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Food for thoughtCorporate social responsibility for food and beverage manufacturers

Food for thought Corporate social responsibility for food and beverage manufacturers 2

Aim of this report

While corporate social responsibility (CSR) is increasingly acknowledged as an importantbusiness issue, there is still relatively little practical guidance available to help companiesrespond to the challenges it presents. Tools that do exist tend to apply to any companyand can therefore be somewhat generic; there is very little guidance that addresses thespecific CSR challenges faced by companies in specific industry sectors. This report aimsto identify what CSR means for companies in the food and beverage sector. It isintended to help companies in the sector to define or evaluate their CSR strategies, withthe emphasis on activities that respond to sector-specific challenges rather than genericCSR solutions.

This report is intended as aresource for individuals at thestrategic, policy-setting level todevelop CSR strategies in food andbeverage manufacturingcompanies. Research draws largelyon the experiences of majormultinational companies, and thefindings can also apply to nationalcompanies.

1: Introduction

‘Food for thought’ examines the societaldilemmas and opportunities arising fromthe mainstream business activities ofcompanies in this sector both in terms ofdirect effects as well as externalperceptions. It is the result of acombination of desk-based research andinterviews with key stakeholders in thesector (see appendix). The desk-basedresearch drew on publicly-availableliterature produced by both companiesand relevant multilateral organisations.The companies are representative of someof the world’s largest food and beveragemanufacturers, producing some globally-recognised brands. Four of thesecompanies were featured in the FTSEGlobal 100 list in October 2001.

The relevance of CSR for the food andbeverage sector

The food and beverage business has beendescribed as ‘a minefield of cultural andeconomic sensitivities’1. For many reasonspeople have very strongly-held views aboutwhat they eat and drink. This creates auniquely complex set of responsibilities forcompanies in this sector, in terms ofproduct marketing and changing eatinghabits among consumers, and increasinglyin relation to the conditions under whichagricultural commodities are produced andtraded.

This report will focus on multinationalfood and beverage manufacturers, whohave a key role to play in many of themajor CSR issues facing the sector,

primarily due to their relative size in thesector and well-known brands.

At least three major trends are having anincreasingly significant impact on thesebusinesses. These trends make theimportance of socially responsible businesspractices in the sector a compelling one:

• The global population is expected toreach 7.5 billion by 20202. At thesame time, availability of land forfarming is on the decline and water foragriculture and other uses isincreasingly scarce. The capacity of theworld’s food production system to meetthe needs of this expanding populationis being increasingly challenged.

• Economic globalisation, combined withadvances in food packaging, processingand storage technologies has givencompanies the ability to move high-quality food and beverage productsaround the world quickly. At the sametime, companies are beginning to viewvalue chains in a broader and moreholistic way, raising questions aboutwhere their wider social responsibilitieslie. How companies manage thesevalue chains is critical to the success oftheir businesses, from both anoperational efficiency and reputationperspective.

• The communications revolution hasplayed a crucial role in facilitatinggrowth in world trade and globalbranding, but at the same time has

1 Food and drink industry survey Financial Times, 19.9.012 Global Food Outlook: Trends, Alternatives, Choices IFPRI, 2000


1: Introduction pg. 2

2: Drivers and challenges pg. 4

3: Managing opportunities pg. 10for engagement

4: Conclusions pg. 13

Acknowledgements pg. 15 and bibliography

Contents of this report given dissenters the means tocommunicate and organise themselvesrapidly and with potentially devastatingeffect on company brands andreputations.

The next section looks at what is drivingCSR in the sector what major challengescompanies face. The third section offers aframework for CSR engagement bylooking at how leading companies in thesector are addressing these challenges. Thefinal section draws conclusions andproposes a management process, based onstandard management systems, whichcompanies can follow to engage in CSR.

Food for thought Corporate social responsibility for food and beverage manufacturers

Food and beverage manufacturingoperations tend to be decentralised, with acentral policy-setting headquarters that takesa strategic overview but has little directoperational responsibility. Many goods areproduced in conjunction with joint venturepartners who can range from small, locally-owned businesses to other large globalmanufacturers.

When these companies establish operationsthey tend to have a significant and verylong-term impact on local economies. Onemanifestation of this is what has beentermed a ‘multiplier effect’ due among otherthings to the sourcing, distribution andpackaging requirements of themanufacturers. An independent study ofThe Coca-Cola Company, for example, hasshown that for every direct job created bythe company in China, ten jobs werecreated indirectly4.

Who are the stakeholders driving CSR inthe food and beverage sector?

One way to examine the drivers of CSR isthrough considering the needs of differentstakeholders. Many companies in this sectorhave explicitly defined their stakeholdergroups in their social reports. UsingKenneth Goodpaster’s definition5 of astakeholder as any group or individual whocan affect or is affected by the achievementof the organisation’s objectives, and drawingon the stakeholder groups identified byindividual food and beverage companies, a

stakeholder ‘map’ emerges as shown overleaf.The relative significance of differentstakeholder groups varies according to thecircumstances of individual companies.

Our interviews and desk research made itclear that a prime driver for CSR was that itshould simply be how companies do goodbusiness. For many it represents acontinuation of policies that have been inplace for many years, but may not have usedthe language of CSR.

Employees are a primary group drivingCSR. The success of any CSR policy isdependent to a large extent on how awareemployees are of social issues created bytheir business operations, and on how theythemselves are treated. Employees also playa major part in determining the publicperception of the company, since it isthrough their direct experiences that theirfamilies and local communities come toform impressions of the company.

Employees have been significantly affectedin some companies as a result of therestructuring referred to above. In 2000,nearly 30,000 jobs were lost among some ofthe companies reviewed in this report, withone company reducing its workforce by21% and another planning to lay off 25,000workers over the next five years . Whilerestructuring can be an importantcomponent of remaining competitive, it canhave reputational repercussions. Leadingcompanies handle retrenchment with

3 Food and drink industry survey Financial Times 19.9.014 Economic Impact of the Coca-Cola System on China Peking

University, Tsinghua University, University of South Carolina,August 2000

5 Business Ethics and Stakeholder Analysis Kenneth Goodpaster,1993

4

2: Drivers and challengesWhat are the characteristics of food and beverage manufacturers?

Many food and beverage manufacturers have grown rapidly in the last decade, for two mainreasons. Firstly, the opening up of previously restricted markets in countries such as Chinaand Russia has vastly expanded the consumer base for food and beverage products -especially in areas in which processed goods had not been widely available. This hasprovided significant growth opportunities for companies in a sector otherwise characterisedby maturity, low growth, aggressive competition and stable revenues.

Secondly, the frequency of mergers and acquisitions between food and beveragemanufacturers has led to a smaller number of companies, of increasingly global reach.Acquisitions worth almost $100bn were announced by major companies between March2000 and August 20013.

This section gives an overview of thesector, looks at CSR drivers andchallenges for food and beveragemanufacturers. It then looks at theimplications for companies.

Food for thought Corporate social responsibility for food and beverage manufacturers

Drivers of CSR: a stakeholder summary

Our public commitment tothese issues has given retailersconfidence in our products andthey in turn are able to assureconsumers that the product wasproduced with due concern for thesocial and environmental impact.

“

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extreme sensitivity, considering communityimpacts and paying special attention toensuring that individuals find employmentelsewhere, often offering emotional orfinancial support and training.

Many employees are represented by well-established trade unions, often under theumbrella bodies such as the InternationalUnion of Food Workers (IUF). In certaindeveloping countries and also in someWestern European countries includingFrance, where the current socialistgovernment is publicly supportive ofworkers’ rights, trade unions can play a veryactive role in the lives of food and beveragemanufacturers. In parts of Central andSouth America, trade union leaders havedemonstrated a willingness to mount publiccampaigns about alleged abuses, even thosethat appear relatively minor.

Another key stakeholder group is civilsociety, which includes major opinionformers, the media6, pressure groups andothers who create a perception about thelevel of CSR engagement in companies.This is especially true in the current widercontext of ‘anti-globalisation’, wherecorporations can become scapegoats for

endemic social problems. A growth inactivist NGOs, combined withtechnological developments in the media,has pushed the exposure of corporatebehaviour on to news channels, the pages ofpopular newspapers and the internet.NGOs can be campaigning organisationsand/or work collaboratively with companies.Cross-sector partnerships between privatecompanies and NGOs, while they canrequire very careful management7, can serveto improve both performance andreputation, resulting in mutual benefit.

One example of the impact that civil societycan have on company activity is when ahealth risk is associated with a product. Inthese cases, whether the risk is perceived orreal, the consequences can be dramatic - itcan lead to reputational damage, productboycotts or expensive withdrawal of anentire product batch. There are significantregional differences over which issues are ofgreatest concern. An interesting case is thatof genetic modification, which had beenapplied to some agricultural products in theUSA for over ten years. When geneticallymodified food was introduced in certainEuropean countries, however, there wassignificant public resistance to the idea.

Quotes from interviews 1

6 For a discussion of the role of the media in CSR, see GoodNews and Bad: The Media, Corporate Social Responsibility andSustainable Development Sustainability, UNEP and Ketchum,2002

7 See Managing Partnerships PWBLF 1998


This in turn led to consumer pressure backin the USA, with "Starlink" corn beingsubject to a high-profile Greenpeacecampaign. This demonstrates howconsumer pressure in one part of the globe -catalysed by NGOs and pressure groups,and amplified by global communicationsmedia - can quickly lead to pressure in otherparts of the world.

The genetic modification issue is indicativeof a wider set of considerations that stemfrom the environmental impact of thissector’s business activities. For example, thefood system is heavily dependent on crudeoil due to the high transportation demands.As well as the possibility of causingpollution, this dependence could leavecompanies vulnerable should widelyavailable and inexpensive crude oil suppliesbe depleted8. The knock-on effects ofglobal warming on food production anddistribution chains could be extremelysevere.

Retailers, who themselves face pressuresfrom consumers and civil society, are anincreasingly significant driver of CSR inmanufacturers as their purchasing powerincreases, and along with it their influenceover the quality and type of products thatthey purchase. Many major retail chains inthe UK, for example, are members of theEthical Trading Initiative and have madehigh-profile commitments to corporatesocial responsibility. Manufacturerssupplying these retailers are being asked todemonstrate that the goods were producedunder specified social and environmentalconditions.

Ultimately companies have to respond toconsumer needs, such as the growth in so-called ethical consumerism. Examples ofthis include organic goods, ‘GM-free’ goods,or, more recently, goods whose ingredients

have been sourced without the use of childlabour. Purchases of food products based onethical considerations rose by 24% between1999 and 20019, and although thiscurrently represents a tiny market share, itseems symptomatic of an increasinglyimportant trend. However, it is a point ofsome contention as to what constitutes an‘ethical’ purchase. For example, the viewamong consumer activists and campaigningorganisations in Western Europe thatgenetic modification is unethical hasclouded the issue in near-hysteria, which hasmade informed and reasoned debate aboutthe subject extremely difficult. One waythat manufacturers have responded to theemergence of ethical consumption isthrough raising awareness of the complexityof the issues via corporate communicationchannels. Some current mechanisms forthis process are not without drawbacks,however (see box, left).

Exploring the context for CSR: the valuechain

At the risk of some simplification, thediagram below can help to reveal thecomplexities of meeting the needs ofdifferent stakeholder groups. The next partof this section considers some of thechallenges and dilemmas raised byconflicting stakeholder needs.

A value chain comprises those stakeholdersinvolved in converting an agricultural cropinto a packaged product available for sale toconsumers. At each stage along the chain,various activities are undertaken that canadd value to the product10. The diagrambelow shows the different social challengesarising at various parts of the chain:

• Sustainable agriculture• Ethical trade

Label Babel

Eco-labelling and social labellingare market-based mechanismsdesigned to demonstrate thatproducts have been sourced withdue regard for social andenvironmental consequences. Aneco-label may describe a productas ‘environmentally friendly’, asocial label may give someguarantee about the labourconditions under which theproduct was produced. However,unlike product content or safetylabels, claims that the item hasbeen produced withoutexploitation or abuse are difficultto verify. While labelling can carryuseful information about aproduct’s contents, a consensus hasyet to be reached on theeffectiveness of using labels todesribe the social or environmentalquality of a product, and groupscalling for this kind of labelling donot have a uniform requirementfor information.

CSR challenges across the food and beverage value chain

8 Eating Oil: Food Supply in a Changing Climate Sustain/Elm Farm Research Centre, November 20019 Taking Flight: the rapid growth of ethical consumerism New Economics Foundation report for the Co-operative

Bank, October 200110 Value Chain Partnership Project: Lessons from the Kenya Tea and Indonesia Cocoa sectors Resource Centre for the

Social Dimensions of Business Practice, 2002


• Food safety• Nutrition, lifestyle and marketing

Underlying all of the challenges is theimperative of obeying the laws of thecountries in which they operate (asignificant challenge in countries whereregulatory enforcement may be lacking) andoperating to a uniform and consistentstandard in an unstandardised world. Whencompanies rigorously adhere to their ownhigh standards applied throughout theirworldwide operations, it can make asignificant - if unquantifiable - contributionto social development.

Food and beverage value chains vary to asignificant degree depending on thecommodity in question11. Broadlyspeaking, however, at the start of the chainis one of two production arrangements.One is the smallholding, or family farm,which produces commodities such as cocoain the Cote d’Ivoire and coffee in CentralAmerica and Africa. The second is thecommercial farm, which producescommodities such as tea in Sri Lanka andbananas in Central America. The degree ofinfluence that large food and beveragemanufacturers have in promotingsustainable agricultural practices thereforevaries according to the agriculturalcommodity and production processes inquestion. For example, for crops that tendto be produced in large plantations, it maybe easier to raise social and environmentalstandards, largely because it is far morepractical to communicate with workers on asmall number of large farms than onhundreds of thousands of smallholdings,where the value chain is more complex dueto the aggregation of goods by multiplelayers of brokers and processors. Indeed,significant inroads have been made inraising standards in the production of tea(e.g. the Tea Sourcing Partnership in theUK) and bananas (e.g. Chiquita/RainforestAlliance’s ‘Better Banana Project’).

For commodities produced onsmallholdings, working conditions can varyconsiderably. There may be scope forimproving the social and environmentalconditions on less developed smallholdings:this is discussed in the ‘sustainableagriculture’ and ‘ethical trade’ sectionsbelow. Food safety is of course paramountthroughout the entire value chain ascompanies seek to ensure product integrity.Finally, at the consumption end of the chaincompanies can engage in CSR throughnutrition, lifestyle and marketing initiatives(see below).

The next part of this section looks at thesechallenges in more detail, while illustrativeexamples of how companies are responding

to them are shown in the table on pages 13and 14.

Sustainable agriculture

In a speech to the International Food PolicyResearch Institute (IFPRI) in 2001,Professor Jules Pretty of the University ofEssex talks of a more sustainable form ofagriculture as one which "seeks to make thebest use of nature’s goods and services asfunctional inputs … by integratingregenerative processes ... into foodproduction processes. It minimises the useof inputs that damage the environment orharm human health and builds on farmers’knowledge and skills … to make productiveuse of social capital."

Why does it matter to companies?

From a food and beverage manufacturer’sperspective, the argument for engagement inthis area can be simply stated: without longterm access to agricultural raw materials,goods cannot be produced in the long term.However, developing sustainable agriculturalpolicies is made complicated by the differingneeds of different groups. For example,farmers tend to be risk-averse andpromoting more sustainable practices is avery long-term commitment, requiringsignificant dedication from companies andother key stakeholders for often littletangible short-term benefit. Also, it canrequire trade-offs and compromises fordifferent stakeholder groups. One exampleof this kind of trade-off is that increasing theyield of land may increase the workload offarmers, or more specifically, farm workers.In the case of family smallholdings, thiscould include children, whose educationmay suffer as a result of the extra workload.

Despite these challenges, increased pressureon land and other natural resourcescombined with an expanding globalpopulation make progress in this areaimperative. Small, incremental changes canbe made through the company’s corebusiness activities and pressure can broughtto bear in public policy arenas (i.e. workingwith research institutions, governmentagencies or multilateral organisations) topromote a more sustainable model ofagricultural production.

Some useful resources:• The International Food Policy Research

Institute: www.ifpri.org. IFPRI providesin-depth analysis exploring theimplications of a more sustainable modelof agricultural production by providingpolicy guidelines and analysis.

• The United Nations’ Food andAgriculture Organisation: www.fao.org.

11 See, for example, Value Chain Partnership Project: Lessons from the Kenya Tea and IndonesiaCocoa sectors NRI/RCSDBP, 2002

The FAO works to promote a cross-sector approach to sustainableagriculture.

• The Centre for Environment and Society,University of Essex:www2.essex.ac.uk/ces/. Conductsresearch into ‘natural and socialrelationships that crosses traditionalboundaries between disciplines andsectors’.

Ethical trade

Food and beverage companies develop closerelationships with the organisations whosupply them with agricultural produce.This can result in raising standards amongsuppliers. For example, companies whowork directly with farmers to ensure thattheir agricultural produce is of a certainquality and standard may as a consequenceimprove working or environmentalconditions associated with the agriculturalproduction.

Recently the notion of ‘ethical trade’ hasevolved, which aims to ensure thatconditions within mainstream value chainsmeet basic minimum standards, thuseradicating the most exploitative forms oflabour. It is distinct from, butcomplementary to, ‘fair trade’, which aimsto strengthen the economic position ofmarginalised producers in value chains12

(for an example of fair trade, see box, left).

Until now much public debate about ethicaltrade has centred on the use of codes ofconducts. However, while the use ofindependently verified codes of conduct canplay an important part in raising social andenvironmental standards among agriculturalproducers, they may not be the mosteffective mechanisms in value chains whereformal, organised labour is not the norm.

The focus must be on a commitment to thehighest possible standards in mainstreambusiness practices; ‘ethical’ or ‘fair’ trade canbe useful distinctions so long as they are notused to suggest that mainstream practicesare necessarily unethical or unfair.


Companies can benefit from a long-termand stable supply of agriculturalcommodities. In the current internationalfood system it can be difficult for manyplayers in the chain to look to the longterm, which can result in negative impacts –particularly for smallholders.

When purchasing commodities that havebeen produced on smallholdings, majorfood and beverage manufacturers are buying

raw materials and ingredients from literallymillions of individuals, who are not formallyrepresented. In many areas, a small numberof companies directly or indirectly control asignificant percentage of trade in certaincommodities. These companies do not havea direct relationship with smallholders atfarmgate, which makes it more difficult forthe companies to have a direct impact onrevenues, conditions or incentives for thesmallholder. However, they do have closerelationships with those intermediariesdirectly upstream in the value chain – thatis, local traders, exporters and importers -and companies can work with them toexplore opportunities for raising social andenvironmental standards further down thechain. Manufacturers can ask for guaranteesfrom these intermediaries that certain socialand environmental standards are being met,in turn the intermediaries pass these criteriafurther down the chain and this can resultin a positive impact on the originalproducer. For example, if a manufacturerasks for a guarantee from importers thatgoods have been produced without the useof certain pesticides, this criterion must thenbe applied by the importers in the next stageof the chain, and so on back to the source.

This is clearly a long-term process, whichrequires a degree of trust betweenorganisations who may not traditionallyhave explored common concerns. If anumber of companies and key organisationswere to work collectively in this area, thusspreading possible risk, there may be ways toraise standards for smallholders.

Some useful resources:• Ethical Trading Initiative:

www.ethicaltrade.org. A cross-sectororganisation promoting codes of conductto improve labour standards indeveloping countries.

• The International Federation forAlternative Trade (IFAT): www.ifat.org.A global network of over 160 fair tradeorganisations in more than 50 countries.

• Rainforest Alliance: www.ra.org. Aconservation NGO using independentcertification programmes to improvesocial and environmental performancefor crops (including bananas, cocoa,coffee and citrus fruits).

Food safety

The globalisation of the food trade, alongwith increased urbanisation, changingconsumer patterns and changing methods ofagricultural production have contributed toan increased risk of foodborne disease13.

The Codex Alimentarius, a global food code

Food for thought: a guide to corporate social responsibility for food and beverage manufacturers 8

Rural producers and financialfutures: a fair trade approach

Rabobank believes that by 2003,up to 10% of the world’s $4trillion market in agriculturalcommodities will be tradedonline1. This has seriousimplications for rural producers,who will have even less access tothe international marketplace. AWorld Bank international taskforce on commodities is currentlylooking at ways to providesophisticated market tools to ruralagricultural producers. Producerspurchase a form of insurance (a‘put option’) from an internationalbroker. If the price of thecommodity decreases, the farmeris effectively insured because theprice has been guaranteed by thebroker. If the price rises he losesthe option but gains on the price.The scheme has already beenpiloted with some success amongcoffee growers in El Salvador andTanzania, with the put optionscosting between 3 and 12% of theminimum price of the crop2.

_____________1 The Economist, 23.3.002 How not to come a cropper Andrew

Bounds, Financial Times 12.10.01

12Social labels: Tools for Ethical Trade Simon Zadek, SanjivLingayah and Maya Forstater, NEF, 1999

13Report of a Food Safety Strategic Planning Meeting WHO,2001


established by the FAO and WHO, hasbecome the single most important referencepoint for food safety in the internationalfood trade. It has produced the Code ofEthics for International Trade in Food,which companies can adopt to ‘protectconsumers’ health and promote fair practicesin the food trade’14.

Recent developments in this area include theproposed establishment of an independentEuropean food standards agency is currentlyin discussion by European governments.Also, in May 2000, a group of globalretailers established the Global Food SafetyInitiative in order to provide a globalbenchmark for food safety standards.Chaired by Royal Ahold, the Initiative isnow supported by more than 40 majorretailers.


The international expansion of markets hasbeen rapid, but political and legislativeframeworks governing food safety have notexpanded at the same rate. Recentoutbreaks of foodborne disease, such assalmonella, listeria, and aflatoxin, have led topublic concern about food safety. If a well-known brand name is linked tocontaminated products, however indirectly,its reputation is at risk. In response, wherepossible, companies are developing anextremely sophisticated understanding of thevalue chains of products in order to ensurethe traceability of product ingredients bothforward to customers and back to thesource.

Some useful resources:• Codex Alimentarius:

www.codexalimentarius.net Supportedby FAO and WHO, an internationally-recognised code of conduct forpromoting food safety.

• The Food Business Forum:www.ciesnet.com Includes informationon the Global Food Safety Initiative.

Nutrition, lifestyle and marketing

Leading food and beverage manufacturershave an important contribution to make inthe area of promoting the importance ofhealthy lifestyles at a time when eating anddrinking habits are becoming increasinglyimportant factors in public health (see box,left).


Food and beverage manufacturers produce awide range of products to meet the needs ofa diverse consumer base. Some high-calorie

products (for example certain types ofchocolate, alcoholic beverages, or carbonateddrinks) could be described as ‘luxury’ goods,in that people generally purchase themprimarily for leisure or enjoyment ratherthan to meet basic nutritional needs. Greatsensitivity is required when marketing thistype of product, as a major food servicesretailer recently discovered15.

Although it is in the interest of companiesthat consumers understand the importanceof a ‘well-balanced lifestyle’, there isunderstandable public resistance to thenotion that companies themselves perform adirect ‘educational’ role. Even if companieswere to do so, an international survey ofopinion leaders on issues such asenvironment, human rights and healthfound that NGOs are trusted by nearly 60%of respondents, versus 15% for governmentand media and only 10% for business16.

Some useful resources:• World Health Organisation:

www.who.int/nut/index.htm Includesthe nine goals of the ‘World Declarationof Nutrition’

• Food and Agriculture OrganisationNutrition division:www.fao.org/es/ESN/NUTRI.htm Thisdepartment of the FAO works acrosssectors of society to promote nutrition

The four CSR challenges described in thissection are presented separately for the sakeof clarity but there are clear overlaps andlinkages between them. For example, in thearea of food safety, companies aredeveloping increasingly sophisticatedtraceability mechanisms for their products.Currently companies are able to guaranteethe quality and safety of the food and in thefuture they may even be able to identify thewider environmental and socialcircumstances under which commoditieshave been produced, with possibleconsequences for their involvement in otherissues.

The success of any individual endeavour inthe area of CSR is contingent on a holisticapproach that looks across the entire valuechain, and is part of a wider commitment topromoting responsible business practiceswithin the company. In common withmanaging other aspects of corporateperformance (such as quality, health andsafety etc.) these issues are best addressedwithin a coherent management framework.Before identifying some of the responses tothe CSR challenges described in this section,the diagram below is an illustrativeframework that may be drawn upon inorder to manage the process ofimplementing policies to manage thecompanies’ impacts on society.

14www.codexalimentarius.net15See, for example, McLibel: Burger Culture on trial John Vidal,

Macmillan, 1997 16StrategyOne, Edelman PR Worldwide, 2000

Gro Harlem Brundtland, Director-General World Health Organisation

Proper nutrition andhealth are fundamental humanrights.

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Deteriorating lifestyles

A WHO consultation found thatobesity is now so common that itis replacing more traditionalpublic health concerns such asundernutrition and infectiousdiseases as one of the mostsignificant contributors to illhealth, especially in developedcountries. The consultationconcluded that the fundamentalcauses of the obesity epidemic aresedentary lifestyles and high-fat,energy-dense diets. _____________1 Obesity: Preventing and Managing theGlobal Epidemic (Consultation Report) WHO, 1997


A management process for the implementation of CSR policies in food and beveragemanufacturers

The individual steps in this process aredeliberately somewhat generic as it isrecognised that there is a variety ofsubsectors within the overarching food andbeverage sector. Companies can adapt theprocess according to their situation, and the‘thought bubbles’ leading off some of thesteps start to explore the company-specificissues.

Any significant culturechange in large companies takesenormous effort and consistentleadership, based on realalignment and understanding ofexpectations.

“

”Quotes from interviews 2


3: Managing opportunitiesfor engagement

This section shows how companiesare responding to the challengesoutlined in the previous sectionthrough their different levels ofcontact with society.

How far are food and beverage manufacturers engaging in CSR?

While leadership companies in the sector have developed an extremely sophisticatedunderstanding of their role in society, others have made comparatively little progress inthe area of CSR. In terms of the management process outlined at the end of the lastsection, companies are at different stages of implementation.

Opportunities for engagement

One way of understanding theopportunities for CSR engagement is toconsider the levels at which busines canimpact society. At each level, business hasan opportunity to maximise potentialbenefits and to minimise potentialnegative impacts, as illustrated in themodel below. A company has mostinfluence over its core business activities,

and less so over its value chain and in hostcommunities. At the advocacy and policydialogue level an individual company canhave relatively little direct influence, butwhen companies work together in policydialogue, for example through tradeassociations or with governments ormultilateral institutions on issues such asgenetic modification or sustainableagriculture, they can have a significantinfluence.

Adapted from Partnerships for Sustainable Development PWBLF, UNEP and Tufts University (1994)

Opportunities for CSR engagement in food and beverage manufacturers

The table on the following two pagesillustrates how leading companies in thissector are addressing the challengesoutlined in the previous section. Itprovides examples of how companies areresponding to these challenges at each levelof contact with society. The examplesillustrate how the challenges can be turnedinto opportunities for companies to createvalue for shareholders while contributingto social progress. Some of the initiativesare ad hoc responses to local needs, whileothers emerge as a result of sharingexamples across networks between countryoffices. The table does not imply thatthese examples are the sum total of theCSR activities of the companies surveyed.Many of these companies haveimplemented innovative governancestructures, accountability mechanisms,stakeholder consultation processes, andother CSR leadership practices, but theseshould be considered as part of a broadercommitment to CSR rather than solutionsto sector-specific challenges.

As the table demonstrates, there is a widerange of initiatives that leading companieshave adopted. Some of the more effectiveapproaches have been undertaken inpartnership with NGOs or multilateralorganisations, as a partnership approachbrings complementary skills and insightstogether to address complex issues. Suchexamples may be replicable elsewhere – atleast in terms of the process ofengagement, if not the specifics of theinitiative. For example, experiences gainedabout identifying and working with localpartners can be shared between businessunits.

Effective internal communications –whether via the company intranet, trainingprogrammes, or internal trasnfers – play acritical part in this knowledge-sharingprocess. Exposure visits where staff aretaken to see aspects of the value chain atfirst hand can also be useful. For example,a marketing manager who normally has nocontact in their day-to-day job with thesourcing of agricultural products, could begiven first-hand insight into the conditionsin which commodities are grown. He orshe may then be motivated to explore waysin which their marketing skills could beused to address some of the issues raisedby this experience.

Individuals charged with responsibility forthe development of CSR in theirorganisations are discovering the cross-functional nature of the work. Forexample, human resources departments arecalled on to respond to the training needsarising from policy developments in thisarea. Research and development functions

within the companies can take sustainableagriculture or nutrition into account whendeveloping new product lines. Somecompanies in this sector have vast researchfacilities and thus have a huge impact onnutritional science and other research areasthat are involved in getting a product ontosupermarket shelves.

While the case studies represent the tip ofthe iceberg and there are many moreexamples to be found, there needs to be areal sense of urgency in the context of thethree trends outlined in the introduction –continued population growth anddeclining availability of land; theinternationalisation of the food productionsystem and a broader view of value chains;and the communications revolution, globalbrands and global dissent.

As many companies are increasinglyrecognising, open dialogue betweenstakeholders to find solutions is vital:superficial mistrust between groups mustnot provide obstacles to discovering areasof common concern.


I find myself talking tojust about every departmentinternally to progress theseissues. At the end of the day itaffects everyone in theorganisation. ”

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Quotes from interviews 3

All of Chiquita’s owned bananafarms in Latin America (71,000acres) have achievedcertification to the BetterBanana Project standards of theConservation AgricultureNetwork (CAN), a coalition ofNGOs led by the RainforestAlliance. The mission of CAN isto transform tropical agriculturethrough certificationprogrammes designed to‘safeguard biodiversity, conservewildlife-rich tropical habitats,reduce pollution, and ensurehealth, productiveenvironments for people’.

Unilever has developed a seriesof indicators to measure theirprogress in sustainableagriculture, looking at issuesincluding biodiversity, energyand water usage, social/humancapital and the local economy.

Unilever formed a partnershipwith the World Wide Fund forNature in response to the risingglobal demand for fish, in thelight of the fact that about 70%of the world’s fish stocks areoverexploited or fully fished. In1997 the Marine StewardshipCouncil was established as anindependent, self-financingbody to implement thisobjective. Unilever hascommitted to source all its fishfrom fisheries certified to MSCby the year 2005.

Cadbury Schweppes has drawnup a ‘human rights and ethicaltrading’ policy which is backedby a rolling programme puttingin place processes forcompliance within all parts ofthe business, including thesupply chain.

In addition to achievingcertification an all its ownedfarms, Chiquita has influencedindependent growers supplying30% of the company’spurchased bananas to achievethird-party certification to thesocial and environmentalstandards of the RainforestAlliance’s Better BananaProject. Chiquita also workswith its growers to implementthe safest possible programmesfor pesticide use.

Diageo works with dairyfarmers in Ireland to providetechnical and managementtechniques to increase suppliesof cream for Baileys. Help wasgiven to introduce very tightquality controls and fine-tuneyear-round performance,bringing many farmers up to EUbest standards.

Mars works in conjunction witha German development agencyto improve the sustainability ofcocoa production in SouthWestern Cote d’Ivoire.Initiatives include farmereducation programmes toenhance husbandry techniquesand ecnourage therehabilitation of abandonedand degraded land, improvedorganisation of farmer co-operatives, as well asprogrammes to improve thequality of the cocoa crop.

Nestlé works with rural farmersin India to ensure that milkurns are sterilised before use.The farmers, often uneducated,do not understand the purposeof sterilisation so the companyprovides information onbacteria, disease transmissionand basic hygiene. This raisesstandards among the farmersand safety procedures for thecompany are simplified.

South African Breweries isworking with its businesspartner in China to developcompany technological andenvironmental standards whichmeet international levels andupgrade water treatment plantsat four breweries which meetthese standards. As well asimproving standards among itssuppliers this will give thecompany a competitiveadvantage.

In August 1999, Unileverbought the Beijing TeaCompany and with it the Jighuabrand of jasmine tea. Thecompany identified that 80% ofthe tea samples received wereunusable due to pesticideresidues higher than the safelevels permitted by the Chinesegovernment. After acquisition,Unilever identified bulksuppliers who could meet thenational standard, offered thema premium price for a qualityproduct which they in turnpassed on to the tea growersand provided technicalassistance on reducingpesticides and detectingresidues. These improvementsmeant that by the end of 1999,80% of samples received metthe standard, rising to 95% bymid 2000.

Diageo’s South Africansubsidiary, Guinness UDV SouthAfrica, distributed disposablebreathalyser kits throughselected retail outlets in all nineprovinces of the country duringa recent festival season to raiseawareness of the dangers ofdrink-driving.

South African Breweries’ Polishsubsidiary KompaniaPiwowarska has adopted a 14-point voluntary code onmarketing and promotions,especially to protect minors,which goes beyond legalrequirements.

Coca-Cola is providingmarketing expertise to developpublic awareness andinformation campaigns forUNAIDS and international andlocal partners across Africa.

The Nestlé research centre isworking with the InternationalFederation of the Red Cross andRed Crescent Societies (IFRC) tofind the ‘optimal food basketfor emergency relief’. They arecurrently working together todevelop software to determineand evaluate the nutritionalcontent of food programmesduring emergency relief, as wellas the nutritional status of thetarget population and trainingfor IFRC staff.

In some developing countries,systems of self-regulation inadvertising are beingestablished. Unilever has takena lead in establishing the GhanaAdvertisers Board, where in1999 a Unilever executiveserved as its vice-president. Thecompany sought best practicefrom Europe and other parts ofAfrica to shape its approach toadvertising.


Key challenge

Opportunities for CSR engagement in key challengesVa

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Nestlé South Africa works withlocal NGO EcoLink to providepractical training to ruralproducers to ensure thesustainable use of naturalresources. For example,women are shown how to linetrenches with litter such ascans and cardboard and usedecaying plant matter forcompost for seedlings, thusproducing vegetables without

using fertiliser.

As part of its publiccommitment to sustainableagriculture, Unilever supportsthe Living Lakes programme.Coordinated by the GlobalNature Fund, this programmepromotes voluntaryinternational collaborationamong organisations that carryout projects benefiting lakes,wildlife, and people. Itsprogrammes include thepromotion of the exchange ofenvironmentally friendlytechnology for use bybusinesses and others, sharinginformation and experience inraising awareness of the needfor lake protection, andgenerating internationalpolitical support for lakeprotection.

The UK’s Ethical Trade Initiativeis a cross-sector organisationwhich has since 1998 beenworking to promote theadoption of codes of conduct invarious industry sectors,including the food andbeverage sector. While atpresent food and beverageretailers are the mainrepresentatives of the sector, theorganisation would be keen toexplore opportunities to workwith manufacturers. Chiquita isan active supporter of an ETIpilot programme in the bananaindustry in Costa Rica, the aimof which is to compare theeffectiveness of various modelsof social auditing.

The Federation of Food andBeverage Industries (FIAB) inSpain, whose membershipincludes The Coca-ColaCompany and Nestlé, runs an‘open doors’ exercise in itsprocessing plants. This hasbeen established to showconsumers that the companiesapply the strictest health,hygiene and safety controls aspart of the sector’s commitmentto transparency and toguarantee food safety.

Through its chairmanship of theInternational BananaAssociation Science Committee,Chiquita has led collaborationwith U.S. regulators to speedapproval of safer pesticides andto increase industry baselinestandards for food safety. Asenior Chiquitsa executive alsochairs the United Fresh Fruitand Vegetable Association,which, in the light of recentanthrax scares in the U.S.m hascoordinated a prdocue industryreview and discussions withregulators regardings controls toprotect against intentionaltampering of food products.

Nestlé in Brazil is teachingchildren aged 5-14 abouthygiene and nutrition, so thatthe children may pass on theknowledge to the communitiesin which they live.

Diageo has worked with otherleading alcoholic beverageproducers as well asgovernments, teachers and thepublic health community toidentify practical solutions tocommon problems associatedwith the negative effects ofalcohol. ‘Social AspectOrganisations’ have beenestablished in 30 countriesworldwide, including thePortman Group in the UK andthe Century Council in the USAto promote sensible drinkingand help prevent alcoholmisuse.

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4: Conclusions This report provides a foundation from which to start thinking about what CSR meansfor food and beverage manufacturers, and it offers suggestions for those companies thathave developed a more sophisticated understanding of their role in society. What followsis a summary of the main points in the report. We hope that further value will comefrom the companies and other stakeholders sharing experiences in these non-competitiveareas. Through the process of researching and writing this report the Forum hasdeveloped a perspective on the issues addressed and would be happy to work withmember companies in the food and beverage sector to explore its implications for theirbusiness.

Conclusions about CSR in this sector are as follows:

• Broadly speaking, companies havealways operated responsibly, althoughrecently they have begun to articulateand communicate their engagement inthis area through practices such assustainability reporting and increaseddialogue with a variety of externalstakeholders.

• Many companies have a set of corebusiness principles or values thattheoretically govern all of thecompany’s activities. To be trulyeffective, however, these statementsmust be commonly understood andadhered to by employees throughoutthe company. Ensuring that this is thecase throughout all internationalbusiness operations can be complex, –especially in joint ventures, workingwith subcontractors and in otherbusiness partnership arrangements.However, understanding how (and if )these values and principles shouldapply in these business arrangements isan important issue, as the point belowmakes clear.

• One future driver of CSR in this sectorarises from the trend towards theoutsourcing of manufacturing. Thereare two main consequences of thistrend: lay-offs and reputational issues.Lay-offs often follow a restructuringprogramme; how companies handleenforced redundancies is a crucial partof their social responsibility. Brandreputations can be at risk ifsubcontractors do not adhere to the

same international standards(particularly in terms of labour rightsand product safety) as themanufacturers.

• Leading companies have made someinroads in the areas of ethical trade andsustainable agriculture individually, butcould do more through collaborationbetween companies and organisationsfrom other sectors – especially giventhat companies in the sector alreadycollaborate in certain areas such as thedevelopment of marketing codes andthe sharing of distribution channels.Although this is a long-term process, itcould benefit the companies through amore stable, long-term supply ofcommodities, and impact ruralproducers, who would have improvedworking conditions.

• One current major focus of work forleading companies in this area isworking with experts from externalstakeholder groups to develop metricsto measure and demonstrate progress inthe area of CSR - particularly in thecase of sustainable agriculture.

• In increasingly health-conscioussocieties, where eating patterns amongconsumers are changing rapidly, foodand beverage manufacturers areincreasingly aware of not only thenutritional value of their products, butalso how they are marketed andconsumed.


Acknowledgements from theauthors

We would like to thank the following people who were interviewed and providedextremely useful insights into a sector that they know far better than we do:

Amanda Bowman and Geoffrey Bush, Diageo; Eric Churchward, Robert Harland andCarol Martel, Coca-Cola; Mandy Cormack, Unilever; Sue D’Arcy, Mars; Neil Makin,Cadbury Schweppes; David Hudson and Hilary Parsons, Nestlé; Alison Ramsden, SouthAfrican Breweries; Phil Watts, Fair and Ethical Trade Consultant; Dan Rees, EthicalTrade Initiative; Pauline Tiffen, World Bank; Jeff Zalla and George Jaksch, ChiquitaBrands Inc.

The views expressed in this report are those of the authors and do not necessarily reflectthe views of the individuals interviewed, nor of the organisations they represent.

Thanks to the following IBLF colleagues for their help and support in numerous ways:

Jane Nelson, Julian Parr, Jacqui MacDonald, Sharon Parr and Robert Davies for theirinput into the content; Jo Burleigh for proofreading; and Joe Phelan and Nick Claridgefor their design input.

Dave Prescott, Alok Singh and Aidan DavyInternational Business Leaders Forum, February 2002

The following publications and websites have been particularly useful, and we are extremely grateful for theircontribution to our thinking:

• Chiquita Corporate Responsibility Report 2000 Chiquita Brands International, 2001 <www.chiquita.com>

• Diageo Corporate Citizenship Guidelines Diageo, 2001 <www.diageo.com>

• FERGUSON, C, (August 1998) A review of UK company codes of conduct. DfID Social Development Division<www.dfid.gov.uk>

• NELSON, Jane (1996) Business as Partners in Development. PWBLF <www.csrforum.com>

• NELSON, Jane (1998) Building Competitiveness and Communities. PWBLF <www.csrforum.com>

• Nestlé in the Community Nestlé, 2001 <www.nestlé.com>

• Global Trends 2015: A Dialogue About the Future with Nongovernment Experts CIA, 2000 <www.cia.gov>

• South African Breweries Corporate Citizenship Review South African Breweries, 2001 <www.sabplc.com>

• The Economist and The Financial Times, May 2001- October 2001 <www.economist.com> <www.ft.com>

• UDV Polska: Our Economic, Social & Environmental Performance Diageo, 1998 <www.diageo.com>

• Unilever Social Review 2000 Unilever, 2000 <www.unilever.com>

• Resource Centre for the Social Dimensions of Business Practice: <www.rc-sdbp.org>

Bibliography

About the IBLF and its sectoralwork

The Prince of Wales InternationalBusiness Leaders Forum is a not-for-profit organisation with a mission "topromote international leadership inresponsible business practices – tobenefit business and society". Sinceits inception in 1990, the IBLF hasworked to build cross-sectoralpartnerships, promote individualbusiness leadership and create theright enabling environment, forresponsible business practices toflourish. The IBLF now has amembership of over 60multinational companies, engagingwith a mix of senior executives andoperational managers on a range ofissues – for example: human rights,corporate governance and health –in over 30 countries.

With its sectoral work, IBLF has setout to understand the distinct socialresponsibility issues, challenges andimperatives faced by companiesoperating in certain business sectors.IBLF is currently working on reportssimilar to ‘Food for thought’ for anumber of other sectors. For furtherinformation on IBLF and its sectoralwork, please visitwww.iblf.org/sectors or [email protected]

Food for thought:Corporate social responsibility for food and beverage manufacturers

© IBLF 2002

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