This is Part 2 of our interview with Hervé Le Faou, Chief Procurement Officer of Heineken. Part 1 is here).
Moving from the vision back to current activities, Le Faou is one of the co-leads of Heineken’s sustainability programme. The firm has cut carbon emissions from its breweries almost in half since 2008 and has committed to using 70% renewable energy within ten years. “Regenerative agriculture” is another priority, which in areas such as barley cultivation looks to improve the soil, develop healthier water systems and increased biodiversity, as well as improving the lot of farmers. Heineken also is working to make logistics and cooling greener too, which matters as the firm has no less than 150,000 of its green fridges out in the marketplace!
Water is another focus. The “every drop” programme is reducing the amount of water used for every litre of beer brewed. 10 years ago the usage was 10 litres, now it is 3.2 and 2.8 is the target. The programme extends even to “replacing” the water in the product that is eventually drunk by consumers; for example, through re-forestation programmes. We have a number of breweries around the world using solar power to provide the energy needed for brewing - another demonstration of how sustainability thinking and innovative technology are closely linked.
To achieve this progress, procurement must engage with suppliers on sustainability and technology issues. A few years ago, the metals (cans) and glass markets were dominated by a few large, conservative suppliers. “Bringing these firms into a sustainability mindset was not easy” Le Faou acknowledges.
“We asked questions like how could we make the primary packaging “smarter” and lose the secondary packaging”. This was radical, and changing the approach meant moving away from traditional commercial negotiation. But Le Faou is (rightly) cynical about the results of the old adversarial procurement approach in many firms. “Let’s be honest, you beat up the supplier, you think you are making savings, but at the end of the year, somehow your supplier’s P&L is better and yours is worse!”
But making real change in terms of sustainability and the circular economy needs the involvement of not only suppliers but also whole sectors, governments, retailers and more. So procurement must work with a wider range of external – and internal - stakeholders. “We are now closer to our people in corporate affairs and we go outside the business too, talking to regulators and governments.”
In terms of making circular economy ideas work, for instance, Le Faou explains that “whole industries have to move. No-one will change how they do things for just part of the sector.” So there is a major job to be done in terms of persuading many different people and organisations.
But while some suppliers weren’t sure at first that Heineken was serious, now the messages associating sustainability, innovation and technology are getting through. The can and bottle industries are getting into renewable energy and circularity. “Some thought they would lose revenues, but we had to say, you will die if you don’t adapt!” Eventually that message was heard and firms are acting.
Le Faou feels that for procurement functions and people, the discussion with very top management is easier if you talk about sustainability and innovation rather than purely commercial matters. And the pressure is continuous. “Being the best doesn’t last long today. We want to be the best, to be the first – but then we will also share ideas and collaborate with others to innovate.” People are vital too, with the ongoing “competition for talent”, and you must have the best people to sustain that advantage.
We then moved on to social matters. Le Faou has a fascinating perspective here. “Environmental issues used to be defensive and regulatory. Now they can be a competitive advantage. The same thing is now happening with “social” issues, such as human rights. We can turn this into a positive, proactive issue, not just think of the regulations and the risks.”
For instance, he believes that “multinational firms can make things better for people, and help bring them out of poverty. That is a real sense of purpose!”
Heineken believes it can create many jobs directly and indirectly – but of course measuring how many people move out of poverty is not easy. As you might expect, this enlightened attitude in Heineken has come from the top. But “not all CEOs are mature enough to listen to these ideas, they still focus on year end. So we think we can help to move the needle on purpose, help to move whole industry sectors. And when you find a CEO who is passionate about this, who will allocate resources to the future, then they will win.”
In our opinion, the same applies to CPOs. Those, like Hervé Le Faou, who can focus on sustainability, innovation, technology and agility in the supply base, taking both internal stakeholders and suppliers with them, will be the success stories of the procurement world. It is not always easy, and you need that supportive Board, but it is surely the way that procurement leadership is moving, as Le Faou (and others we have met and interviewed) show.