Executive gives a detailed introduction about the history,

Executive Summary

The purpose of this report was to identify and explain
environmental sustainability concepts that can be used to evaluate the
efficiency and relevancy of the environmental sustainability practices of
Dilmah Tea.  The key concepts of this
report are; the triple bottom line of sustainability, the circular economy, the
RESOLVE framework and environmental partnerships. The report gives a detailed
introduction about the history, product range and the major competitors of
Dilmah and an outlook for the tea industry.

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The main objective of this report was to
identify and relate 03 key concepts of environmental sustainability concepts
and its strategic relevance to the brand of Dilmah tea and its competitive
advantage. The report also gives detailed examples of major global brands that
adapt the explained environmental sustainability concepts.

The report draws a conclusion how their
management approach revolves around the concepts of environmental
sustainability and their reporting style is line with the triple bottom line
approach of reporting as seen by their annual sustainability reports published
on their website.

The only area that Dilmah tea seems to lack in
terms of environmental sustainability is in the physical packaging and delivery
of goods and has been included as a recommendation.

 

 

 

 

 

 

 

 

 

 

 

Contents

Introduction

This report gives a detailed explanation of
three main concepts that can be used to evaluate the environmental
sustainability of a company. The topic of environmental sustainability has been
of growing importance due to the drastic climate changes and delpletion of
natural resources.

The report is based around Dilmah Tea, a major
tea production and exporter based in Sri Lanka that has captured both the Sri
Lankan and global teal market. The report covers the environmentally
sustainability practices adopted by Dilmah and many other renowned global
brands. The report also gives an recommendation of how Dilmah can further
improve their environmental sustainability.

All information has been gathered from secondary
sources and includes both qualitative and quantitative data.

 

Background on Dilmah Tea

Dilmah Tea also called (Ceylon Tea Services PLC) was founded in 1974
by Merrill J Fernando and was the force behind the concept of introducing tea
that was ‘picked, perfected and packed’ from origin .It is one of the most
popular tea brands in the world, available in over 92 countries and the sixth
bestselling tea brand on Amazon in 2018 (Appendix
01)

Their product range has a large array of different types
of teas varying from Black tea, to flavored black tea, green tea, herbal tea,
organic tea and white tea to name a few (Appendix
02). They have a total of 207 different types of teas with different tea
strengths, flavors and formats all available to purchase from stores and
online, shipping to over 65 countries (Appendix
03).

The head office is located in Peliyagoda spanning over
four acres of land with a labor force of 1200 employees. All of their tea comes
from the 31 tea gardens they own across the different tea regions of the
country (Appendix 04).

Apart from tea production and exporting, they also have a
printing facility that caters to the telecommunications, textiles, FMCG and education
industry and is also the biggest packaging supplier to the tea industry on a
global level. Other companies that have stemmed as a result of Dilmah tea
include ; Forbes & Walker (the prevalent tea & commodity broker in sri
lanka) , MJF Beverages , The Ceylon
Spice company and Timber concepts. All of these companies, including Dilmah Tea
is under the parent company MFG Group.

The global tea market is projected to grow at a CAGR of
more than 4% during the period 2016-2020 (Technavio, 2018). For Sri Lanka, tea
exports contributed 13.33% to the total exports in the year 2017, which is a
jump from the recorded 12.25% in 2016 (Appendix
05). The outlook for 2018 seems to be unfavorable in the first 02 quarters
but is expected pick pace in the last quarters of the year.

There are over 100 registered companies that operate as
tea exporters in Sri Lanka, mainly exporting to the middle east countries ,
Russia and Asia. The big giants in the Sri Lankan tea export industry are Akbar
Brothers (Pvt) Ltd, George Steuart Teas (Pvt) Ltd, Jafferjee Brothers , Impra
Tea , Finlays and Stassens to name a few. Dilmah has a competitive advantage
over the rest, as they are successfully established Australia and New Zealand,
with big stakes in the tea market share in both countries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Theoretical concepts relating to
environmental sustainability

01. The triple bottom line of sustainability

The triple bottom line is a
method of reporting company performance that strays away from the traditional
profit/loss and other financial statements, it measures the profitability of
the business based on the degree of its social responsibility, economic value
and environmental sustainability (Investopedia).

The TBL method considers a business to be more than just
a profit earning entity, rather a social and environmental entity. It gives a
broader perspective of the current economic and environmental situation and
where the company stands presently and its capability to survive in the future.

The triple bottom line of sustainability is broken down
into social sustainability, environmental sustainability and economic
sustainability (Appendix 06).Environmental
sustainability is based on the idea that the less natural resources a business consumes,
smaller the effect the business has on the environment , therefore resulting in
long term success for the company. This requires effective management, monitoring
and reporting of a business’s consumption of resources, waste and emissions.

This is a timely and costly process as it requires a
thorough research and study of the business operations and its effect on to the
environment and then the development and implementation of appropriate
green-policies that needs to be communicated across all departments of the
company. The Global Reporting Initiative provides a number of different metrics
that can be used as pointers for measuring and reporting of environmental management
(Appendix 07).

As useful as it is, the triple bottom line approach
involves numerical measurement of the environmental impact of the business on
the environment, for example it is not as easy to put a numerical value on an
oil spill.

Many renowned companies focus on the triple bottom line
to adapt their operations to be more environmentally sustainable. For example
the globally successful courier service DHL, use bicycles to deliver the
packages as a measure to being more environmentally sensitive.

Patagonia, a business that specializes in the
manufacturing of climbing gear uses recycled and organic materials in their
production process with minimal chemicals. They also make sure their products
do not cause any harm to the environment. The Company “Seventh Generation”
manufactures cleaning products using all natural ingredients as an effort to
minimize the effects that otherwise traditional cleaning products have on
people and the surrounding environment.

 

02. The Circular Economy

A traditional linear economy is based on the
take-make-dispose plan (Appendix 08),
where resources are extracted and used to their maximum and disposed once it
can no longer be useful. However this model does not serve as an acceptable
model in today’s times with the increased pollution levels, risk to ecosystems
and depletion of the supply of vital resources which in turn will lead to the
hiking of their prices (Appendix 09).

A
circular economy on the other hand focuses on extracting minimal amount of resources,
using it for as long as possible and recycling the waste and end products (Kirchherr,
Reike & Hekker, 2017). This system allows resources and products to
be used optimally for a long period of time as a result of restoration, renovation
and recycling (Ellen
MacArthur Foundation, 2016). (Appendix 10)

Big
companies like Dell have taken incentives to cut down e-waste by using 50
million pounds of recycled materials and recovering 02 billion pounds of
e-waste by 2020 (GreenBiz,2018)

Adapting
to a circular economy will result in less harmful emissions, efficient land productivity,
improved soil health and reduced negative externalities (Ellen
MacArthur Foundation, 2016).
Apart from the environmental benefits there also economic advantages such as improved
economic growth, improved resource savings and greater incentive for
individuals and businesses to be innovative (Kraaijenhagen,
Van Oppen & Bocken, 2016)

When
a company decides to adapt a business model that is circular there are five
business concepts that can assist them (Fast Company, 2018). Three of these
models are ideal for environmental sustainability:

1.    Product Transformation

This is the concept of transforming old
products/part of products to a completely new product. For example, BMW
customers have the choice of spending money on a completely new BMW spare part
or using an original remanufactured BMW part which is a cost saving for the
customer and beneficial for the environment.

 

2.    Recycling 2.0

Also called innovation in recycling enables
the high quality goods to be manufactured as a result of a perfect mix between
innovation and recycling. For example the wastes of coffee grounds at Starbucks
is broken down to generate an acid that is then used to produce detergents and
medicines.

 

3.    Next Life Sales

This is when products are renovated and
refurbished to be sold again in the market. Tata cars are reconditioned and
available for purchase, much like a second hand dealership.

The
RESOLVE framework introduced by McKinsey
is a model that is based around the circular economy and consists of six
actions that businesses have to concentrate in order to move towards a more
circular economy:

Ø  REgenerate

Ø  Share

Ø  Optimise

Ø  Loop

Ø  Virtualise      

Ø  Exchange

These
actions will allow businesses to improve the utilization of resources, lengthen
the life span and reduce the risk of resource depletion/scarcity (Appendix 11).

03. Environmental partnerships

As
the importance of including environmental sustainability in a firms businesses
strategy heightens, most firms now opt to form environmental partnerships so
that they have better access to information, expertise and technology to make
the implementation process of being environmentally sustainable a less complex
process.

When
choosing an environmental partner the company needs to make sure they have a
clear objective of what they are trying to achieve from such a partnership and
the chose partner has the capability to meet the needs of the company. Most
companies engage in three types of environmental partnerships:

     
i.        
innovation-seeking

    
ii.        
legitimacy-building

  
iii.        
policy-influencing

Many
companies engage in environmental partnerships to be more environmentally
sensitive , for example Johnson& Johnson has partnered up with the World
Wildlife Fund to support their “Healthy Communities, Healthy Ecosystems”
project.

Giant
retail companies like Levi’s , H and Marks & Spencer have partnered
with “I:CO”, a company that specializes in the collecting , re-use and
recycling of old clothes and shoes. The BMW USA factory has partnered up with
the South Carolina Wildlife Federation to help preserve the natural habitats
across the state.

An international
environmental charity named Earthwatch Institute has partnered up with many
renowned companies from across the globe and across various different
industries with aims to improve people’s knowledge about the importance of
environmental sustainability. Their partners include Earnst & Young, HSBC,
Starbucks and British American Tobacco (Earthwatch Institute, 2017).

Environmental Sustainability and Dilmah

Dilmah
Tea has an impressive resemblance to the circular economy model , their
management approach focuses on reducing impact on the environment as a result
of their operations  and “replenish,
restore and rejuvenate” the environment (Dilmah Tea Sustainability Report,2017).          

Their
Environmental Management System (EMS) is ISO 140001 (2004) and aims to reduce emission
and effectively manage energy, water, materials and waste. The important to
note here is the business objectives have been aligned with their
sustainability objectives giving them a competitive advantage over the others
and goes in line with the organisations brand.

The
Dilmah headquarters achieved carbon neutrality staying true to the statement
made by Merrill J Fernando in 2014.Other environmental performance indicators
such as waste consumption and energy consumption has reduced by 10.6% and 8%
respectively (Dilmah Tea Sustainability Report, 2017). (Appendix 12)

Two
solar power plants have been installed at their headquarters and they are
planning to generate hydropower at their Kahawatte plantation, which will bring
them a step forward in their carbon neutral objective.

Dilmah
has also engaged in the production of Biochar from waste tea, which is believed
to improve soil health and therefore the quantity and quality of tea, this can
be related to the theoretical view of “Recycle 2.0”.

They
have implemented the Triple bottom line approach of reporting organizational performance,
as their sustainability report gives large amounts of information and
statistics of their environmental performance over a range of different
measures such emission levels, renewable energy production, energy consumption
and waste management.

In
line with the environmental partnership concept, Dilmah has founded a “Change
Research station” in their Nawalapitiya estate together with the IWMI
(International Water Management Institute), Sri Lanka Meteorology department
and two other local universities.

Other
environmental highlights for the year 2016/2017 is the establishment of a
botanical collection names “One Earth Urban Arboretum” with aims to educate the
community of the importance of forests, recognising Sri Lankan innovators by
awarding them the “MFG Eco-Innovation Award” as a form of motivating more
people to come forward with new innovations to improve environmental
sustainability and planting 500,000 cashew trees in the Batticalo district.

Conclusion

Environmental
sustainability and tea production go hand in hand as it’s an industry that
monetizes the gifts of nature, it is therefore important for a company like
Dilmah that has been in this industry for close to 50 years to make sure their
operations have minimal impact on their surrounding environment.

Their
management approach revolves around the concept of environmental sustainability.
The carbon neutrality achievement at their headquarters proves their commitment
to being environmentally sustainable in the 04 main areas; energy,
transportation, waste and water.

They
have maintained a triple bottom line method of reporting, together with a more circular
model of business management and various environmental partnerships.

Recommendations

Even
though they have reported some impressive figures in terms of emission, water
and waste management and have engaged in various other environmental projects,
there is no mention of the packaging (tea boxes, tea bags) and delivery
(transport and shipping of the product) aspect and what they have done to
improve impacts that these two divisions might have on the environment.

Proper
research & development on how to make the physical packaging of tea more
environmentally friendly will make Dilmah tea an environmentally sustainable
company in all aspects of the business.

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