How New Belgium is Fighting Climate Change One Pint at a Time - Katie Wallace Flashcards
Katie Wallace, Chief ESG Officer of New Belgium Brewing Company, and Adam Fetcher, Senior Director of Communications and Public Engagement, discuss how climate change’s impacts on their operations and ingredients led them to engage with policymakers and take their climate message to their beer customers.
New Belgium Brewing is a craft brewing company based in Fort Collins, Colorado. We are actually now America’s largest and fastest growing craft brewer. We were founded in 1991 in Fort Collins by Kim Jordan and Jeff Lebesch. Jeff had been a home brewer who had brought back to Fort Collins an inspiration from a trip to Belgium, where he enjoyed the Belgian style beers so much that he came home inspired to start a brewery.
And Kim was a social worker. And what I think was really unique about New Belgium from the very start is that Kim, she founded a company, the only way a social worker would, which is to put people first. So, over those early years, she instituted some practices that are still very rare, frankly, in the business world: fully paid health care premiums, open book management, paying a living wage, renewable energy sourcing, and many more practices that, are now sort of on the vanguard of what we call sustainable, responsible business. We have breweries in Fort Collins, Colorado, and Asheville, North Carolina. And we also just combined with Bell’s brewery based in Kalamazoo, Michigan, we have about 1300 co workers across the nation.
May 2022
02/03/24
Some of our biggest brands are Fat Tire Amber Ale, that’s our flagship. It’s an OG of craft brewing, and very famous. We’re also the brewery behind the Voodoo Ranger IPA, which is America’s number one IPA. And finally, I’ll just say, you know, our business model, which we call the human powered business model, is really what propels us forward to this day.
Katie Wallace:
I got an undergrad degree in finance and economics, had my business degree, and was really passionate about green building and sustainability and met someone from New Belgium at the US Green Building Council Conference. And being wind powered, before that was a thing really, for other businesses, being employee owned, which was novel at the time, was something that I found really intriguing. And I could tell that folks were really passionate about that. Committed and authentic upon my first visit.
I got a job there actually helping to build systems, utilizing my business degree. I worked with finance, and accounting, and sales, and marketing, and the supply chain, to help develop systems that would allow us to communicate and work together as we grew bigger. But my passion really, once I realized that you could do sustainability within a job and not just a nonprofit, my passion really took me in that direction. And after annoying everybody for over a year, I finally was able to get a job doing just that at New Belgium itself. And that’s what I’ve been doing the last 15 plus years. We had a few peer partners at other companies like Patagonia and Ben and Jerry’s, we still get together a couple times a year and just help each other figure our way out and operationalize our social and environmental principles within the daily business
So Katie, I wonder if you could give us a primer on how does climate change affect New Belgium? What are the vulnerabilities in your operations and supply chains? And then on the flip side, how does New Belgium affect the environment and what is New Belgium doing?
Over the last decade, we’ve experienced two record breaking fires within the state of Colorado right here in our watersheds. Wildfires are not novel to the Colorado area, but they are growing in intensity and frequency. And when that happens, we’re not able to use the water in the river for a couple of summers during the melt off because it’s full of sediment and very expensive to filter, but also leave smoky residuals in the taste of the water that would be transferred to our beer. We had, a couple of years ago, hops that were affected by the wildfires in the Pacific Northwest where all of the hops are grown, and hops are delicate flowers that also absorb the attributes of smoke, affecting the taste of the beer.
Drought and others that are climate related continue to increase the challenges of growing hops. And then this last year, barley farmers reported the worst barley crop within their lifetimes that they’d experienced due to the unrelenting heat that we experienced last summer.
Back in the 90s, we did an environmental assessment and became concerned about the greenhouse gas emissions related to our coal powered electricity. And we called up the utility, asked them if they were willing, or interested and able to bring renewable electricity onto the grid. They said, coincidentally, they had been asked to commit to wind power just up the road and bring it into the grid, but that they did not think that ratepayers would accept the increased cost for that wind.
We had to do a 10-year commitment upfront. We had that money in the bank, but we’d promised it out to our coworkers as part of our profit sharing already at that point. And, given that environmental stewardship was a core value of ours. Jeff and Kim, our founders, wanted to leave that decision to the coworkers since that money had already been promised to them.
It took just under an hour, but the coworkers discussed it amongst themselves, emerged from the conversation and they let Jeff and Kim know that every single one of them was willing to give up their profit sharing that year to be able to support wind power coming to Fort Collins. And so that was the introduction of renewable energy to our grid officially here in our community.
We built a pretty strong program in the years since where we capture over 90% of the heat within our brewing process and create a number of efficiencies throughout the operations and light weighted our bottles long before others did.
But as we started to do our own greenhouse gas modeling and what it would cost to reduce our emissions to the degree that was starting to be advised by climate scientists as the IPCC came together and the greenhouse gas protocols were released, we realized that this is not something we would be able to do on our own. And as a medium size business, we can’t easily affect the entire system, but we found that our best avenue there was to go to our policy makers. And with that, we started advocating to state, federal, and local policy makers, asking them to commit to renewable electricity, providing the business case for climate action and helping to display what we understood as our business risk of inaction around climate change.
We have quite a bit of renewable electricity on our own sites, but we were also able to lobby our local city council to mandate a hundred percent renewable electricity on our grid here in Fort Collins as well, by 2030. It will benefit more beyond New Belgium than doing it ourselves on site. But, we still do produce quite a bit of electricity with bio-gas, from our process water treatment plant, with solar and other sources on site, We have committed to the science based targets initiative, RE100, in addition to releasing a carbon neutral beer, so we are committed to directly reducing our carbon emissions to limit warming to 1.5 degree Celsius.
Our total operations that we’re responsible for within a brewery are about 15% of our greenhouse gas emissions annually. About 40% comes from packaging. That’s our largest source of emissions. Cans, bottles, fiber, cardboard. Barley farming is our second largest source of greenhouse gas emissions, and distribution trucking to deliver our beer is our third largest. So, 85% of our emissions being within our scope. Three area makes it quite difficult for us to overall reduce our emissions.
Our science-based targets initiative requires that our scope 1 and 2 emissions, those are our operational emissions, are reduced by 55% from absolute levels between 2019 and 2030. That’s regardless of growth. As a growing company, we are increasing our emissions year over year. And that makes that challenge quite a bit harder. Our scope 3 emissions, we have to reduce those by 30% from 2019 to 2030. Those are the emissions that are coming from our suppliers. Barley, packaging, distribution, primarily. RE100 is our commitment to source a hundred percent of our electricity from renewable sources by 2030
Can you give us some other examples of some government policy efforts you’ve been engaged in?
We are members of Ceres BICEP. So that’s, Businesses for Innovative Climate and Energy Policy. And as a part of that group, regularly speak to state and federal policy makers to encourage the understanding of the business case for climate action and the fact that smarter policies will reduce our cost overall as businesses. So with that, we try to focus exactly on the topics that are relevant to the brewing industry. And we have advocated for the Kigali Amendment, the Montreal Protocol to be properly mobilized. And so that is actually a policy that would help us join the rest of the world in committing to phasing out HFC refrigerants. Hydrofluorocarbon refrigerants replaced this CFCs that caused the holes in the ozone layer, however, from a greenhouse gas perspective, refrigerants are 2,000 to 9,000 times more potent than CO2 in their warming potential.
It has been identified as one of the top five ways to reduce carbon in the world is to remove those HFCs and creating those incentives at the federal level and mandating them would help us get there much faster. It is quite expensive to retrofit, but once you have retrofitted, it’s a positive business case overall.
Also, we work together with a sustainable Ag working group to push for policies that support farmers in making their crops more resilient and also lower impact farming through a transition to regenerative agriculture. Those technologies are available today. It’s just a matter of transitioning our growers in that direction. And what we hear from our growers that have moved already to regenerative agriculture is that as their soil health grows, they actually have higher yields per acre and stronger, more resilient crops in the face of increasingly challenging weather patterns.
A couple of other subjects that we work on, EPR, extended producer responsibility, or container deposit laws, bottle bills as we know them, to help drive recyclability, and glass and aluminum are endlessly recyclable. We can have nearly a 100% recycled content if we were able to gain that recycled content from the system. However, in the United States, our collection of those materials are quite poor and most of them end up in the landfill. And so that’s a lot of embodied carbon in the landfill that could be recovered and brought into a circular economy to increase our recycled content and dramatically decrease our greenhouse gas emissions. And so at the Colorado level, we are openly in support of extended producer responsibility. This is legislation that to actually put the cost on the producers and that’s ourselves, to help fund systems that will ensure more collection of our materials so that they can be recycled. Right now in Colorado, where we could be recycling about 5x as much as we are right now, but unfortunately we’re just not collecting it.
Across the US, every county, city, state, has their own recycling regulations, which, all that red tape makes it impossible for a business to come in and profitably collect and redistribute those materials.And also, having to import those materials as they’re mined from other countries is actually a bigger risk for us as well as a business. So, there’s some strong business case around collecting those materials from our landfills here in the United States and sourcing that material domestically, including a number of climate benefits.
If it’s a win-win for the farmers and the environment, what policy do we need to encourage more farmers to engage in regenerative agriculture?
This type of farming requires a different type of equipment and process, which requires an investment on the farmer’s part to get there. It’s incentivizing the transition, which does have a cost associated with it. Ag subsidies that exist today aren’t necessarily always driving the farming methods that would benefit business and climate right now. So the subsidy programs broadly, for oil and gas even, for agriculture, were something that our government instituted long ago to solve different issues of our time that are not as relevant today. And so modernizing those subsidies to address the current day issue would be something that would be a great benefit to the growers and to businesses like ours, that depend on agricultural products.
Katie, why do you think so few companies are engaging in policy advocacy?
I think that typically companies have engaged with lawmakers when it’s directly related to their bottom line. And there’s been a long tradition of companies advocating to reduce regulations and reduce incentive of programs or tax programs that help to fund projects like these if it is something that the business has to incur. And so it’s just a mindset shift towards longer term thinking. And I don’t think that businesses, at this point, across the board have done their work to understand the cost that climate change will have to their business. It’s just a shift in mindset and the willingness to incur some of the costs that comes from these policies on the business end and do the analysis to understand that ultimately that is the best business case available to us, but the sophistication is growing quite rapidly among businesses.
I also think there’s rightfully a recognition that real meaningful action in a company’s own operations is a bit of a precursor to speaking out on the advocacy front, whether it’s for industry change or in the policy arena. There’s a lot more awareness among business leaders that this is not only an existential threat to their businesses, but there’s also significant business benefits that come from investments in clean energy, clean tech, climate action at large. But at the same time, there’s a dearth of action among a large swath of industry. Nearly 2/3 of Fortune 500 businesses don’t yet have a meaningful climate plan.
There was an interesting Harris poll that came out recently that said 65% of leaders from large US businesses said they wanted to make progress on sustainability efforts, but they didn’t actually know how to do that. And meanwhile, 68% of these very same leaders in the same poll are admitting privately when they’re asked anonymously that they’re guilty of greenwashing.
I just want to add too just that right now, there’s a concern of shareholder perception that is changing quite rapidly. The disclosures you’ve seen proposed by the SEC, and there’s the global disclosures that companies are required to produce now for their shareholders to let them understand the cost of climate change on the share value. You’re seeing companies being able to better rationalize some investments in this space. And so those who are actually staffing the work and staying on top of the opportunities at hand are really starting to come around to understanding policy as a solution.
One of the things that attracted my attention to New Belgium in the first place on the climate change stage is the work you’ve done with your products and engaging customers. So, you’ve launched some beers that really are evocative of the climate change issue. And for one thing, Fat Tire Amber Ale is the first American certified carbon neutral beer.
Certified carbon neutral is a certification administered in our case, by SCS Global, that proves that we are not only working to reduce emissions within our business and for the Fat Tire brand specifically, but we’re also then engaging to neutralize the emissions that do remain through extremely high quality programs around regenerative agriculture, renewable energy, other types of projects that don’t just offset, but actually have an outsize positive impact on the climate crisis. And so that means from a consumer perspective, when Fat Tire became the first certified carbon neutral beer in America, they could feel confident that this is a brand that’s taking the climate crisis seriously.
Our consumers do care about this issue. I think it’s known as a controversial issue, but the reality is it’s not nearly as controversial as it may seem. A large majority of Americans, 60% in fact, view climate change as an urgent threat to the wellbeing of the country. That’s the highest level in that particular poll.
When we did our research through Nielsen, before we decided to go towards carbon neutral certification, we found that our customers, about 64% of them, thought it was important for a beer to be carbon neutral. And once they received the definition of carbon neutral, that jumped up to 86% of beer drinkers thinking that it was important for beers to be carbon neutral. These are beer drinkers at large through the Nielsen data.
Actually, Bud Light just announced recently that they’re taking one of their smaller beers in that direction. And so, yes, bigger brewers are paying attention to this and seeing the interest.
And what’s this done to cost of goods sold? Is this a small investment? Is it a large investment? And what’s it done to sales? Have you seen a reaction in the marketplace that bumps up the market share of Fat Tire? Yes. Fat Tire’s trends have improved since we launched carbon neutral certification and continuously talk about climate action as a part of the brand. Already, the cost of climate change is at a higher rate than what we’re paying for the carbon offsets even today with the impacts we’re seeing. However, we know that carbon offsets are not the end game. We have to reduce our carbon emissions overall.
Ehen we first announced that Fat Tire had become certified carbon neutral, we did so by charging customers a hundred dollars for a six pack of Fat Tire, as a way to illustrate the future cost of beer if the climate emergency continues to go unabated. And we actually went to the lengths of working with some retailers to literally charge that much and drive awareness around that issue.
Let’s talk about a very different approach. You launched a beer called Torched Earth Ale, which uses drought resistant grains and smoke tainted water, and you sold it as a limited edition. So tell us about this. That’s a very different approach than certifying a beer that you’re actually enjoying. This is one perhaps giving you a glimpse into the future.
Climate change often feels like such a big intractable problem. It’s hard for people to understand both what it means and certainly how they can play a role. It feels slow, long term, somewhere out there in the future. And so our goal was to tap into beer, the heart of our business. It’s something that so many people love. You literally hold it in your hand. It’s a product that brings us together, that brings us joy, that fosters fun. There’s almost no other product that I can think of that’s like it in that sense. And yet this product is directly threatened by the climate crisis, not 50 or a hundred years in the future, but it’s happening right now. It hit people over the head in a way that we had hoped and the reaction was: this beer tastes bad. If this is going to be the only beer that’s available in the future, I need to start thinking about this problem a little bit differently.
We then also gave people who tried the beer or people who read about the beer in the press an opportunity to come and take action along with us to help solve the problem. we created a really robust action center on our website where folks could join us in advocating for climate action among Fortune 500 businesses. It’s drinksustainably.com. Once you use that tool, share your voice with these companies, whether it’s congratulating them for having a climate plan or urging them to adopt one, there’s a whole raft of other actions that you can take everything from reducing your own personal carbon footprint to voting climate and making sure that you’re going to the polls with climate as your top issue.
In 2022, during the Olympics, New Belgium launched a third beer with a campaign theme on climate called Point of Snow Return. Fat Tire drinkers love is sports, outdoor sports, specifically winter sports. And so we released this beer around the time of the Winter Games, driven by the insight, this fact that we saw that said that most cities that have hosted the winter games in the past will not be able to host again in the future. They’ll be too warm to host again if the climate emergency continues as it is going. And so that shocked us. And I think we wanted to bring that to our audience along with this beer.
If you want to protect your main event that happens every four years, you’d do everything in your power to make it so, and we feel like that’s a natural step for the International Olympic Committee to take. We had thousands of people sign our petition. We are in the process of working to deliver that petition to the IOC. It resulted in a lot of media interest and business to our website. So I think from the standpoint of engaging people around this issue, things that they love that are under threat, again, it was a big step in the direction that Fat Tire is heading, which is further and further deepening its commitment around climate change and really making that the center of the brand.
So our team has quite a different approach to ESG than you see in a lot of areas, in that we partner very deeply with those across the organization to get the work done and really seeing our brand platform as one of our tools for impact and having the team on the branding side, that’s very willing and interested and understanding of the value of mobilizing our brand to encourage action among our customers has been a real win for us. So it’s an unusual approach, but I think one that more companies are looking at more seriously these days.
My inbox is full of folks that want to get into the field, and understand how it’s done, and find their niche. I would say more and more, there are specializations happening so you can get deep on carbon accounting and financial disclosures. There’s a lot of interesting work happening right now when it comes to the international financial reporting standards and the SEC, it’s pretty nerdy and fun. You can get deep into the policy realm, of course, which needs quite a bit more business acumen within it. And then finally, I would say in Adam’s world on the communication side, there are very few people today that really understand the issues at hand and do an excellent job of translating that into something that’s really digestible from a customer perspective, a lay person’s perspective. So if you’d have a talent for communications and distilling something down to be relatable and engage-able, that’s something that could bridge a really important space in the business and climate action world.
And I’d be remiss if I didn’t make one more point, and this may be a little antithetical to the podcast, but I will say consider public service. Consider public service at some point in your careers, whether it’s early on working in politics or the policy arena, or later after you’ve got some experience in the business world, we desperately need public servants who are eager to embrace and get into the details of what it will take to solve the climate crisis. And I certainly know that I learned 30 years worth of stuff from my 5 or so years in national politics.
