March 25, 2012
Graham Hutcheon, Group Operations Director of the Edrington Group, reports on action taken within the Scotch Whisky industry.
The Scotch Whisky industry is a mature sector and the firms and people who work in it are collaborative by nature – up to a point.
When it comes to sales and marketing, it is highly competitive. Yet up to that point, there is a genuine shared interest in doing things better – for the good of the environment, the economy and individual businesses.
It was 2008 when we saw a real opportunity to do something special with the industry – to set an environmental bottom line that all the major Scotch Whisky firms signed up to. Three years later, there are still many challenges ahead, but we have made great progress.
We started from the premise that the Scotch Whisky industry was big and important – and if it could achieve this environmental bottom line, it would make a big difference.
When we set out on our journey in 2008, Scotch Whisky was Scotland’s biggest export and made up 20 per cent of the UK’s entire manufactured food and drink exports.
Each year, 90 million cases of Scotch were exported worldwide, contributing £3.1 billion to the UK balance of payments, including £800m in taxes to the UK Exchequer.
In addition, 1.25 million people were visiting our 108 distilleries each year, and the industry across the UK supported 40,000 jobs.
As well as our positive economic story, we felt we had a positive environmental story to tell too – because whisky is the ultimate sustainable spirit. It uses only natural ingredients and no additives, sources most of its supplies locally, re-uses casks from the Sherry and Bourbon industries and largely ships its exports.
However, no-one underestimated the big questions that needed to be answered – particularly around the industry’s intensive use of energy and water, the footprint left by the supply chain, the desire for quality packaging and the global market for our product.
As we looked at the scale of the challenge, one of the biggest difficulties was that markets were getting further away. Our main export markets include France, the United States and Spain – but the majority of emerging markets are in the far east like Taiwan and China, or Latin America like Brazil and Mexico.
So the question we asked ourselves was ‘Can we do more?’ and the answer was undoubtedly yes. By 2008, environmental credibility was a mainstream business issue and we saw the chance to put the iconic Scotch Whisky industry ahead of the curve – by demonstrating leadership, maintaining our reputation for quality and putting sustainability at the heart of our own long-term success.
There was clearly a financial imperative there too, but what we saw was a collective opportunity to deliver an enduring strategy across the industry much bigger than the sum of individual company contributions could ever hope to achieve.
On deciding to go ahead, we realised we needed a strong baseline – and carried out a Life Cycle Assessment of our product. This quantified the inputs and outputs of the whole sector’s activities and its environmental footprint. More importantly, it gave our targets a real credibility and scientific basis.
With this research done, The Scotch Whisky Industry Environmental Strategy was launched in June 2009, a project driven from the top down with commitment from all members. We took a non-competitive approach to bring everyone along – but only up to the point where sales and marketing kicked in. As I said, from then on, there is fierce competition!
Importantly, as we set ourselves very challenging targets, we had buy-in and support from SEPA and the Scottish Government. So what were those targets?
Energy and water use was always going to be central and we aimed for a 20 per cent reduction in energy from fossil fuels by 2020 & 80 per cent by 2050, as well as an increase in energy efficiency and effective water management.
Packaging was another significant factor, as we looked for:
We also pledged to source oak casks from sustainable forests and to work hard to embed these principles through our supply chain by influencing our partners.
Although we had support across the industry, with full buy-in from all Scotch Whisky Association members, these targets required a new approach – not least major investment and a new approach to return on investment.
However, the collaboration created big opportunities – to develop new technologies, shape new legislation and share best practice. We arranged events to showcase opportunities around biomass and other renewable energies and have worked with partners like the Carbon Trust to examine all the different possibilities open to us.
There has been enormous progress in terms of fuel switching to energy from co-products (such as biomass and biogas), the use of alternative non-fossil fuels and green tariff electricity, re-using heat, innovation in packaging design (including early investment in lightweighting) and significant efficiencies in both the manufacturing process and logistics.
We have made good progress against targets – even exceeding the recycled packaging target already – but major challenges remain, especially around energy.
To move more quickly towards these targets, we need strong legislative and regulatory support from government. The framework has to be right – and our industry has long felt we need to be able to cut through the forest of bureaucracy and administration more effectively.
We need clear legislation, less red tape and early clarity on proposals. The carbon landscape is still cluttered and confusing (EU ETS, CCAs & CRC, etc) and there is some real policy overlap between different bodies.
We also need more central support to help us influence the supply chain – as we are not and can never be responsible for 100 per cent of our carbon footprint. We require assistance to steer the behaviour of, for example, farmers, glass manufacturers, hauliers and shippers – and we need a harmonised approach to footprinting, and a better understanding of the barriers to ‘greener’ distribution.
The Scotch Whisky industry has made huge progress in this area and has won a number of awards to recognise this – including the Scottish Natural Heritage Award 2009 for Excellence in Sustainability and Scottish Waste & Resource Award 2010.
We are doing well, but what next? That’s the hard bit.
We must get accurate data that can inform our decisions – and help us identify appropriate timescales for action. Delivering a data management tool to members will be a major step forward.
There is also much work to do on refining our understanding of transport and shipping impacts, of defining ‘sustainable casks’ and working better with stakeholders and joining up parallel initiatives.
We know there is a long way to go – but we are also pleased to have made such enormous progress. No-one has broken ranks, which is quite refreshing. We have worked collaboratively across a mature industry and learned many lessons along the way.
We hope these lessons will help our own industry make further progress and encourage others to follow a similar collaborative path.