As this year's Responsible Business Summit approaches (18th-19th May, London), Oliver Balch sat down with Jim Bergin, Chief Executive of Glanbia Ingredients: "Ireland's largest dairy ingredients company"
Jim Bergin (B.Comm., M.Sc. Management Practice) (aged 51) is Chief Executive of Glanbia Ingredients Ireland Limited, a significant associate of the Group. He was appointed to this role in 2012 (having previously been CEO of Dairy Ingredients Ireland). He worked for Glanbia between 1984 and 2012 and has held a number of senior positions during that time.
Based in Kilkenny, Ireland, Glanbia Ingredients Ireland (GII) is Ireland’s largest dairy ingredients company supplying quality dairy products into blue chip companies around the world across a variety of sectors including infant formula, clinical and sports nutrition as well as branded dairy products. It is also a significant supplier of enriched milk powder in consumer-ready formats to markets in West Africa, Middle East, Asia and Central America.
Ethical Corporation: How international is Glanbia Ingredients Ireland’s supply chain?
Jim Bergin: We’re a global business, for sure. We have a turnover of £900m, we process about 1.8 billion litres of milk a year, and we sell into 50 countries worldwide. That said, our supply chain remains quite local. Most of the milk that we buy we source from 4800 dairy farmers who live on the island of Ireland. There are 32 counties in total on the island, and we collect milk from 21 of those.
EC: We read about the low price that milk producers are paid nowadays. Is that the case for GIIs’s suppliers too?
JB: No, in the Republic of Ireland, dairy farmers are actually coming off two good years. Milk production is very different in Ireland from Northern Ireland and the rest of the UK. In Northern Ireland, they use an intensive indoor system all year round. Because of the temperate climate we have in [the Republic of] Ireland, however, most of the milk is produced off grass. Our cows are grazing off grass on average 300 days of the year and producing milk off that. As a result, we have one of the lowest cost milk production systems in the world.
As I say, in 2013 and 2014, we have had record milk prices and so our farmers have done very well. In recent months, the price has reduced. It is still above €0.30 per litre, which is still a reasonable price on average. We are definitely not seeing any dairy farmers going out of business. Last year, in fact, the average income of a dairy farmer in Ireland was €69,000, which was a record. It’s also considerably greater than for beef or grain farmers. For that reason, there are more people joining rather than leaving the dairy farming industry.
EC: How would you describe GII’s relationship with its suppliers?
JB: I’d say it was very strong. We collect milk from them every other day, so we know all the farmers very well. We know what their production is, we know how many cows there have in their herds, we know what their plans are going forward, we know what the constituents of the milk are. And, because of the EU milk quota system, we have all this information for the last 30 years or so.
EC: How does GII seek to support its suppliers?
JB: GII has a team of 22 advisors who are dedicated to working with our farmer suppliers. Farms are allocated by region to certain advisors. The advisory team is separated into three categories. One focuses on helping farmers develop their business. They might provide advice on a farm expansion plan, for example. The second element is quality, and the third is sustainability.
EC: What assistance do GII’s sustainability advisors provide the milk suppliers?
JB: Under our Open Source Sustainability programme, one of the main tasks of the sustainability team is to help farmers prepare for sustainability audits and to deal with any social or environmental issues that they are dealing with or that might arise through the audit process. All the audits are conducted by the Irish Food Board, so they are fully independent. They focus on a full range of factors, not only sustainability. Product quality and safety is a big issue, for example. The Sustainability element or topics covered by sustainability is a relatively recent addition. We now have an added focus on issues such as animal welfare, water quality, energy usage, carbon emissions and biodiversity. Obviously, economic sustainability is a critical factor within this too. By the end of this year, we plan for all our suppliers to have been audited.
Ethical Corporation: When it comes to engaging suppliers on sustainability, what would you say are the most important lessons to pass on?
JB: First, I think it’s really important that farmers understand why we are putting so much focus on sustainability. We also need to explain clearly the critical link they have with customers and the huge role they play within the food chain. That way they begin to see themselves as positive participants in the process. The other message that I believe is vital to convey is that a good sustainability status is a good efficiency status. Farmers need to understand that if they have a very sustainable operation, they can have a very profitable operation too. The two are not contradictory. Whether it’s an issue around animal medicine, the use of energy, the consumption of water, or quality standards on farms, say, these are all management challenges that farmers have to deal with on a day-today basis. Address these and their income will increase, just the same as with any other business.
EC: Transparency is a theme we hear a lot these days with respect to supply chain management. Why is this such a key topic, do you think?
JB: For a business like GII, food safety and traceability is a huge issue. In recent years, there have been a number of food scares and scandals around the world. This is one major reason why transparency is so important. Consumers have to be absolutely confident of the safety of the products they eat and drink. The only way to achieve that and to build trust is to have transparency. Consumers today wish to see all the way back to the farms and the manufacturing processes, and we aim to facilitate this. And we do so because if brands can show their customers that their supply chain is trustworthy and safe, then it’s good for everybody.
The second reason I’d give is around continuous improvement. This is a hallmark of how we run our business. If we are going to have continuous improvement in the supply chain, then we have to have collaboration. Collaboration, in turn, requires transparency. In the long run, it leads to greater transparency too.
EC: What tangible business benefits have arisen from GII’s efforts to engage its suppliers around sustainability?
JB: For us, it all comes down to differentiating ourselves in the market. Our turnover is £900m, which is large, but not a patch on the really big multinationals in our industry. We don’t have the budget to compete on product innovation, so instead we have set out to compete on issues relating to sustainability, transparency and risk management in the supply chain. On that basis, we have been able to draw alongside some of the biggest global brands in the world. In particular, we’ve managed to establish ourselves as partners with them on topics relating to innovation around risk management and sustainability.
EC: You are down to speak at the upcoming Responsible Business Summit 2015 on the subject of the “redevelopment of global value chains”. What key messages will you be looking to convey?
JB: The first thing that I think is really important to point out is the centrality of consumer sentiment. This is what is going to drive good practice. Sustainability is about building a positive approach to business that is regenerative and that isn’t damaging to natural resources. Consumers want that and we anticipate them becoming increasingly articulate in demanding it from large companies.
The next thing to highlight is the emergence of regulation in this space. There is lots of debate around climate change at present, for example, and we can expect regulatory changes related to this.
Thirdly, the link between sustainability and supply security is a critical one to convey. Companies today have to ensure they have a sustainable and growing supply source. I was at a conference last year in Ireland with lots of the household brands. The overriding message from these brands was that their ability to continue and to grow was based on their intangible assets. After their brand name, their supply source was the next most important thing. So I think we’ll see a lot more investment from companies in order to ensure that their supply chains are developed and nurtured. Our suppliers have predicted they will grow by 63% by 2020, for instance. To guarantee that this growth happens smoothly, we intend to help train our farmers in financial management.
Ultimately, responsible supply chain management is an evolution, not a project. Sustainability in particular may be a new phase that we are going through now, but it’s not something with a start or a defined finish line.dairy Food food supply chain Glanbia Ireland
May 2015, London, United Kingdom
Europe’s leading meeting place for corporate leaders delivering sustainable business. 12+ C-Suite and over 300 attendees will address some of the key issues and opportunities, including: sustainable innovation, collaboration, and resource efficiency and brand strategies