What does sustainability mean to a business? What role can and should procurement play in defining it and acting upon sustainable initiatives? As we talk of the procurement evolution over the last decade, we often speak mostly around technology and a business-wide recognition that procurement is more than the back-office function of yesteryear. But where does sustainability come into the equation? For Budweiser APAC, which is part of AB InBev, operating as the largest and a fast growing beer company in Asia Pacific the brewing, importing, marketing, distributing and selling of more than 50 beer brands is achieved through a supply chain and procurement ecosystem that has sustainability embedded deeply throughout. “All of our procurement activities revolve around cost, supply security, quality, innovation and creating efficiencies,” explains Jan Clysner, VP of Procurement and Sustainability. “Running right alongside that is our sustainability agenda, which we try to embed as much as possible in our procurement strategies and our business going forward. One is connected with the other. It’s not that procurement is a different animal from sustainability. They’re very closely connected and going forward, I see the connection growing further and getting closer and closer. Indeed our suppliers are key actors to enable the change we want to bring to drive our sustainability agenda. ”
AB InBev has been a global steward for sustainable action for many years and recognises its leading position to leave the world a better place for future generations and in 2018 the company launched its most ambitious sustainability 2025 goals yet.
These goals include; Smart Agriculture (100% of direct farmers will be skilled, connected and financially-empowered), Water Stewardship (100% of communities in high stress areas will have measurably improved water availability and quality), Circular Packaging (100% of products will be in packaging that is returnable or made from majority recycled content) and Climate Action (100% of purchased electricity will be from renewable sources; and a 25% reduction in CO2 emissions across value chain).
For Clysner and Budweiser APAC, procurement is key to achieving these goals. “At the end of the day, we produce and we sell beer. It’s as simple as that, and we’re supporting the process,” he says. “But it has been much more than just supporting. We are truly part of the business, being part of the discussions, the decision-making and the strategy including sustainability to ensure we still produce and sell beer 100+ years from now.
“Ultimately, in order to achieve our goals as a business, we need the right suppliers who will allow us to grow.”
Looking at the APAC market, Clysner highlights that a large proportion of suppliers had to be developed from a supply security, quality and innovation perspective. This is where procurement’s much more integrated role within the business comes to the fore as he recognises that it is about how procurement can support that it’s brands, both producing and selling them, are doing the right things.
“The brand is the face towards consumers. It’s about doing the right things with our brands, also from an environmental point of view and bring purpose to our brands with our sustainability agenda,” he says. “We have a responsibility as a big entity, we use resources and we want to use them in the most efficient way, and at the same time have a positive impact on our society and environment.”
This idea of moving beyond simply doing the right thing \ and into a position of having a positive impact is something that is extremely close to the heart for Clysner, and with a consumer base that is becoming increasingly switched on to the environmental responsibilities of businesses, the ‘right thing’ can easily be lost in translation. “Doing the right thing sounds so easy on paper and indeed it can be,” he says. “It’s about recognising your responsibility and looking at the levels within your value chain and implementing the right techniques in order to deliver on the promise of real sustainable change.”
The challenge of working towards sustainability targets is that these targets and the very definition of sustainability is fluid, as it shifts for each and every part of the procurement and supply value chain. Budweiser APAC works with companies in paper and cardboard, glass, agriculture – all very different raw materials with their own process in place. Their individual understanding of and capabilities around sustainability is different. Clysner adds; “That’s where we aligned all our four key goals. Water and wheat are the key ingredients for our products, which are our beers, so we look at agriculture and we look at water. These products require packaging and therefore we must consider the circle of packaging. One way or the other, you need packaging material, you need to carry it, bring it to your consumers, and then of course, there’s our carbon footprint. Our carbon footprint stretches right from the farmers, all the way up to and including the refrigeration required to deliver it cold to our consumer.
“The targets are close to our core business, and there we can truly make a difference now, and continue to do so going forward.”
As a global entity, AB InBev has businesses the world over. Some of these businesses are further along this sustainability journey than others, some are just finding their feet. All of them are driven by the same vision and this huge network with varying degrees of maturity on this journey is something that Clysner can tap into in order to identify and apply best practices in his own region. This comes down to the way in which the business is structured. Sustainability in procurement is not spoken of or handled as an independent category, instead Clysner has people in his team that are procurement and sustainability focused that have either a regional or countrywide responsibility. These procurement people, no matter where they are situated in the world, have a counterpart that they can communicate with. “There is a lot of global interaction within procurement for many reasons. Category managers discuss global sourcing and supply strategies and they also interact to learn and share best practices. That’s how we treat sustainability as well,” he says.
“Of course it varies to a certain extent, but ultimately we have a fairly flat structure where every counterpart in my organization knows who to go to, whether it’s day-to-day if it’s very integrated or less rigid or on a monthly basis if it’s about best practice sharing. That’s where our global colleagues are very important for us. They can help us to get extremely quick visibility on good examples that are happening across the world, disseminate knowledge and bring them to Asia, or at least give the visibility where we can then see it would make sense to apply something similar or help us with the implementation.”
This flat structure that Clysner points to proves crucial in not only establishing, but truly fostering a culture within procurement and the broader business. This culture is defined by our 10 key principles that sit at the very core of the business.
“These principles are not just something that we pin up on the wall and say this is our company culture. We live and breathe them each and every day. It’s about ownership and leading by example,” he says.
“We try to give people clear targets. People are, obviously, motivated to deliver on their targets, so we have to make sure that our people have the right targets. If people have the right targets, the right mindset and the right ownership then the right things are happening.”
Procurement is a relationship based environment and people are crucial to striking and fostering the right relationships with key suppliers so that when it comes to driving growth, change and in this instance sustainable responsibility, these relationships are formed around trust and mutual respect. Budweiser APAC of course has a huge supplier footprint from farmers to manufacturers and distributors and each relationship has its own nuances and complexities. It’s important for Clysner to highlight this and stress that there is no ‘one size fits all’ approach to any of them. He points to the relationship with the farmers as an example.
“With farmers it’s a very particular working relationship, because it’s not your traditional negotiation like we do with some of our big suppliers. In India we’ve got teams that are 100% focused on those farmers. We give them targets such as they have to make sure that the barley we get is best for the quality that we need, but we also give them targets to make sure that they provide the necessary amount of training and support to those farmers and that they reach out at the right moments to them,” he says.
“For those individuals, it’s much more focused on cooperation with these farmers, and making sure that we can provide support to them. You never know with the harvest. There’s not a single year which is the same as the previous, but you can do things to maximize the harvest. Because if you maximize the harvest, it’s good for us and it’s good for the farmer because it’s good for his income. It is a completely different cooperation and management of your suppliers, in this case, the farmers, than it would be if you were talking to a glass manufacturer who delivers you thousands and thousands of bottles on a yearly basis.”
Ultimately, the one commonality throughout the supplier relationships (however big or small) for Clysner is striking the right balance between innovation, quality, cost and the ability to deliver it on a timely basis. Sustainability, as mentioned above, is not a separate part of this; it goes hand-in-hand with it. We do operate and we do cooperate in sustainability, slash, innovation as well. Again looking at farmers as but one example, Clysner notes that Budweiser APAC is there to help them because if they do well, it immediately impacts Budweiser APAC and drives the sustainability conversation forward.
“Depending on the supplier, sustainability is right there at the heart of it,” he says. Is it through water? Is it through electricity? Is it through the use of recycled content in packaging material? These are all a part of the decision process. Then, of course, depending on the country and what capabilities the suppliers have, we work with them to get them to the level that we want and need them to be in order to drive sustainable change.”
The relationships are measured on key goals and metrics, for sure, but they’re built and fostered on key conversations. These conversations need to be open and transparent when dealing with costs and efficiencies and even more so when dealing with sustainability. Clysner and his team strive to be as direct as possible with suppliers because he firmly believes that it allows Budweiser APAC to better manage risk and to act fast when things go wrong.
“Whatever the plan is, we can debate for days and months on it but the only thing we know is that it never is fully executed as per plan,” he says. “The whole chain is too complex. Sometimes it’s the weather, sometimes it’s a machine but things do go wrong, and communication is key.
“This is good for suppliers because they can show what they’re capable of and their agility. That’s where sustainability becomes an additional tool in your communication with the supplier. You can look at it as a burden, as the problem, something else that you need to work on, or you can look at it as another facilitator in your discussion. It’s an engaging discussion that most of the suppliers want to participate in. I think that’s how to approach it and how you bring people along on the journey successfully.”
One thing that caused significant disruption is the COVID19 pandemic. AB InBev and Budweiser APAC have not been immune to the challenges faced as a result of the pandemic, but by having these conversations with the suppliers, the company has been able to collaboratively mitigate the challenges as best as possible.
“Our first priority was the safety of our own people first. Then we started working with our suppliers to see if we could support them on a case-by-case basis,” he says. “Sometimes it’s by giving them orders early, sometimes it’s through payments or giving them visibility on what we know is going to happen earlier than we probably would do but it was about asking; How can we help you? Because we need you going forward.”
In spite of the COVID19 pandemic, the future looks incredibly bright for procurement and indeed sustainability at Budweiser APAC. With solid foundations in place, Clysner can look to the future with a certain degree of optimism as 2025 comes closer and closer. “Sustainability is in our hands. It’s up to us to manage and focus on because we have the knowledge or we know whom to work with to get it done,” he says.
“It’s up to us to decide on the road which we want to follow. The journey is not over yet. It’s a never-ending test for all of us, including our suppliers, to see how successful we can be. During those moments, you really see who are the ones that you can count on.
“In the end, it doesn’t matter what kind of contract I have with a supplier; if we cooperate badly, if our communication among the two of us is poor, it will be tough in a normal situation. And it’s probably going to become impossible during such a crisis like COVID, so communication and cooperation are even more important. I do believe that we have some very good and solid suppliers that we can continue to drive real change with.”