Beer Industry SDG Analysis
Waleed Hussain, Jorge Martinez-Blat, Miguel Salas Cam
It is no secret that producing beer requires the use of a lot of energy and water. Inevitably, this impacts the environment, whether through emissions or through waste by-products.
From small craft brewers to big multinational brewing conglomerates, there’s a growing self-awareness and consciousness about how the industry can change and become ‘greener’. The industry is reliant on natural resources, so it seems logical to try to protect and preserve them. From safeguarding hop harvests from climate change to the amount of wastage after a batch of brewing, concerted efforts are being made to lessen the impact on the environment and planet.
The industry has considerable potential for reducing energy use and mitigating its impact on climate change. Some breweries have already added solar panels, installed onsite wastewater treatment plants, insulated brewing vessels and recaptured steam from the brewing process. But those kinds of measures require upfront investments that are likely to increase prices.
Some indicators of the environmental performance of breweries is its water and energy usage and waste and wastewater production.
Water: Breweries use water in the product, but it is also used for other purposes such as cleaning. The volume of water used per liter product produced is an important indicator of environmental performance for the beverage sector.
Energy: Breweries use electricity and fuels to produce beer. The process of making beer is very energy intensive and consists of electrical and thermal energy which together make up total energy use.
Waste and Wastewater: Waste is made up of outputs from the brewing products which are not beer and are not used as secondary products. Wastewater is the water which is not beer and not usable for other purposes.
The beer industry needs to focus on SDG 12 to minimize its carbon footprint. By achieving targets of achieving sustainable management and efficient use of natural resources and substantially reducing waste generation through prevention, reduction, recycling and reuse companies can gain a competitive advantage both in terms of costs but also in creating customers loyal to their brand while at the same time ensuring long-term success by mitigating the risks that arise from climate change.
Please refer to Appendix 1 for SDG 12 detailed targets.
How do these goals compare to the industry’s current sustainability goals?
We looked at the top 5 largest breweries in the world to see what they were doing: AB InBev, Heineken, China Resources Snow Breweries, Carlsberg, and Molson Coors Brewing. All but CRS had sustainability initiatives pertaining to energy. (Links 2,3,4,5 in Sources). Most initiatives look good and align with the Clean & Affordable Energy SDG.
Are the current initiatives in this industry contributing towards achieving your sustainability goals? Where do these initiatives fall short?
Sustainability at Heineken, for example, has been a priority and is exemplified with their sustainability strategy ‘Brewing a Better World’ and their vision for the ‘Drop the C’ programme. With ‘Drop the C’ Heineken has ambitious plans to shift their energy mix from 14% to 70% renewables by 2030. Moreover, the idea is to address the carbon footprint through the entire value chain by setting new emissions targets for every step along the way. Starting from sourcing, production, packaging, cooling and distribution, the company has embarked on a journey to becoming a leader in safeguarding the future and has partnered with suppliers, governments, research institutes and customers to achieve their goals.
Heineken has already made great progress with numerous projects all over the world. Pilot project breweries in Singapore and the Netherlands are running on solar and wind, while the Goss brewery in Austria is completely carbon neutral. A large part of the energy requirements at breweries in Vietnam are being met with biomass and biogas, which utilises waste from the community turning it into energy and a source of income for locals.
Another area Heineken has focused on is sourcing sustainably and protecting water resources. The quality and supply of water is of major importance. Heineken’s brewery in Zoeterwoude, Netherlands uses local river water which is stored and purified by the dunes in South Holland before it reaches the brewery. The company has partnered with various research institutes to employ satellite observations and meteorological data in parallel with biophysical analyses to predict future water levels and ultimately better manage the water resources. Natural purification methods such as this cost less, have ecological benefits, create a pleasant environment, and will provide a store of water in times of drought.
Propose and explain a business model innovation for a company (or set of companies) in this industry that can help achieve your chosen UN SDGs and that is also profitable. This can be an existing business innovation or a new business model that you propose. State clearly the context and the social/environmental challenge addressed.
We propose the XaaS (Anything-as-a-service) business model to help the beer industry achieve its SDG goals. In this case, we will be focusing on a particular new technology called the “EcoVolt”, by Cambrian Innovation [6]. This shipping-unit shaped tech hooks up to a brewery’s water system to receive wastewater as an input. The unit contains electrically charged microbes which consume the organic matter in the water while discharging biogas and electricity. Thus, wastewater is treated while producing energy, reducing the amount of water wasted while helping to supply electricity to the brewery. Cambrian Innovation is using a “Water-as-a-service” financing model, almost a “Waste Energy Purchasing Agreement”. It leases the technology to the brewery and charges a fixed monthly cost over the lifetime of the purchase, and the breweries usually see returns after only two to three years.
How does this business model outperform existing business models both financially and environmentally/socially? Do financial growth and social/environmental impact form a feedback loop (i.e. the faster the growth, the larger the impact and vice-versa)?
The current business model produces a large amount of wastewater as a byproduct of the brewing process; in fact, for every liter of beer brewed, two to four liters of wastewater are produced. This presents a huge business opportunity, as much energy can be harvested from the organic material in the wastewater.
The advantage for breweries in using the EcoVolt as opposed to building their own treatment units is that they can use Cambrian Innovations’ servitization model and thus bypass the costly capex investment they would otherwise need to purchase. By paying monthly fees over the course of the agreement’s lifetime, the breweries now have a predictable expenditure which can factor much more easily and affordably into their financials. Since Cambrian Innovations takes care of the system’s maintenance, the breweries have yet another thing to cross of their list of worries.
Environmentally the solution is twofold; water is treated with very high standards and once having gone through the process it is reused, while the biomaterial that is recovered during this treatment process serves as input in the generation of renewable energy. What’s more, the financial growth and environmental impact form a feedback loop. This is because while Cambrian Innovation’s fee is fixed, the resulting amount of water treated and therefore the recovered material for biogas increases with growth in production.
Why could this innovation be game-changing (demand and/or supply point of view)?
Using this innovation means that a brewery can reap all the benefits of renewable energy tech and implementation of circular economy principles without having to worry about the huge upfront costs of purchasing and building such technology, and tackling the risks involved in such decision.
If this solution is combined with improvements in existing technology to become more energy-efficient and improvements in the brewing process to be less resource-intensive, it can help close the gap so that breweries are nearer to a circular production and energy system with minimal waste in energy and byproducts. From the supply point of view, it is a game-changer due to its fixed monthly financing model. Since it can both reduce the amount of wastewater generated while generating more electricity, it easily pays for itself over the course of its lifetime.
Furthermore, a brewery using it will have a much clearer view into its ongoing operational costs, especially with respect to energy and water. This innovation decreases the amount of risk, focus and hustle needed to implement environmentally friendly technologies within the process of large and mid-size breweries, arguably in any geography.
What are the potential costs and risks of this innovation? What are the barriers to scaling this business model?
The main cost of this is giving away control over part of the process to an external entity, meaning that breweries would need to establish a liaison with Cambrian Innovations. Additionally, If this doesn’t work out as expected, breweries might be forced to invest in capex that can do the job, as it might have committed to meet targets.
Regarding risk, the main concern would be the dependence on a single supplier who holds a monopoly and commands higher prices than is economically desirable for breweries. Having another company with competing technology in the market would even the playing field and help drive prices down.
Another issue with having a single supplier is that the patent on the EcoVolt’s technology is privately owned by a fairly small company, which might be bought or taken by a larger firm with a different strategy or focus. Breweries would have very limited access to influence the process if the unit underperforms and having no knowledge of the technology creates an inability to find other potential synergies.
As with risk, the largest barrier to scaling is the dependence on a single supplier to provide the technology as far or as close as they want. This could severely limit the radius within which breweries could benefit from this technology. The size of Cambrian Innovation is still fairly small, meaning that it might not have yet the means to expand-so there’s no telling when, how, or in which direction it will do so.
What are possible next steps to mitigate the risks associated with this business model and to allow it to scale?
One potential method of mitigating the aforementioned risks would be to invest money in Cambrian Innovation to help it expand. This would be in the interest of the biggest brewers such as AB InBev and Heineken, brands with a presence all over the world. Helping Cambrian Innovations expand and then leasing in bulk would be a good way to drive down prices across the board while allowing for a greater expansion of the technology, as well.
What are the potentially negative social/environmental impacts of this business model?
As long as Cambrian Innovation has only one plant then it will be expensive in terms of both capital and carbon to transport its solutions all over the world. As great as a business model servitization is, even it can’t fix the issues associated with the carbon costs of shipping these large units all over the world, much less providing maintenance support for them when they are thousands of kilometers away from their central plant.
Another potentially negative impact might arise from irrational thinking on behalf of the breweries, which might think that adopting EcoVolt technology is enough to tackle their environmental goals. They might, as a result, stop investing in other options, which would be detrimental to the advancement of such technologies.
Appendix
Appendix 1
Goal 12: Responsible Consumption and Production
Targets
- Implement the 10-year framework of programmes on sustainable consumption and production, all countries taking action, with developed countries taking the lead, taking into account the development and capabilities of developing countries
- By 2030, achieve the sustainable management and efficient use of natural resources
- By 2030, halve per capita global food waste at the retail and consumer levels and reduce food losses along production and supply chains, including post-harvest losses
- By 2020, achieve the environmentally sound management of chemicals and all wastes throughout their life cycle, in accordance with agreed international frameworks, and significantly reduce their release to air, water and soil in order to minimize their adverse impacts on human health and the environment
- By 2030, substantially reduce waste generation through prevention, reduction, recycling and reuse
- Encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle
Sources :
1 – https://blog.technavio.com/blog/top-companies-global-beer-market
3 – https://www.environmentalleader.com/2018/02/heineken-renewable-energy-2030/
4 – https://carlsberggroup.com/sustainability/our-ambitions/zero-carbon-footprint/
5 – http://www.molsoncoors.com/en/news/brewing-renewable-energy
6 – https://www.greenbiz.com/article/inside-cambrians-water-service-financing-model