Cadbury, Kraft, and sustainability in takeover defence

This morning Cadbury’s defence against Kraft’s £10.3 billion offer is all over the news.

I was emailed a copy of it this morning by the company.

It makes fascinating reading.

It does show how an unwanted takeover bid can sharpen corporate targets.

But what’s likely more interesting for corporate responsibility professionals is what Cadbury has to say about sustainability to shareholders.

There’s a page on the topic in the PDF advocating a ‘no’ to Kraft’s shareholder overtures, sent out this morning to shareholders and media.

Cadbury says that the company is creating “Sustainable value from our values”, telling shareholders that:

“Our sustainability commitments are integrated into our business plan to create value and competitive advantage, helping to strengthen our business, build our reputation and motivate our people”.

The page in the PDF goes on to talk about how having 350 million Cadbury Dairy Milk bars to carry the Fairtrade mark , adds “value to the brand and the consumer”, noting that the company has “100 farming communities active in the Cadbury Cocoa Partnership adding value to our supply chain”.

The copy goes on to point out that Cadbury is targeting a 10% reduction in absolute carbon emissions by 2011, has achieved a 20% water reduction since 2006 and has some “award-winning eco packaging launched for key seasonal and gifting lines”.

The company also points out to shareholders that “97% of our portfolio carries nutritional labelling, 40% of our portfolio is defined as a ‘wellbeing choice’ including sugar free, natural, organic, fortified and portion controlled options” and that “88% of colleagues say they are ‘proud to work’ at Cadbury”.

Obviously, it’s great to see a company referencing sustainability as part of a takeover defence, particularly when so much is at stake for them.

Cadbury has missed an opportunity here though.

That’s because the argument they make throughout the document, which is that the company is better as a stand alone ‘pure play’ chocolate, gum and confectionery company does not reference sustainability except on one page.

Cadbury is not linking their considerable responsible business achievements to shareholder value, real and future, as much as they might have done.

You can make a tangential connection between Cadbury’s reduced energy consumption and shareholder value, but it’s not made obvious.

This may be because saving money is not as important as new opportunities.

So one could argue it is reasonable not to make that a central plank of their argument throughout the document.

However, the real missed opportunity IS related to the central core of their argument.

This is that their future lies in high growth emerging markets.

These are riskier operating environments for companies, as we all know.

So Cadbury could have highlighted their commitment to sustainable sourcing much more as a risk management tool, than they do in the current document.

Expensive commodities such as cocoa are from volatile regions, such as West Africa.

There’s a good argument to make that going fairtrade helps reduce risk in such places by creating a more stable economic growth platform.

Highlighting this represents a chance to link core business practice and sustainability.

After all, 46% of Cadbury’s revenue comes from chocolate.

Similarly, the fact that “88% of colleagues say they are ‘proud to work’ at Cadbury” is an important statistic.

More could have been made of this elsewhere in the company’s defence document. A business is nothing without motivated people. The takeover would surely have a big impact on employee morale, which is currently high. Yet this is not mentioned.

Cadbury is a leader in big business sustainability. The fact that they reference their achievements in responsible business in a hostile takeover defence document is praiseworthy.

There have been comments from Cadbury’s CEO and Chairman in the media in recent months, emphasising that Kraft’s values are a long way from theirs.

More could have been made of their responsible business related progress in this defence document, and the company could have spent more time emphasising the links between sustainability and core business for future growth.

So if indeed “sustainability commitments are integrated into our business plan”, which I believe they are in the company, let’s hope to hear more about them as the takeover saga continues.

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