Dialogue 2014

Stable procurement is crucial to the ongoing delivery of the “Joy and Satisfaction of Food”

Employees of Asahi Group companies involved in material procurement operations invited external experts and suppliers to come together for dialogue to identify the issues faced by the Asahi Group in the stable procurement of materials, how to achieve sustainable procurement activities, and what social responsibilities we should fulfill.

Stable procurement is crucial to the ongoing delivery of the “Joy and Satisfaction of Food”

Participants from the Asahi Group

  • Shinji Otsuka Asahi Group Holdings, Ltd.
    Manager, Procurement Section

    Shinji Otsuka
  • Tomoyasu Sasaki Asahi Breweries, Ltd.
    Manager, Procurement Section

    Tomoyasu Sasaki
  • Kayoko Kondo Asahi Soft Drinks Co., Ltd.
    Deputy Manager and
    Purchasing Group Leader,
    Purchasing Section

    Kayoko Kondo
  • Hiroshi Nakamura Asahi Food & Healthcare Co., Ltd.
    Procurement Section,
    SCM Headquarters

    Hiroshi Nakamura

Assessing risks throughout the entire supply chain

Participants expressed their recognition of bleak conditions. This included experiencing first-hand the difficulties to stable procurement in the past few years due to negative impact from the supplydemand balance, and being keenly acute of the risks to procurement from catalysts such as climate change. In recent years, droughts, flooding, cold waves, and other natural disasters have been occurring frequently on a global scale. This has led to major damage to agricultural regions. At the same time, there has been a sharp rise in the consumption of various resources owing to the growth in world population. Given these factors, it is becoming increasingly difficult to secure the necessary quantities and quality when procuring raw materials.

According to experts, a major risk in particular to procurement is the global water shortage issue. Forecasts indicate that in 2025 two­thirds of the population will not have access to a sufficient amount of water for daily living. This is expected to have a significant impact on the Asahi Group, which procures many raw materials from regions overseas. One common factor is that, when looking at the entire supply chain, the largest amount of water usage occurs at farms that produce raw materials, while the amount of water used during the manufacturing stage, including factories, accounts for a mere several percent of total water usage. Participants offered recommendations that focused on the supply chain, such as providing guidance on water conservation to producers and taking future water risk into account when selecting supply regions.

Fortifying relations with producers to achieve sustainable raw materials procurement

There are potential cases where raw materials are procured legally with the approval of the local government, but which constitute a substantial environmental burden as tropical rainforests are clear cut to create the fields where the agricultural products are grown. Another concern voiced by participants— when we focus only on buying things cheaply—was the possibility of being unable to secure essential raw materials due to producers shifting to the farming of products with a higher profit margin.

One solution discussed was a differentiation strategy whereby raw materials are purchased from certified farms that carry out sustainable production, with the final product sold as a high value-added product. The purchase of raw materials grown on certified farm at a fair price would improve earnings for those producers.

One opinion shared by all participants was that relations should be strengthened with upstream suppliers from which raw materials are procured. There is substantial room for improvement in the cultivation methods being used mainly in developing regions. By embarking on initiatives together with producers, there is ample potential to boost quality and production efficiency while simultaneously reducing the burden placed on the environment. Some participants mentioned that they no longer leave everything up to the supplier, as was done conventionally,but are starting to go directly to the regions where the raw materials are farmed to work together with these producers.

After the conclusion of this dialogue, participants came away with various impressions. There was renewed recognition of the deep connection between procurement operations and CSR given that the raw materials being used were mainly “gifts” from nature. Others believed that it was necessary to maintain a long-term outlook of 10 or 20 years, rather than just a few years. Each participant had a stronger conviction for achieving sustainable procurement.

Expert comment
Naoki Adachi

Dr. Naoki Adachi
President
Response Ability, Inc.

Manufacturers cannot carry out their operations without raw materials. The method of raw material procurement has a considerable impact on the natural environment and ecosystems. There are a number of preconceptions, such as it is expensive to procure raw materials from socially and environmentally conscious farms. In actuality, it is possible to provide guidance and management support to producers to improve productivity and facilitate stable procurement. By enhancing corporate brand strength, there are also revenue benefits, such as sales growth. In addition, as potential investments, institutional investors are looking for companies that use sustainable procurement methods for raw materials to minimize future procurement risk.

It is very important that companies deepen their understanding of the close connection between CSR and procurement and raise the awareness of each of its buyers in production regions. I look forward to the Asahi Group being an industry pioneer that introduces new innovations in the area of raw materials procurement.

Comment from participants from outside the company
Shun Furuyama

Shun Furuyama
Starch Sweetners & Beverages Team TeamLeader, Sweeteners & Beverages Dept.,
Sumitomo Corporation.

There are various risks to the stable procurement of raw materials by companies, including constraints on resources and food supplies and water shortage issues due to an increase in population as well as flooding and droughts triggered by climate changes. In any of these situations, it will be too late if we wait until conditions grow serious before we deal with them. Employing a broad outlook to focus on these issues, it is necessary to share information and enhance mutual understanding throughout the entire supply chain. TheSumitomo Group has established The Sumitomo Corporation Group CSR Action Guidelines for Supply ChainManagement and is promoting initiatives to create a sustainable society. We plan to strengthen our alliance with our business partner, the Asahi Group.

After the Dialogue
Tomohiko Sata

Tomohiko Sata
General Manager, Corporate Social Responsibility Section,
Asahi Group Holdings, Ltd
.

The Asahi Group is expanding its procurement activities in Japan and abroad. A long-term and global outlook is essential for stable procurement that sustains quality, quantity and cost. I believe a major achievement is that through this dialogue we are able to mutually share this goal. Although it is difficult to make sudden considerable changes to conventional procurement methods, it is vital that we gradually embark on measures to steadily work toward our CSR goals. This is not only the responsibility of the procurement section. These goals must be achieved via cooperation between various departments, including Marketing, Production, andCorporate Planning Sections. Going forward, we aim to deepen our internal communication.