Impact on developing markets continued
Local economic impact
As participants in society, any company’s operations can have three kinds of impact: economic, environmental and social. Within Heineken, disclosure of environmental and social impacts is the subject of detailed reporting and analysis through dedicated (sustainability) reporting. Insight into our economic impact over and above the profit and loss account had not been studied in any detail until 2006. However, in the context of our contribution towards realisation of the Millennium Development Goals (MDGs), we acknowledged the need to improve understanding of our contribution to poverty-related MDGs (for example those on hunger, education and health).
Because there is not yet one clear standard methodology to calculate the direct and indirect economic impact of an organisation, we partnered with the National Committee for International Cooperation and Sustainable Development (NCDO), a Dutch government agency that raises awareness on development issues. Together with NCDO, a tender was issued allowing a number of well-regarded consultancies to pitch for the assignment. After due consideration, Dutch consultancies Triple Value Strategy Consultants and InReturn, were chosen. Our joint venture in Sierra Leone, Sierra Leone Brewery Ltd. (SLBL) was selected to work with these agencies.
We believe we need an easy-to-use model to assess our economic impact. Economic development and poverty reduction are not only important from a humanitarian perspective – in many emerging markets lack of economic prosperity is also one of the most important obstacles to further growth of our business. Understanding precisely what determines the level of our impacts gives us an opportunity to optimise the positive influence that we have.
After preparation of the framework, the field research in Sierra Leone took place during July 2006. As part of the field work, an ‘input-output’ table for the Sierra Leonean economy was constructed using publicly available material and following discussions with officials from the statistics office, the central bank and the Ministry of Finance. Referring to this ‘input-output’ table and the profit and loss statement from SLBL, the study analysed different dimensions of economic impact, with particular focus on two aspects: economic activity generated through the spending and re-spending of money and indirect employment generated.
Other aspects were also investigated, including the redistribution of cash among different population groups, and the potential consequences of Heineken switching away from local production towards an import-only business as a theoretical exercise.
The results of the study confirmed what was already widely believed: that the economic ‘multiplier’ generated by our activities is significant. The total indirect economic impact of our activities is around five times as great as our annual turnover in the country, while for every one employee working for SLBL in 2005, an additional 40 jobs were generated in supply and distribution, with the majority in the second category. The redistribution of money also had a positive impact on poor, non-poor and food-poor people. You can read the conclusions of this study in greater detail on our corporate website.
To build internal acceptance of the model, an internal user group was put in place, comprising operating companies from Spain, Poland and Rwanda. The group’s purpose was to assess the feasibility and desirability of the model’s reapplication in markets with different characteristics. The group concluded that the model could feasibly be re-used in the three markets concerned and that on initial analysis, it seemed a good initiative that should be repeated on a local level.
To involve external stakeholders, two NGOs were invited to comment on the model and its impacts. These were Oxfam NOVIB and SOMO (Centre for Research on Multinational Corporations). Both organisations were positive yet critical, their main criticism concerning the scope of the model, which only focuses on monetary impacts and does not include social and environmental impacts. This is a valid point. However, there is no common understanding about how to translate environmental and social effects into monetary value, which means it is extremely difficult to incorporate them into a robust economic model.
The methodology and the results of the study were presented to an external audience on 23 November 2006 in Amsterdam. NGOs present at this meeting reached similar conclusions to those from Oxfam NOVIB and SOMO; while private sector representatives cautioned against the risk of over-complexity in the model. The general conclusion reached at the meeting was that the current model presented a sound basis to proceed and that NCDO, Heineken and the consultants concerned would assess the viability of including certain social and environmental aspects in a refined model.
During 2007, we will assess the practicalities involved in building stakeholder comments into the model, while actively promoting its use by our operating companies. At least one more study will take place in 2007.
