change in the British press EMS Environmental Management Systems 200,000 ISO certificates ISO certificates 1,600 Sustainability Reporting GRI reports certified (Global Reporting Initiative) GRI reports Nb. articles , ,000 50,000 Average annual growth = 42% 1, Avg.annual growth = 51% Sources: ISO Environmental Management: Joana M. Comas

4 Yet, price pressure continues to increase in food supply 4 Food expenditures as a percentage of disposable personal income Demand for cheaper food: % 23.4% 9.5% Sources: enditures_tables/ Roundtable for Sustainable Palm Oil:

5 Unilever Initiative: Leapfrogging to Mainstream Public commitment to source 100% Rainforest Alliance CertifiedTM Tea by 2015 All tea used in PG Tips & Lipton Yellow Label tea bags in Western Europe sourced from Rainforest Alliance Certified farms within three years of announcement All Lipton tea bags sold globally from Rainforest Alliance Certified farms by 2015 Video: Transforming the Tea Supply Chain

6 Unilever Case (A) Discussion Questions 6 What lessons can be learned from the Unilever initiative to shift its entire supply to tea from Rainforest Alliance CertifiedTM farms? What are the opportunities, the challenges and risks posed by this initiative? Video: Interview with Paul Polman, CEO

7 A leadership issue and a supply chain issue 7 How do you execute such an initiative making sure that you can balance supply and demand across regions during the rollout?

8 THE CAMPAIGN Rainforest Alliance certified packs Short movie to inform and entertain Promo packs 2 nd phase TV Senor Al TV announcement Take a sip National press, radio and PR

9 Rainforest Alliance Overview Founded in operating budget of $30.1 million USD Nearly 300 staff worldwide

10 Rainforest Alliance Programs Agriculture Sustainable farm management certification 1.35 million acres certified in 24 countries United Nations funding to certify 10% of global coffee supply Forestry World s largest certifier of forest lands Certifies to the Forest Stewardship Council (FSC) standard 131 million acres certified in 66 countries Tourism Working with the UN to improve the sustainability of tourism industry Climate Verifying forest carbon and developing methodologies for agricultural carbon.

11 Rainforest Alliance Certified: The Gold Standard of Certification Comprehensive Standard built on the three pillars of sustainability: People, Profit, Planet. Stakeholder input: conceived in the tropics by farmers, environmentalists and scientists; monitored by local auditors local indicators make it real. It helps producers drive cost efficiencies, higher yields and crop quality; gives them access to value added markets to meet consumer demand for responsibly produced goods Applicable to large plantations and small holdings. Rainforest Alliance certifies farms and producers; not companies 10 Principles 94 criteria 14 CRITICAL criteria Requirement scores for Certification: 100% on critical criteria 80% overall score 50% minimum score in EACH of the 10 principles

12 Sustainable Agriculture Network Standards Management System Conservationists Industry Ecosystem Conservation Wildlife Protection Water conservation Working Conditions Occupational Health Community Relations Integrated Crop Management Soil Conservation Scientists Communities Integrated Waste Management

13 Rainforest Alliance Certified Tea Origins: 2007

14 Rainforest Alliance Certified Tea Origins: 2009

15 Rainforest Alliance Certified Tea Origins: 2014+

16 Unilever Case (A) Questions 16 Can Unilever rely on the Rainforest Alliance to monitor ongoing compliance with certification over time? How exposed is Unilever if the standard for the certification is raised? Video: Interview with Mercedes Tallo, Rainforest Alliance Manager

17 The Rainforest Alliance Tea Journey 17 Started in 2006, now covering: Kenya Tanzania Argentina India Indonesia Malawi 87,000 hectares 125,000 tonnes 170,000 workers

18 Kenya Tea Case Study First certification in Aug 09: Momul Factory (KTDA) 2 other factories certified since Total of 38,000 smallholders, whole farm approach to certification 8,800 hectares 15,000 tonnes tea 16,000 Personal Protective Equipment sets sourced by KTDA 25,000 tea bushes in-filled 40,000 native trees planted

19 Kenya Tea Case Study Good agricultural practices, safe use of agrochemicals and Farmer Field School (FFS) training 5-15% increase in yield in 4 pilot factories through better plucking and pruning techniques Project in place to scale-up the FFS methodology to cover every single factory in 2010, reaching 530,000 smallholders over the next few years Kenya Tea Development Agency: set up a new national microfinance institution to provide PPE and other inputs to farmers

20 Argentina Tea Case Study 20 Argentina is the largest exporter; 40% of production to US market 6,500 small growers; not organized 40K ha tot. production and 7K ha. certified; 2012 projection = 14K ha. Conservation of biodiversity hotspot Misiones, Amazon region Creation of biological corridors; protection critical habitat for native species of jaguar, tapir, anteater Empowerment of women; higher paying jobs Intercropping with yerba mate (complimentary growing cycles)

21 Unilever Case (B) 21 Put yourself in the shoes of Mark Birch and Michiel Leijnse. What could you do to ensure that the demand surge coming from competitors getting on the bandwagon would not feed on Unilever s certified supply base. Video: Interview with Marc Engel, CPO

22 Tetley Initiative Member of the ETP Tetley Blue Rainforest Alliance Certified in the UK and Canada by All Tetley brands 100% Rainforest Alliance Certified by

23 Ethical Tea Partnership ETP: an industry association of 20 tea companies A thriving tea industry that is socially just and environmentally sustainable

24 Summary of Lessons 24 Sustainability is seen by some analysts as one of the biggest business opportunity of the 21st century. It is clearly a supply chain issue (90% of the potential). Engage stakeholders, suppliers and employees. Embracers see benefits: Cost reduction and improved visibility in the SC Assurance of supply Brand reputation and right to operate Customers are not (yet) willing to pay for eco-friendly products. How? Execution must balance supply and demand.