Disclosure Based on TNFD Recommendations

As a Company Sustained by the Gifts of Nature

As a company that depends on water and agricultural crops, we believe it is our responsibility to protect the ecosystems where this value originates, including water resources and ingredient production regions. Comprehensive measures are essential to prompt appropriate action-taking for the deeply intertwined crises of climate change, biodiversity and water as a global multifaceted beverage company. For promoting to set science-based targets for nature and activities to achieve them, Suntory Group is participating in the program run by the Science Based Targets Network (SBTN) for piloting the target validation process in accordance with the SBTN guidance released in May 2023, being the only Japanese company among the 17 piloting companies*.

We have started pilot disclosure of the Taskforce on Nature-related Financial Disclosures (TNFD) based on assessments and progress made in the SBTN validation pilot. The TNFD framework uses the LEAP approach, consisting of the steps of Locate, Evaluate, Assess, and Prepare. The steps of Locate and Evaluate used the assessments produced in steps 1 and 2 of the SBTN validation pilot for direct operations and the upstream supply chain. For the Assess step, the direct operations (production sites) of the Alcoholic Beverage Business were assessed based on the findings from the Locate and Evaluate steps. The figure illustrates the relationship between the SBTN and the TNFD approaches.

Based on the progress of the SBTN validation pilot, going forward we will incorporate target setting, further assessment of risks and opportunities, and specific measures into our strategy with the goal of realizing a nature-positive world aligned with science-based global standards.

  • *
    In addition to Suntory Group, AB InBev, Bel, Carrefour, Corbion, Alpro (Danone Group), GSK, H&M Group, Hindustan Zinc Limited, Holcim Group, Kering, L'OCCITANE Group, LVMH, Nestlé, Neste Corporation, Tesco, and UPM were also selected
TNFD and SBTN Alignment on Target-Setting
TNFD and SBTN Alignment on Target-Setting

Participation in the Taskforce on Nature-related Financial Disclosures (TNFD) Forum

Participation in the Taskforce on Nature-related Financial Disclosures (TNFD) Forum

Suntory Group is participating in the TNFD Forum, a global and multi-disciplinary consultative network of 400 institutional supporters who share the vision and mission of the TNFD and make themselves available to contribute to the work and mission of the Taskforce.

1. Governance

The Global Risk Management Committee (GRMC) conducts Group-wide risk management for Suntory Group. Based on the GRMC, operating companies establish a risk management committee or risk management team (ex.: the Risk Management Committee at Suntory Beverage & Food Ltd. (SBF), the Global Risk & Compliance Committee at Suntory Global Spirits Inc.(SGS) Inc. (BSI), and the Risk Management Teams at Suntory Spirits Ltd. and other operating companies). The GRMC meets four times a year and conducts activities including identifying risks and opportunities across the Suntory Group, implementing countermeasures, and developing the crisis management structure. Problems involving nature, such as those related to water and raw ingredients, are discussed in the GRMC as Group-wide material risks, and the status of addressing them is monitored.

The Global Sustainability Committee (GSC) discusses medium- to long-term strategy related to climate change and the seven themes set forth in the Suntory Group Sustainability Vision, including Water, Raw Ingredients, and Containers and Packaging. Operating companies have also established organizations to discuss strategy and initiatives at a more granular level (ex.: the Sustainability Committee at Suntory Beverage & Food Ltd., the Corporate Responsibility Committee at Suntory Global Spirits Inc.).

The GRMC and the GSC work together on an ongoing basis, and for important matters requiring decision-making, the Board of Directors holds further discussions as well as deliberates on and issues decisions. Reports are also made to the Board of Directors on a quarterly basis regarding strategy and its progress, risks and growth opportunities that involve nature, including those related to climate change. The Board of Directors also regularly sets up opportunities to receive advice on sustainability management, including workshops with the outside experts.

The CEO is responsible for matters involving climate change and nature, and the CSO is responsible for evaluating and managing nature-related risks and opportunities. Sustainability is included in targets set as part of performance evaluations that determine executive compensation and the like.

Organizational Chart

Organizational Chart

2. Strategy

For direct operations and the upstream supply chain, we assessed the impacts and dependencies on nature of our Group’s business and set priorities based on the results. In this assessment, we used the tools and database recommended by the SBTN.
We focused on water use and water pollution as the materiality in the impacts of our business on nature, and then identified priority sites and analyzed risks and opportunities for the direct operations of the Alcoholic Beverage Business on a trial basis.

Impacts and Dependencies on Nature of Our Group’s Business

The impacts and dependencies on nature of our Group’s business were assessed for direct operations and the upstream supply chain. For direct operations, we selected activity classifications that applied to our business from the International Standard Industrial Classification of All Economic Activities (ISIC), and then categorized and defined the Suntory Group business activities to be assessed. We used the Materiality Screening Tool (MST) developed by the SBTN to gain a comprehensive understanding of the impacts on nature from our business activities. For the upstream supply chain, we used the MST to assess the raw ingredients used in our business. In addition, we identified raw ingredients with particularly significant impacts on nature using the High Impact Commodity List (HICL), which is a list of raw ingredients the SBTN considers as having significant impacts on nature. For dependencies on nature, we used the Exploring Natural Capital Opportunities, Risks and Exposure (ENCORE) online tool jointly developed by the Natural Capital Finance Alliance (NCFA) and the UN Environment Programme World Conservation Monitoring Centre (UNEP-WCSC) to gain a comprehensive understanding of the dependencies.

Impacts on Nature
Impacts on Nature
  • *
    As these items are outside the scope of the SBTN, they were not included in the assessment of local conditions, the identification of priority locations and the risk/opportunity assessment.
Dependencies on Nature
Dependencies on Nature

For the business activities in our direct operations, water use and water pollutants in wastewater were identified as likely having impacts on nature overall. For business activities in the upstream supply chain (cultivation of barley, corn, sugar cane and other non-perennial crops, poultry rearing, iron ore mining, etc.), land use and land use change, water use, and discharge of water and soil pollutants were identified as likely having impacts on nature overall. Regarding dependencies on nature, we identified a high degree of dependence on groundwater and surface water in our direct operations. In the upstream supply chain, in addition to groundwater and surface water, we identified a high degree of dependence on pollination services, maintenance of soil fertility and the health of the water cycle, water quality, prevention of soil erosion and pests, and natural processes including those mitigating the impact of natural disasters.

Identification of Priority Sites

As part of identifying priority sites in our direct operations, we prioritized sites in terms of water use and water pollutants. In this prioritization, we ranked each site considering both the Pressure indicators calculated from the water use or the water pollutants in wastewater and State of Nature indicators (the state of water availability or the water pollution that our business is dependent on) as well as the State of Biodiversity. In addition, we assessed the area in a 20-km radius around the site using the Integrated Biodiversity Assessment Tool (IBAT). Of the sites near protected areas or Key Biodiversity Areas, those in the top 10% or in the top 10 of the ranking were identified as priority sites.

Number of High-Priority Site
  • *
    Only production sites selected (not including offices)
Pressure Indicators Non-Alcoholic Beverage Alcoholic Beverage Business Other
Water Use (Surface water use/Ground water use) 13 6 0
Water Pollutants (N&P loading) 16 3

Among the Suntory Group businesses, we analyzed risks and opportunities for production sites in the Alcoholic Beverage Business, including sites with a high degree of importance and priority in terms of both water availability and water pollution.

Number of Priority Sites by Region in the Alcoholic Beverage Business
Number of Priority Sites by Region in the Alcoholic Beverage Business
Identification of Risks and Opportunities

Based on the results of identifying priority sites as well as the impacts and dependencies on nature, we conducted a qualitative assessment of risks and opportunities in the Alcoholic Beverage Business using the two axes of risk occurrence potential and impacts on our business.

Risk Analysis Results

1. Identify major risks 2. Impacts of each risk/opportunity on business
Types of Risk Risk item Impacts and/or dependencies Anticipated impacts on business
Physical risk Chronic Risk of deteriorating quality of water intake Water quality
  • Impacts on product quality from the quality degradation of water, the most important raw ingredient for Suntory Group
  • Increased treatment costs
Transition risk Reputation Risk of society deeming company water measures are insufficient, lowering brand value Water quantity/quality
  • Reduced sales from a more negative company image
Reputation Risk of conflict with local residents over water intake and wastewater impacting business Water quantity/quality
  • Increased costs from additional surveys and facilities investment
  • Impacts on sales and business continuity from impacts on operations

Regarding risks, impacts on product quality and increased treatment costs from quality degradation of water, the most important raw ingredient for Suntory Group, are anticipated. Furthermore, business impacts from lower sales from a more negative company image and conflicts with local residents are also anticipated.

Regarding opportunities, reduced costs related to water intake and wastewater from improvements in water use efficiency are anticipated. Continuing and expanding water source conservation activities and Suntory Mizuiku — Education Program for Nature and Water, as well as externally communicating information on the Suntory Group’s approach to water, are expected to improve brand value, leading in turn to increased sales.

3. Risk and Opportunity Management

Risk in the Suntory Group is defined as current and future uncertainty with the potential to impact the execution of business strategy and achievement of business targets. Identification of material risks and opportunities as well as their evaluation, including those related to nature such as water resources across the Group, are conducted through the Global Risk Management Committee (GRMC) and the risk management committees and risk management teams established at operating companies. The risks for which Suntory Group needs to prioritize taking action are identified and countermeasures examined, with revisions to them made annually.

Risk Management System
Risk Management System
Management Methodology for Identified Risks

For risks whose mitigation is of particularly high priority, the person responsible and the monitoring organization are designated and risk mitigation measures are implemented. The status of risk mitigation is reported to and discussed by the GRMC. The material risks for the following fiscal year are selected based on the results of risk mitigation as part of conducting the PDCA cycle of identification, evaluation, taking action, and monitoring.

Management Methodology for Identified Risks

4. Targets and Indicators

For climate change and water, which are anticipated to have major impacts on the Suntory Group’s business, we have established the Environmental Targets toward 2030 as medium-term targets and the Environmental Vision toward 2050 as our long-term vision, and are taking actions accordingly.

Targets and Progress for Water
Targets and Progress for Water
  • *1
    Owned plants that manufactures finished products and excludes plants for packaging and ingredients
  • *2
    Reduction of water intensity of production based on 2015 baseline year
  • *3
    Coffee, barley, grapes

For more information on water-related achievements, see the List of achievements data.

Water Resource Cultivation Initiatives around the World
Water Resource Cultivation Initiatives around the World

<Japan> Natural Water Sanctuary

In order to maintain the safety and reliability of groundwater as well as sustainability, we conduct Natural Water Sanctuary Initiative to recharge more than twice the amount of groundwater withdrawn by our plants in Japan in the forest areas at the source of our plants.
Forests that cultivate quality groundwater are rich in biodiversity. The plant and animal life living in forests will also change if the primary functions of the forest can be revitalized. We conduct systematic management through continuous ecosystem monitoring of animals, plants and insects including birds at Natural Water Sanctuary.
Focusing on wild birds, which are said to serve as a barometer of a given environment, we conduct wild bird surveys by specialists every year based on the idea that it is possible to comprehensively grasp the changes in the entire ecosystem that supports them. We are conducting a project to support nest building and rearing of chicks by eagles and hawks, which are top predators in ecosystems at all of the Natural Water Sanctuary in Japan. The objective is to advance the development of forests rich with biodiversity by taking a bird’s perspective of Natural Water Sanctuary.

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