Our operating context
Our use of natural resources and our impact on people is by no means limited to the brewing activities in our plants. Much of our impact happens in our supply chain – in the use of water and energy to grow hops and barley and in the small businesses and rural communities where our raw materials are grown. In 2016, brewers in New Zealand purchased $632 million of goods and services from upstream industries including $97 million of ingredients such as hops, malt and sugar. The beer value chain in New Zealand from grain to glass was worth $2.2 billion in the year to March 2016.
Responsible agriculture and sourcing have never been more important as the pressure to feed more people and the impacts of climate change unfold. Zero hunger is a key UN Sustainable Development Goal and includes a target of doubling the agricultural productivity and incomes of small-scale food producers by 2030. HEINEKEN is working with key partners on local sourcing initiatives in Africa where these issues have clear and present impacts. However, we need to also act responsibly when it comes to local sourcing and what that means in the context of New Zealand.
Excerpt from UN Sustainable Development Goals
Why sustainable sourcing is important to DB Breweries
Our aim is to develop a supply chain that supports local communities and smaller businesses, reduces our environmental footprint and ensures a consistent supply of raw materials for our business. Maintaining this consistent and reliable supply of raw materials is a business imperative. Our commercial success is tied to the success of suppliers who depend on access to land and water as well as labour and thriving rural communities.
DB Breweries has 1,327 suppliers. Based on our top 100 suppliers, we spend more than 90% of our procurement budget on New Zealand raw materials, packaging, services and freight. Focusing on local, New Zealand based suppliers allows us to form strong and long term relationships. This helps us to access high quality raw materials and support local businesses and employment. We can also develop relationships with suppliers on broader issues such as reducing their environmental footprint and ensuring compliance on social challenges such as fair work and on-farm safety.
DB Breweries' key mechanism in increasing the sustainability of our sourcing is through the implementation of the HEINEKEN Supplier Code. HEINEKEN is committed to sourcing 50% of its main raw materials from sustainable sources by 2020. The code outlines our expectations of suppliers in the areas of:
- integrity and business conduct (eg. legal compliance, conflicts of interest, confidentiality)
- human rights (eg. safe work practices, fair treatment, equal opportunity, child and forced labour and values associated with the Universal declaration of Human Rights and the Core Conventions of the International Labour Organization)
- environment (eg. resource efficiency, reducing environmental impact & use of environmentally friendly technologies).
The HEINEKEN Supplier Code consists of a four stage programme of: signing, risk analysis, monitoring and auditing. In 2014, we began communicating Step-1 of the HEINEKEN Supplier Code Procedures which required our suppliers to sign the Supplier Code Procedures.
Our target for 2016 was to have 95% of our suppliers sign the Supplier Code Procedures to complete Step 1. This was achieved ahead of time with 100% of our required suppliers and 90% of all suppliers having signed the Supplier Code Procedures in 2015. In 2016, we progressed this to 100% of all suppliers having signed the Supplier Code Procedures. We have also progressed Step 2 by completing a risk assessment of 1,066 locally managed suppliers.
|HEINEKEN Global commitment by 2020||DB Breweries – objective by 2016||What DB Breweries has done in 2016|
|Four-step Supplier Code Procedures operational within all OpCos – 95% compliance||Complete Step 1 of the Supplier Code Procedures – 95% of suppliers having signed the Supplier Code Procedures||
Step 1 of the Supplier Code Procedures – 100% of all suppliers have signed the Supplier Code Procedures
Step 2 of the Supplier Code Procedures – 80% of suppliers assessed for risk
We continue to prioritise local sourcing of raw materials and services. We source 90% of our hops locally and have increased our sourcing of New Zealand malt from 67% in 2014 to 95% in 2016.
Our priority action remains the roll out of the HEINEKEN Supplier Code Procedures and we are currently progressing to Step-3; Supplier Monitoring, having completed Step-2; Supplier Risk Analysis in 2016. This assessment will help to determine the frequency and type of subsequent audits. The risk assessment is based on the significance of our spending with the supplier, the country of origin and if the materials supplied contribute to products branded by HEINEKEN. Of the eight suppliers identified as high risk, six have since accepted our invitation to join the EcoVadis sustainability-monitoring platform. Of the remaining two high risk suppliers, one supplier refused to subscribe to EcoVadis and was terminated, while another supplier is no longer being used. HEINEKEN is currently reviewing the Supplier Code to strengthen these procedures in the coming year.
Actions with suppliers
This year HEINEKEN has commenced a global procurement programme looking at what is being purchased, how much and from who. The aim is to develop a single collaboration tool to manage the full sourcing cycle, a central repository for contracts and a one stop procurement system. Although a key objective of the project is to increase our own productivity, the system will make it easier for us to manage our relationships with our suppliers and also make it easier for them to manage their relationship with us by streamlining processes and payment schedules. This is particularly important as we increasingly source raw materials locally and seek to explore forms of shared value with our supplier base in New Zealand.