Wine's triple bottom line

The question most often asked about ESG is probably, what is it? And the second most asked might be: what’s it got to do with wine? At its most basic, ESG is a set of environmental, social and governance criteria that companies of all shapes and sizes use to prove their environmental and social commitments.

The criteria can say a lot about whether a business can continue to function in a radically different future – one that involves increased risks of social upheaval, transport disruptions, floods, droughts, heatwaves, virus alerts, poor air quality, and rising trade barriers, to name a few. This makes it particularly relevant to publicly listed companies.

For example, the 2018 ESG report, from the Frankfurt and Hong Kong listed Dynasty Fine Wines Group Limited, covers a range of sustainability initiatives from greenhouse gas emission reduction to training, anti-corruption, and community investment. In its explanation, the company says that it sees integrating ESG as “key to our continuous success in the future”.

A second answer would be to say that any business that uses land, water, and has stakeholders – be they shareholders, family, staff or clients – needs to have ready answers to questions about its planet and people friendly policies. Winemakers concerned about image and risk management, or the cost of mismanaging either, might want to think about what actions they could take to future-proof their business.

ESG and TBL

In California, one of the wineries best known for its work on integrating ESG thinking and practices into its daily business is Jackson Family Wines. Only they don’t call it ESG. “We talk more about the triple bottom line (TBL) for people, planet and profit,” said Julien Gervreau, the company’s vice president of sustainability.

What that means in practice, he said, is moving away from thinking about a single budget, with one financial bottom line, to thinking about a range of situations that could make doing business possible or impossible: water, for example, land, or people.

Gervreau, who has an MBA in sustainable management, said one of the best routes to introducing a TBL is to see it as a way of making a business “more resilient and more profitable.” Another is to think about it as a way of identifying ways to cut costs and increase earnings.

The Jackson Family is now so far down the TBL road that last year it co-founded, with Spain’s Bodega Torres, the International Wineries for Climate Action group (IWCA). Because climate and social issues affect wineries large and small, the philosophy is collaborative and the group is open to new members.

As of January this year, the IWCA has six members, including the founders. The newest wineries to join are Portugal’s Symington Family Estates, California’s Spottswoode Estate, New Zealand’s Yealands Wine Group and Chile’s VSPT Wine Group.

Homing in on a starting point useful to all, Jackson Family Wine’s first TBL goal was simply to begin using energy more efficiently. “I call that the gateway drug to sustainability,” said Gervreau. “Once you get more efficient you can see a direct and immediate improvement in utility bills.” For the Jacksons that meant savings of about $8m on electricity alone over the five years from 2009 to 2014.

Having pulled on the energy thread, the family took the next step and reinvested those savings in a range of initiatives, including solar panels. Today, the estate has the largest solar operation in the US wine industry.

Currently, that solar power represents about 32% of what the Jackson winery needs. By the end of this year, the goal is to hit 50% solar. Most of the panels end up on buildings, but the idea of putting a few on the estate’s irrigation ponds is being considered.

The other thread the Jackson’s pulled was a sustainability report. Acting as a baseline, the report measured the estate’s water and energy usage, waste production and its carbon emissions. A set of five-year goals, to be achieved between 2015 and 2020, was included. To help them on their way, they drew up a ‘progress toward goals’ table.
Speaking at the international wine fair, Vinexpo, in May 2019, Katie Jackson, vice president of sustainability, was asked what first steps a winery might take toward a greener future. Her advice was simple: “First measure and ideally hire a consultant to help.”

For those not quite ready to hire a consultant, another first step could be to seek out any initiatives and support provided by local wine authorities, keen themselves to reduce their region’s overall footprint. At the same Vinexpo session, Miguel Torres Maczassek, general manager for the Torres Group, said one of his focal points, along with tree planting and reservoir construction, has been a hunt for new grape types – ones known for their resistance to water shortages and later ripening such as Querol, Gonfaus, Selma and Forcada.

On the energy side, at least 25% of the Torres family’s energy needs now come from solar panels and all staff drive electric cars. In addition, a bottle recycling project is underway. Torres Maczassek added that he believes private initiatives are the way forward, as political solutions risk being weak and taking too long.

As any list-maker would agree, the acts of measuring and writing things down go a long way toward getting things done. Back at the Jackson’s, Gervreau said that as of 2019 the estate had achieved eight out of their 10 five-year goals. “And we will reach the other two by the end of the year.”

The focus now is on developing new goals for 2030. These fall into four key areas: reducing greenhouse gas emissions, water resilience, land use, and social impact.

Good for the planet, bad for business?

Finding ways to do good things for the planet while making a profit is, of course, the ideal. But what about things that are good for the planet but not for profit? Asked about that, Gervreau gave the example of water. “Water is basically free here. But it’s not. We are coming out of five or six year drought. We leaned into that shortage and took the opportunity to examine our relationship with water.”

Because it had no official value, the process began with the company looking at what it cost to use a gallon of water – the pumping, transporting and heating of it. “Our total water usage cost was about three cents a gallon. That’s of course a gross under-valuation, but at least it put a price tag on it,” Gervreau said. And that created the opportunity for a payback. “For example, using ultraviolet light to replace some of our cleaning water. Or by capturing and reusing rainwater. It was not the best business case but it was a start.”

Those steps morphed into the company thinking of water conservation as insurance. “In case the local water board slapped a 20% reduction order on everyone one day. From there, water conservation became a future hedge.”

Next, the Jacksons began planting drought tolerant root stocks and spreading compost between vine rows to reduce evaporation. The change of thinking meant that compost was no longer seen as an expensive addition. Instead, compost’s benefits multiplied as it meant more water in the ground, better soil health, reduced synthetic fertilizer use, and more carbon dioxide sequestration potential thanks to the soil’s higher levels of organic matter.

All good news from what many might have seen as an unnecessary start.

It’s all about the people

Turning to people, Gervreau admits this is the area that needs the most active change management, because people dislike change.

One of the first areas currently under review is presence. “We might not need people to sit at a desk 9am to 5pm,” said Gervreau. As well as offering staff more flexibility, the move could reduce travel emissions.

Gervreau’s words about people and change management are borne out by a recent research paper. Titled The Triple Bottom Line in the Global Wine Industry, it was written by academics at Colorado State University, the University of Tennessee and Italy’s University of Verona.

The researchers found that two out of three wasn’t bad for most wine businesses undertaking a TBL approach. In fact, 86% of the 112 wine businesses in the study made progress on one or two of the three bottom lines. It also found, though, that the dimension most often lacking was social sustainability. The difficultly of changing people’s ways could be one reason for that. But the paper suggested another: customers not caring. But then, why would they? A very brief survey of local wine labels revels little to no information about the working conditions of anyone involved in making it, from the boss to the vineyard worker.

On the upside, the study found that “if customers required all three dimensions, the desire for pragmatic legitimacy could also propel achievement of the triple bottom line.”
Or, in other words: as everyone becomes a bit more aware, don’t be surprised if drinkers of all budgets begin picking up wine bottles in the store and examining them for, among other things, ESG or TBL ratings.