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Climate Change Measures

Disclosures Based on Task Force on Climate-related Financial Disclosures (TCFD) Recommendations

In order to sustain business and continue to create value, the Suntory Group thinks it is necessary to identify risks due to climate change as well as their potential impact on business and respond appropriately.

The Suntory Group has declared its approval of Task Force on Climate-Related Financial Disclosures (TCFD) recommendations in May 2019. The TCFD was established by the Financial Stability Board (FSB).

In addition, we established the Suntory Group’s 7 Sustainability Themes in July 2019 as future initiatives with the reduction of Green House Gas(GHG) emissions serving as an important theme among them.
Making the promise of "Mizu To Ikiru", literally "living with water", to society, along with grasping water supply risks due to climate change and conducting appropriate water conservation and discharge management, we will evaluate all the watersheds that surround our sites and, together with our stakeholders, promote initiatives for water sustainability. From here on, we will assess the risks and opportunities that climate change poses to society and businesses, as well as the resilience of strategies against these risks, and expand disclosure of related information.

1. Governance

The Global Risk Management Committee (GRMC) was established in April 2015 in order to carry out risk management throughout the entire Group. We have established a risk management committee and risk management team based on this GRMC (e.g. installation of a Risk Management Committee at Suntory Beverage & Foods Ltd., the Global Risk & Compliance Committee at Beam Suntory, and the Risk Management Team at Suntory Beer Ltd.). Meeting four times a year, the GRMC identifies our risks, executes countermeasures, and engages in activities related to the establishment of crisis management systems. Climate related risks, one of the most serious risk categories, are discussed by the GRMC and the responses to those risks are then monitored.

Regarding opportunities and sustainability strategies related to climate change, the Global Sustainability Committee (GSC) discusses medium- to long-term strategies relating to the seven themes defined by the Sustainability Vision, and also discusses initiatives designed to reduce GHG emissions. In addition, we have established committees, etc. at each business in order to hold discussions about more specific strategies and initiatives (e.g., the Sustainability Committee was established at Suntory Beverage & Foods Ltd. and the Corporate Responsibility Committee was established at Beam Suntory).

The GRMC and GSC are in constant cooperation, and important matters to be discussed are further deliberated and resolved by the Board of Directors. Progress in implementing strategies related to environmental and social issues, and business risks and growth opportunities are reported to the Board of Directors on a quarterly basis. In addition, the Board of Directors provides opportunities to receive advice on climate change and sustainability management, such as by regularly holding study sessions led by invited external experts.

Organizational Chart

Institute for Water Science

Making the promise of "Mizu To Ikiru" to society, Suntory has established the Institute for Water Science as a specialized institution that promotes research and technological development in order to deepen understanding about the water that we use and promote water-related initiatives across our businesses. Mineral water is essential for producing Suntory products. This has led us to search for quality water since our founding. We believe that protecting water, using it carefully, and returning it to nature is our corporate social responsibility and important for realizing a sustainable society.
Starting with research of forests that nurture groundwater and water itself, the Institute for Water Science conducts, based on hydrology, research such as water resource research in Japan and overseas as well as research related to health and customer tastes involving water as a multi-faceted food and beverage company. It promotes research and dissemination of knowledge to provide a comprehensive understanding from water that exists in the world" to water that exists in the body.

Research Content

Forest hydrology

Suntory is broadening its Natural Water Sanctuary activities with the objective of cultivating more groundwater that is used by our plants by expanding forest areas. However, the types of management methods that will lead to healthy forests with high groundwater recharge have not yet been scientifically clarified. The Institute for Water Science collaborates with researchers working in various fields including hydrology, soil science, and botany to establish optimal forest management methods and science in forests with different environments through an individual-based trial and error process and conducts scientific verifications. For example, in order to understand the relationship between forest management methods and water dynamics, we conducted an experiment in which forest areas comprised of planted Japanese cypress trees were intensively thinned (50% to 60% on a numeric basis). We clarified that intensive thinning increases the amount of rainfall in the forest, and that the flow rate of rivers increases stably, not only immediately after it rains. In addition, we measured the flow rate of spring water and river water in the forest and analyzed the water quality to find out when and where rain takes on the form of those water types and use it in forest management. In addition to information on topography and geology, we created a simulation model to visualize water dynamics based on the findings obtained from field surveys conducted in collaboration with a third-party organization and conducted research to estimate the amount of groundwater recharge.

Sustainable groundwater use

We must have a detailed understanding of natural water cycles in each area if we want to use groundwater in sustainable and environmentally friendly ways. As previously mentioned, the Institute for Water Science carries out on-site investigations in collaboration with third-party organizations to assess water quality and quantity of natural spring and surface water and conduct monitoring operations in order to develop a detailed understanding of groundwater conditions.

Global water resources

Communities around the world suffer from water scarcity, unsafe drinking water, and a host of other water-related challenges. Climate change can be a threat to agricultural production and growing regions, which in turn has an impact on people’s lives and livelihoods. Suntory owes so much to water and has become deeply involved in global water issues. The Institute for Water Science has developed indicators capable of objectively evaluating the environmental impact of water use, taking into consideration water scarcity. These indicators are also being used by government ministries, companies, and other entities for environmental impact assessment. Furthermore, we are developing methods for assessing global water resource risks and promote the dissemination of related information to society.

2. Strategy

Recognizing that the risks and opportunities associated with climate change will have a significant impact on its business strategy, the Suntory Group works on scenario analysis, understanding the risks and opportunities that climate change poses to its business, and countermeasure implementation.
In response to risks, we have promoted efforts for water sustainability, such as understanding water supply risks, implementing appropriate water management, and evaluating all the watersheds that surround our sites.
As for opportunities, we are expanding our portfolio of beverages designed to prevent heat stroke that contain ingredients recommended by the Ministry of the Environment as products that conform with climate change countermeasures. In product development, we use heat stroke prevention posters and leaflets in our heat stroke prevention education activities that are provided free of charge to elementary school students nationwide.

Evaluating Risks and Opportunities Due to Climate Change

Among the physical risks and transition risks due to climate change, we are proceeding with physical risk directed initiatives this year, among which we will start to consider water supply risks and stable procurement of raw materials, which are said to have a large impact on the food sector.

Water Supply Risks

Water is the most important ingredient of our products, as well as a precious shared resource, it is imperative for the Suntory Group to understand the impact that water risk has on our business, local communities, and the ecosystem based on water risk assessment for sustained business growth.
Based on this, the Suntory Group conducted a risk assessment of water sustainability at its own plants*.
(*Covered 26 production plants in Japan and 64 production plants overseas owned by companies that collectively account for more than 90% of the Suntory Group's sales.)

Water Risk Assessment Process

Preliminary Assessment ― Screening of sites for detailed risk assessment

During the preliminary assessment, screening was conducted through uniform risk assessment at all Group sites from the two perspectives: ① The possibility that water resources used by a given plant will be depleted, and ② the magnitude of the impact of environmental changes caused by water use at plants.

① Possibility that water resources used by a given plant will be depleted

For the risk assessment, we used the Baseline Water Stress country score, developed as part of World Resources Institute’s Aqueduct Water Risk Atlas, as an index that can evaluate sites around the world in common at the global level, to identify countries with high water stress from the countries where our plants are located.
In addition to Baseline Water Stress, we have adopted 2040 Water Stress, which evaluates water stress in 2040 based on future scenarios such as climate change. Plants with either Baseline Water Stress or 2040 Water Stress scores of "Extremely High" or "High" are defined as plants with high water risk in the Suntory Group. The percentage of water withdrawals at plants with high water risk is 19% of all of our plants.

Layered by Aqueduct Baseline Water Stress Index Score
  • Source
    : World Resources Institute "Aqueduct Project"
② Magnitude of the impact of environmental changes caused by water use at plants

Furthermore, we classified the water used at plants as either natural water (surface water or groundwater) or water supplied by the municipality. Municipal water is supplied through the local waterworks bureau and its use is fee based. Generally, the range of municipal water resources is wide so that they can be shared with more users. As the management is mainly done by waterworks bureaus, we must coordinate with the local waterworks bureau and coexist with the local communities. However, when natural water (surface water or groundwater) is used, the range of water sources is narrower than that of municipal water and more affected by environmental changes such as climate variability. As its management is mainly done by Suntory, it is necessary to prioritize efforts at highly water-stressed plant that use natural water (surface water or groundwater).

Secondary Assessment ― Individual site assessment

Sites that passed the screening in the preliminary assessment were assessed individually from two perspectives: ① Water management provisions for water intake, ② water management provisions for water conservation. Since each plant faces different water-related conditions in their respective area, it is necessary to consider measures that correspond with local conditions.

Water Management

Since it is necessary to deal with water properly in order to fulfill our responsibility of water use, which is a precious shared resource, we will evaluate the following two points.

① Water management for water intake

Promotion of activities to use water properly (to not take in too much water)

  • Note
    : For plants that use municipal water, the local waterworks bureau manages all water intake management. Therefore, those plants are not evaluated.
② Water management for water conservation

Ability to prove that water is being used properly (that water is not being wasted)

  • Note
    : For plants that use municipal water, the local waterworks bureau manages all water intake management. Therefore, those plants are not evaluated.
  • Water Management (water intake) - Avoid taking in too much wate
    • Ability to show using data that water intake has no impact on the local environment.
    • Required data compiled for proof.
    Water intake data is not being managed Red
    Management of water intake data is insufficient Yellow
    Water intake data is being managed and water intake is being handled properly Green
  • Water Management (water conservation) - Avoid using excessive water -
    • Targets established in order to use water efficiently.
    • Conduct activities to achieve targets.
    • Targets are achieved
    No medium-term target for water consumption per unit of production established Red
    No short-term target for water consumption per unit of production established/achieved Yellow
    Target for water consumption per unit of production achieved Green
  • Results of the Secondary Assessment

    In the examination conducted in January 2019, among the plants subject to the secondary assessment, 22% of the plants were evaluated as "Green" and 78% were evaluated as "Yellow" for water intake management. For water conservation management, 46% of the plants evaluated were rated "Green," 31% were rated "Yellow," and 23% were rated "Red."
    After visualizing risks, those risks were defined and suggestions for solutions were made, resulting in the rapid implementation of an action plan designed to decrease risks. In the examination conducted in January 2020, 44% of the plants were evaluated as "Green" and 56% were evaluated as "Yellow" for water intake management. For water conservation management, 69% of the plants evaluated were rated "Green," 31% were rated "Yellow," and 0% were rated "Red," which showed a large improvement.

    Using the same process, we will continue improvement efforts giving priority to high-risk areas.

    Stable Procurement of raw materials

    Activity promotion scheme for ensuring raw and packaging materials in long-term

    With regard to agricultural products and other raw ingredients that are essential to our products, we cooperate with business partners across the supply chain, identify social and environmental issues, and promote sustainability initiatives that enable us to grow together, thereby enriching our communities.

    It is predicted that extreme weather, such as drought and flooding, occurring due to the rise in the Earth's average temperature due to climate change will have a major impact on production activities, including causing fluctuations in production volumes and creating the need to move to other locations which offer suitable cultivation. Furthermore, behind production and procurement activities lie social issues that negatively affect the human rights of people working in the supply chain. To offer our customers high-quality products and services, at the Suntory Group we believe it is crucial to promote sustainability throughout our entire supply chain. This means we need to give due consideration to environment and society, as well as to safety and reliability.

    Based on this belief, Suntory Group established the Procurement Center of Excellence in April 2021 to promote long-term raw material strategy of the Suntory Group, optimum procurement globally and deliver sustainable procurement throughout the Group.

    Overview of long-term strategy

    The TCFD framework is used to formulate the strategy, and it also utilizes open scenario such as RCP2.6 (scenarios below 2℃), RCP 8.5 (4℃ scenario) from the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA) scenarios, to draw up the future world and understand risks and opportunities.
    Furthermore, by focusing on our own policies such as Environmental Vision toward 2050 or The Suntory Group's Basic Policy on Supply Chain Sustainability and long-term trends specific to raw materials, we aim to create a vision of what we would like raw material procurement to be in the future world, and to find countermeasures based on the gaps between the current situation, so that we can respond to a wider range of social and environmental sustainability issues.

    Activity Overview

    The strategy development is based on the following steps:

    1. 1.
      Selection of important raw and packaging materials
      • Identify materials that are particularly important for our business activities.
      • Conduct risk assessment of materials handled in our business.
      • Based on the results of the assessments, the materials for which long-term strategies are to be formulated are selected through consultations with related parties.
    1. 2.
      Creation of focused teams
      • A team consisting of experts within the group from various departments such as research, development, procurement, and quality assurance is formed to work on the selected materials.
    1. 3.
      Building strategy
      • Analysis of market, company, and trends by team of experts
      • Analysis of future world scenarios and description of the ideal state within those scenarios
      • Design of activities by Back-casting from the future world back to the present to set issues
    1. 4.
      Strategy monitoring
      • Monitoring of signs of scenario change and strategy revision based on prior assumption of change
      • Revise road map of strategy building by reevaluating materials risk
    Strategy Execution

    The long-term strategy formulated by the team of experts is discussed with each operating company to promote its activities. The Global Sustainability Committee, which is an advisory body to the Board of Directors, also discusses the strategy on a regular basis.

    2021 Progress of Activity

    Based on the aforementioned approach to strategy formulation, we have implemented the following activities in steps 1 to 3 in 2021, which are described in detail below.

    Step.1 Selection of important raw materials

    In 2021, we conducted a risk assessment of the sustainability of raw materials used in our alcoholic beverages and non-alcoholic beverages businesses to determine raw material items for which to develop long-term strategies.

    <Risk assessment process>
    ①Extraction of important raw materials

    The impact is defined as the loss of product sales that the business would suffer if there were a problem with the supply of raw materials, and raw materials with a high impact were extracted as priority raw materials, including agricultural materials such as barley and corn, the material that undergo a certain processing such as sugar, vitamin C, and oak wood.

    ②Risk Assessment

    To evaluate the possibility of problems in the supply of the extracted key raw materials – the effects of climate change on yield and suitable areas for cultivation, which are considered to have the greatest impact on future supply, were studied and evaluated from the research and statistical perspectives. One of the results is shown in Figure 2. For raw materials that undergo a certain amount of processing, the risk assessment considers the impact of climate change on the production area of the base material and the ratio of raw materials used in the process. (Example: for sugar, see the results of climate change impact assessment for sugar cane and sugar beet)
    Based on the above approach, we found that the yields of agricultural raw materials such as barley, sugar cane and corn used in both alcoholic beverages and non-alcoholic beverages, oak, and hops used in the alcoholic beverage business, coffee beans used in non-alcoholic beverages, will be significantly impacted in several production areas.

    Figure 2: Yield Impact Survey Results

    Scenario of a 4℃ temperature increase: Study of the effects of yield and suitable land on major raw materials and production area

    -/+ Impact
    Below 10%
    More than 10% ~ below50%
    More than 50%
    /
    /
    /
    Business
    Sector
    Material North
    America
    Latin
    America
    Asia Europe/Africa Oceania
    Alc/Beverage* Barley Canada
    Yield:
        UK
    Yield:
    France
    Yield:
     
    Alc/Beverage* Corn USA
    Yield:
    Brazil
    Yield:
    China
    Yield:
       
    Alc/Beverage* Sugarcarne   Brazil
    Yield:
    Thailand
    Yield:
      Australia
    Yield:
    Alc. Oak USA
    Wood quantity:
      Japan
    Suitable land :
    Spain
    Suitable land :
     
    Alc. Hop USA
    Yield:
        Germany
    Yield:
    Czech
    Yield:
     
    Beverage Coffee beans   Brazil
    Suitable land :
    Colombia
    Suitable land :
    Guatemala
    Suitable land :
         
    • *
      Include origin of processed material
    ③Formulate a road map of strategy building

    By referring the results of the survey and through discussions with the relevant departments, the following raw material items were selected to implement the long-term strategy as comprehensive decision. In the future, we plan to increase the number of raw material items for which we will formulate long-term strategies on an annual basis based on this activity plan.

    2021: Ethanol, Coffee, Oak, Oolong Tea and Corn
    2022: Barley, Sugar, High Fructose Corn Syrup (HFCS), Vitamin C and Citric Acid
    2023: Lemon, Orange, Grapefruit, Maize starch and Black Tea
    2024: Dairy, Wheat and Rye

    • Note)
      The results of the referenced climate change impact study are listed. Coffee is modeled by Coffee beans HFCS, Vitamin C and Citric Acid are modeled by Corn

    Prior to the above activities, we are working to mitigate the impact of climate change on our business with regard to hops, a raw material for alcoholic beverages, and blackcurrant, a raw material for beverages, as follows.

    Hop

    We have been working with the Czech Hop Research Institute to analyze the hop genome and develop cultivation techniques using materials to secure the necessary quantities on a permanent basis.

    First in the world to unravel the hop draft genome | Suntory Global Innovation Center

    Blackcurrant

    Suntory Beverage & Food Great Britain and Ireland manufactures and sells Ribena conducts research on new species of cassis that is resilient to climate change. In July 2020, new species of cassis that is resilient to climate change named "Ben Lawers" were harvested. This was a result of a long-term joint research with the James Hutton Institute, a research institute for agriculture.

    Sustainable Agriculture Support for Blackcurrant Farmers

    Step.2 Creation of focused teams

    Following the activity plan of Step 1, team of experts are being formed for Ethanol, coffee, oak, oolong tea, and corn in 2021.

    Step.3 Building strategy

    For the raw material items for which the task force was formed, we set the time axis to 2050, and we envision changes include financial impact on our business in the future world of 2050 by referring to open scenarios it covers environmental element like climate change, and also covers social perspectives such as human rights. Then, based on the trend analysis and the company’s own goals, the ideal state of raw material procurement in the future world is drawn, and the way to reach this goal is examined.

    Next Step

    The long-term strategy will be formulated over a period of three years, and activities will be carried out on an annual basis while incorporating new information on the market environment and the impact of climate change. In Step 4, Strategy Monitoring, which is scheduled to be conducted after the strategy is formulated, we will periodically check for the occurrence of events such as the junctures of multiple possible scenarios and the success of technological innovations necessary to achieve the desired goals. This will enable us to capture important changes as much as possible in advance and revise the strategy to incorporate them.

    3. Risk

    Suntory defines "risk" as a potential event that affects the achievement of the Group's strategies and goals. Through the Global Risk Management Committee (GRMC) and the risk management committees and risk management teams established at each group company, we identify and evaluate important risks for the entire group and identify risks that should be prioritized for our company, consider countermeasures, and reviewing them on an annual basis.

    Risk Management System

    Approach to Identifying and Evaluating Risks

    For the risks identified, we create a heat map based on the two axes of "Risk Exposure" and "Degree of Response", evaluate the importance especially for group-wide material risks on a three-point scale, and identify the risks to be prioritized. "Risk Exposure" is calculated by probability of occurrence (probability) x magnitude of impact (impact), and "Degree of Response" is calculated by the degree of preparation for countermeasures. As a result of the evaluation, climate-related risks are positioned as one of the most important risk types.

    Assessment Criteria for Risk Occurrence (for reference)

    Score Level Probability of Occurrence Frequency/Speed of Occurrence
    1 Extremely low probability of occurrence 5% or less Once every 10 years
    2 Low probability of occurrence Around 25% Once every 6 to 9 years
    3 50-50 Around 50% Once every 3 to 5 years
    4 High probability of occurrence Around 75% Once every 1 to 2 years
    5 Almost certain probability of occurrence 75% or more Annually

    Assessment Criteria for Level of Impact (for reference)

        Quantitative Criteria Qualitative Criteria*
    Score Level Impact on Company in Terms of Sales* Business (including human resources and technology) Compliance (Legal/regulatory impact) Reputation Strategy (Impact on customers/ brand/market)
    1 Minimal Impact Less than 1%
    of sales
    Examples of
    Factors to
    Consider

    • Disruption of
      each operating
      unit
    • Response to
      customers
    • Disruption of
      operations on
      a company level
    Examples of
    Factors to
    Consider

    • Prosecution or
      investigation
    • Fine or
      investigation
    • egal liability
    Examples of
    Factors to
    Consider

    • Mass media
      reports
    • Stakeholder trust
    Examples of
    Factors to
    Consider

    • Delay in achieving
      strategic goals
    • Impact on
      customer base
      and time required
      to restore it
    • Impact on brand
      and market
    2 Some Level of Impact 1% to less than 2%
    of sales
    3 Large Impact 2% to less than 4%
    of sales
    4 Very Large Impact 4% to less than 8%
    of sales
    5 Definite Impact 8% of sales or
    higher
    • *
      Will have an impact on sales for the entire Group when it is a Group company that controls multiple companies.
    • *
      In not suitable for assessment using quantitative criteria, use qualitative criteria.

    Response Level Assessment Criteria (for reference)

    Score Level Response Status Response Status
    1 Poor There are definitely points to be improved Either no control or supervision or does not work as intended due to major flaws even if control or supervision exists.
    2 Low There are important points to be improved Risk is still present because proper control/supervision is limited.
    3 Medium There is room for improvement Control/supervision exists, but there is room for important improvements to be made.
    4 High There is still small room for improvement Although proper control/supervision is being conducted, there is still small room for improvement in operations.
    5 Excellent Effective measures are already being implemented Proper control/supervision is being conducted and operations run as intended.

    Approach to Managing Identified Risks

    For the identified risks that should be prioritized, a person in charge and a monitoring organization will be appointed to implement the risk countermeasures. The response status is reported and discussed by the Global Risk Management Committee (GRMC), and the PDCA cycle of extraction, evaluation, countermeasures, and monitoring is carried out by selecting important risks for the next fiscal year based on the response results.

    4. Indicators and Targets

    Regarding climate change and water, which are expected to have a large impact on business, the Suntory Group has established "Environmental Targets toward 2030" as the medium-term targets with 2030 as the target year and "Environmental Vision toward 2050" as the long-term vision with 2050 as the target year, and are moving ahead with initiatives for dealing with climate change.

    • *1
      Reduction of water intensity of production based on 2015 baseline year
    • *2
      Water intensity is the amount of water withdrawn per unit of production, which is 1 kiloliter of production
    • *3
      Owned plants that manufactures final products and excludes plants for packaging and ingredients
    • *4
      Coffee, barley, grapes
    • *5
      Based on emissions in 2019

    Initiatives

    To achieve the 2030 target, we are globally promoting various water-related initiatives such as activities to conserve and restore the natural environment. We started the Natural Water Sanctuary Initiative to cultivate water resources in forests in 2003. Now we have 21 Suntory Natural Water Sanctuaries in 15 prefectures which cover a total area of approximately 12,000 ha and supply more than twice the amount of water used by our plants in Japan. In 2021, we signed a partnership agreement with the Alliance for Water Stewardship (AWS), an internationally prestigious organization that promotes water conservation and stewardship (responsible management of water resources) globally, and now we are recognized as a leading organization in promoting water sustainability.
    As part of our GHG reduction efforts, we will aim to achieve 100% renewable electricity in the group's 63 directly-owned manufacturing sites and R&D facilities in Japan, the Americas and Europe by 2022*1. In addition, the company will start introducing internal carbon pricing to its group companies this year and plans to invest a total of approximately 100 billion JPY (equivalent to approximately 900 million USD*2) by 2030 to shift to low-carbon alternatives. The company estimates that these actions together will amount to a reduction of approximately 1 million tons of greenhouse gas (GHG) emissions in its direct operations compared to a business-as-usual projection for 2030.