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.
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.
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.
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.
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 initiatives for physical risk since FY2019, among which we have been considering water supply risks and stable procurement of raw materials, which are said to have a large impact on the consumer staples sector.
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 activities, 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 sustainability of water supply at its own plants*.
(*23 production plants in Japan and 56 production plants overseas that produce products in the Suntory Group)
Water Supply Risk Assessment Process
■Primary Assessment ― Screening of plants to prioritize based on Science Based Targets (SBT) for Water
We revised the primary assessment conducted in FY2019 using a methodology developed in the SBT for Water pilot study* in which we participated in 2021.
As a first step, we identified materialities related to water in our direct operations based on industry characteristics. Through this, we found that the most critical materiality is the water availability in watersheds where our plants are located. In addition, we identified that groundwater and surface water as the ecosystem services on which our plant operations the most highly depend.
Next, we assessed water availability at all our plants to narrow down plants that need risk management as a priority. We used Aqueduct developed by the World Resources Institute, an international non-profit research organization for global environment and development issues, and Water Risk Filter developed by World Wide Fund for Nature (WWF), one of the world's largest environmental protection organizations. Specifically, we used four Aqueduct and Water Risk Filter indicators to assess water availability that is our materiality. We used these indicators to assess the water demand against the water supply in nature. To determine the current water stress situation, we used three indicators, such as “Water depletion” of Water Risk Filter, that show the current water resource status. Furthermore, we used the “2040 Water Stress” of Aqueduct, which estimate the state in 2040, to assess the risks related to water availability based on future scenarios such as climate change. Each indicator assesses the scale of risks in five levels, and we have calculated the average score of the three indicators to evaluate the current state of each plant. We categorized sites located in areas with an average score of "5: Extremely High" or "4: High" as sites with "Extremely high water-stressed." Also, the sites with a score of “2040 Water Stress” over four were categorized as sites with "Highly water-stressed."
As a result, of the total water withdrawal by all our plants in 2020, 3% were by sites with “Extremely high water-stressed.” and 14% were by sites with “Highly water-stressed.”
(*Pilot study to verify methodology related to SBT settings for water by Science Based Targets Network)
Water Depletion of Water Risk Filter (Five Levels)
Source: Created based on Water Risk Filter of World Wide Fund for Nature (WWF)
2040 Water Stress of Aqueduct (Five Levels)
Source: Created based on Aqueduct Project of World Resources Institute
■Secondary Assessment ― Individual site assessment
Sites that passed the screening in the Primary Assessment were assessed individually on the progress of their measures to reduce risks from perspectives of water management (water withdrawal and water-saving) and co-existence with the community. Since each plant faces different water-related conditions in its respective area, we conduct measures to reduce risks that correspond with local conditions.
The water resource is a precious shared resource that needs to be used appropriately, and it is important to conduct water management at plant for responsible use.
First, we categorized water used in our plants as natural water (surface water or groundwater) or municipal water. Municipal water is supplied through the local waterworks bureau by paying a water utility fee. Generally, the water source is from a wider area and shared by many users. As the waterworks bureau primarily manages it, cooperating with the local bureau must coexist with the local community. When using natural water (surface water or groundwater) as a source, it is sourced from smaller areas than municipal water, and the impact from climate change and other environmental changes is more significant. In addition, it is primarily managed by Suntory, and we proceed with measures at our plants that use natural water (surface water or groundwater) as a priority.
We evaluate the following two points.
①Management for water withdrawal
Promotion of activities to use water properly (not to draw too much water)
Note: The local waterworks bureau manages all water withdrawal management for plants that use municipal water. Therefore, those plants are not evaluated.
②Management for water-saving
The ability to prove that water is being used properly (that water is not being wasted)
●The ability to provide data that water withdrawal has no impact on the local environment.
●Required data compiled for proof.
|Water withdrawal data is not being managed||→|
|Management of water withdrawal data is insufficient||→|
|Water withdrawal data is being managed, and water withdrawal is being handled properly||→|
●The target was established to use water efficiently.
●Conduct activities to achieve the target.
●The target are achieved
|No medium-term target for water use per unit of production was established||→|
|No short-term target for water use per unit of production was established/achieved||→|
|The target for water use per unit of production achieved||→|
Results of the Secondary Assessment
We implemented an action plan designed to reduce risks through visualizing risks and suggesting solutions. As of December 2021, 33% of the plants were evaluated as "Green," and 67% were evaluated as "Yellow" for water withdrawal management. For water-saving management, 43% of the plants evaluated were rated "Green," 33% were rated "Yellow," and 24% are currently under investigation.
Using the same process, we will continue improvement efforts prioritizing to high-risk areas.
Co-existence with the Community
Recognizing that we are users of water resources and are one member of many stakeholders in the watershed, we aim to work hand-in-hand with other stakeholders to conserve the water resources in the watershed and to contribute to society’s development.
●Water-related issues are identified.
●Working with the community to solve issues.
|Insufficient “identification of water issues"||→|
|Conducts “identification of water issues"||→|
|Conducts “identification of water issues" and “initiatives with the community"||→|
Results of the Secondary Assessment
We identify water-related issues and conduct water resource conservation initiatives with universities and experts in each area. As of December 2021, 38% of the plants were evaluated as "Green," 29% were evaluated as "Yellow," and 33% were rated "Red."
As we advance, we will coordinate with "Mizuiku" - Education Program for Nature and Water as part of the activities to raise awareness about the importance of water in areas where we promote water resource conservation activities.
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.
The strategy development is based on the following steps:
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.
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.
・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
・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
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.
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
Suitable land ：
Suitable land ：
Suitable land ：
Suitable land ：
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.
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.
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.
■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.
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.
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%
|2||Some Level of Impact||1% to less than 2%
|3||Large Impact||2% to less than 4%
|4||Very Large Impact||4% to less than 8%
|5||Definite Impact||8% of sales or
*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.
*1Water intensity is the amount of water withdrawn per unit of production, which is 1 kiloliter of production
*2Owned plants that manufactures finished products and excludes plants for packaging and ingredients
*3Reduction of water intensity of production based on 2015 baseline year
*4Coffee, barley, grapes
*5Based on emissions in 2019
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.
For more information on Environmental Targets toward 2030 and Environmental Vision toward 2050, please visit here.
For more information on results of GHG emissions, please visit here.