Let’s be real. Beer is not going away anytime soon. It’s consumed in mass quantities around the world, meaning it takes a LOT of energy and input to produce, ship, and sell this lovely golden nectar. ABInBev is the world’s leading beer maker and they are taking climate change seriously, as an industry leader ought to.
Climate Change’s Impact to Business Model
The business model for making and selling beer is quite simple. First source the hops from farms, haul the hops to the brewery, make the beer with a secret recipe, package and ship the beer to final consumers (either via retailers or via other means like bars, duty free shops, etc.) where beer lovers can go and pick up a pack of Budweiser – the King of Beers (this is just a slogan, not an opinion), lastly, post-consumption, the responsible beer drinker recycles the bottle.
| Impact of Climate Change to Business Model | |
| Farming | Yield uncertainty due to unpredictable weather patterns and water availability for irrigation may raise cost uncertainty for hops and impact the company’s operating profitability. |
| Production | Climate change will primarily focus on two things for production: a) Reduction of the total energy consumed, and b) reduction of the total CO2 emissions during the entire production process. Both these will increase the costs and the pressure to innovate and use more efficient technologies for production. Finally, disposal of all the waste after production will be under scrutiny with an objective to have a closed loop, ideally speaking. |
| Bottling / Packaging | Climate changes will also put pressure on the ability of such firms to close the loop on packaging and reduce the amount of total disposable packaging. Such techniques will require changes in the supply chain (especially reverse supply chain) and may increase costs for the firm. |
| Shipping & Distribution | Firms will have to make the hard choice between opening new factories (localization) in order to reduce CO2 emissions via shipping vs keeping the same means of production but finding efficient ways to ship products all over the world. |
ABInBev is not playing around, they have made Climate Action one of four 2025 Sustainability Goals and is focused on the following elements2:
- Climate Action – 100% of our purchased electricity will be from renewable sources and a 25% reduction in CO2 emissions across our value chain (science-based).
- Smart Agriculture – 100% of our direct farmers will be skilled, connected, and financially empowered
- Water Stewardship – 100% of our communities in high-stress areas will have measurably improved water availability and quality.
- Circular Packaging – 100% of our products will be in packaging that is returnable or made from majority recycled content.
As some would say, the proof is in the pudding, and that’s true with ABInBev. They have already made progress towards this goal with2:
- Power purchase agreements in key markets: in 2018 about 50% of our U.S operations’ purchased electricity comes from renewables — enough to brew more than 20 billion 12 oz. servings of beer each year.
- Partnering with power suppliers to construct wind farms, i.e. in the United States established agreement with Enel Green Power resulted in the construction of the Thunder Ranch Wind Farm in Oklahoma.
- Invested in low-emission transportation by launching green logistics initiatives
- Purchasing eco-friendly coolers: In 2017, 96% of ABInBev’s global cooler purchases met the standards set for eco-friendly coolers.
- Implementing science-based target for carbon reduction across the value chain: achieving this target will be the same as taking more than a million and a half cars off the road every year
- Between 2012 and 2017, the firm reduced total absolute energy usage by 10%.
- Removed 146,000 metric tons of material from packaging between 2012 and 2016.
- Created an accelerator dedicated to innovations in sustainability (100+ Sustainability Accelerator)
Although ABInBev has made some progress in this area, there are additional steps that the company should consider implementing to reduce their exposure to business model impact due to climate change:
- Supporting the development of innovative farming processes to ensure responsible and sustainable sourcing of ingredients
- Work on the recipe and the ingredients (other than hops) to promote good health and wellbeing of consumers.
- Further reducing carbon emissions by investing in increasing energy efficiency in the manufacturing process
- Partnering with farms to develop efficient and eco-friendly infrastructure
1https://www.ab-inbev.com/ 2https://www.ab-inbev.com/sustainability/2025-sustainability-goals.html
Authors: Jinna LI, Sal MUN, Mukul AGGARWAL.
Really good to see. Beer cans & bottles seem to create an enormous amount of waste, so good to see that they’re thinking the right way about it.
Wow! Guilt-free indeed. When they talk about packaging, do they mean the bottles/cans that beverages come in, or are they referring to the paper cartons/plastic wrapping that, say, a six-pack would be packaged in? I hope that they consider using post-consumer recycled materials for the former as well (if they are not doing so already), as that creates the majority of waste.
Nice to hear about that! I had no idea that they were already improving a lot in the last years.
However, I feel that the goals for 2025 are quite ambitious… I wonder whether they could have set more realistic goals, is 100% renewable energy really possible? How will they ensure that 100% of the farmers are well trained and financially empowered?
Anyway, it’s very good to see companies like ABInBev moving in the right direction, investing that much on sustainable goals.
Really interesting!! And definitely, the packaging is a problem in this industry, although normally it is 100% recyclable. Are they thinking about reducing the water needed to grow their plants to avoid any future impacts of Climate Change? Maybe they can switch to sort of vertical farming, use drones, etc. to reduce the level of water needed and increase productivity.
Great to see the leader in beer taking sustainability seriously, especially following the firms recent merger with SAB Miller.
Given their scale, the issue of how to make their supply chain sustainable is key. In particular, I see challenges ahead in how to make the farming operations be more ecological (e.g. around water, pesticides etc.), the logistics operations less carbon heavy (beer is notoriously heavy and carried on ships and trucks) and the packaging recyclable (the amount of glass used for beer bottles must be enormous!), or fully co-effective. On all these points there is quite some way to go still.
The real question is though – how to carry this out while maintaining the ruthless cost cutting approach of their 3G owners!?
Thank you very much for this very interesting blog post!
I am impressed by how much effort AB InBev has invested into CSR. Nonetheless, I agree with previous commentators that there still is a large way to go!
It would be very interesting to see how their sourcing and associated costs will change due to the climate change. This can have large implications on their financials!
A very impressive list of measures that ABInBev has already launched to reduce or compensate its impact on the environment ! I was wondering if it was ever considered to produce concentrated beer that would only be diluted in regional centers a few miles away of the end consumer to reduce transportation costs as well as the pollution due to it? This is done for juices and other non-fermented beverages, but I haven’t heard anything about beer in this context. Or is the beer production relatively decentralized?
Very interesting to see that a company has dedicated itself to work on sustainability goals and offset the negative effects it might have on the environment. Curious to know how the company has been actually affected to date by climate change (ie costs)?
Do you think ab imbev is able to do all of that due to their size? I mean, is it transferable for small companies that would like to mimic it?
Interesting article and good to see AB is taking the lead on sustainability in the industry. It seems though that the final hurdle, actually getting consumers to recycle the extremely energy dense glass beer bottles, is one that is yet to be properly addressed. Perhaps partnering with governments or legislators is required to encourage consumers to drink and dispose more responsibly.
As a beer enthusiast, I more than happy that the biggest producer in the world is moving towards a more eco-friendly direction. What I would personally like to see is 3G’s Zero-Based Budgeting (ZBB) concept transforming into a Zero-Based Emission (ZBE) business model, in a sense that they could redesign their processes calculating their emissions from scratch and eliminating any unnecessary wastes. The impact of such an initiative could be huge as it could stimulate other big groups to adopt similar policies.
Great article about reducing the carbon footprint and the business policies of a major player.
As a home brewer, malt (sugars extracted from roasted wheat or barley) is another key ingredient in beer. A great analysis on the life cycle impacts of this key ingreedient: https://www.novozymes.com/-/media/Project/Novozymes/Website/website/document-library/LCAs/Comparative-LCA-of-malt-based-and-barley-based-beer—Full-report.pdf
Really interesting to see another big player in the beer industry moving to a more environmentally friendly business.
One another key element for beer production in which ABInBev could work on is water, a resource that is already being put under pressure in many geographies.
Another big player working in this direction is Heineken. I think that joint research among large players could bring faster progress in developing more environmentally friendly processes and might have more power to influence scope 2 and scope 3 emissions, of course, product differentiation might be affected but, what’s the main goal?
Nice article!
The scale of ABInBev is undeniable and so is their climate footprint. It is good to know that they have already begun tweaking their operations towards more climate-friendly solutions. Investing in smart technologies would help farmers monitor soil/harvest changes and may mitigate the risk of losses in the supply chain. I would also add that this adjustment has other environmental externalities such as improved farmers productivity and income, reduced water wastes, a more reliable supply chain, license to operate, and even increased brand loyalty by consumers particular about climate action. ABInBev’s initiatives are a positive precedent in the industry and could lead to a competitive advantage in the future.