Communication in Business

Over half of the world’s population consume, or have been consumers of alcohol. (WHO 2014). For thousands of years, humans have been producing and consuming alcoholic beverages; Alcohol has a place in almost every culture in the world (WHO 2014). In 2016, two of the world’s largest alcoholic beverage companies, Anheuser-Busch InBev (AB InBev) and SABMiller finalised the deal on their merger, making AB InBev the largest producer of alcoholic beverages in the world (Prinsloo and Buckley 2018). The company sells over 500 beer brands to over 100 countries around the world, including the sale of the world’s most popular beer: Budweiser (AB InBev 2017b).

Corporate social responsibility (CSR) is the theory that companies have a duty to meet the needs of many stakeholders, as well as the shareholders of the company (Moir 2001). These stakeholders include anyone that is, or could be affected by the company’s actions and decisions (Moir 2001). In the AB InBev 2016 annual report, they state that “With our presence around the world comes an opportunity to be a force for good.” (AB Inbev 2016, 11). AB InBev works towards a “better world” by setting and pursuing ecological sustainability goals (AB InBev 2017b), however they have also been found responsible for a corruption scandal involving the bribing of government officials in India (Barlyn 2016). This report aims to analyse they ways in which stakeholders have been impacted by AB InBev’s corporate social responsibility successes and shortfalls.

A Case Against AB InBev: Corrupt Dealings

The social contracts theory implies that society has an expectation for a business to act ethically towards society, and that there is a ‘social contract’ to which the business is held accountable (Moir 2001). Bribery is a form of corruption and is not deemed to be socially responsible behaviour by external stakeholders including investors and consumers (Lopatta et al. 2017). Actions such as this can be damaging to a company’s reputation, as well as hindering economic growth in corrupt countries as corruption favours the state sector at the expense of the public sector (Lopatta et al. 2017). Consumers of a multinational company’s products in countries where bribery and corruption are not tolerated do not accept the excuse that such activities are considered normal in other countries (Henning 2016). Corrupt transactions violate the social contract under which companies are expected to act ethically.

One of the aspects of globalisation is that multi-national companies will experience cultural differences in the various countries they operate. This presents many opportunities and challenges for business, though it can cause ethical dilemmas in markets where bribes and governmental corruption are a part of doing business (Sharma and Mitra 2015). In India, corruption is high relative to other markets with more comprehensive, strongly enforced anti-corruption policies (Sharma and Mitra 2015). India scores 40 on the Corruption Perception Index, on which a score of 0 is “Highly Corrupt” and a score of 100 is “Very Clean” (Transparency International 2018.) As an emerging market for the beer industry (Vashishth and Tripathi 2016), the cultural difference is perhaps more apparent to multinational companies whose core markets exist in countries where bribery is not an acceptable way of doing business. AB InBev is one such company, as the majority of their products are sold in countries that rank high (clean) on the corruption perception index.

From 2009 to 2012, a wholly owned subsidiary of AB InBev, Crown Beers India Private Limited, was found to have solicited third parties to bribe government officials in India in order to increase production and sales in the country (Barlyn 2016; Smith 2017). India’s alcohol sales and production are highly regulated (Vashishth and Ttrpathi 2016), and the bribes were used as a way to circumvent these regulations. The company was put on notice by employees, who had complained about the transactions, however AB InBev failed to rectify the issue despite carrying out audits in 2010 (Barlyn 2016). Furthermore, the company had been using language in employee separation agreements that prohibited the employees from reporting such matters to the SEC with the threat of punishment for those that did (Smith 2017). The SEC findings were that AB InBev was therefore responsible for the corrupt actions of its subsidiary.

By bribing government officials AB InBev has gained an unfair advantage in the marketplace, which impacts many stakeholders, most notably the marketplace itself, as competing businesses do not benefit from this unfair advantage unless they too are guilty of bribing government officials. As a result of the investigations into these matters, the SEC determined that AB InBev was responsible for bribing the officials and had ordered AB InBev to pay over $6 million in fines (Smith 2017), directly impacting profits available to the shareholders. AB InBev has been ordered to cooperate with the SEC with reports detailing its foreign bribery law compliance efforts (Barlyn 2016). The company has also revised its anti-corruption policies, adopting a “zero tolerance policy toward bribery and corrupt conduct in any form” in order to prevent corruption in future (AB Inbev 2015).

A Case for AB InBev: Environmental Sustainability

AB InBev has succeeded in achieving it’s 8 sustainability goals and has now set new goals related to improving agricultural practices, water stewardship, reducing waste and reducing their carbon footprint (AB InBev 2018). In pursuit of these goals, AB InBev act not only to improve their own practices, but also to measurably enrich the livelihoods of local communities, thus benefiting many external stakeholders in the communities (AB InBev 2018).

Currently, AB InBev uses approximately 3.09 litres of water in order to produce one litre of beer – a number that the company boasts is declining as they continue to improve their own efficiency (AB InBev 2017b). This number was 5.03 litres of water per litre of beer in 2007 (AB InBev 2009), and the amount of water saved in the last five years is calculates as nearly 20 billion litres (AB InBev 2017a).

According to World Wide Fund for Nature (WWF), two thirds of the world’s population will suffer from water shortages by 2025. AB InBev recognises this, and has made it a goal to ensure that by 2025, all communities where AB InBev brews its product will have access to sustainable water supplies (AB InBev 2018). Water scarcity is not a problem unique to Africa, however it is certainly prevalent there. 95% of agriculture of Sub-Saharan Africa relies on rainwater in order to produce food (WWF and AB InBev 2017). AB InBev furthers their responsibility as ‘water stewards’ by helping to improve clean water availability and sustainability in areas where water is scarce (WWF and AB InBev 2017). With AB InBev increasing activity in Africa, it stands to reason that they would work to improve water conditions as they require water themselves in order to be able to grow ingredients and brew their beers. By working with WWF, AB InBev is able to use their influence to improve the situation for communities struggling to access clean water, whilst simultaneously benefiting from the infrastructure that will allow for their expansion in the African continent.

Since 2012, AB InBev has also been able to reduce the amount of packaging for its products by over 140 000 tonnes (AB InBev 2017b). The new goal to reduce waste is to have 100% of their products in packaging that is returnable or made from mostly recycled materials (AB Inbev 2018). Again, this is not without benefit to AB InBev, who are actively reducing their costs as less materials need to be bought for packaging. Further to this, AB InBev has partnered with Parley to reduce the amount of plastic waste in the ocean (AB InBev 2017b). Whilst this may seem as altruistic philanthropy, a criticism of social outreach programs such as this is that the program is actually a cleverly designed marketing campaign with the true intent of promoting a brand (Corona in this instance) and as a tactic to enter or develop local markets (Yoon and Lam 2013). Whilst this may be the case, companies such as AB InBev should surely be encouraged to continue working to better the environment and reduce their impact, especially if they are able to increase profit margins to benefit shareholders whilst doing so.

Conclusion

AB InBev has become the largest alcoholic beverage company in the world and recognises that with such vast power and influence, there is an opportunity to make the world better. The company is very successful at reducing their ecological impact, whilst also assisting with global humanitarian issues such as the water crisis. AB InBev, however, has been involved with corrupt dealings that cast a shadow over their successful environmental performance and which has forced the company to strengthen its anti-corruption policies. Whilst corrupt dealings such as this would typically damage the reputation of a corporation, it has been suggested in academic literature that stakeholders, including the government, are more likely to be lenient or forgiving towards a company with strong positive CSR. This has been referred to as the “Halo Effect” (Hong and Liskovich 2015). On the balance, however, it would certainly appear that AB InBev is successful in acting as a force for good, and have acted accordingly to reduce the likelihood of repeating the mistakes made in India. It is a common factor in many of the sustainability goals that AB InBev also benefits, typically through cost reduction or by themselves having access to sustainable resources required for expansion in developing nations such as Africa. Surely, to the communities that benefit from their philanthropy, and for the environment that benefits from reducing waste, it is not relevant if AB InBev is making a financial benefit for their shareholders. For the external stakeholders, their world has been made slightly better too.

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