Author: Ben Adler | UC Berkeley School of Law | J.D./MBA Candidate 2021 | Posted: July 26, 2019
Like many Americans, I am a beer enthusiast. But I recognize that brewing beer is an inherently unsustainable business and the industry does not rank highly on environmental sustainability metrics, specifically for energy and water conservation. Breweries require large amounts of energy to control temperature in the brewing process and to package and distribute their product. [1]. Beer, which is ~90% water, requires large quantities of water to produce – between 4-10x the volume of beer produced. [2]. Because water is the main ingredient in beer, and one of the most important, many brewers take pride in and advertise the quality of their water. [3].
Some brewers believe that brewing can be sustainable, and even waste/energy neutral, and are influencing the industry. [4]. Sustainable brewers likely fall under the “Ethical Supply Chain”, incorporating social and environmental sustainability into its services or production, or “Environmental Sustainability”, selling products or services that improve energy efficiency and sustainability, business models. [5]. Both models have inherent Profit-Purpose tension and a negative correlation between generating profit and creating social good, reflected in a tension between investors, seeking financial returns, and the social entrepreneur, seeking to bring about positive environmental impacts. [6].
While not incorporated as PBCs or SPCs (I am unaware of any that are) [7], brewers use the themes of social enterprises to help them achieve mission lock and preserve their environmental sustainability business interests. [8]. However, brewers do not need to be registered under social enterprise structures (L3C, PBC, or SPC) in order to internalize their sustainability missions and protect the company’s environmental purpose. Instead, brewers can argue that environmental stewardship positively correlates with long-term profits. By tying their sustainability decisions to their underlying business and sourcing of raw materials, brewers can effectively argue that sustainability furthers their bottom line to the point where they will likely receive business judgement rule (“BJR”) protection. BJR protection in turn allows brewers to undertake new and exciting sustainability programs and innovate to help reduce water use in the industry. [9]
With respect to water sustainability, brewers argue that using sustainable, clean water makes their product taste better and safer for consumers. [10]. Thus, investing in water resources and their preservation is an investment in a high quality raw material. Further, in the era of resource conservation, brewers argue that using less water in make the beer industry more sustainable and viable long-term. [11]. Because brewing requires large amounts of water, shortages, droughts, and wildfires threaten the entire industry. States like California, with a large number of breweries, could see an entire industry harmed if water resources are not properly managed. Brewers are investing in on-site wastewater treatment that allow them to recycle water, thereby protecting natural resources, reducing their water-related expenditures, and generating a public relations boost. [12]. Supporting strong environmental policies around water are benefitting brewers bottom lines. Further, brewers can become innovators and thought leaders in how food and beverage producers think about water sourcing and sustainability. The concept of eating off of recycled plates and drinking out of cups made from recycled materials are now commonplace, but brewers can lead the discussion on how we view recycled food and water. By using innovative methods of water recycling, brewers can gain a PR bump by showing their commitment to the environment and water stewardship. [13]. There is little legal precedent for BJR lawsuits against corporations’ decisions to support environmental sustainability, and the beer industry’s success is directly tied to water conservation efforts. Brewers would likely be able to make a defensible case for investing in sustainability, which will hopefully continue to guide the craft sustainability movement.
[1] Energy is required throughout the brewing process. https://www.newbelgium.com/sustainability/environmental-metrics/energy/; https://www.brewersassociation.org/attachments/0001/1530/Sustainability_Energy_Manual.pdf; https://www.energystar.gov/ia/business/industry/LBNL-50934.pdf.
[2] Large amounts of water are needed for brewing. For brevity, I am going to focus on water sustainability in this blog post. https://www.newbelgium.com/sustainability/environmental-metrics/water; https://growlermag.com/the-thirsty-business-of-beer-how-breweries-are-confronting-the-industrys-water-problem/.
[3] Brewers large and small often advertise the quality of water used in their brewing process (i.e. Coors often includes the fact that it uses pure Rocky Mountain spring water to brew Coors products that are “born in the Rockies”). https://www.millercoors.com/beers/how-we-brew; https://www.denverpost.com/2007/06/04/for-coors-water-is-water/; https://www.miaminewtimes.com/news/miami-man-sues-coors-because-its-beer-doesnt-include-rocky-mountain-water-8291304.
[4] Brewers like New Belgium, Sierra Nevada, and Lagunitas have robust sustainability programs addressing water used, water waste reduction, energy conservation, and even sustainably sourcing raw materials (wheat, barley, and hops). It’s clear that their impact has extended to larger brewers and helped change how the industry views its environmental impact. https://www.newbelgium.com/sustainability/environmental-metrics; https://sierranevada.com/brewery/about-us/sustainability;
https://cambrianinnovation.com/craft-beer-pioneer-lagunitas-signs-up-to-save-22-5m-in-water-wastewater-and-energy-costs-with-cambrian-innovations-wepa/; https://www.millercoors.com/sustainability/sustainably-brewing/water-stewardship;
https://psmag.com/environment/crafting-solutions-to-water-shortages-in-brewing.
[5] and [6] There is a direct tradeoff between manufacturing efficiently and maximizing profits versus manufacturing sustainably at a higher production cost – the more sustainable the brewery, the more profits are reduced. https://westaway.co/social-enterprise-business-models/; https://www.theguardian.com/small-business-network/2018/mar/12/social-enterprises-go-bust-all-the-time-how-the-sector-is-tackling-its-image-problem.
[7] Note, New Belgium has a B-Corp registration.
https://www.forbes.com/sites/susanadams/2017/07/17/once-a-craft-beer-darling-new-belgium-brewing-is-struggling-to-go-from-niche-to-national/#27578bf83982. Also note, with the growth of craft and micro brewing by independent brewers, many beer producers are closely held corporations. However, the largest producers and conglomerates, often that have a stake in smaller independent brewers, are public companies. https://www.forbes.com/sites/garystoller/2018/03/20/craft-breweries-dominate-the-top-50-but-guess-which-giants-rule-the-beer-market/#521abaefdcad.
[8] Discussing social enterprise business models. https://westaway.co/social-enterprise-business-models/; https://www.forbes.com/sites/meimeifox/2016/08/08/5-reasons-why-social-entrepreneurship-is-the-new-business-model/#13711fb944ca;
https://hbr.org/2015/05/two-keys-to-sustainable-social-enterprise.
[9] BJR is the “presumption that in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.” Aronson v. Lewis, Del. Supr., 473 A.2d 805, 812 (1984)
[10] There are product reputation benefits to using high-quality water. https://www.newbelgium.com/sustainability/environmental-metrics/water/; https://www.coorslight.com/our-beer. In fact, brewers often argue that the water used can influence the flavor profile of the beer. https://psmag.com/environment/crafting-solutions-to-water-shortages-in-brewing.
[11] Using less, or even recycled water, in places like California, which suffers from frequent droughts and wildfires, can make producing beer less directly detrimental to the local environment. https://www.theguardian.com/sustainable-business/2016/mar/14/californian-craft-brewer-beer-recycled-water-environment; https://psmag.com/environment/crafting-solutions-to-water-shortages-in-brewing; https://www.newbelgium.com/Sustainability/Community/PolicyandIndustry.
[12] The water recycling system purchased by Lagunitas is projected to save the brewer over $22M over its lifetime. https://cambrianinnovation.com/craft-beer-pioneer-lagunitas-signs-up-to-save-22-5m-in-water-wastewater-and-energy-costs-with-cambrian-innovations-wepa/; https://psmag.com/environment/crafting-solutions-to-water-shortages-in-brewing.
[13] https://psmag.com/environment/crafting-solutions-to-water-shortages-in-brewing.