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Sierra Nevada Brewing Co. in Chico, Calif., makes some of the most famous beers in the country. But since the company's inception nearly 30 years, Owner Ken Grossman has tried to soften its environmental impact in an industry that is extremely resource and energy intensive.

For instance, its efforts in finding uses for all of its waste streams have diverted tons from its local landfills and saved the company millions.

Cheri Chastain, Sierra Nevada's sustainability coordinator, joined GreenBiz Radio to talk about some the company's latest environmental efforts, including getting off the grid. By the end of the year, Sierra Nevada could be generating enough renewable energy on-site to satisfy all of its operational needs.

Tilde Herrera: Cheri, let's start with a little background on Sierra Nevada and its early environmental initiatives. What were some of the drivers behind these initiatives then versus now?

Cheri Chastain: Sierra Nevada was founded in 1979 and sold our first beer in 1981. Sierra Nevada was a home brewing venture that turned into a capital business. The brewery was founded using recycled beer equipment, and being a small company, this whole idea of resources conservation and consuming less overall, the recycling and reusing was really a founding principle for the company. Those founding principles have stuck with this company to today.

We have currently a little over 450 employees. We have a restaurant on site, a concert venue on site, as well as the brewing and bottling facility.

TH: Now, when you talk about founding principles, it was this small business that was hatched out of this home brewery (with) the mantra of having to recycle and reuse. Was that more about economics or was that more about ideals?

CC: It was a little a both, and it still is to this day a little of both.

In Chico, Calif., where we're at, it's kind of a whole mindset, especially within the culture of our town, (which) is being good environmental stewards and just leaving a small footprint. But it was also an economic necessity. The more you waste, the more you have to purchase. So it makes sense both economically and from a cultural point of view to engage in these kinds of practices.

TH: Those are the drivers. Would you say that those drivers have evolved from then until now?

CC: I'd say the drivers are still there and they’re still the same, but since the company has grown so much, so have those guiding principles. They’ve become a little more prominent. And I think a lot of it goes back to consumer awareness that consumers are now starting to ask questions of their products and how their products were developed. So companies and employees are having to pay a lot more attention to these things like recycling and energy conservation.

TH: Can you talk a little bit about some of the early initiatives of the company in terms of recycling and reusing?

CC: Recycling is the first and largest of our environmental programs. We recycle pretty much everything on site, everything from cans and bottles in the break room, the cardboard and shrink wrap in the manufacturing process, as well as spent grains and yeast for animal feed from the brewing process itself.

Most of the materials that we are recycling today are materials that have always been recycled: the cans and bottles specifically, the glass bottles from our filling production. The spent grain, hops and yeast have been recycled for more than 10 or 15 years, and that all goes for animal feed, which is a substantial amount of our solid waste, actually, is the spent grain tops and yeast by volume and by percentage.

TH: How much has your recycling program saved the company on an annual basis?

CC: For 2007, we diverted at little over 31,000 tons of material from landfill. By diverting that volume of material from landfill, it saved the company a little over $1 million in landfill tipping fees. The tipping fees are the amount of money that you pay the landfill to dispose of your items with the landfill. Now that’s $1 million in tipping fees, but there’s also an additional almost $2 million in waste hauler service fees, so that’s your bin charges, your fueling, you’re environmental charges, and the general services of having your materials taken to landfill.

So by recycling a little over 31,000 tons of material, we saved approximately $3 million dollars in waste charges from the hauler and from landfill. Now in that same process, we brought in, I think, between $800,000 and $850,000 in revenue on those materials that we diverted.

TH: Are there any expenses associated with your recycling program?

CC: There are some. As the recycling program grows and expands, there are some capital investments that need to be made and that’s for things like bins. We do have a sanitation crew, so there’s the labor hours involved of going around and picking up this material and getting to an appropriate place where it can be recycled.

TH: Now the company has set a goal of using only renewable energy and getting off the grid. Can you tell me a little bit about how this goal was created, why it was created, and what the company is doing in terms of achieving it?

CC: Our energy generation program was developed for two main reasons. The first reason is a reliable source of power. When the power goes down at our manufacturing plant we lose product. That product is money, essentially. So we found ourselves in a situation where we didn’t have extremely reliable power, so we started looking at opportunities and ways that we could generate our own power.

Now it’s also going back to these same sustainability principles of removing yourself from the grid, consuming less energy and putting less demand on the local utility, which then puts less demand on your community in a power shortage situation. So we’ve come about this in two main ways.

The first was fuel cell installation. We installed four 250 kilowatt fuel cells that are direct fuel cells. They run on a blend of natural gas from the pipelines as well as waste methane that’s generated at our on site water treatment plant. So we’re able to take a byproduct from our wastewater treatment, and instead of releasing it as a greenhouse gas, we’re able to capture that and produce electricity with it. So that was the first main energy generation installation.

The second was solar generation. We’ve installed a 503 kilowatt system. I believe that’s DC power, so roughly half a megawatt of solar in the form of a parking lot structure. So it’s an elevated structure. It’s a sun tracking system which increases the efficiency. The panels actually move with the sun across the sky.

We’re also in the process of installing another full megawatt of power on our warehouse rooftop so our bottle shop and beer warehouse and storage warehouses are all going to be covered in solar panels. The first phase of the rooftop solar installation is scheduled to be finished by the end of this month, February. The second phase will include another warehouse that has not actually been built yet, and that’s scheduled to be finished by the end of 2008.

So the total square footage will have, I think, over 120,000 square feet of solar panels.

TH: With the completion of this solar installation at the end of the year, will you be completely off the grid?

CC: We will be almost off the grid. We’ll be at about 80 percent total self generation. We will be off the grid during peak hours, during peak demand time. But there are some times where we will need to pull energy off the grid.

TH: Now you talked about instances where the company found itself without reliable power supplies. Can you talk a little bit about those situations?

CC: Sure. It’s mostly just our local utility, and for some reason or another there’s a power outage, a pole goes down or there’s maintenance and they lose power to specific areas. It was mostly just our local utility and everybody in our vicinity was affected by it.

TH: When you talk about the fuel cell, when was that installed?

CC: The fuel cell installation was completed in the summer of 2005.

TH: O.K. How long was that process and what were the challenges there?

CC: The main challenges come from the fact that it’s a new technology. So with any new and emerging technology you’re going to have bumps in the road that you have to get over, and that’s mostly programming and just kind of working out the bugs on it.

As far as actually building and getting it permitted, fuel cells are currently exempt from California air permitting requirements so permitting was relatively easy. We did have to get building permits, but I think that was the extent of the permitting problems that we ran into.

TH: And when you consider the cost of installing these various renewable energy systems and the amount that you’re actually saving in energy expenses each year, what is the ROI? What sort of return on investment are you looking at?

CC: Sure. The return on investment for both the solar panels and the fuel cells is roughly six to seven years each, so the fuel cells have been up and running for about two and a half years, so we’ve got another four and a half or so years left on that investment. That investment period -- that payback period -- was made possible because of rebates and tax credit and tax incentives. We had some rebates from the local utility. We also had some rebates from the Department of Defense, so that helped out significantly.

The solar installation also has a roughly six to seven year payback period at this time, and, of course, all of this is pending what electricity prices are gonna be and that kind of thing.

TH: You mentioned it earlier, you talked about your water treatment facility.

CC: We installed a wastewater treatment plant I believe six or seven years ago. It was right around 2000. The brewing industry does produce a lot of wastewater and it puts a big demand on the local city system, so our city came to us and said, "Your company is growing. You’re producing a lot more wastewater. We can either bump up your rates and have to charge you a lot more, or you can install your own water treatment facility."

So we did the responsible thing and installed our own wastewater treatment facility. I’m not exactly sure on the payback period of the water treatment facility, but it was obviously economically beneficial for us, otherwise we wouldn’t have installed it.

The water treatment plant handles all of our brewery wastewater, so any water associated with the brewing process, cleaning water, brewing water, sanitation water, any of that water goes to the water treatment plant. It goes through a two stage digestion process. It goes through an aerobic and an anaerobic digestion process. It’s all completely contained on site at Sierra Nevada.

The anaerobic digestion process is what produces the methane that goes to the fuel cells as a fuel source. And we’re also in the permitting process to be able to utilize our treated wastewater as irrigation water for the on site hot field and some of our irrigation needs on site.

TH: The city approached you about the amount of wastewater that was being generated. How much water are we talking?

CC: It’s quite a significant amount. I believe it’s roughly 100,000 gallons a day.

TH: Now you mentioned that the company was able to utilize various rebates and tax breaks for making some of these improvements. Can you talk a little bit about those incentives and how easy or how difficult it was to find them?

CC: Sure. Most of it was handled by the companies that we were contracting with to install some of these programs. The rebates, we obviously worked with our local utility and we have a representative from the local utility assigned to our account and it was easy working with that person to find out what rebates are available and how do we go about taking advantage of them.

And then the companies that we contracted with also found a lot of the other rebates that were out there, the Department of Energy and those rebates that were out there.

TH: O.K. When you consider all of the various environmental initiatives that the company has taken on, which would you say have been the easies, the sort of low hanging fruit?

CC: The low-hanging fruit I think is the consuming less and producing less waste. The consumption end -- it’s so easy for companies to go through and do an energy audit and see what lights are on and how many are on and it necessary to have them on. Just by shutting lights off or assigning sensors or timers to lights, you’d be amazed at the difference in your electricity bill.

And then recycling is such an easy program to institute. I think (that) the State of California, especially, has made it incredibly easy for people to recycle, and it’s such an easy thing to do and it can save a company a lot of money.

TH: What are some of the other things the company has done to sort of soften its environmental footprint that didn’t really cost a lot?

CC: Things that don’t really cost a lot is, again, going back to consumption, and just kind of looking at our processes: Where are we wasting resources, where are we wasting water, where are we wasting electricity, where are we producing waste, and what kind of waste are we producing? Is there a way to minimize that waste, to not have that waste coming out of that process or that technology or that piece of equipment?

And then working with vendors on the materials that they’re sending in is a really easy thing to do. Just ask them, "Is it necessary to have this much packaging on this product that we have to order from you?" Surprisingly, they’re all very willing to work with us and they’ll say, "Yeah, you’re right. I didn’t need that packaging." It reduces their cost, it reduces our cost, it reduces our waste, so it’s a benefit for everybody.

TH: You make a product that is shipped all over the country, and I assume out of the country as well. How does Sierra Nevada handle the transportation related emissions and footprint?

CC: Transportation is a difficult monster to tackle. Transportation has I think the largest environmental impact of our whole process and I’m sure industry as a whole. We’ve tried doing a lot of different things. We’ve started a couple of rail transport programs. The first one is bringing our raw material, our grains, in from Canada by rail rather than truck. We can get four truckloads of grain to one railcar.

So instead of having to drive four trucks across the United States, we can now rail them in and get multiple railcars per train. So that’s saving the company almost a million dollars a year in doing that. It’s reducing emissions. It’s reducing congestion, (and) reducing accidents on the roadways.

We’re also using the rail system to transport our finished product. So we’re using what’s called intermodal transportation where we fill a truck up with our products, drive it to the rail line. It’s then loaded onto a railcar and then railed across the United States instead of having to drive that truck across the United States.

Again, that’s saving our company a significant amount of money by doing it that way, and it’s also reducing emission, congestion, and all of the other environmental impacts associated with transportation.

TH: Now how does the company communicate all of these environmental initiatives to the public? You said that the public is much more aware of these sorts of things. How does the company communicate these things, or do you?

CC: Good question. I think the general public as a whole is becoming aware of environmental issues in general and just starting to question I think all industries. We struggled with marketing our environmental program.

We’ve seen a lot of companies get into hot water while they’re incorrectly marketing their environmental programs, not advertising it as truthfully as they should have been, and there’s been some backlash from consumers on that. So it’s a really tricky, tricky thing to approach with consumers. We’ve chosen to not market our products based on our environmental stewardship, and market on our product instead.

We are starting to get some of our environmental programs out there to other businesses and to the general public as more of a role model setting. (We’re) just kind of letting people know that this is what we’re doing and giving people resources and knowledge that maybe hopefully they can (use to) do the same thing, and start instituting the same kind of recycling program or energy conservation within their own business.

TH: So at this point, it’s more outreach to other companies.

CC: Yes. When consumers are curious and interested, we are, of course, more than happy to share our story with them, but at this point, we’re marketing more on our quality rather than our environmental stewardship.

TH: O.K. Do you give tours to the public?

CC: There are public tours available at the brewery on a daily basis. I do private tours for special groups that kind of focus on our sustainability program. But, again, that’s a private thing.

TH: Just to take a step back, can you talk about the industry as a whole in terms of environmental stewardship? Are the things that Sierra Nevada is doing that are typical in this particular sector?

CC: I think some of the things that Sierra Nevada is doing, especially the fuel cells and the solar panels, those larger programs, are unique to Sierra Nevada. However, the brewing industry as a whole relies on the environment so heavily for our raw materials, our grains, our water, that all comes from the environment. So I think the brewing industry has this ingrained sense of needing to take care of that environment in order to maintain the sustainability of your business. If you continue to degrade the environment, you lose your raw materials and your business will decline.

TH: Now just generally speaking, having spearheaded some of these efforts, what would you say are the challenges and opportunities presented from a company trying to be a good corporate citizen?

CC: The biggest challenge that I see in networking with people in my position, which I have the benefit of not having to go through, is working for a corporation. There are shareholders and stakeholders and board members, and it’s much more difficult to get programs through all of the different facets that it needs to run through in order to get them instituted.

Working for a private company, it’s incredibly easy to go to our owner, especially since he’s so aware and involved in our environmental program, and say, "Hey, I think this is really a good thing and I think we should do this." I just have to go to one person.

TH: There’s no bottleneck.

CC: Exactly, there’s no bottleneck. So I think that’s the biggest roadblock for a lot of people and a lot of companies at this point.

And capital investment is also another really difficult monster to deal with. There is a lot of capital investment to maintain programs, to institute programs like solar panels.

TH: What about opportunities?

CC: Oh, I think there’s ample opportunity. There are so many small things that make such a big difference, like shutting off the lights or shutting off the water. It’s such a small thing and it makes such a big difference. Getting off of junk mail is another very small thing that a company or a person can do in their life that makes a huge impact. So even if you don’t have the capital to invest in larger programs, there are a lot of small projects that can be done.

TH: So where does Sierra Nevada go from here?

CC: Oh, goodness, we have a long way to go. I am the sustainability coordinator here and I will be the first to tell you that there are a lot more things that we could be doing to work towards being a sustainable business.

I don’t think that there are any fully sustainable businesses out there. Just being a manufacturer that sells a good, we’re inherently going to have this problem of transportation and its impact on the environment. So looking at alternative fuels or ways that we can reduce the transportation impact is going to be a big project for us.

Reducing electricity and water consumption is also going be another project. Although we are generating most of our own power on site, if it’s wasted with inefficient use, we’ve kind of defeated the purpose. So I think just focusing on efficiency in all sectors is going be an important process.

TH: Thank you so much for being here today, Cheri.

Cheri: You’re welcome. Thank you for having me.