Keeping it simple
f
t
SLBL impact on inequality can be
quantified using EIA model
Food Poor
24% of the people in Sierra
Leone
Have too little to feed themselves
sufficiently
Because they live on less than
$0.35 per day
Therefore they typically do not
consume SLBL products
Poor
46% of the people in Sierra
Leone
Have too little to meet their
broader daily needs
Because they live on less than
$0.75 per day
They typically consume only
locally brewed Star and Guinness
Non Poor
30% of the people in Sierra
Leone
Are not considered poor
Because they live on more than
$0.75 per day
They consume imported
Heineken and Star/Guinness
With the EIA model the effect of SLBL on inequality can be
quantified
Beer is only consumed by the poor But SLBL's presence generates Which makes them net
and especially non poor but not by Indirect cash flows for the food qA beneficiaries of
the food poor poor (In the supply chain) SLBL's presence
TRiPLE VALUE 2008 TnpH V»k* SMttgy Cflntulting *n« mR«mm Contmuncy a* rljha rmrvM iPlJ&ruKN
1 Definition of non-poor, poor and food poor.
Sierra Leone Brewery is of major direct importance to Sierra
Leonean economy
Some indicators of the Importance of SLBL for the Sierra Leonean economy
(without considering the Informal economy):
SLBL product consumption as of household final consumption: 2.0%
SLBL value added as of GDP: 0.5
Workforce as of estimated people with formal Jobs: 0.3%
Total tax payments as of Sierra Leone tax revenues: 3.7%
Distribution of direct and indirect cash flows.J~
Other multinational companies, including oil giant Shell and mobile
telecom company Celtel, are now showing interest in adopting a EIA model
similar to the one developed for Heineken to assess its impact on local
economies.
Heineken is now looking to test the new EIA model in other countries at
different stages of development, such as Rwanda, Poland and Spain. "Of
course, there will be different value drivers in each country, but this EIA
model gives our local managers a perfect opportunity to quantify the
benefits we bring and give local stakeholders a much clearer and balanced
idea of what Heineken does," Van Rijn says.
Both men agree that the beauty of the EIA model developed by Triple Value
and InReturn is its very simplicity. This view is shared by Thierry Sanders of
the NCDO. "Heineken wanted a model that used hard facts and figures to
measure its direct and indirect impact and tell us who the beneficiaries of
that impact are," he says.
The model uses the cash flow statement of a Heineken OpCo to
measure its direct impact through the cash it puts into the economy via
wages, utilities bills, taxes and payments to suppliers, among other inputs.
It then measures the company's indirect impact by tracing the subsequent
re-spend of that cash as it flows into the economy. "Heineken already
believed it was having a positive impact on the Sierra Leone economy," says
Sanders, "but even they were surprised at how extensive that impact
actually is."
As the study showed, every one of the 175 jobs in 2005 at the brewery
supported 40 other jobs in the local economy, ranging from agriculture to
distribution and sales. The study also showed just how dramatic the impact
can be if a company decides to use locally produced raw materials.
"In Sierra Leone, Heineken has chosen to use locally grown sorghum as
part substitution for the more expensive imported barley," says Sanders. "In
2005, that extra economic activity generated no less than USD 630,000 in
household income. The sorghum production alone involves 3,000 farmers,
who are among the poorest people in the country."
The EIA model also measures which income groups benefit the most
from SLBL's business. One of the results of the study was to show that in
Sierra Leone it is the poor and the very poor who benefit most from
Heineken's use of locally grown sorghum, an approach Heineken applies in
several African countries.
And because the model only uses existing financial data, it does not
create any extra work for the operating company, which means they can
get on with business as usual.
"This research isn't exhaustive," says Montijn. "It's perhaps 80%
accurate. We opted for a generic model that was limited to the economic
impact of our operations. We didn't want to develop a model that we
couldn't use elsewhere, and nor did we want to assess every aspect of our
impact. Heineken is active in 68 countries around the world, and we want
the model to be useful wherever we are."
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