PARIS (Reuters) - Drinks group Pernod Ricard, which is being targeted by activist investor Elliott, is banking that its push into socially and environmentally sound business practices will boost its growth in the coming decade.
Pernod, the world’s second-biggest spirits group behind Diageo, is unveiling on Wednesday a strategic roadmap plan going up to 2030.
That plan includes eight pledges to undertake socially responsible business habits, such as preserving and looking after the land used to produce its Martell cognac or Mumm champagne brands.
Other pledges include aims to save water and cut down on waste and carbon emissions, as well as fighting alcohol abuse and promoting gender balance in its top management teams.
Companies around the world are tweaking business models to ensure they capture the current vogue for having strong environmental, social and corporate governance habits (‘ESG’).
This is partly to win over “Millennial” customers who are often keen to help the environment, and to attract investments from funds that specialize in putting trillions of dollars into companies screened for having good ethical criteria.
“It’s about making sure we have a very cohesive plan of action that addresses all aspects of our business from grain to glass,” said Pernod executive Vanessa Wright, speaking to Reuters ahead of the publication of the new Pernod plan.
Pernod - together with peers such as Diageo, Danone and Nestle - is looking to respond to new demands from consumers choosing healthier diets and lifestyles seen as helping the environment and communities.
Wright, who is group vice-president for Sustainability & Responsibility at Pernod, said the new ethical pledges formed part of Pernod’s broader plan to lift profits and sales, with the French company under pressure from Elliott.
New York hedge fund Elliott Management wants Pernod to improve profit margins and corporate governance.
Pernod, which also makes Absolut vodka and Jameson whiskey, has already vowed to raise operating margins by 50-60 basis points each year between now and 2021, provided it can deliver annual organic sales growth of 4-7 percent.
Pernod is also promising to close the gender pay gap across its business by 2022.
In the last eight years, some 95 percent of Pernod’s vineyards have been awarded formal certificates to show they do not harm the environment, while those vineyards have also cut back on the amount of water used and their carbon emissions.
“A lot of these actions will create long-term value. Value will also come from consumers being more attracted to our brands and we will also save some costs,” said Wright.
By 2030, Pernod is committing to halve its carbon footprint levels from 2.84 million tonnes per year at present.
It is also hoping to replenish 100 percent of the water consumption at production sites, and will ban promotional items made from single-use plastic by 2025, among other gestures.
Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta