Wait – not our beer?
Breweries are already being affected by climate change, and the effect is likely to increase in coming years. Producing a product that consists of mostly water, using water-intensive crops and energy, and then shipping it all over the world is going to have a pretty considerable impact on the environment. And when you’re the company producing 457 million hectoliters of it per year, you’re going to be a little worried.
Formed upon the 2008 merger of Anheuser-Busch and InBev, AB InBev is the world’s largest brewer by a large margin. With $43.6 billion in revenue in 2015, the company operates in over 50 countries and sells its products all over the world. Its brands include favorites like Budweiser, Corona, and Stella Artois. Producing beer at such massive quantities has obvious implications on the environment, and company of this scale would clearly be concerned about in terms of consumer perception, impact on the bottom line, and broader corporate social responsibility.
Water is perhaps the most obvious issue they face. It takes an average of 5 barrels of water to produce 1 barrel of beer. In a world where water shortages are affecting communities all over the globe, consumers are increasingly becoming conscious of products that consume large amounts of this resource. The importance of consumer perception is clear to AB InBev – just visiting their website one quickly notices one of their six home navigation tabs is labelled “Better World”, dedicated to sustainability.
Beyond perception, there are also very real economic implications that climate change will have on the company. More frequent and severe droughts are being attributed to climate change today, which impact the raw materials AB InBev relies on. US production for hops, a key raw material for beer, is concentrated around the western part of the country– with 91% coming from Washington, Oregon and Idaho. The drought in the western states has become a severe problem for a crop that can demand large amounts of water. This has the potential to result in a crop shortage and increase prices. Barley, the other agricultural input to beer, is experiencing the same water shortage problem.
AB InBev is keenly aware of these issues, and already working on solutions. Through Voyager Plant Optimization (VPO), their operations management system, they’ve built in environmental incentives deep into their processes. Their commitment includes compliance above the legal standards, incorporation of environmental targets in performance evaluations, and accountability at the individual level.
(Image Credit: AB InBev)
They also have developed specific initiatives: Their Global Barley Research program aims to create more efficient barley cultivation, with goals of up to 40% less water usage. They also have irrigation research projects with similar goals underway, and have developed a network of weather stations called AgriMet in order to provide farmers with information that can help optimize their water usage. Among their corporate social responsibility projects, they started a campaign in partnership with Water.org that provided about 800,000 people with clean water, in addition to a project to preserve important river basins in Brazil .
Of course, there’s a lot of work ahead and additional opportunities to be pursued. One option would be to work with farmers to incentivize the diversification of US hop growing to other states. This could help reduce the strain on the west and allow water to be diverted to other crops, while mitigating the risk of a shortage in the face of a drought. They could also invest in new crop yield technologies. An example would be working with a cutting edge research firm like Indigo Agriculture to leverage microbiomes in increasing efficiency. Additionally, there’s the option of contributing to longer term sustainable water sources. Water shortages are likely to be a major problem on a global scale going forward, so larger scale technologies like water desalination could be a good investment for the future.
AB InBev’s aggressive Environmental Policy closes with the following line: “Neither production goals nor financial objectives shall excuse non‐compliance”. Let’s hope to see more companies adhering to this principle in the coming years.
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