Position paper

Context

As a company we recognise that our impact, and therefore our accountability, extends beyond our own immediate operations to include those of our supply chain partners. Here, we not only have an economic impact, spending over $5,700 million with suppliers around the world, but also a social and environmental impact resulting from our purchasing decisions. For example, through job multiplier evaluation, we have estimated that approximately 1.6 million jobs have been created in our supply chain. These jobs have been created through the sourcing of our agricultural raw materials such as barely, hops and sorghum, as well as through the procurement of manufactured goods and services.

SABMiller, however, recognises that job creation is not the only measure by which our relationship with suppliers will be judged by our stakeholders. We accept that there are many potential areas of sensitivity, particularly the working conditions that our suppliers offer to their workforce. For example, in response to public campaigns highlighting poor labour practices, there has been a significant growth in interest in ethically sourced products, particularly in Europe and North America, and in the fair-trade movement, which offers consumers assurances about the conditions in which products were made. We shall continue to engage with NGOs to learn how we can apply these principles to our products.

The past 20 years have also seen a growing realisation that our rates of consumption are unsustainable. Society as a whole currently uses natural resources at a faster rate than they can be replenished by nature. In other words, we are currently living beyond the carrying capacity of the planet. This has significant consequences in terms of the sustainable development agenda, particularly in areas such as poverty alleviation. SABMiller recognises that our commitment to Sustainable Development must extend beyond our own operations to the entire length of the supply chain. This means initiating a dialogue and longer term partnership with our suppliers on all sustainable development issues.

We recognise that operating in a socially and environmentally responsible manner is key to ensuring that the company’s growth is responsible and sustainable.

These challenges are therefore not just about monitoring standards but also about working to encourage improvements, understanding and ownership throughout the value chain. Many companies leading this debate are acknowledging the link between internal policies, such as buying and operating procedures, and supply chain issues such as site pollution and unsustainable agricultural practices.

Objectives

The objectives of this position paper are to:

• Provide a shared vision of SABMiller plc’s views, commitments and future outlook in relation to incorporating environment and social principles into supply chain interactions.
  
• Define the SABMiller approach to the supply chain as one of engagement and sharing, in order to tackle all the issues identified in the Sustainable Development framework.
  
• Define Individual Stairway Statements and key performance indicators (as part of our sustainability assessment matrix – SAM – a self-assessment performance management tool).

SABMiller commitments to responsible procurement

SABMiller is committed to creating a sustainable supply chain, to identifying practices that are not compatible with our SD framework and to working with suppliers to improve any such practices. We recognise the importance of understanding the impacts that our procurement and operational activities have on the individuals and communities involved in the value chain and are committed to taking appropriate action. Our buying activities influence conditions further down the supply chain and we endeavour to understand and address any negative impact we have, and to driving improvements where necessary.

We recognize that a supply chain which is both responsible and efficient should result in reduced costs, improved quality and provide a competitive edge, as well as being sustainable.

In addition we have undertaken to be transparent and open about the issues we face and how we tackle them. We accept that many of these issues will take time to resolve, however we are committed to working in find appropriate and realistic solutions.

Our approach to driving sustainable development in our supply chain

SABMiller has a three pronged approach to managing its value chain.

Embracing sustainable development, as a whole, in our supply chain

SABMiller has identified 10 key priorities that it believes are central to delivering our sustainable development aspirations. Whilst being applicable to our own operations, we also believe in communicating our entire SD framework to our suppliers and involving them to minimise the negative impacts that fall within their sphere of influence.

Our engagement is reciprocal and we aim to assist suppliers in achieving their own SD goals through our framework with the eventual aim of reaching mutually beneficial sustainable relationships.

The SABMiller top 10 priorities are:

“The need to…

1.  Discourage irresponsible drinking.
2.  Make more beer but use less water.
3.  Reduce our energy and carbon footprint.
4.  Have a vibrant packaging reuse and recycling economy.
5.  Work towards zero waste operations.
6.  Have supply chains that reflect our own values and commitment to sustainable development.
7.  Have respect for human rights.
8.  Bring benefit to the communities we serve.
9.  Contribute to the reduction of HIV/Aids within our sphere of influence.
10.  Be transparent in reporting our progress on these environmental and social sustainable development priorities."

Basic human rights

Our SABMiller Responsible Sourcing Principles have been developed to ensure basic human rights are acknowledged and respected by both our own procurement activities and the activities of our suppliers.

SABMiller group companies will engage with their suppliers of goods and services to promote the following principles, and work towards implementing these principles throughout their supply chains.

• Business conduct - in the conduct of our business, SABMiller will deal openly and fairly with suppliers, adhering to contract terms.
  
• Working conditions - policies and procedures for health and safety, as a minimum, meet legal requirements and where these do not exist, are sufficient to protect the well-being of employees.
  
• Employment - forced or compulsory labour is prohibited. Employees should not be forced into involuntary labour and coercion at work is not acceptable.
  
• Child labour - in accordance with relevant ILO conventions, children may only be employed in circumstances which fully safeguard them from potential exploitation, which protect them from moral or physical hazard and long term damage to health and which do not disrupt their education.
  
• Wages and hours - pay will not be lower than that required by local law or, in the absence of a law, the level paid generally within that industry. Hours of work will be in line with local law or, in the absence of a law, the norm within that industry and shall not be excessive.
  
• Diversity - whilst being sensitive to cultural differences we expect the development of equal opportunities in employment without discrimination on grounds of race, religion, and gender or any other arbitrary means.
  
• Freedom of association - there should be constructive dialogue between workers and management. Employees shall be free to join lawful associations.
  
• Environment - suppliers will be aware of and comply with local environmental laws, and show sensitivity to other environmental issues that may impact on either local communities or SABMiller.

Small scale agriculture suppliers

Many of our markets rely on smallholders to supply basic agriculture based raw materials. We do however recognise that the Human Right Principles and Sustainable Development Guidelines that we would apply to commercial operations are difficult to implement in this environment. We are, however, committed to doing as much as we possibly can. In order to address this we have developed a specific set of guidelines for this situation.

“Good Practice” smallholder agriculture principles

SABMiller has adopted the Sustainable Agriculture Principles that were developed through a very thorough process by Unilever. The principles were subsequently re-evaluated, with the assistance of external stakeholders, in order to make them more applicable from a smallholder context, acknowledging that indicators applicable to medium and large agriculture undertakings are not always practical or possible to measure for land owners with small tracts of land.

The indicator base covers:

1.  Soil fertility/health
2.  Soil loss
3.  Nutrients
4.  Pest management
5.  Biodiversity
6.  Value Chain
7.  Water management
8.  Social/human capital
9.  Local economic impact
10.  Access to market

In a number of the areas where we have smallholder supply bases our respective divisional commercial teams work with partners to train the farmers in good agriculture practice and product quality improvement to ensure raw materials meet our specifications. We are committed to ensuring that over time we will embed the principles outlined above into that process.

Principles of supply chain management

SABMiller commercial and/or supply chain managers will:

• Ensure that suppliers have a good understanding of SABMiller’s approach to sustainable development and the sustainable development framework.
  
• Ensure suppliers have identified their own social, economic and environmental impacts and gain an understanding of their priorities.
  
• Move towards a position of sustainable development partnerships with suppliers where both SABMiller and supplier needs are addressed in a mutually beneficial manner.

Supplier codes and toolkits

SABMiller will:

• Develop and publish supplier codes, e.g. the responsible sourcing principles, as appropriate, that reflect particular areas of concern. Such codes will be applicable to all company suppliers irrespective of size or geographic location.
  
• Establish toolkits, e.g. agriculture small holder good practice principles, that will provide a framework against which specific supply chain initiatives can be evaluated and advanced.

Local economic impact

SABMiller commercial managers will:

• Where possible, ensure that purchases support national and/or local priorities such as Rural Development in Africa and Asia, Black Economic Empowerment in South Africa and Diversity support in the United States.
  
• Track the contribution supply chain decisions have on local economic growth through the job multiplier principle.

Implementation

These principles will take time to implement but group companies need to commit to continuous improvement, demonstrated by an improvement in their position on the stairways, with Level 1 representing the minimum standards which we would expect all countries to achieve. Companies will be expected to use the stairways to define their current position, identify actions needed to improve and measure and demonstrate progress. Levels on the stairways range fro Level 1 to Level 4 which represents achievement of what is currently considered to be best practice in a particular field.

Accountability and Responsibility

• The SABMiller Executive Committee (Excom) is the overall decision making body within the group and is responsible for ratifying any policies, position papers (etc) which reflect group views.
  
• Supporting the Excom, from a commercial/purchasing perspective, is the Global Sourcing Council (GSC), a body consisting of the respective hub commercial directors and group specialists, which acts as an advisory body to the executive on supply chain management and, in turn, sets overall policy on how procurement activities are conducted in all regions or countries of the world.
  
• At hub level, the respective country/operation commercial directors are responsible for ensuring the hub technical/commercial director(s) is(are) aware of their stairway position and leads the process of communicating policy outward and collection of key performance indicators required to manage their stairway position.
  
• The SABMiller plc environmental manager will support both the hub and country/operational technical directors in facilitating the above processes.