Env. business strategy evian
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- 1. UNIVERSITY OF STRATHCLYDE, , DEPARTMENT OF CIVIL
ENGINEERING, DAVID LIVINGSTONE CENTER FOR SUSTAINABILITYEvian the
implications on its business strategy following the introduction of
legally binding carbon emission targets on governments.
Environmental Business StrategySofia Diaz Rivera
Ollivier1/6/2012
- 2. 1. Executive SummaryEvian bottle water comes from the French
Alps and is sold worldwide. Following climate change,the risk of
water shortage and stakeholder pressure especially bottle water bad
press; Evian had tohave a Sustainability Strategy to secure its
business in the future. They started by protecting theirwater
source and identifying that their carbon footprint came primarily
from transportation andpackaging, followed by manufacturing. They
took some actions to reduce its carbon footprint byshipping 59% of
their production within EU by train and using boat for exports. In
the packagingarea they did some lightweigthing and are using
recycled PET. They also have set many actions toprotect the water
source in Evian Les-Bains. They want to be carbon neutral by the
end of 2011,and what they cant reduce they are going to compensate
it by reforesting a mangrove in Senegal.Even though they have done
a lot to reduce their carbon footprint, they are things Evian
isntconsidering. For instance, their growth will come from outside
the EU where their transportfootprint is larger, because
distributors transport Evian mainly through ground increasing its
GHGsemissions. Also even though the water source is protected it
may become scarce if they extractmore water than the spring can
produce. Finally even though they have done a lot to have
moreenvironmentally friendly packaging consumers are responsible of
the end of life disposal of Evian.This report contains
recommendations on what Evian can do to tackle these new
environmentalchallenges. 1
- 3. Contents1. Executive Summary
....................................................................................................................
12. Background
................................................................................................................................
33. Macro Analysis -PESTEL
..............................................................................................................
3 3.1
Politics..................................................................................................................................
3 3.2 Economics
............................................................................................................................
3 3.3
Social....................................................................................................................................
4 3.4 Technological
.......................................................................................................................
4 3.5 Environmental
......................................................................................................................
4 3.6 Legislative
............................................................................................................................
44. Stakeholder
analysis...................................................................................................................
45. Environmental Risk
....................................................................................................................
66. Porter 5 Forces Analysis
.............................................................................................................
6 6.1 Threat of entry
.....................................................................................................................
6 6.2 Threat of substitutes
............................................................................................................
6 6.3 Power of buyers
...................................................................................................................
7 6.4 Power of
suppliers................................................................................................................
7 6.5 Competitive Rivalry
..............................................................................................................
77. Evian Sustainability
Strategy.......................................................................................................
8 7.1 Manufacturing
.....................................................................................................................
8 7.2 Packaging
.............................................................................................................................
8 7.3 Transport
.............................................................................................................................
9 7.4 Nature & Water protection
................................................................................................
10 7.5 Consumers & other Stakeholders
.......................................................................................
108. Analysis on Evian Sustainability Strategy
..................................................................................
10 8.1 SWOT
.................................................................................................................................
10 8.2 Recommendations: Strategic Response
..............................................................................
12 8.3. Conclusions
.......................................................................................................................
139. Reference
List..........................................................................................................................
1310. Appendix I Stakeholder Analysis
..........................................................................................
1611. Appendix II Packaging Materials Environmental Impact
....................................................... 1712.
Appendix III Turnitin submission
................................................ Error! Bookmark
not defined. 2
- 4. 2. BackgroundEvian is part Danone Group Water Division; as
such its shares its values. Danone placessustainability in the
heart of its business strategies, having its Nature and
Sustainability programsas one of the companies 5 growth pillars.
Franck Riboud its CEO says My vision for Danone is acompany that
creates economic value while creating social value (Grosser et al.,
2010), so it iscommitted to reduce CFP by 30% from 2008 to 2012
(Sacchi, 2010).Evian water is bottled in Evian-Les-Bains, France.
It takes 15 years for the water to filtrate throughthe French Alps,
so it is perfectly pure and balanced in minerals. It is untouched
by human hand,so it is free from pollution (Evian, 2011). Evian is
the number 1 premium brand on the market, ithad a retail value
share of 2% in 2010 (Euromonitor, 2011).Evian is sold in 110
countries in Europe, Asia, America and Middle East. In some
countries it usesits own sales force and distribution system,
mainly within the EU and outside it uses distributors.In total it
uses 150 distributors. Its top national markets: France, UK, Japan,
Germany and USAaccounts for 74% of its sales (Eurmonitor,
2011).Evian needs a sustainable strategy, to ensure that their
actions today dont limit their business inthe future, especially to
ensure their water supply. First I will go through a brief
PESTEL,stakeholder, risk and Porter 5 forces analysis. Then I will
describe Evian sustainability strategy, andanalyze it with a SWOT
analysis. Finally I will give recommendations.3. Macro Analysis
-PESTEL3.1 Politics After Kyoto, governments are using different
tools to encourage and re-enforce companies to reduce their GHGs
emissions: regulatory pressure; subsidies, tax, voluntary
agreements, etc. (Stone & Ozimek, 2011).3.2 Economics The cost
of reducing GHGs emissions is about 1% of the GDP, it is something
we have to afford otherwise we will have serious economic
consequences on growth (Stern, 2007). 3
- 5. Carbon trading schemes motivates business to reduce their
GHGs emissions by either buying or selling carbon allowances, which
are reduced over time (Stone & Ozimek, 2011).3.3 Social
Consumers are not well informed about GHGs emissions and how they
can reduce them, they arent willing to sacrifice their own
convenience or prices (Stone & Ozimek, 2011). Most consumers
dont reward companies that are environmentally friendly but they
punish those that they think are acting bad (Stone & Ozimek,
2011), for example consumers are substituting bottle water with tap
water in EU, because they consider it bad for the environment
(Eurmonitor, 2011).3.4 Technological Governments are incentivizing
the development of technologies that reduce GHGs emissions such as
renewables through funding and subsides (Coninck et al., 2008).3.5
Environmental If GHGs emissions arent reduced and temperature rises
above 2C, there will be problems with water supplies and
availability, among other consequences (Stern, 2007). The world
needs to reduce emissions to 500-550 ppm CO2, that is about 25% of
current emissions by 2050 (Stern, 2007), or otherwise businesses
will need to adapt to new conditions.3.6 Legislative New laws like
Chicago $5 cent tax on bottle water (Swedloff, 2008) can come into
place in more countries. EU has various environmental such as the
EC packaging waste directive that dictates that 25-45% of packaging
must be recycled (Freire et al., 2001).4. Stakeholder
analysisStakeholders are of main importance to Evian, some of them
posing a serious threat, see figure 1for Evians stakeholder
classification. 4
- 6. Figure 1: Evians Stakeholder classificationSince 2007 Evian
has been receiving bad press. NGOs and Green Consumers are
promoting todrink tap water because bottle water packaging and
transport is damaging the environment(Euromonitor, 2009). This bad
press added up to the economic crisis 2008-2009 made a massivedrop
in Evian sales in Western Europe which represents 60% of the market
(Euromonitor, 2010)see figure 2. Also they have lost 30% of
turnover in UK and England since 2007 (FAME, 2010). Figure 2: Evian
off trade Volume-Western Europe (MM lts) (Euromonitor, 2010) 5
- 7. After 2007 Evian monitors carefully stakeholders especially
the ones with high power and has arisk mitigation strategy (Valdez,
2011). For further information on Evians stakeholderenvironmental
motivators and the risk they pose to Evian business see Appendix
I.5. Environmental RiskAn environmental risk becomes a company risk
if it has economic consequences on the business(Schaltegger et al.,
2003).Evian currently has two risks that put in danger its current
businessmodel and profitability: 1. Bottle water bad press for
damaging the environment (Eurmonitor, 2011). 2. Climate change, if
temperature rises above 2C water supply and availability will
decrease (Stern, 2007), and can put in risk Evians water
supply.Evian needs to address this risk in its Sustainability
Strategy to secure business in the future,working closer with
stakeholders, developing greener packaging and protecting its
waterresources. It also needs to develop a contingency plan of
production if Evian-les-Bains is left withno more water to
produce.6. Porter 5 Forces Analysis6.1 Threat of entryBarrier of
entry are low so many private label brands are now competing on
price with big brands(Euromonitor, 2011). Evian strategy is to try
and differentiate itself from private label brands withhigh quality
water, appealing to a certain lifestyles and investing lots of
money to maintain itsbrand awareness (Valdez, 2011).6.2 Threat of
substitutesTap water and water filters are the main threat to
bottle water. Tap water is of special treat inEurope and North
America where tap water is safe to drink. Several studies compared
bottle vs.tap water and concluded that while some bottle waters
have better quality than tap water, it isnot always the case
(Hunter, 1993; Olson, 1999; Lalumandier & Ayers, 2000 in Doria,
2006). Itbecomes a stronger threat when consumers and organizations
start promoting tap water, for 6
- 8. example in the video the story of bottle water by Annie
Leonard (2008) where she gives theexample of Clevelands tap water
which is safer and cleaner than Fiji. Evian also has
othersubstitutes which include soft drinks since it is competing
for consumer share of throat(Euromonitor, 2011).6.3 Power of
buyersMass market retailers and distribution chains such as
Walmart, Tesco and Carrefour are seeking towork with suppliers that
are environmentally friendly (Grosser et al., 2010). Walmart for
examplehas its own product sustainability index that uses to
compare different products (Walmart, 2009).So there is pressure
from buyers to turn green or otherwise they will stop buying.
Supermarketsaccount for more than one third of bottle water sales
(Euromonitor, 2011).Other buyers are Evian s distributors outside
the EU, for them Evian represents 10% or less ofwhat they sell, so
Evian doesnt have a strong power over them to make them incorporate
Evianssustainability strategy (Valdez, 2011).6.4 Power of
suppliersCosts of PET are really volatile, and will tend to rise
especially since China, India and Indonesia areproducing clothes
with polyester (Boswell, 2011). This affects Evian price structure
because whenPET price raises Evian isnt able to negotiate with
suppliers. RPET suppliers are still few, andrecollection rates of
PET are still small for example in the UK 39% of the PET used is
collected and17% of the PET recollected in the EU is sent to China
(Welle, 2011), making it difficult to havesufficient recycled PET
to make new bottles.6.5 Competitive RivalryBottle water Industry is
a competitive market, with top leading multinationals Pepsico,
Coca-Cola,Nestle and Danone fighting for market share. Even though
there are top players the market isfragmented, with only 18% of the
volume coming from the 10 top brands (Euromonitor, 2011).The soft
drink industry has moved to a more environmentally friendly
production so there is anongoing war between main producing
companies to see which has the most eco-friendlypackaging in the
market, for example in 2009 Coca-Cola launched its plant bottle in
Dansani waterbottle (Hill, 2010) . 7
- 9. 7. Evian Sustainability StrategyWith all the factors mention
in the above analysis, Evian needs a strategic management in order
tosurvive, overcoming todays environmental situation and reducing
its carbon footprint, whilemaintaining the company profitable and
competitive. Evian has high environmental opportunitiesas well as
high treats so it should have an innovative environmental strategy
which includesanticipation, differentiation and acceptance of
change (Schaltegger et al., 2003).Thats why Evian did a lifecycle
analysis and found its carbon footprint comes mainly frompackaging
and transport, followed by manufacturing (Grosser et al., 2010).
Their strategy is toreduce its carbon footprint as much as possible
through the use of EMS and an eco-efficiencystrategy to reduce
materials, enhance its recyclability, reduce energy etc Their
reduction target is50% by 2011. When they cant reduce any more,
they will compensate reforesting a mangrove inSenegal in
partnership with Ramsar (Valdez, 2011). Evian has the objective to
become carbonneutral by 2011 (Grosser et al., 2010). If it achieves
it, Evian will become a green star with higheconomic and
environmental performance (Schaltegger et al., 2003). I will go
briefly into thethings Evian is doing to reduce its carbon
footprint through its supply chain and production.7.1
ManufacturingThe factory in Evian-Les-Bains is certified with ISO
140001. It also is has an internal EMS calledGREEN (Global Risk
Evaluation for Environment), that review the environmental risks in
theindustrial site, and it is audited by an external partner
(Grosser et al., 2010). Evian hasntincorporated EMS into its supply
chain.7.2 PackagingEvian packaging mix is 85% PET and 15% glass
sold mainly in HORECAS1 (Valdez, 2011). They aredoing lifecycle
analysis of all their product range and know for example that the
carbon footprintof Evian 1.5 L bottle is 133 g CO2/L. They are
working to reduce its packaging footprint in PETbottles through
light weighting, and the use of recycled pet (Perthuisot &
Jouin, 2010).They have light weighted all its PET packaging, having
a 40% reduction from 1995 to 2010, seetable 1. The progress was
slower than expected because older lines where harder to
convert(Grosser et al., 2010).1 Hotels, Restaurants and Cafeterias
8
- 10. Table 1: Evian light weighting through its product line
0.33 L 0.500 L 1L 1.5LBefore 12.8 g 15.8 g 27 g 32 gLight weighted
11.8 g 14.3 g 24 g 28 g(Perthuisot & Jouin, 2010)They also use
35% to 50% recycled PET depending on the format (Grosser et al.,
2010). PET bottleCarbon Footprint can be reduced by more than 50%
if the PET is recycled (Pasqualino et al., 2011).All of Evians
efforts are in PET bottles and they arent considering that glass
water has a higherenvironmental impact that PET bottled water
(Pasqualino et al., 2011). Go to appendix II to seefurther
information on the carbon footprint of different packaging.7.3
TransportAs said before transportation of Evian bottles accounts
for an important part of its carbonfootprint. To reduce it they are
increasing train shipment, 59% of the product departing from
thefactory is transported thorough railway mainly within Europe
(Grosser et al., 2010), railtransportation has a lower carbon
footprint than planes and ground delivery (Cholette &
Venkat,2009). For Asia, America and Middle East they signed a
partnership with Maersk shipping totransport Evian by boat. This
partnership helped reduce transport footprint by 5% from 2009
to2010 (Grosser et al., 2010).Each distributor has a different
Incoterm agreement. An Incoterm outlines the obligations of
buyerand seller in an international transaction (Biederman, 1999).
Once the product is delivered to thedistributor where agreed in the
Incoterm, Evians responsibility ends. As soon as the distributorhas
the product in the port or its distribution center they can
transport it by plane or groundincreasing again the carbon
footprint that was reduced by transporting it by sea. When
Eviannegotiates Incoterm agreements, the priority are savings not
reducing Evians transport footprint(Valdez, 2011).Today almost 60%
of Evian volume comes from Europe where transportation is
moreenvironmentally friendly. But Evians growth is expected to come
from outside the EU because ofmarket saturation (Euromonitor,
2011), increasing this way distributors non-ecologically
friendlytransportation. 9
- 11. 7.4 Nature & Water protectionEvian needs to protect the
water bodies in Evian-Les-Bains to secure its business in the
future.That is why in 1992 they created the Association for the
Protection of Rainwater Catchment forEvian Mineral Waters (APIEME).
Its main function is to ensure there is a sustainable
developmentand management in the region to maintain its
biodiversity, promote sustainable agriculture, andavoid the use of
pesticides and fertilizers that might infiltrate the water. In 2004
Frank Riboud,CEO, signed the Groundwater protection policy, so they
dont withdraw more water that what thespring can naturally produce
(Grosser et al., 2010). In 2008 the Evian Water protection
Institutewas created in partnership with Ramsar to help protect and
restore wetlands, and have aneffective water management with local
community participation (Ramsar, 2010). In 2009 Evianwas classified
a Ramsar zone, as such they have to protect the biodiversity within
(Grosser et al.,2010). Evian complies with policies and goes beyond
its area of expertise, in 2010 promoted aframework agreement with
APIEME, council of Haute-Savoie and the community of
municipalitiesof the Evian region, to decrease the use of salt in
roads during winter and avoid the soil and waterbeing contaminated
with chloride compounds (Grosser et al., 2010).7.5 Consumers &
other StakeholdersBusiness need to walk the talk, and be sure that
the claims they make are substantiated by factsand are communicated
to consumers clearly (Stone & Ozimek, 2011). Danone created
with Britishagency Futerra an internal policy on environmental
claims that is applicable for Evian since 2011.This will help avoid
green washing consumers (Grosser et al., 2010). Evian also did
training toemployees and key stakeholders called Protect purity
training, that explained Evianssustainability strategy (Grosser et
al., 2010) and was used to engage with them.8. Analysis on Evian
Sustainability Strategy8.1 SWOT 10
- 12. To analyze Evians current Sustainability Strategy and be
able to give recommendations I did aSWOT analysis, see Table
1.Table 2: SWOT analysis of Environmental StrategySTRENGTHS
OPPORTUNITIES - Use of up to 50% of recycled pet in its - Consumer
environmental education: lack of packaging, which has a lower CFP
awareness of sustainable alternatives (Pasqualino et al., 2011).
continues to be a significant barrier to - Light weighting by 40%
in PET packaging. purchase (Quadir, 2011). - Use of train transport
within EU and by - Cause-related marketing has potential to boat
outside the EU. boost sustainable brands (Quadir, 2011). - Water
protection in Evian-Les-Bains - Use the power of new media to -
Third party partner Ramsar. communicate sustainability initiatives
and - CO2 Compensation by reforestation of a engage with key
stakeholders (Belle, 2011). mangrove in Senegal. - Develop a plant
bottle like Volvic to reduce - EMS system in plants. its dependence
on PET. - Environmental claim policy. - Employee and main
stakeholders involvement through Purity Training.WEAKNESSES THREATS
- Grow will come from developed markets - Water filters and private
label competition where tap water quality is poor in countries
where tap water isnt clean. (Euromonitor, 2011), increasing the -
Increased consumption of tap water. transport footprint. - Bad
image of bottle water, because of its - EMS only in production
sites not in the environmental impacts. whole supply chain. - Water
contamination or shortage in Evian- - European bottle water
business remains Les-Bains. weak and accounts for about 60% of the
business (Danone Euromonitor 2011). - Not doing anything in Glass
packaging which accounts for 15% of volume. - Communication of its
sustainable strategy to green consumers, and social media
management. 11
- 13. 8.2 Recommendations: Strategic ResponseEvian is going in
the right path but still needs to consider other factors to be a
green star brandand secure its future growth. They need to work on
engaging more with key stakeholders throughsocial media and other
communication mediums, so they can act as ambassadors and
reducebottle water bad press. They have to put their sustainable
actions in their website so that greenconsumers that are interested
can find them. They also need to educate consumers, since they
areresponsible for the end of life of Evians bottles.It should also
be a good strategy to extend their EMS to the supply chain,
especially transportwere the main carbon footprint comes. They
should also evaluate that Incoterms agreementsbenefit Evians
transport footprint and try to work with distributors to have a
more sustainabletransport where they operate.In the packaging area
they should substitute glass bottles with PET, they might need to,
make anice PET bottle suitable for HORECAS. They can also
incorporate plant based material to their PETbottle as it was done
by Volvic its brother company.I think that what they are doing to
protect the water source and their partnership with Ramsar
isoutstanding. They were really intelligent to protect their water
resource since 1992, but acontingency plan needs to be drawn if the
effects of climate change are severe and Evian-Les-Bains is left
without water or if they extract from the spring more water that it
can produce.Looking more into the future, and considering that
Evian cant produce elsewhere because of itsorigin, and most of its
growth is coming from outside EU in developing countries where
usually tapwater isnt safe to drink. I would suggest them to create
Evian water filters to sell in thesedeveloped markets. The filters
should have the same kind of rocks there are in the French Alps
andsimulate a 15 year filtration so the water taste is the same.
This eliminates the current problem oftransportation and packaging
that contribute the most to Evians carbon footprint and can
alsohelp if the spring runs out of water. 12
- 14. 8.3. ConclusionsIn this report I analyzed Evian Marco and
Micro operating environment through a PESTEL and 5forces analysis.
I identified the primary stakeholders and the threats green
consumers and NGOsare posing to its business with bottle water bad
press. Then I identified the risks climate changebrings to Evians
business, especially if they run out of water in Evian- Les-Bains.
Finally I went intoEvians current sustainability strategy did a
SWOT on it and gave recommendations forimprovement like engaging
more with key stakeholders through social media, and doing
someinnovations such as plant bottles, and water filters that
simulate Evians filtration through theFrench Alps. It can be
concluded that even though a company has an environmental
businessstrategy and it is making progress it should evaluate it
once in a while to see if it is still valid, or ifchanges need to
be made. Businesses need to adapt quickly to the operating
environment so theirenvironmental strategy should change
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- 17. 10. Appendix I Stakeholder AnalysisIn table 3 you can find
Evians main stakeholders their motivation in the company and the
riskthey pose to Evian.Table 3: Stakeholder AnalysisStakeholder
Motivation RiskShareholders Maintain and increase their revenues.
If They dont invest any more in Evian becauseand investors
environmental conscious they will invest they think it wont survive
in the future and it in companies in the Down Johns is risky.
Sustainability IndexEmployees Work for an organization that share
the Many environmentally conscious employees same values as them,
and obtain if they think Evian is damaging the environmentally
healthy work. environment will leave the organization.Suppliers
Adopt new environmental quality If they dont adopt new
environmental criteria, to continue selling. criteria Evian will
need to find new suppliers.Media Searching for information to write
Widespread media coverage of the negative about. environmental
impact of bottle water packaging and transport had negative results
in growth in Western and USA (Euromonitor, 2011).Local Maintain and
improve the conditions in They can put in danger the production
ofCommunity which they live. Evian if they think Evian is
threatening theEvian-les Bains conditions in with they live.NGOs
Act as advocates for the environment Can ruin Evians reputation and
convince and watchdogs. They promote consumers to stop drinking
bottle water. For environmentally friendly behavior in example
Clean Up Australia campaigned businesses. against bottle water
saying it has the same environmental impact as driving a car for 1
km (Williams, 2008).Green Want eco-friendly products and are on Can
damage the reputation with their opinion 16
- 18. Consumers the watch for greenwashing. on social media or
create a consumer boycott. For example the video about the story of
bottle water has been seen by around 2 million people (Leonard,
2008), encouraging them to bring back tap water.Clients/ Buyers
They want more ecologically friendly Stop buying Evian if you dont
supply what products for their stores, as they are they expect, or
dont comply with their also turning green. standards.Governments
& Protect and conserve the environment Punish if you dont
comply the law or set theAuthorities on behalf of the society
example, like SCOTS council that planned to ban bottle water from
departments and meetings (Paisley, 2008).Motivation taken from
(Schaltegger et al., 2003)11. Appendix II Packaging Materials
Environmental ImpactPasqualino et al. (2011) did an environmental
evaluation of the impact of manufacturing anddisposing different
types of packaging for beverages: plastic HDPE, plastic PET,
aseptic carton,aluminum and glass. They found that the more
environmentally friendly packaging is plastic andaseptic carton for
sizes greater than 1, and the glass bottles have the highest
environmentalimpact. Packaging that contains more volume content
> 1 L has lower environmental impacts. Inselecting the best
packaging material for beverages it is important to consider their
transport andsecondary materials, as well as final disposal. The
most environmentally friendly way to disposeany packaging is
recycling, followed by landfilling and finally incineration. They
recommend theconsumption of local products over those that require
transport to minimize the environmentalimpact as much as possible.
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