Expert Reviews

Background

Lion Nathan National Foods (LNNF)  is Australia’s largest food and beverage company, whose portfolio of businesses includes many of Australia and New Zealand’s favourite food and drink brands.  Lion’s products include milk, juice, cheese, other dairy products, soy beverages, beer, wine and spirits. The company is a significant purchaser of agricultural goods and also an integral part of the retail, hospitality and tourism industries in Australia and New Zealand.
This is LNNF’s first sustainability report to cover the combined operations of Lion Nathan and National Foods. The report follows the Global Reporting Initiative (GRI) G3 Sustainability Reporting framework and LNNF have done an admirable job in embedding the guidelines throughout the report.

Content

The title of the report, Doing the Right Thing for the Long Term, aptly describes LNNF’s approach to producing this report and embedding sustainability into its core business practices. The report begins by giving a clear outline of its scope, the company’s approach to sustainability, the process for identifying material issues and stakeholders, significant issues impacting on the broader industry sector (such as sustainability in the dairy industry, and healthy eating and drinking) and sustainability targets. The ‘Targets’ section outlines quantitative group-wide targets covering areas such as water usage, energy consumption, injury rate and ISO14001 accreditation.
Despite this being the first report to cover National Foods, LNNF appears to do an impressive job of outlining relevant issues. The report is divided into four priority areas: Commercial and Governance, Environmental, Community, and People. The discussion within the report distinctly relates to sustainability and is not simply lifted from the annual report.  Material issues are identified in each category and are discussed with a good amount of detail. While quantitative data is lacking in some areas, the qualitative narrative is informative and wide-ranging. For example, ‘ethical sourcing and procurement’ discusses a range of individual issues such as farmgate pricing, working with farmers, bobby calves, palm oil and GMOs.
Each of the four sections begins with a snapshot of LNNF’s  strategy, highlights, challenges and outlook for that focus area.  The ‘outlook’ component is particularly useful as it provides a forward-looking statement of where the company and sector are likely to be heading. This is something many sustainability reports fail to provide and gives confidence that the report title, Doing the Right Thing for the Long Term, does reflect overall company intent. Each chapter then provides a broader discussion on five to eight key issues in a good amount of detail. While the quality of disclosure is in line with best practice Australian food and beverage companies, it could be improved further by incorporating some longer-term trend data and industry benchmarking.

Communications

LNNF’s report is well structured and user-friendly. The report can be downloaded as a pdf but functions best as a web-based interactive report, with each section on a separate tab linked to additional pages. Sub-issues are listed in the table of contents and the GRI Index at the back, cross references where indicators have been reported on and the extent of reporting against them.
Although it runs to 90 pages, the overall design of the report is clear and uncluttered. ‘Communication’ is clearly the report’s priority - text is concise and well-considered and the information is organised and  laid-out in distinct sections. The report opens with a snapshot of the company, its financial performance, location of operations and history, which are simply depicted in graphic diagrams. This provides the reader with the context to which to apply the rest of the information given.

Credibility

LNNF has not declared a GRI application level for this report, and the information has not been externally verified. This is understandable as it’s LNNFs first consolidated report , but to achieve best practice, LNNF should seek external assurance for future reports.  LNNF’s effort at incorporating the GRI Guidelines and Framework and the description of the company’s sustainability approach and materiality assessment provide confidence that LNNF has taken into account the full range of issues at stake for a food and beverages company.
As this is the company’s first detailed sustainability report disclosure in some areas is limited. This may be the reason for the qualitative nature of disclosure in some sections of the report. The report also states that as of 2010, responsibility for LNNF’s sustainability performance has been elevated to the board level and a new sustainability strategy is being rolled out across the group, indicating that sustainability is being integrated into the broader business context.
The credibility of LNNF’s report is enhanced by its balanced discussion of performance in each issue area. Whilst positive initiatives and successes are discussed more than the failures, the company does not appear to be hiding its mistakes. For example, there is detailed disclosure on the various product recalls, consumer complaints in advertising, fines, license breaches, etc. occurring over the year.

Recommendations

• It may be worth highlighting the most material (critical) issues in the introductory or materiality section of the document. Currently each issue is discussed equally, which makes it difficult to determine what the most pressing issues are likely to be. • Discuss negative performance in more detail and provided strategies to address performance shortcomings in future.
• Develop a wider base of group-wide targets and KPIs linking in to each issue. Disclose performance against these KPIs where possible.
• Provide longer term trend data for key indices to enable year-on-year comparison of performance and provide an industry average to enable benchmarking.
• State the applicable GRI level and seek external assurance or verification.

Serena de Kretser is Senior Associate at Net Balance, a sustainability advisory services firm with offices in Melbourne, Sydney, Brisbane and London. www.netbalance.com