In order to sustain business and continue to create value, the Suntory Group believe it is necessary to identify risks due to climate change as well as their potential impact on business and respond appropriately.
In May 2019, the Suntory Group has declared its support for the Task Force on Climate-related Financial Disclosures (TCFD) recommendations established by the Financial Stability Board (FSB).
In July 2019, we also established seven important sustainability themes for the group including the reduction of greenhouse gas (GHG) emissions as one of the key themes.
In 2022, risks and opportunities related to climate change that effect the society and corporations were assessed and identified to calculate the monetary impact on business. We aim to improve resilience by incorporating specific measures for actualized risks and opportunities in the strategy. We will continue to expand disclosure of related information.
In April 2015, we established The Global Risk Management Committee (GRMC) to strengthen 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. (SBF), the Global Risk & Compliance Committee at Beam Suntory Inc. (BSI), and the Risk Management Team at Suntory Spirits Ltd.). Meeting four times a year, the GRMC identifies the entire Group’s risks, executes countermeasures, and engages in activities related to the establishment of crisis management systems. Climate related risks, one of the most important risk categories, are discussed by the GRMC and the responses to those risks are then monitored.
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 relating to climate change. In addition, we have established committees 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 climate change, 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.
Climate related KPIs are set in the management strategy meeting. CEO is responsible for climate related issues and CSO is responsible for assessment of climate related risks and opportunities as well as their management Sustainability is included as target used for business performance which determine officer remunerations.
The Suntory Group assesses climate change related issue based on their importance. For risks that are expected to have a large impact on business, we have set medium- to long-term targets and are proceeding with initiatives. As the approach to identifying risks and their assessment, we create a heat map of the identified risks based on the two axes of "Risk Exposure" and "Degree of Response," evaluate their 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.
With consumers, investors, and other stakeholders increasing interest in GHG emissions by corporations, we recognize that risks and opportunities related to climate change may greatly affect our business strategy. We conduct scenario analysis to understand and take measures against risks and opportunities related to climate change that may impact business and consider them during financial planning.
Risks and Opportunities (Identify risks and opportunities, estimate the amount of monetary impact)
To identify important financial risks and opportunities for an organization, impact and frequency of each item in the span of short (0 to 3 years), medium (3 to 10 years), and long (10 to 30 years) term were considered. Result of the internal assessment is organized and shown below. Of the identified risks and opportunities, we recognized that increase in costs due to introduction of carbon tax, opportunity loss due to insufficient supply of water at production sites, and increase in raw material costs due to decrease in yield of agricultural products are the three items that may have a significantly impact and estimated the amount of their monetary impact on business. For the basis of analyzing risks and opportunities, we used RCP 8.5 as global warming scenario and IEA NZE 2050 and other scenarios as decarbonization scenario.
|1. Identify major risks and opportunities||2. Assess the impact of each risks and opportunities on business
(For most important risk, estimate the amount of monetary impact)
|3. Determine/conduct response measures|
|Types of Risks and Opportunities||Estimated impact on business||Measures to reduce risks/seize opportunities|
|Increase in production costs due to introduction of carbon pricing||
|Impact of insufficient supply of water on operation of production sites||
|Increase in procurement costs due to decline in yield of agricultural products||
|Flood, etc. caused by large typhoon or heavy rain||
|Impact on health due to rising temperatures||
|Change in consumer behavior due to increased environmental awareness||
|Cost reduction due to introduction of new technology||
Note 1:Estimated using our Scope 1 and 2 emissions in 2019 and carbon tax price independently estimated based on forecast figures of the International Energy Agency (IEA)’s “Net Zero by 2050: A Roadmap for the Global Energy Sector (NZE).”
● 2030: Japan, Europe, and Americas. US$130/ton, APAC US$90/ton.
● 2050: Japan, Europe, and Americas. US$250/ton, APAC US$200/ton.
Note 2:Estimated impact on profit if all plants located in areas with high level of water stress have restriction on water withdrawal. Aqueduct Country Ranking developed by World Resources Institute and Water Risk Filter developed by World Wide Fund for Nature (WWF) are used for assessing water stress level of areas where our plants are located in.
(Exchange rate as US$1 = JPY139)
We aim to resilient by considering both scenarios and taking strategic approach toward the above actualized risks and opportunities. We have been focusing on identifying water supply risks, proper management of water, water resource cultivation activities, and other water sustainability activities but are considering risks related to raw material procurement and other aspects. In addition, in order to reduce GHG emissions throughout the value chain, from raw material procurement to manufacturing, distribution, sales, and recycling, we set challenges for each department and take action. For opportunities, we are expanding product portfolio of beverages with ingredients which are recommended by the Ministry of Environment of Japan as products addressing climate change. We believe that continuing and enhancing water resource cultivation activities, "Mizuiku" - Natural Water Education Program and other activities related to water as well as sharing information about Suntory Group’s approach to water to the public will raise are brand value and lead to increased sales. In terms of resource efficiency, we are actively promoting recycle of plastic bottles.
Water Risk Assessment
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*.
*Owned plants that manufacture finished products and exclude plants for packaging and ingredients: 23 plants in Japan, 56 plants overseas
Stable Procurement of Raw ingredients
With regard to agricultural products and other raw ingredients, 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 their production activities, including fluctuations in yield and the need to move production to other areas which offer suitable cultivation. As corporate activities become more and more globalized, need to appropriately manage human rights of people who work in the supply chain and other social issues increase.
To offer our consumers high-quality products and services, 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, we established and promote long-term strategy for safe, reliable, and sustainable supply of raw materials.
3. Risk Management
We define risk as current and future uncertainties that may affect the execution of business strategy and the achievement of business objectives. 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 climate change and other 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 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.
*1Suntory Group plants that manufactures finished products
*2Reduction per unit production based on the business fields in 2015
*3Coffee, barley, grapes
*4Based 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 22 Suntory Natural Water Sanctuaries in 15 prefectures which cover a total area of approximately 12,000ha 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, an internationally prestigious organization that promotes water conservation and stewardship (responsible management of water resources) globally, to take a leadership role in promoting water stewardship in Japan.
As part of our GHG reduction efforts, we have switched purchased electricity to 100% renewable in all our 63 manufacturing sites and R&D facilities in Japan, the Americas and Europe by 2022. In addition, we introduced internal carbon pricing to from 2021 and plan to invest a total of approximately 100 billion yen by 2030 to promote decarbonization. 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 GHG related measures, we are reducing Scope 3 emissions through strengthening recycling of plastic bottles as well as starting project on regenerative agriculture. We have also approached raw ingredient suppliers to kick start collaborations.