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Sustainability Review (continued)
Source agricultural raw materials locally in Africa
Compliance with our Supplier Code Procedure
Report of the
Report of the
Financial
Sustainability
Other
Introduction
Executive Board
Supervisory Board
Statements
Review
Information
Heineken N.V. Annual Report 2017
View
case
study
online
2020 commitment
Deliver 60% of agricultural raw materials in Africa via
local sourcing within the continent12.
2018 milestone
56% of agricultural raw materials used in Africa to
be locally sourced from within the continent.
Our progress in 2017 Offtrack
We sourced 42%13 of agricultural raw materials
used in Africa and the Middle East locally in 2017
(2016:49%). This includes two new operating
companies consolidated since 2016: South Africa
and Ivory Coast. When we look at like-for-like
compared with the original scope, the percentage
decreased from 53% to 46%.
Challenging economic conditions impacted our
ability to source locally in 2017. In some operating
companies, local currency devaluations and scarcity
of hard currency (Forex) pushed up demand for local
raw materials. This, combined with below average
harvests in some countries, drove up the price of local
crops. While these price increases are good news
for many farmers, this volatility can make it difficult
for us to secure the quantity and quality of local raw
materials we require, at competitive prices.
We are now sourcing locally in 13 operating
companies across 28 different value chains, including
six Public-Private Partnerships (PPP). These projects
support more than 150,000 farmer households.
We launched a new PPP in Ivory Coast which aims
to develop the local rice value chain.
We have reached an agreement with The International
Finance Corporation (IFC) to extend our barley
project in Ethiopia into new geographical areas
in 2018and 2019, when two newmalteries are
expected to be operational.
For more on our Local Sourcing programme in Africa, progress
in 2017 and initiatives in other markets like Jamaica and Haiti,
see our website and case studies
Looking ahead
In our Public-Private Partnership, we continue
to focus on improving farmer access to better
seeds, other agricultural inputs and working
capital financing.
Ourglobal malting partners are exploring
opportunities to invest in new processing capacity
in Africa, and are developing and testing crop
varieties that are well adapted to local conditions.
In Mozambique, we have begun building a
new brewery and we are running pilots with
smallholder farmers to decide which raw materials
to use.
We are working with theAfrican Studies Centre at
Leiden University on an independent study into the
social and economic impact of our sorghum value
chain in Nigeria.
12 Based upon volume (in tons). With local
sourcing we refer to sourcing within the region
of Africa and Middle East. More than 80% of
local raw materials are sourced domestically,
with the remainder coming from other
markets within the region.
13 Estimate.
Ethiopia
Our local sourcing project in Ethiopia
works directly with more than 20,000
farmers who produced around 80,000
tons of barley, of which an estimated
50% was sold to the brewing industry
and the rest was sold on the local
food market.
2020 commitment
Ongoing compliance with our Supplier Code Procedure.
2018 milestone
95% compliance with our four-step Supplier
Code Procedure.
Our progress in 2017
More to do
In 2017, compliance with our four-step Supplier Code
Procedure among the operating companies in scope,
remained at 78%14.
We stopped working with 85 suppliers because
they were unwilling to sign our Supplier Code (47),
refused to subscribe to EcoVadis (37) or refused to
undergo a site audit (1).
Many more of our operating companies
are working with suppliers at the site audit
stage of our Supplier Code Procedure.
The threshold for compliance is high
and the required action can take many
months for a supplier to implement.
We are working to improve the support for
operating companies in delivering the audit
stage of our Procedure to implement our
2020 commitments.
For more details on our Supplier Code approach and
2017 progress, and to read our new Supplier Code,
see ourwebsite
14 See page 151 'Reporting basis and governance of non-
financial indicators'for more information on the supplier
procedure and how we calculate this percentage.
Looking ahead
Following a review by NGO Forum
forthe Future in 2016, we revised
our Supplier Code to make it more
comprehensive, precise and actionable.
Applicable to all first tier suppliers,
the topics it covers are: Integrity
and Business Conduct; Human and
Labour Rights; Health and Safety; and
Protecting the Environment. The new
SupplierCodewill be rolled out in 2018.
We aim to identify our high risk areas
so that we can prioritise future activities
required to manage our Human Rights
risks beyond our first tier supplier base.
