Sustainability has been a passion area of mine for many years. After I heard Courtney Kingston talk about KFV's push to go organic and researched the Canary Islands' initiatives in going green, it made me consider how wineries could further integrate sustainability and other "doing good" missions into their business model. I've read into B Corporations ("B Corps") and their agreement to being held accountable to a triple bottom line (people, planet, profit), and I believe the B Corp mission could be woven quite naturally into the business models of many wineries. As of May 2019, however, only 25 wineries were certified B Corps. Is this certification worth pursuing for wineries?
The certification (and re-certification) process is rigorous. Every aspect of the business is investigated thoroughly for its commitment to a triple bottom line. Fair wages for workers throughout the supply chain, environmentally friendly methods of sourcing and harvesting ingredients, and packaging materials are all fair game for evaluation. Subsequently, businesses are reevaluated every three years. Lubanzi Wines (South Africa), is one of the few wineries in the world that pursued a B Corp certification. This winery has, among other initiatives, partnered with a non-profit to contribute 50% of net profits to the well-being of farm workers in the wine industry of South Africa. Lubanzi and other B Corp certified wineries are truly contributing to the health of the environment and improving people's lives. However, some argue that the certification sometimes feels a bit like lip service, and that these businesses are not driving necessary legal or policy changes.
Does it really matter, if Lubanzi and other wineries are bettering the world around them? I would argue that it doesn't, and that B Corps will have a net positive global impact regardless of how significant that impact is. 2 important considerations, however, are whether it's pragmatic for a winery to become a B Corp, and whether it makes sense within their larger business strategy. Not every winery has the ability to essentially donate 50% of their profits. There is a cost to invest in environmentally friendly production technologies, to change the materials that go into packaging the wine, and to ensure that every individual that touches the wine making process can afford food, housing, health care, and education. In this vein, for the short term, a winery may instead choose to focus on optimizing to a "double bottom line." For example, for wineries particularly passionate about eco-friendliness, there may be other types of certifications, like Napa Green, that they may choose to pursue instead. Such a certification may make more sense for the time being while a winery works toward achieving the B Corp's rigorous triple bottom line standards in the long term.
However wineries choose to operate based on their respective circumstances, I believe it's essential that for the long term, they all work towards the triple bottom line strategy mandated for B Corps. A simple reason for this is to capture more of the growing millennial market. Millennials are increasingly engaging in conscious capitalism, and with a collective $200 billion in buying power, it's essential that their purchasing preferences are considered. While millennials aren't necessarily searching for the B Corp certification in making purchasing decisions, the B Corp stamp is a mark of economic and environmental conscientiousness that millennials largely endorse. We've talked extensively in class about how wineries are facing challenges selling premium wines to the millennial population, so for wineries that can afford it, the B Corp certification (and advertising around it) may be a worthwhile investment. In addition to attracting more millennial wine buyers, wineries that are part of the B Corp network have increased access to partnerships with other B Corp companies that share their values, and attract employees with a similar "making the world a better place" mindset.
The B Corp structure may not benefit every winery, but the values it emphasizes merit incorporation to some degree into the business models of wineries around the world. Not only could it be a profitable long-term business play, but a participating winery has the opportunity to be part of a global movement using business to improve the world around us and the people in it.
https://bcorporation.net/about-b-corps
https://www.npr.org/sections/thesalt/2019/05/13/720665348/why-some-wineries-are-becoming-certified-b-corp-and-what-that-means
https://napagreen.org/
http://brownpoliticalreview.org/2018/12/pays-off-kind-case-b-corps/
Super interesting blog post— I really like that re-certification standards set the bar for companies to increase points every few years to show that they’re innovating and working towards improving their B Corps status. B Corps seems like a legitimate way to go given its all-encompassing, holistic approach; and your post got me thinking about a topic that’s been on my mind a lot recently, greenwashing, and how it permeates the wine industry. While B Corps is a certification that requires investigation of every aspect of the business, eco-labels range from unregulated misleading terms added to labels to well-defined, fact-based certifications.
ReplyDeleteAfter some preliminary research, I landed on an interesting study from 2010 called, Eco-Labeling Strategies and Price-Premium: The Wine Industry Puzzle. Eco labels are supposed to reduce information asymmetry between the winemaker and the purchaser and can be used like a B Corps certification as a marketing ploy, however, misunderstandings over labels often leads to customer confusion. Moreover, terms like “sustainable”, “green”, “natural” can be used carelessly and are not well-defined the same way that “organic” or “biodynamic” are (as we read in the Chateau Pontet case). Ambiguity in the terms definitely leads to customer confusion, and I worry that it hurts the legitimacy of actual well-defined terms and certifications. There is definitely value in eco-certification (and especially in more holistic ones like B Corps, which is certainly higher in rigor to achieve), and to protect this legitimacy, we need to protect eco-certified companies from those that abuse eco-labelling.
Also, back to further research on greenwashing in the wine industry— there are even vineyards that use carbon sequestration techniques to decrease their overall carbon footprint, but at the same time, this can serve as an excuse to not reform the carbon intensive practices already built into their production and distribution (e.g. shipping wines in carbon/GHG intensive ways). Sounds a little bit like when some big bank funds the planting of a forest in a developing country to “offset” the wasteful energy usage in their office buildings (those offices are freezing jeez!!! and AC is extremely power intensive). I think as eco-certification awareness grows and as consumer preferences shift toward valuing products that have achieved legitimate standards to receive sustainable recognition, we will see more wineries achieving B Corps status and other eco-certification standards (kind of like the regulatory movement we are seeing in labeling meat products and plant-based meat products with lots of regulation around wording on labels).
ReplyDeleteThe B Corp agreement is definitely a good option for wineries. As we’ve discussed in class, incentives for producing wine are already a little unconventional— tradition, prestige, and love for the process can also drive the business. Including the option of “doing good” in the business model could allow more mission-driven wineries to invest in more than just one bottom line. There are two things I am thinking about based on your and Sela’s discussion above. As Sela mentions, sometimes it is hard to distinguish between a genuine certification and a catch all term like “green” and “natural.” Are there case studies of certifications actually helping improve quality of wine— or is there a trade-off between quality and ecofriendliness? And is the myth of the natural-preference millennial true? In other words, does the way a product is made actually affect whether a millennial will buy a product?
Effect of Certifications on Wine
I checked out Demeter USA’s website— biodynamics was mentioned in the Pontet-Canet case and Hannah made an excellent post explaining the concept [1]. Demeter argues that their certification is valuable because it helps wineries adhere to the best practices, and the quality of their wines increase as a result. [2] According to a 2016 study in Journal of Wine Economics, it seems that ecocertifications actually can increase wine quality (100-point scale) by an average of 4.1 points. [3] This would be a price increase of around 20% (based on PC case study). The main intent of the study is to disprove the idea that wineries forego high quality to achieve these production standards. And it makes a pretty compelling case, at least for California wines. Although the result is statistically significant in general, this is upheld only by the red wines. For whites and other wines, ecocertification makes no quality difference. What I take away is: before you invest in converting to an eco-standard, make sure the price increase and quality effect will be well worth it for your unique vineyard and/or winery.
Millennials and Certifications
There is a lot of market research supporting the idea that millennials are willing to pay for sustainable options. For instance, “about 75 percent of Millennials are altering their buying habits with the environment in mind, compared to 34 percent of Baby Boomers.” [4] 75% of millennials are also willing to spend more on sustainable products than their non eco friendly counterparts. This concept is quite clear— but how does this kind of consumer respond to ecocertifications in general? A 2009 study titled “Who's Reading the Label? Millennials' Use of Environmental Product Labels” found that it’s usually younger women who are most concerned about certifications. [6] Since the majority of wine consumers are women, labeling could be very beneficial in boosting brand perception for this consumer segment.
Not everyone agrees with the traditional young-and-eco-friendly riff. While almost 65% of Millennials report wanting to buy sustainable brands, only 26% follow-through with their commitment. [7] If a winery commits to some form of sustainability certification, it will need to find other ways to emphasize this differentiation and draw the customer to purchase.
Sources
[1] https://rappwinter2020.blogspot.com/2020/02/biodynamics-some-science-some.html
[2] https://www.demeter-usa.org/downloads/Demeter-FAQ-Wine.pdf
[3] https://www.ioes.ucla.edu/project/ecolabel-quality-wine/
[4] https://www.bizjournals.com/bizwomen/news/latest-news/2018/12/millennials-drive-big-growth-in-sustainable.html?page=all
[5] https://www.ypulse.com/article/2019/02/27/how-young-consumers-really-feel-about-eco-friendly-products-in-5-stats/
[6] https://www.researchgate.net/publication/260403870_Who's_Reading_the_Label_Millennials'_Use_of_Environmental_Product_Labels
[7] https://hbr.org/2019/07/the-elusive-green-consumer