Harvard Case - Driving Sustainability at AB InBev
"Driving Sustainability at AB InBev" Harvard business case study is written by Ethan Rouen, Antonio Manuel Oftelie. It deals with the challenges in the field of Accounting. The case study is 19 page(s) long and it was first published on : Oct 3, 2023
At Fern Fort University, we recommend that AB InBev implement a comprehensive sustainability strategy that integrates environmental, social, and governance (ESG) considerations into its core business operations. This strategy should be driven by a robust framework that combines financial performance measurement with environmental sustainability and corporate social responsibility goals. The strategy should be communicated clearly and consistently to all stakeholders, including employees, investors, and consumers, through integrated reporting and transparency in its financial statements.
2. Background
This case study focuses on AB InBev, the world's largest brewer, facing increasing pressure to address its environmental impact. The company's operations, particularly its water usage and carbon emissions, are under scrutiny from stakeholders. AB InBev is seeking to balance its commitment to profitability with its responsibility to be a more sustainable company. The case study highlights the company's efforts to develop a sustainability strategy, including initiatives like water conservation and renewable energy adoption.
The main protagonists are:
- Carlos Brito: CEO of AB InBev, tasked with driving the company's sustainability efforts.
- The Sustainability Team: Responsible for developing and implementing the company's sustainability strategy.
- Investors and Consumers: Increasingly demanding sustainable practices from companies.
3. Analysis of the Case Study
This case study can be analyzed through the lens of corporate strategy and sustainability. AB InBev needs to develop a strategy that balances its growth strategy with its commitment to environmental sustainability. This requires:
- Financial Analysis: AB InBev must assess the financial impact of its sustainability initiatives. This includes considering the cost analysis of implementing these initiatives and the potential return on investment (ROI). Activity-based costing can be used to analyze the costs of different sustainability initiatives and their impact on profitability.
- Environmental Sustainability: AB InBev needs to identify its key environmental impacts, including water usage, carbon emissions, and waste generation. The company should set specific, measurable, achievable, relevant, and time-bound (SMART) goals for reducing these impacts.
- Corporate Social Responsibility: AB InBev should consider its social impact, including its relationships with employees, suppliers, and communities. The company should develop initiatives that promote fair labor practices, responsible sourcing, and community development.
- Stakeholder Engagement: AB InBev must effectively communicate its sustainability strategy to all stakeholders, including investors, consumers, and employees. This requires transparency and accountability in its financial statements and integrated reporting.
4. Recommendations
- Develop a Comprehensive Sustainability Strategy: AB InBev should develop a clear and concise sustainability strategy that aligns with its business objectives. This strategy should be based on a framework that integrates environmental, social, and governance (ESG) considerations.
- Set Measurable Goals: The strategy should include specific, measurable, achievable, relevant, and time-bound (SMART) goals for reducing the company's environmental impact.
- Implement a Robust Monitoring and Reporting System: AB InBev should establish a system for tracking its progress towards its sustainability goals. This system should be transparent and accessible to all stakeholders.
- Invest in Sustainable Technologies: AB InBev should invest in sustainable technologies, such as water-efficient brewing processes and renewable energy sources.
- Engage with Stakeholders: AB InBev should engage with its stakeholders, including investors, consumers, and employees, to build consensus and support for its sustainability strategy.
- Integrate Sustainability into Business Operations: AB InBev should integrate sustainability into its core business operations, including its manufacturing processes, supply chain, and marketing.
- Develop a Strong Corporate Governance Structure: AB InBev should establish a strong corporate governance structure that ensures accountability for its sustainability performance.
- Provide Incentives for Employees: AB InBev should provide incentives for employees to support its sustainability efforts. This could include employee performance management programs that reward sustainable behavior.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: AB InBev's core competencies are in brewing and marketing. A strong sustainability strategy aligns with the company's mission to be a responsible and sustainable business.
- External Customers and Internal Clients: Consumers are increasingly demanding sustainable products and practices. Employees are also more likely to be engaged with companies that have strong sustainability commitments.
- Competitors: AB InBev's competitors are also adopting sustainability initiatives. A strong sustainability strategy will help AB InBev remain competitive in the long term.
- Attractiveness ' Quantitative Measures: While it is difficult to quantify the impact of sustainability on financial performance, studies have shown that companies with strong sustainability practices tend to outperform their peers.
6. Conclusion
By implementing a comprehensive sustainability strategy, AB InBev can reduce its environmental impact, enhance its social responsibility, and improve its financial performance. This strategy will require a strong commitment from the company's leadership, as well as the support of all stakeholders.
7. Discussion
Other alternatives not selected include:
- Ignoring sustainability concerns: This would be a short-sighted approach, as it would likely lead to reputational damage and regulatory scrutiny.
- Focusing solely on financial performance: This would be a narrow approach that would not address the growing concerns of stakeholders about sustainability.
Key assumptions of the recommendations include:
- Consumer demand for sustainable products: This assumption is based on the growing trend of consumers choosing sustainable products.
- Investor support for sustainability: This assumption is based on the increasing importance of ESG factors for investors.
- Government regulations: This assumption is based on the increasing likelihood of government regulations on environmental sustainability.
8. Next Steps
- Develop a Sustainability Strategy: AB InBev should develop a comprehensive sustainability strategy within the next six months.
- Set Measurable Goals: AB InBev should set measurable goals for its sustainability initiatives within the next year.
- Implement a Monitoring and Reporting System: AB InBev should implement a monitoring and reporting system within the next 18 months.
- Invest in Sustainable Technologies: AB InBev should begin investing in sustainable technologies within the next two years.
- Engage with Stakeholders: AB InBev should engage with its stakeholders on a regular basis to build consensus and support for its sustainability strategy.
By taking these steps, AB InBev can become a leader in sustainability and achieve its business objectives while making a positive impact on the world.
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Case Description
It was the height of the summer in 2022, and Michel Doukeris, the CEO of Anheuser-Busch InBev (AB InBev), and Peter Kraemer, the company's Chief Supply Officer, gazed across the vast desert surrounding Zacatecas, Mexico. They were visiting their Grupo Modelo Brewery, AB InBev's largest and the highest-volume producer in the world, to contemplate their goal of increasing sales while reducing the company's impact on the natural environment. This case documents how company executives led an organizational transformation designed to help the firm balance growth and sustainability and achieve two benchmarks: becoming the number-one consumer packaged goods company for top-line growth and achieving their 2025 sustainability target, referred to as 100+ goals, and composed of smart agriculture, water stewardship, circular packaging, and climate action. The case illuminates the key decisions AB InBev executives needed to make, including making capital-intensive investments into the supply chain that drive sustainability and growth, reinventing processes and an overarching business model that had remained largely the same for hundreds of years, as well as changing how people work in a culture steeped in tradition.
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