Alcohol Industry Under the Spotlight: Examining the Social and Environmental Impacts for Ethical Investors

The alcohol industry, long a cornerstone of social culture and economic activity, is increasingly under scrutiny from ethical investors who are evaluating the social and environmental impacts of their portfolios.

Social Impacts

Health Concerns

Alcohol consumption is a significant public health issue. The World Health Organisation (WHO) estimates that alcohol-related harm accounts for 3 million deaths annually, representing 5.3% of all deaths globally. In Australia, there were 1,742 alcohol-induced deaths recorded in 2022, at a rate of 6.0 deaths for every 100,000 people. These include liver diseases, cancers, and accidents caused by impaired judgment. For ethical investors, the health implications of alcohol consumption are a major concern.

Societal Costs

The societal costs of alcohol consumption extend beyond individual health. Alcohol abuse contributes to social problems such as domestic violence, child neglect, and road traffic accidents. In Australia, the Foundation for Alcohol Research and Education (FARE) reports that alcohol-related harm costs the nation approximately AUD 36 billion per year. This figure includes healthcare expenses, law enforcement costs, and lost productivity.

A Nov 2023 report from FARE also notes that the least socioeconomically advantaged quintile in Australia (Q1, 11.7 deaths per 100,000) is nearly three times as likely to die from alcohol, compared to the most advantaged (Q5, 3.6 deaths per 100,000).

Environmental Impacts

Alcohol production, particularly brewing and distilling, is resource-intensive. The processes require substantial amounts of water and energy, contributing to environmental degradation. Alcohol production is an energy-intensive process, from farming through to bottling, requiring significant quantities of water—taking around 800L of water to produce 1L of wine (NIH) and 298L of water to produce 1L of beer. Additionally, the energy required for heating, cooling, and transportation in alcohol production results in a significant carbon footprint.

The cultivation of crops used in alcohol production, such as barley, hops, and grapes, often involves the use of pesticides and fertilisers, which can lead to soil degradation and water pollution. Vineyards and breweries can also contribute to land use changes and habitat loss. Sustainable practices are being adopted by some producers, but the overall impact remains substantial.

Ethical Considerations for Investors

Corporate Responsibility

Ethical investors are increasingly looking at the corporate responsibility of alcohol producers. Companies that adopt sustainable practices, promote moderate consumption, and invest in community welfare initiatives are more likely to attract ethical investments. Transparency in reporting environmental, social, and governance (ESG) metrics is crucial for assessing a company's commitment to responsible practices.

Regulation and Advocacy

Investors are also considering the regulatory environment and advocacy efforts. Governments worldwide are implementing stricter regulations on alcohol advertising, labelling, and sales to mitigate its negative impacts. Ethical investors may support companies that comply with these regulations and advocate for stronger policies to reduce alcohol-related harm .

Conclusion

The alcohol industry faces significant social and environmental challenges that are critical considerations for ethical investors. Health impacts, societal costs, resource-intensive production, and agricultural effects all contribute to the industry's complex profile. Ethical investors must carefully evaluate these factors, supporting companies that demonstrate a commitment to sustainability and corporate responsibility.

Investing in the alcohol industry requires a balanced approach, weighing potential returns against the broader impacts on society and the environment. As consumer awareness and regulatory pressures grow, the importance of ethical investing in this sector will continue to rise.