WFA and alcohol/health policy

Blog #13 based on a review of the Winemakers Federation of Australia current website 21/11/13

There are several facets to the policy of the WFA with respect to alcohol and health.  The WFA is the sole owner of the National Wine Foundation (NWF).  That institute was created to celebrate the Australian bicentenary. Winemakers contributed alcohol to a ‘national’ blend that was sold and resulted in a $1million fund available to the industry.  The interest from the fund is applied to promote the responsible consumption of alcohol. 

As a consequence NWF became a part of the overall alcohol and health strategy of WFA.  The strategy has key elements including a statement and presumably an objective to encourage the enjoyment of wines through moderate consumption.  Secondly it encourages wine companies to support that objective.  Finally, it rejects the adverse notion that wine does not command an accepted place in modern society.

The action plan in support of the above objectives includes initiatives to present supporting evidence regarding the social operating licence of wine.  Funds are invested to fill knowledge gaps. There is a commitment to support evidence based programs that address both social and cultural issues leading to alcohol misuse by the minority. It looks to wine companies to support these plans.

Further support for the ‘Responsible Wine Initiative’ includes funding for DrinkWise Australia and the Alcoholic Beverages Advertising Code.  It offers for use by members both a standard drinks and Pregnancy logos as bottle labels.

In addition the Wine and Health section of the Responsible Winery Initiatives site includes an overview of current research into the health impacts of wine and access to the wider research by AWRI on this topic.  There is also available the NHMRC Guidelines to reduce the health risks of drinking alcohol.

In support of the above the WFA has also prepared papers for recent inquiries regarding alcohol advertising, a minimum floor price on alcohol (position taken – no changes to wine taxation), and Foetal Alcohol Spectrum Disorder.

It would be advantageous if the above initiatives could be given teeth eg a budget, identified responsibilities, deadlines, reports and review plus re-commitment to programs that yield positive results.

If you are involved or have an interest in this topic I would like very much to hear from you either at WordPress or ian.powrie@adelaide.edu.au 

  

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TWE: CSR (continued) with strategic comparisons

Blog # 12 the strategic elements in the TWE CSR approach.

In 2012,Treasury Wine Estates issued a five year (Fiscal Years 2012-2017) strategy to cover it’s approach to Corporate Social Responsibility mechanisms, opportunities and risks. It addresses four main topics: sustainability; responsibility; governance and commercial aspects (SRGC). The overall review of developments is through the Global CSR Council comprised of the CEO and 8 senior executives meeting 3 times per year. (The frequency of meetings is a leading indicator of the importance of the topic. Three times per year is on the low side, representing only 1-2% of working days input per year, the main Board meets more frequently than that). The focus of the strategy is given as: programs that relate to communities from the perspective of sustainability; opportunities for global extensions to gain efficiency; long-term commercial sustainability and the impact of agri-environmetal events on communities.

The SRGC structure is also followed in the FY 2013 programs covering CSR, amounting to 11 separate programs in total. In addition there are included in the overall strategic program separate sections for the environment (5 aspects that include: risks; opportunities; quantified results and training on know-how/problem solving), climate change (4 aspects) and vineyard sustainability (4 aspects).

By comparison the Lion Co strategy includes a commitment to educational advances in connection with ‘at risk’ consumption of alcohol and tackles the problem in part through support for the DrinkWise Australia program on drinking and pregnancy. With regard to the same issue of the risk aspects of harmful drinking the Company has initiated ‘The Tomorrow Project in NZ’. Other aspects of its strategy include a ‘determination of material matters’ as have impacted sustainability (5 items eg supplier sustainability)and three items as applying to systems (database creation involving both internal and external information, the analysis and mapping of that data and finally its integration into the range of strategic developments).

A summary of the Wesfarmers strategy dealing with sustainability includes: training the workforce to create value and recognise opportunities; evolution of long-term relationships with suppliers (especially Coles), a focus during FY 2014 on all sustainability issues (presumably with the outcomes reflected in the metrics); responsible sourcing and involvement with local communities.

Australian Vintage Limited (AVL) does not have a separate approach to sustainability (and derivatives) but rather addresses the issues through its risk management practices consistent with ASX Principle #7, Recognise and manage risks. Under that approach the Boards’ responsibilities include strategic guidance over risks that extend to Health and Safety and additional environmental issues. The Board sub-committee on OH&S is also detailed to remain abreast developments regarding environmental issues in general which is accomplished with the ad-hoc inclusion of senior management in those meetings.

It is clear that despite the significant differences in chosen approaches to the range of strategic issues inclusive in sustainability there are common issues that thread their way through management thinking. The clear impression is gained when reading these reports that any approach is still in a formative stage. The management of the issues including developed/developing risks and opportunities, cross-functional requirements, short/long term implications, risk and return, centralised/decentralised developments, general case/speciality issues and the influence of third parties are all present to some degree or other. Nowhere is there an indication of any leadership into new types of strategic thinking such as post greening strategies about which more will be written in future blogs. In the meantime there are still some aspects of the current management challenge to explore.

Comments welcome, via WordPress or ian.powrie@adelaide.edu.au

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TWE: CSR (continued) with comparisons

Blog #11 19/11/13

This blog is based on the Treasury Wine Estate Corporate Social Responsibility Report 2012 with comparisons to other company strategies in the same or similar field.

The previous blog suggested that there was a commonality of approach developing, in what is only a loosely defined area of significance, for business in a strategic context.

Prior to becoming involved in the planning details within an individual company, or, cross company comparisons related to the interpretation of this field of strategy it helps to have in mind some kind of structure. A first attempt to create that structure includes a recognition of approaches that include: culture of an organisation; objectives; strategy; tactics; metrics; control; communications; third party contribution and stakeholders.

Yesterday we examined various corporate cultures as this sets the overall ‘tone’ towards an enterprise becoming involved in this additional aspect of corporate responsibilities, within the context of corporate social responsibilities (CSR, that we already know are but one sub-set or derivative of ‘sustainability’.

Continuing a review of the “aide memoire” listing of topics that provide a guide as to whether all the essential elements of this extended strategy are in place the next topic is:

Objective[s]

TWE has promulgated various objectives, starting with a reference back to 2010 when it was preparing to be spun off by the Fosters Group. At that point the guiding principles were, to lead the wine industry in the pursuit of CSR across the whole of it’s value chain. It also acknowledged a responsibility to protect and enhance people’s safety and development and recognize a connection with it’s host communities. Finally TWE recognised a need to limit the use of natural resources to the minimum needed while using them efficiently.

That rather philosophical approach was replaced for Fiscal Year 2013, when it was indeed a separate publicly listed company on the ASX, by framing objectives under the categories of: sustainability; responsibility; governance and commercial with each objective in turn having several sub-objectives, for example, measurement of the environmental impact of packaging or the development of a leading indicator based on GRI metrics or creating a suite of metrics appropriate to monitor performance.

By contrast Lion set an objective in 2012 of creating a ‘Balanced Business Strategy’ by Fiscal Year 2015 that includes detailing priority targets, for example, working towards a cultural change in both the Australian and New Zealand markets in respect of drinking in a sociable manner. They also committed to support the DrinkWise Australia initiative to educate women with regard to the risks involved with drinking alcohol while pregnant.

Wesfarmers on the other hand developed an approach (2013) to ‘sustainability’ that included topics of health of employees, management of reputation with stakeholders, developing a policy towards taking responsibility for sourced products, making a contribution to communities, minimising the environmental footprint and future value creation.

It is forty years since the UN launched the process of thinking that eventually led to the concept of sustainability. It was about that time that business became engrossed with the concept of strategic planning and the announcement of objectives. It is hard to imagine the launch of either a conventional business or marketing strategy that would be so imprecise in its quantified and qualitative objects as still prevails with sustainability. The challenges of stratagems for sustainability are different to normal financial strategy. The additional costs and real resources associated with developing the infrastructure are considerable. The exercise is bound to be a ‘drip down’ development from the adequately resourced larger companies. Across the spectrum starting at the UN level progress and achievements have been grindingly slow which is disappointing. It remains to be seen what the next stage of strategy has to offer. That issue will be addressed tomorrow.

Comment welcome ian.powrie@adelaide.edu.au or via WordPress

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TWE: CSR

Blog 10, 18th November 2013

After analysing dozens of of specialised annual reports, described in different but linked ways, that typically deal with broader and longer-term challenges, today’s blog is structured around the Corporate Social Responsibilities report of Treasury Wine Estates Group,for 2012. The most recent year published, at the time of writing, http://www.tweglobal.com. It is but one of relatively few examples of this type of report from enterprises in the wine industry (by which is meant the upstream businesses of that industry). This type of report covers a range of business strategies with the themes of Corporate Social Responsibility(CSR), Sustainability, Environmental, Social and Governance opportunities and risks. All of the terms in this aspect of business strategy are loosely defined because they cross the classical boundaries of individual company and hence Board control with a mixture of quantified and qualitative metrics that do not directly represent an economic outcome and where the boundaries of control are weakened and extended. At best the outcomes can be integrated with the financial results with a one step conversion eg gigalitres of water with a cost factor but where the operational control remains in the original data.

Given the loose structuring of the terms, accompanied by their relative infancy of application, then all reporting enterprises struggle somewhat with approaches and reporting and more importantly with perspectives, in each form of temporal, spatial, internal or external and operational or strategic forms. It is the blurring of these boundaries that are also the genesis of the extension of strategic formulation from the fully controlled as with labour costs to include such as supply and value chain responsibilities including transparency and disclosure.

No part of the ‘sustainability’ strategic equation (and all its derivatives) is much beyond forty years old, in a business context, and this raises the further issue of systems development and the construction of data bases, analytics and most importantly experience in managing this new breed of variable that is still incomplete. But patterns are starting to emerge. In previous blogs on this topic covering Lion Company Sustainability and Wesfarmers Group Sustainability their approaches were described in the same fashion as their public reporting ie with culture, objectives and data described and presented. In this blog I shall present the TWE report from the perspectives of features that are also included in the other reports but in different ways. The synopsis of these different approaches could, in time, act as the beginings of ‘an aide memoire’ approach to the subject with pratical case studies to inform the new entrants to this extended form of strategy formulation.

The model presented here has two parts: applied strategic management and alternatively ‘leadership’ in strategems to achieve sustainable trends. The first part includes the following sections: culture; objectives; strategy; tactics; metrics (systems, databases and audits), controls, communications and third party insertion.

Culture
The definition of ‘sustainability’ used by TWE is “…development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (Brundtland Commission, 1987). This approach is stated to be at the heart of everything done at TWE and leads to statements regarding open lines of communications and community engagement. The scope of these very open ended aspects of the culture are, however, returned to normal through the explanation that the Board receives the reports on Corporate Social Responsibilities and related matters including climate change. It would indeed be very difficult for the Board to perform otherwise given it’s fiduciary responsibilities with acknowledgement of the significance of agri-industrial operations.

The introduction to the fiscal year 2013 objectives for CSR itemises the company’s strong links to agriculture and the need for sound management practices to deliver the opportunities represented by long-term sustainability.

By contrast the pursuit of responsible, sustainable growth at Lion Company is characterised through the cooperation of employees and society in protecting the environment. Sustainability is considered to be an integrated core element of a commercial strategy. Accordingly, the senior company strategic committee is named the ‘Sustainability Leadership Group’ and includes the CEO, the three MD’s of the operating businesses, 2 Functional Directors and 13 Senior Managers.

At Wesfarmers the culture leans to the ascetic/Calvinistic end of the spectrum, with ‘Delivering today. Value tomorrow’. The Group philosophy is that ‘Best practice’ and continuous improvement will drive satisfactory returns to shareholders and create value for all stakeholders.

All three companies are major public enterprises, two with a listing on the ASX and the third an Australian affiliate of a Japanese public company. The manner in which each approaches its strategy formulation and formation could not help but be very different yet there are basics that need to be covered irrespective of these different approaches. The similarities are as significant as the differences to strategy and performance.

The other elements will be covered tomorrow. In the meantime if you want to contact me directly my email address is ianpowrie5@gmail.com

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Sustainability strategy at Wesfarmers

Blog #9 based on sustainability reports 2012 and 2013

The key elements of Group philosophy, behind the strategy for sustainability include: ‘best practice management’ and continuous improvement to drive satisfactory returns to shareholders and the creation of value for all stakeholders.  This core statement is extended by the further clarification of ‘Delivery today, value tomorrow’.

The culture of the Group is discernible through:

a) operational improvements that are quantifiable with increasing importance related to third party auditing.

b) full compliance with all appropriate laws and regulations.

c) participation with selected NGO’s and other institutional initiatives eg Carbon Disclosure Project and GRI reporting.

With those issues ring-fenced other potentially disruptive issues such as supply chain performance and relationships with suppliers in general can be brought into focus.  Furthermore, relatively small but significant innovative developments, such as have been demonstrated in horticulture (Urban Ecological Systems Australia) can be added to on-going improvements in the environmental footprint performance.  The sustainability report in general, however, gives the ‘feel’ that the true character of the developing strategic scenario is one of management of predominantly ‘internal matters’ directly related to cost reductions rather than leadership. Indeed that would be consistent with ‘Delivery today, value tomorrow’.

In the overall strategy, as being implemented, there are few obvious gaps.  The breadth of stakeholders and their participation are being increasingly recognised. An independent survey has been commissioned to ascertain third party ideas on issues prevailing. The reported results were, however, rather lack lustre, eg both customers and suppliers “expressed approval or concern”.  I suppose ‘no answer’ would have been even less of a challenge.  The management of the various programs is comprehensive including: continuous improvement; education and training; environmental management; increased integration of systems; operational focus; long-term planning, risk management and sustainability.  Other parts of the strategy as reported deal with the operational aspects, the metrics used, controls and communications.  

As expected from the largest Australian private company employer all the standard routines are in place.  They do not, however, reflect the new research thinking about the goal of sustainability.  Certainly pollution prevention and product stewardship are increasingly under scrutiny, but what of the new science aspects of clean technology or an adaptation of the ‘base of the pyramid’ that gives recognition to the most disadvantaged parties numbering among stakeholders?  In short there is action but the overall challenges that have been set do not seem either sufficiently challenging or capable of delivering future value in any meaningful elapsed period.    

     

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Wesfarmers, Coles, Liquorland Sustainability

Blog #8 source 2012 Wesfarmers Annual and Sustainability Reports.  At the time of writing this blog the 2013 Sustainability report is also available (the 16th in the series).  This blog creates the framework for a review of changes in approach during 2012-2013 that will be covered in blog 9.

Sustainability – key words that characterise the approach: integral to business; innovation; efficiency; performance improvement as expressed through social, environmental and economic results.

The focus of the sustainable business strategies includes: importance of people (200,000 employees); carbon emissions reduction and energy management ; community partnership and investment; reduced environmental footprint and strong economic contribution.

Each of these points of focus are considered starting with:

a) “The Importance of people”.  The Group operates with a combination of “over-arching principles in combination with programs specialised to each business”.

Overall at a Group level 2.2 million hours have been invested in training and development.  Lost time due to injury has been reduced from 12.8% of hours in 2011 to 10.9% in 2012.

Wesfarmers operates a Diversity Policy by which it means: an inclusive culture (eg paid parental leave etc); specific targets incorporated in senior executive key performance objectives and linked to the annual incentive plan; improved management talent reviews with currently a specific focus to provide improved opportunites for women as well as enhanced recruitment practices in general;  pay equity and finally a Reconciliation Action Plan to increase the employment of aboriginal peoples to  reflect the representation of the indigenous population in the broader community.

b) Carbon emissions reduction and energy management.  The Government passed the Clean Energy Law in July 2012.  The Group focus is: legal compliance; investment in energy efficiency, emission abatement and reducing absolute emissions where possible.

In these matters, Group reporting was consistent with the Energy Efficiency Opportunities Act 2006, and the National Greenhouse and Energy Reporting Act 2007.

c)  Community partnerships and investment.  “A healthy business requires vibrant communities”.  Wesfarmers key partnerships include: arts, indigenous development, medical research and education in both Australia and New Zealand.  Total community contributions in cash and kind amounted to $72.2 million a 7% reduction over 2011.

d) Reduced environmental footprint. Performance was reported for a reduction of greenhouse gas emissions by 8% to 5.8 million tonnes in 2012, energy use reduced by 11% to 30 million gigajoules and water use increased by 8% to 13.1 mega litres.

e) Economic Contribution.  “The Group is seeking long-term growth, to support a capacity to generate employment”. In the year to June 2012 the Group paid:  $7156 in salaries, wages and other benefits; $1499 in taxes and roylaties and $1909 in dividends.  The core business is looking to extend on these numbers through improved results through the co-ordination of the supply chain.

In addition to the Sustainability report the Group provides additional information to third party institutions including: the Carbon Disclosure Project; Australian Packaging Covenant and GRI version 3 (granted B+ status).  In addition it is included in the Dow Jones Sustainability Index.

Coles, as one of the major operating businesses of the Group, with revenues in 2012 of $34.1 billion, over 100,000 employees and 18 Million consumer transactions per week through 2260 stores and hotels, lists six current  objectives for business sustainability.  These include: reduce energy consumption (it has installed voltage optimisation technology in 182 stores);  introduced plastic bag re-cycling (23.5 tonnes 2012); invested in staff training; made the opening moves to encourage indigenous employment and engagement; improved the safety time-loss results; invested $21.9 in community projects including the Coles Sports for Schools program and has a program of continuous improvement.

Comment

The reported progress demonstrates a logical and thorough approach to Group Sustainability as befits one of Australia’s largest companies.  The balance of the initiatives is on low risk approaches, exploiting the ‘low hanging fruit’ cost savings programs often labelled as greenmail.  The influence of Government legislation is apparent from the references to the various acts.  In addition the drive towards progress, in certain respects, is given by other third parties such as NGO’s and similar.  The Group is certainly managing the various aspects of the corner stones (or is it ‘pillars’ as the UN originally expressed it) of sustainability including: economic; environmental; social and governance but where are the leadership initiatives?

There is clearly no consideration of developments as suggested by the research leading to ‘The bottom of the Pyramid” (Hart S) or “Knowledge versus Opportunism” (Prahlad C.K) which is an opportunity loss and disappointing. The loss of focus and scope as between the Group report and the initiatives announced by Coles are in stark contrast with developments elsewhere.  The external issues resulting from partnership within the value chains of the alcoholic beverages suppliers are not mentioned despite being acknowledged, for instance by WHO.  Unresolved risks ultimately reduce company valuations.

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Wine Companies CSR programs

Blog #7 Lion Nathan Wines

Genealogy of the company

1840 LD Nathan, New Zealand Trading Company, formed

1900 Dairy Farmers Milk Co-operative formed

1988 Lion Nathan (LN) merged with LD Nathan and Lion Breweries

1998 Kirin acquires 45% interest in LN

2007 Kirin Group acquires National Foods

2009 Kirin Group acquires remainder of LN and forms Lion Nathan National Foods

2011 Name changed to ‘Lion’ with three operational businesses;

Lion Beer, Spirits and Wine Australia

Lion. Beer, Spirits and Wine New Zealand

Lion Dairy and Drinks

2012 Lion acquires Little World Beverages and Emersons

2012 issues a Sustainability Report covering Lion.

In 2012, Lion Beer, Spirits and Wine Australia and New Zealand reported sales of $2327million, and employed 7000 in the two countries.

The Sustainability Report characterises the pursuit of responsible sustainable growth as involving three elements: “our people; our society and our environment”

Also in 2012 Lion conducted its first ever Community Engagement Study.  During the course of the study it canvassed the views of stakeholders (12 various types eg farmers and governments) on a range of topics including employment, marketing, sustainability, leadership, sociability and well being.

Corporate Policy has determined that sustainability will be included as part of overall strategy development and will remain embedded in the commercial operations rather than treated separately, as a separate staff exercise.

The ultimate responsibility for progress with this policy rests with the ‘Sustainability Leadership Group’.  The Group reports to the Board, the CEO is a member as are the three Managing Directors of the different businesses, the Group Operations Director, the People and Culture Director plus 13 senior managers.

The Policy is implemented through, ‘Responsible Business Practices’ with key cultural concepts of:  responsibility, ethical, long-term growth and risk management.

Resultant actions include: responsible consumption, publication of the facts and encouragement of ‘a positive drinking culture’.  The company invested, during 2012, more than $4.5million, plus an unstated amount for the cost of the overheads. In total the final investment might be as high as 10% of operating profits (that were over $600million for the year).  The expenditures as published were disbursed through 34 institutions/projects involving long-term national and local community partnerships and included brand initiatives as well as workplace donations (these latter spread over the causes of cancer research, relief, medical health, heart research and animals).

Clearly for Lion this is a significant program and as such reflects the Kirin Group policies that have been in place for several years.

A key positioning statement is that “alcohol misuse and consequences are a threat to the business not a benefit”.  It is considered that the reasons behind any misuse are complex.  Based on advice from medical and educational experts the company focus is on education and targeted intervention to change the negative aspects of the current drinking culture.  Specific instances of action in support of this approach include support for education, research and cultural change programs.  More specifically the company instigated the joint development of the ‘Cheers’ Website in New Zealand.  This initiative was achieved with the co-operation of NZ Winegrowers, Distilled Spirits Association and the New Zealand Brewers Association.  The website which is aimed at changing the habits of binge drinkers, in the first 5 days, attracted 4000 visitors and 20046 page reviews.

Comment

Progress in whatever form especially as it impacts society through public health initiatives or reduced environmental footprints, which are also part of this program, are valuable as indeed is the on-going economic contribution to society of a profitable company.

The company support for education, research and cultural change has already enjoyed a favourable initial impact through the joint development, with other sectors of the alcoholic beverages industry, that aims to address the binge drinking culture.

Let us not, however, kid ourselves.  The website responses are a siren’s call rather than hard evidence of success.  A review of research programs by, for example, the Centre for Alcohol Policy Research, http://www.capr.edu.au, did not elicit any information regarding policies in respect of research methodology, nor any information on databases and management.  It is difficult from the published listing of research projects to determine whether it is at an equivalent stage of database and analytical experience to WHO with its supporting institutions (of which CAPR is one)!

A recent article in the New York Times suggested that there were concerns in that country that much of the educational research had failed to identify false positive and negative outcomes.  The research programs in themselves, it was argued, were set up on an inadequate basis. The whole issue of research experiments reproducibility  was taken a step further in an article in the Economist on October 19th 2013.

If you are interested or involved in any aspect of the above and would like to make direct contact as opposed to a comment I can be contacted on ian.powrie@adelaide.edu.au

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