Lillian Gabreski, Vergenoegd Wine Estate, 2017

Corruption scandals continue to plague the South African government’s welfare and social impact programs.[1] The country’s energy sector is known for notorious blackouts due to a gross shortage of infrastructure and resources.[2] Over the past year, the dams in the Western Cape have fallen to less than 30 percent capacity, half of the reserve amount just a year ago.[3] As of early January 2018, the city predicts it will run out of water by April 22, 2018.[4] While the country’s leading party, the African National Congress, struggles to maintain its twenty-year grip on power, in the past year alone the city of Cape Town and organizations within it have taken their own initiatives. The city has issued the country’s first green bond, and the nonprofit mothers2mothers the country’s first social impact bond.[5][6] The municipal government hopes these initiatives will address and offer solutions to the problem of strained basic resources in the city.

Those following this recent policy agenda in the city may be surprised to learn that the South African wine sector has already been pursuing similar ingenuities in sustainable business for years. The wineries in the Western Cape of South Africa continue to preserve and protect indigenous wildlife, mitigate climate change risks, restrict water usage and collect rainwater runoff, use alternatives to pesticides, utilize renewable sources of energy, provide education, healthcare, and housing to indigenous farm workers; and they do all this with little to no self-promotion.

As companies compete to be branded as “socially responsible,” and people flock to participate in ecotourism, South Africa’s wine industry has quietly risen to become a global leader in sustainable business. Farmers in the Cape have realized for years that preserving natural resources and the environment is essential to attaining their long-term business plans, and have prioritized sustainability. As public sectors look for new approaches in instituting necessary sustainable policies, they might look towards private agricultural sectors, like the South African winemakers, who have been championing such policies for years. This case study will explore both the ways in which the South African wine sector has become an economic powerhouse while practicing sustainable business practices and allude to how the country’s public sector can emulate the industry’s success in areas like fresh water preservation and the harnessing of solar energy. While implementing these sustainable practices would require resources and a willingness from the public sector, SIBs in Cape Town and the rise of sustainable nonprofits demonstrate the capacity to make this change.

The case for sustainability in economic growth

The South African wine industry has set an example of what foundational practices the country should expect of both its public and private sectors. In principle, as developing countries seek to find a place for themselves among a vast array of multinational corporations in the global market, budding firms have had to develop unique strategies to stand out among competitors. Recent studies have shown that utilizing corporate responsibility protocols can be a major asset to developing country multinationals in broadening their consumer base and maximizing profits.[7] In South Africa, individual wine producers have created a strong national coalition through Sustainable Wine South Africa and Wines of South Africa (WOSA). As a result, otherwise small firms have amassed the powers of a developing country multinational and garnered considerable economic success through weaving corporate responsibility principles into their central business and trade structures. In fact, some of these sustainability principles, as detailed below, were established years before most developed country multinationals incorporated CR into their business strategy, which could be an indicator of the industry’s success in branding itself as a worldwide leader in wine production.

Potential for influence

South Africa is the eighth largest producer of wine worldwide. In 2015, it produced 4.1 percent of total global wine production, exporting over 412 million liters.[8] Growth as a contribution to South Africa’s GDP has come in as at least 10 percent per year since 2003.[9] The country’s largest single market is the UK, which makes up 26 percent of exported sales, followed by Germany, the Netherlands, Sweden, Denmark, and Belgium, which together make up 38 percent of exports. Canada makes up 5 percent of exports, and the U.S. 3 percent.[10] All in all, it becomes evident that the largest importers of South African wine are the world’s developed countries. The sector’s global influence demonstrates that by setting the bar when it comes to sustainable practices, the industry is a viable source of inspiration for public sector policies.

Self-governance and environmental protection in the South African wine industry

Wines of South Africa (WOSA), established in its current form in 1999, is a non-profit organization that represents all South African producers of wine who export their products. The organization’s mandate is to “promote the export of all South African wines in key international markets,” including all of those mentioned above plus Russia and Asia. The organization receives funding via a levy per liter on all bottled exported wines. It also promotes the multilateral corporate responsibility initiatives that the industry undertakes.[11]

There are numerous sustainability initiatives that govern the South African wine industry. Sustainable Wine South Africa is a partnership between the Wine and Spirit Board, the Integrated Protection of Wine scheme, the Biodiversity & Wine Initiative and WOSA, that makes up the foundation of the wine industry’s commitment to sustainable practices and responsible business. The Sustainable Wine South Africa initiative bases its sustainable practices around the San word hannuwa, which is a collective word meaning harmony and plenty. South African producers who adhere to the Sustainable Wine South Africa pledge to farm sustainably; to be a custodian of the land and preserve it; to nurture a culture of respect among workers on the farms and in the cellars; to promote an environment of dignity for all; and to protect the “unique and valuable” biodiversity of South Africa’s winelands.[12] The Wine and Spirit Board runs a voluntary certification program for quality and accuracy in labeling, but also produces an “integrity and sustainability” certification that guarantees the wine complies with the Integrated Protection of Wine criteria. The Integrated Protection of Wine is a voluntary environmental sustainable scheme that the industry established in 1998. The scheme includes global wine industry environmental sustainability criteria and allows consumers to verify that their wine has been sustainably produced via entering unique numbers printed on a bottle’s seal.

The Biodiversity & Wine Initiative is a partnership between the South African wine industry and the World Wildlife Fund (WWF) to minimize loss of natural habitat and promote native species via sustainable wine production. Over ten years (2005 – 2015), the WWF provided free advisory support and guidance to Biodiversity & Wine Initiative members in the wine industry. The WWF notes that a third of the South African wine industry now has environmental management plans in place. The WWF continues to advise and support what they call “WWF Conservation Champions” in not just sustainability and management plans, but also in entering wine competitions and other advertising opportunities. WWF Conservation Champions go through an application process, and after being accepted they can use a logo signifying their stance as “environmental industry leaders.”[13]

Individual wineries’ unique sustainability efforts

When some individual wineries see gaps in the industry-wide corporate responsibility movement, they create their own alliances and/or initiatives. Many align themselves with the World Fair Trade Organization, which certifies products based on fair environmental, labor and development standards.[14] While WOSA is still collecting research on the ramifications of climate change and the actions the wine industry can take to offset negative effects, individual wineries are also taking the lead via unique initiatives. One of the hottest topics in fighting climate change is promoting carbon-neutral practices, or ensuring that the total amount of carbon dioxide the firm releases is reduced to zero or balanced by actions taken to reduce emissions (like planting trees).[15] While these practices are often common across vineyards, the following firms have been pioneers in acting to promote sustainability:

Backsberg Estate

In 2015, Backsberg Estate became the first carbon-neutral vineyard in the country, and one of only three in the world. The estate has been active in socially responsible activities since the late 1990’s, when it instituted one of the first empowerment projects in the Cape region, ensuring farm workers could own their own homes rather than renting from the state. Activities like these have perks beyond social responsibility; for instance, Backsberg wines has received numerous awards and recognition, not just gold for wine-making, but also Green Awards and the like for industry leadership in sustainability initiatives.[16]

Simonsig Estate

In South Africa, two thirds of vineyard workers are seasonal employees, who move from property to property during the year. At the Simonsig Estate, about 45km from the city of Cape Town, the owners have constructed 260 houses, a nursery, and school on the estate for workers’ children. Initiatives like these seek to empower farm workers, many of whom come from previously disadvantaged backgrounds. The winery also provides free healthcare in addition to high wages.[17]

Vergenoegd Low Wine Estate

As a participant in the WWF biodiversity program noted above, Vergenoegd has practiced chemical-free pest control since 1984 through its use of 1070 runner ducks. The Stellenbosch wine estate draws visitors from all over the world to witness its daily “duck parade,” or the procession of the estate’s ducks into the vineyards each day to control pests and has gained global media attention for the event.[18]

On a larger scale, Vergenoegd also established a “Waterbird Habitat Project,” funded by the Table Mountain Fund (TMF) and in partnership with the country’s Department of Environmental Affairs’ Working for Wetlands Programme, the Department of Agriculture’s LandCare program, and the WWF Biodiversity Initiative. The project’s aim is to “produce a guideline document and examples of how private landowners can rehabilitate/change existing water bodies (like a regular irrigation dam) on their property to make it the perfect habitat for all kinds of indigenous waterbirds.”[19] Vergenoegd’s efforts in this regard are just one example of South African wineries, specifically in the Western Cape, utilizing their properties to promote biodiversity and re-introduce native species.

Villiera Estate

Also located in Stellenbosch, Villiera Estate practices sustainable business efforts which are the result of the hard work of family owner and viticulturist Simon Grier. The Grier family has created a conservation area equal to the size of their vines (200 hectares) in order to reintroduce native animals including zebra, giraffes, steenbok, and kudu. They also initiated a “water conservation, recycling, and greening project, which entails the planting of thousands of indigenous trees on the farm.”[20] The family is working to remove trees which are non-native, and to reintroduce native trees at a sustainable pace.

In 2010, Villiera Wines installed what was, at the time, the largest roof-mounted Solar Project in South Africa, which powers all of the winery’s daytime requirements outside of harvest time. It consists of 950 square meters of solar panels mounted on cellar roofs, which can generate 132 KW of power.[21] Villiera has stopped using insecticides and has not sprayed pesticides for the past thirteen years. They instead, like some of their neighbors, choose to employ 1,000 Peking ducks to roam the property eating insects and snails.[22] Villiera also provides free medical services for all staff and a nursery and school for farm workers.

Spier

In the wake of Cape Town’s water crisis, finding ways to preserve water has been of the utmost importance to local wine estates, which experience lower yields and decreased tourism revenue as water becomes scarcer. Spier, a WWF-SA Conservation Champion, has been particularly successful at reducing water usage on its estate. In 2007, Spier installed a water treatment plant, which recycles 100 percent of the estate’s wastewater into water for irrigation. The plant is environmentally friendly, using an oval-shaped reed bed to clean water, which at the time of its construction was the first of its kind in the country. Spier also recycles 80 percent of its solid waste.[23]

In addition to its wastewater treatment plant, Spier has also removed alien plants that suck up water with 53,000 indigenous, less water-intensive species. The estate’s facilities also include water-saving or low-flow taps and showerheads, which helped the estate decrease municipal water consumption by 50 percent since 2009.[24]

Because of the estate’s initiatives, it was the recipient of Nedbank’s Getaway Award for Leadership in Water Conservation in 2015.[25] In addition to private steps taken to conserve water, Spier also co-chairs the Stellenbosch River Collaboration (SRC). Launched in 2013, the SRC aims to improve the water quality of the rivers in the Eerste River Catchment through collaborative governance.[26]

Conclusion

While there have been no studies directly linking sustainable practices to the South African wine industry’s success, nor to policy change at the federal or local levels, it seems evident that the industry’s commitment to sustainability has been a factor in its high growth rate. The wineries listed as case studies above are only a few of the estates practicing sustainable business. As such, while initiatives like these are not unique in the country’s domestic market—and hardly set one farm apart from the next—they are a major factor in marketing South African wine above wine from all other regions of the world. Furthermore, the wineries’ unique adherence to CR promote tourism and directly benefit the national GDP and economy. As proposals for the city of Cape Town’s recently awarded green bond come underway, it will be interesting to see how many proposals come from local winemakers, many of whom have already been practicing sustainable policies for several decades.

References

  1. Chutel, Lynsey. “These are the numbers you need to know on South Africa’s welfare corruption scandal.” Quartz Africa. March 17, 2017. Accessed September 21, 2017. https://qz.com/935420/south-africas-welfare-grant-system-reveals-corruption-data-manipulation-and-benefits-for-the-wealthiest/
  2. “Unplugged.” The Economist. December 30, 2014. Accessed September 21, 2017. https://www.economist.com/news/middle-east-and-africa/21637396-rolling-power-cuts-are-fraying-tempers-unplugged.
  3. Evans, Jenni. “Western Cape dams only a third full.” News24. September 04, 2017. Accessed September 21, 2017. http://www.news24.com/SouthAfrica/News/western-cape-dams-only-a-third-full-20170904.
  4. Smith, Graig-Lee. “Cape Town’s day zero could be moved forward again.” EWN. January 12, 2018. Accessed January 12, 2018. http://ewn.co.za/2018/01/11/day-zero-could-be-moved-forward-again.
  5. Dentlinger, Lindsay. “City of CT raises R4.3bn with ‘green bond’.” Eyewitness News. July 12, 2017. Accessed September 21, 2017. http://ewn.co.za/2017/07/12/city-of-ct-raises-r4-3bn-with-green-bond.
  6. Mannion, Lee. “Will South Africa’s first social impact bond get over the line?” Pioneers Post. April 10, 2017. Accessed September 21, 2017. https://www.pioneerspost.com/news-views/20170410/will-south-africa-s-first-social-impact-bond-get-over-the-line.
  7. Williamson, Peter. “A new model for corporate social responsibility.” University of Cambridge. March 14, 2017. Accessed September 21, 2017. http://insight.jbs.cam.ac.uk/2017/a-new-model-for-corporate-social-responsibility/.
  8. “Statistics.” Wines of South Africa. Accessed September 21, 2017. http://www.wosa.co.za/The-Industry/Statistics/World-Statistics/
  9. Ibid.
  10. Ibid.
  11. “About Us,” Wines of South Africa. Accessed 21 September 2017. http://www.wosa.co.za/About-Us/WOSA/
  12. “Sustainability,” Wines of South Africa. Accessed 21 September 2017. http://www.wosa.co.za/Sustainability/Environmentally-Sustainable/Intro/
  13. “Conservation and Wine,” WWF. Accessed 21 September 2017. http://www.wwf.org.za/what_we_do/sustainable_agriculture_/conservation_and_wine/
  14. “Social Responsibility.” Cape Ardor. Accessed 21 September 2017.
  15. “Ethical Practices at South African wine estates,” Wine and the World. October 3 2015. Accessed September 21 2017. https://sraquinn.org/2015/10/03/ethical-practices-at-south-african-wine-estates/
  16. “Ethical Practices at South African wine estates,” Wine and the World. October 3 2015. Accessed September 21 2017. https://sraquinn.org/2015/10/03/ethical-practices-at-south-african-wine-estates/
  17. Ibid.
  18. “The Duck Parade,” Vergenoegd Wine Estate. Accessed October 9 2017. http://vergenoegd.co.za/about/the-duck-parade/
  19. “Our Biodiversity Project,” Vergenoegd Wine Estate. Accessed October 9 2017. http://vergenoegd.co.za/our-biodiversity-project/
  20. “Environmental Awareness,” Villiera Wines. Accessed September 21 2017. http://www.villiera.com/Page.aspx?PAGEID=2639&CLIENTID=3484
  21. “Environmental Awareness,” Villiera Wines. Accessed September 21 2017. http://www.villiera.com/Page.aspx?PAGEID=2639&CLIENTID=3484
  22. “Ethical Practices at South African wine estates,” Wine and the World. October 3 2015. Accessed September 21 2017. https://sraquinn.org/2015/10/03/ethical-practices-at-south-african-wine-estates/
  23. “Water-Wise Farming for Sustainable Wine Production.” Wines of South Africa. Accessed January 21, 2018. http://www.wosa.co.za/WOSA-News/Blogs/Cape-Chatter/Water-wise-farming-for-sustainable-wine-production/.
  24. “Spier Wins Water Conservation Accolade at Nedbank Green Wine Awards,” Spier 1692. n.d. Accessed January 26, 2018. http://www.spier.co.za/blog/spier-wins-water-conservation-accolade-at-nedbank-green-wine-awards
  25. Ibid.
  26. Ibid.

Lillian Gabreski

Lillian Gabreski

Lillian is an MPA Fellow (‘18) concentrating in Economic and Financial Policy. She focuses on sustainable and transparent practices in the private and nonprofit sectors, specifically in the United States and sub-Saharan Africa. In particular, she is passionate about analyzing ways to maximize the potential positive economic and social benefits of the private sector. Lillian’s research interests include financial management, international and customary law, historic preservation and socially responsible business practices. She graduated summa cum laude from the Pennsylvania State University (16’) and holds an honors degree in Political Science.
Lillian Gabreski

Written by Lillian Gabreski

Lillian is an MPA Fellow (‘18) concentrating in Economic and Financial Policy. She focuses on sustainable and transparent practices in the private and nonprofit sectors, specifically in the United States and sub-Saharan Africa. In particular, she is passionate about analyzing ways to maximize the potential positive economic and social benefits...
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