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 CO2 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 further advance scenario analysis and expand disclosure of information related to the risks and opportunities that climate change poses to business.
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 CO2 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 always working together. Important matters to be decided are further discussed by the Board of Directors.
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 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 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 61 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 layer, 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, and evaluated water sustainability for all sites. We evaluated plants with a Baseline Water Stress score of 4 or higher as highly water-stressed locations where water resources could be depleted and found that they represented 17% 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 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.
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.
●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||→|
|Management of water intake data is insufficient||→|
|Water intake data is being managed and water intake is being handled properly||→|
●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||→|
|No short-term target for water consumption per unit of production established/achieved||→|
|Target for water consumption per unit of production achieved||→|
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.
We conducted scenario analysis for climate change according to the recommendations of the TCFD, learned about the possibility that climate change will have a significant impact on the crops that are ingredients important to the Suntory Group, and will move forward with considering measures in the future.
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.
*1Reduction per unit production based on the business fields in 2015
*2Total reduction based on the business fields in 2015
For more information on Environmental Targets toward 2030 and Environmental Vision toward 2050, please visit here.