How To Write A Triple Bottom Line For An Alcohol Producer

Transcription

1 Towards a Monetised Triple Bottom Line for an alcohol producer Using stakeholder dialogue to negotiate a 'licence to operate' by constructing an account of social performance David Bent, Forum for the Future EMAN-EU conference, Friday 5 March 2004

2 Outline Introducing Forum for the Future Purpose of this talk A framework for sustainability accounting Context: alcohol and the alcohol industry in UK society Practice: constructing a social account through stakeholder engagement Conclusions and next steps

3 Forum for the Future s mission To accelerate the building of a more sustainable way of life by taking a positive, solutions oriented approach

4 What is Forum for the Future? a sustainable development charity works in partnership with business, local authorities, regional bodies and universities manages a portfolio of leading edge projects provides advice on issues as diverse as climate change, procurement strategies, sustainability accounting and the digital divide communicates what we learn with our partners to a wide network of decision-makers and opinionformers

5 Who am I? David Bent Chartered Accountant, 4 years experience at PricewaterhouseCoopers MSc Responsibility and Business Practice (Bath) Member: CSEAR (Centre for Social and Environmental Accounting Research) Member: ACCA Environment and Social Committee Associate: CARPP (Centre for Action Research in Professional Practice), School of Management, University of Bath Director of Groundwork Southwark

6 Purpose of this talk Disseminate our work on social side of sustainability accounting Engage an academic audience

7 A framework for Sustainability Accounting A working definition of Sustainability Accounting? the generation, analysis and use of monetarised environmental, social and economically related information in order to improve corporate environmental, social and economic performance Extending financial accounting to Triple Bottom Line of economic, social and environmental impacts SIGMA Sustainability Accounting Guide

8 A framework for Sustainability Accounting Traditional Financial Accounting Timing of impact Stock Flow Economic Type of impact Internal Location of impact

9 A framework for Sustainability Accounting Financial Sustainability Accounting: Timing of impact Stock Flow Type of impact Economic Social External Shadow Internal Environmental Location of impact

10 Sustainability Accounting in practice: Working with AlcCo Towards a complete Triple Bottom Line Timing of impact Type of impact Stock Economic Social Flow Internal External Shadow Use stakeholder dialogue to construct these accounts Environmental Location of impact

11 Context: Alcohol and the alcohol industry in the UK Alcohol plays a large and complicated role in UK (and European) society Positives: Woven into the fabric of social life Employment and economic contribution Negatives Significant alcohol misuse and abuse A vehicle to service the systemic disfunctioning of society?

12 Context: Alcohol and the alcohol industry in the UK Alcohol industry Greater regulation? wishes to raise profits Duty on alcohol raised Increases volumes of sale Government More public funds needed to deal with alcohol-related problems more alcohol-related problems Consumers Regulatory pressure Civil Society

13 Practice: constructing a social account through stakeholder engagement Objectives working with AlcCo Means to express progress towards a model sustainability company Describe present vicious circle in financial terms Derive an alternative, generative circle Engage with key audiences Other industry players and shareholders Government Civil Society

14 Practice: what did we do? 1. Establish a social cost of AlcCo s products 2. Stakeholder consultation to allocate the responsibility for those costs Identification of stakeholders Semi-structured interviews Alcohol Stakeholder workshop 3. Use results to engage in system-wide interventions AlcCo s measures Society-wide measures

15 Practice: 1. Establish a social cost of AlcCo s products UK government report Health Care Costs 1,683 Workplace and Wider Economy Costs 6,421 Costs of alcohol-related and alcohol specific crime 11,940 m Total 20,044 Cabinet Office, September 2003

16 Practice: 1. Establish a social cost of AlcCo s products AlcCo: Leading manufacturer of niche tall drinks Turnover of UK business ~ 300m UK alcohol market share ~ 3.5% Apportioning social costs to AlcCo s products: Social cost of alcohol in UK ~ 20b UK Market share ~ 3.5% Apportioned cost ~ 700m

17 Practice: 2. Stakeholder consultation to allocate the responsibility Identification of stakeholders Commercial Interest Consumers Civil Society and Government producers distributors government advertisers & media retailers consumers

18 Practice: 2. Stakeholder consultation to allocate the responsibility Semi-structured interviews What are the social costs of alcohol misuse? What types of initiatives could be taken to reduce these impacts? How can responsibility for these social impacts be allocated across different stakeholders?

19 Practice: 2. Stakeholder consultation to allocate the responsibility Alcohol Stakeholder workshop Main objectives reach consensus on how the social costs of alcohol misuse should be allocated across different stakeholders identify measures that an alcohol producer can take to reduce these impacts

20 Practice: 2. Stakeholder consultation to allocate the responsibility Dealing with alcohol duty: Assume that commercial players and consumers bear duty equally Therefore amount to be shared: Apportionment to products 700m Less Duty paid ( 100m) Amount to be shared 600m

21 Practice: 2. Stakeholder consultation to allocate the responsibility Allocation between consumer and commercial players Stakeholder working hypothesis: split 50:50 Consumers 300m Informed and choose BUT Subjected to advertising and may be addicted Commercial players 300m Create the market for the products BUT Undertake voluntary action to discharge responsibility

22 Practice: 2. Stakeholder consultation to allocate the responsibility Allocation between commercial players: Greatest resonance: relative profit Figures only available on revenue share: AlcCo 19% On Trade 38% Off Trade 39% Distributors 3% Advertisers & Media 1%

23 Practice: 2. Stakeholder consultation to allocate the responsibility Allocation between commercial players: By revenue share: AlcCo (19% of 300m) 57m Ad agencies (1% of 300m) 3m Distributors (3% of 300m) 9m Retailers (77% of 300m) 231m

24 Practice: 2. Stakeholder consultation to allocate the responsibility Summary Social cost alcohol in UK 20b AlcoCo market share 3.5% Therefore, apportioned to product 700m Less duty paid (shared equally) ( 100m) To share among players 600m Of which Consumers: 50% 300m Commercial players: 50% 300m Of which, AlcCo (19% revenue share) 57m

25 Practice: 3. Use results to engage in system-wide interventions From the stakeholder workshop, a series of measures for AlcCo: 1. Responsible marketing and branding 2. Sustainability Business Model: Transparent and accountable Creating opportunities through reducing risk Deepening stakeholder engagement Attracting SRI Exerting leadership and influence 3. Investments in public health initiatives Short-term interventions Long-term interventions

26 AlcoCo: Towards the world s first monetised TBL? 60.0m 40.0m 20.0m Economic Social Environmental Duty Paid Shadow Costs: Avoidance and Restoration Monetary Value.0m ( 20.0m) ( 40.0m) Internal Profit External Damage Costs ( 60.0m) Illustrative and draft figures

27 AlcCo: The shadow and external social accounts Three overlapping initiatives to address social responsibility 1. Responsible Marketing 2. Near-term interventions 3. Long-term interventions Shadow Costs: Avoidance and Restoration ~ 700k? External Damage Costs ~ 57m?

28 Practice: 3. Use results to engage in system-wide interventions Next steps on society-wide initiatives: Creating a virtuous circle for all stakeholders (shareholders, consumers, Government) De-linking volume and profit Creating incentives for alcohol industry to internalise its external costs

29 Conclusions and next steps Remaining questions: How do we account for the positive aspects of alcohol? Is there such a thing as an authentic consensus between actors with very different amounts of power? Are numbers right because of the process which is used to calculate them? Can monetary quantities describe of the qualities of society, or of a sustainable future? Is it possible to be a sustainable business if the system as a whole is unsustainable?

30 Conclusions and next steps Success so far enables a process of learning: 1. Learn how to do better according to the assumptions we carry 2. Learn how to improve the assumptions themselves Bateson, Steps towards on Ecology of Mind engages people where they are uses a familiar, common language engages key decision makers highlights how we currently externalise costs onto others, particularly the future

31 Conclusions and next steps Stakeholder dialogue to construct a social account can be a vehicle for: Re-negotiating an organisation s licence to operate Unpack questions of individual action in a social system Feedback and validation on sustainability initiatives Change power dynamic between different players in society

32 Towards a Monetised Triple Bottom Line for an alcohol producer David Bent e: [email protected] t: +44 (0)