Elaine Cohen, Exclusive to the Sustainable Business Forum as part of the Reporting: How They Do It series


ImageFerrero International S.A was established in 1942 and is now a holding company based in Luxembourg. The family-owned and led Group has more than 70 affiliated companies (including 38 business units, 15 production plants and 3 "social enterprises") in more than 100 countries worldwide. The Group has net sales in excess of 6.6 billion Euro, and employs 21,736 people worldwide. Famous Ferrero products include Ferrero Rocher, Kinder Chocolate and Surprise Eggs, Nutella nut spread, Mon Cheri and Tic-Tac.

 

Reporting Period: September 2009 to August 2010

Format:

Framework: GRI B+ Application Level including Food Processing Sector Supplement

Assurance: Full assurance to ISAE 3000 standard

Material issues: Includes a materiality matrix with 10 key issues

Special features: Interesting section on the loyalty of Ferrero employees

Interesting practices:

  • Social Enterprises projects, in which Ferrero production operations assign budgets to fund social projects in Cameroon, South Africa and India.
  • Objective to make all European plants self-sufficient in energy sourcing by 2013, with an increasing share of renewables.
  • ABCDE Plan (A Business Code Dialogue Engagement) to share the Code of Business Conduct with internal and external stakeholders.
  • Use of sustainably certified raw materials. 
  • Research to investigate the metabolic impact of sweet products.
  • Energhe, a new Group company, was set up in 2007 to achieve environmental efficiency in the production, management and use of energy.

This is Ferrero's second report and it comes after the tragic and untimely death of one of this family- owned company's key protagonists, Pietro Ferraro, who died whilst cycling at the age of 47 in April 2011 in South Africa. Pietro was the grandson of the company's founder and ran the company jointly with brother Giovanni, who remains the CEO of Ferrero. The report opens with a eulogy to Pietro, a fitting reminder of the fleeting nature of life and the unexpected risks to the sustainability of business.  (The report was published in August 2011, for a reporting period ending in August 2010).

Ferrero is a big user of confectionery resources. Some fun facts retrieved from the Ferro website are: the amount of milk used by Ferrero in a year would be enough to keep Niagara Falls going for 3 minutes; the jars of Nutella produced in a year, joined end to end, would be as long as the Earth's circumference and the Kinder chocolate produced in 1.5 months weighs as much as the Eiffel Tower. Fererro is the fourth largest global confectionery manufacturer (after Kraft, Mars and Nestle).

Caring for retirees – a great approach

ImageOne of the most impressive aspects of Ferrero's family-values based business approach is the Ferrero foundation and the way it provides for the company retirees – healthcare, medical examinations, sports, social and cultural activities through around 40 activity groups and free accommodation for over 600 retirees  in Italian resorts during winter months, "to mitigate the rigor of winter".  Ferrero's investment in the elderly also includes an intention to "quantify and evaluate the positive influence that physical activity and social relations have on slowing down the aging process and cognitive impairment in older persons". Not only does Ferrero place great importance on caring for retirees, but the Company may soon be able to provide a scientific view on the value to society of such activity. Very progressive!

Additionally, the company runs many programs for to advance a responsible and caring workplace, including a company nursery, (which also offers places for local needy children) and provides parental services including advice from top pediatricians.

25% of Ferrero's staff has over 25 years' service – surely a testament to employee loyalty and significant contributor business continuity.

The real material issues and impacts

All this is impressive for a family business, large though it may be, and demonstrates responsible business practices based on real concern for people and good old-fashioned values. However, the issues that represent more of a material challenge to Ferrero would include: ingredients sourcing (chocolate, cocoa and dairy ingredients), packaging materials and waste, product safety (especially toys), food quality and nutrition (obesity) and advertizing to children.  The Ferrero materiality matrix identifies 10 broad issues and deals with them in the report.

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Sourcing for each key raw material – cocoa, palm oil, milk, coffee and hazelnuts (Ferrero is one of the largest hazelnut consumers in the world), sugar and eggs - is described in the report and Ferrero has sustainable options in place and ambitious goals for improvement. Eggs are free-range, sugar is non-GM, palm oil and coffee are to be 100% sustainably sourced by 2015 and cocoa by 2020 (10% today), while milk will be 30% sourced by 2012 from an "integrated supply chain" which includes long-term preferred-supplier relationships. Hazelnuts will be sourced using sustainable farming options by main suppliers in Italy and Turkey. Ferrero has been an active player in the the World Cocoa Foundation  and the the International Cocoa Initiative, partially sources certified cocoa from the Rainforest Alliance Network  and is a signatory to the Harkin-Engel Protocol which protects human rights in the supply chain. Since the publication of this report, in 2011, Ferrero confirmed participation in a new Public-Private Partnership (PPP) with the International Labour Office (ILO) which pledged $2 million to combat child labor in cocoa growing communities in Ghana and Côte d’Ivoire. 

Positive product safety and energy management

One of the features of the Kinder Surprise brand are the small toys contained in the hollow chocolate eggs, a potential source of risk for Ferrero. However, strict adherence to the regulations and Ferrero's code of practice, including audited supplier procedures, has enabled Ferrero to avoid many of the safety pitfalls that characterize this toy business, and, the company maintains, since 1988, "33 billion toys have been sold in total and absolute security".

Ferrero's energy policy is impressive. The company is moving strongly into self-generation using an own power generating plant delivering 41% of power and heat in the reporting year. Energy sourcing includes natural gas installations, a liquid biomass plant, biogas plants and wind turbines, all of which will deliver much lower carbon emissions and 30% of total energy consumption from renewable sources. 2009 carbon emissions reduced by 12% versus 2008.

Waste management needs more attention

An omission that I perceive in this report includes a frank disclosure on waste as well as a life-cycle approach, which is connected, among other things, to waste. Ferrero sells in small individually wrapped packages (as part of the program to meet bite-size nutritionally acceptable portions), a practice which significantly increases the negative environmental impacts of packaging. Ferrero has made headway in more sustainable packaging and delivered some gains. For consumers, Ferrero has a plan to label products to make consumers more aware of waste but this is a weak response. Total waste directly generated by Ferrero is not disclosed in the report –solid and liquid waste is reported in terms of m3 or kg per ton which is not very helpful. I would recommend additional attention to waste as part of Ferrero's overall life-cycle impacts in its core brand offerings.

Overall – an excellent job

All key issues feature in the report, in greater or lesser detail. The scale and breadth of sustainability activity is commendable. The tone is still very much of a family business even though the Group has grown to very large proportions, building credibility. The language is clear and goals are specific and precisely stated, and progress recorded. As far as reports go, this is certainly one which reflects sustainable progress.