At Suntory Beverage & Food, the Risk Management Committee and Sustainability Committee work in constant collaboration, and important decisions are further discussed and resolved by the Board of Directors.. Progress on strategies relating to environmental and social issues, as well as business risks and growth opportunities, are reported to the board accordingly. The board members are also provided opportunities to deepen their knowledge of sustainability through training sessions with external experts, convening board meetings at production and R&D facilities, and exchanging views.

Suntory Beverage & Food's sustainability management promotion organization

Suntory Beverage & Food assesses climate change-related issues based on their importance. For risks that are expected to have a large impact on our business, we have set medium- to long-term targets and are proceeding with initiatives. For our approach to identifying risks and their assessment, we create an evaluation of the identified risks based on the two axes of "Risk Exposure" and "Degree of Response". We categorize major Group-wide risks as Tier 1 through Tier 3, with Tier 1 being most important risk and Tier 2 important risk. "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 showing more and more interest in GHG emissions by corporations, we recognize that risks and opportunities related to climate change may greatly affect the Company’s business strategy. We conduct scenario analysis to understand and take measures against risk and opportunities related to climate change that may impact our business and consider them when engaging in financial planning.

Risks and Opportunities (Identify risks and opportunities, estimate the amount of monetary impact)

At Suntory Beverage & Food, 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 (4°C Scenario) as global warming scenario and IEA NZE 2050 and other scenarios as decarbonization scenario.

• 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$140/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 = JPY145)

Initiatives Based on Analysis of Risks and Opportunities

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 — education program for nature and water 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.

Risk Assessment of Water Sustainability

Water is the most important ingredient in the Company’s products, as well as a precious shared resource. It is imperative for our sustained business growth that we understand the impact that water risk has on our business, local communities, and the ecosystem, and so we conduct water risk assessments. Based on this, the Company has conducted a risk assessment of water sustainability at its own plants.*

• *
  Suntory Beverage & Food plants that manufacture finished products: 10 plants in Japan, 33 plants overseas

More details about the water supply risk assessment

Aiming for 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.

More details about the stable procurement of raw materials

At Suntory Beverage & Food, the Risk Management Committee identifies and assesses critical risks throughout the Company each year. The committee identifies risks that should be prioritized at the Company and promotes risk reduction activities companywide. The Risk Management Committee regularly reports these activities to the Board of Directors. The Company’s approach to identifying and assessing risks and the process for managing identified risks is shown below.

Risk Management System at Suntory Beverage & Food

Approach to Identifying and Evaluating Risks and Opportunities (Identify Risks and Opportunities, Estimate the Amount of Monetary Impact)

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.

Approach to Managing Identified Risks

Of the identified risks and opportunities, we believe that the three items that may have the most significant impact are: 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.
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 Risk Management Committee (RMC), and the PDCA cycle of extraction, evaluation, countermeasures, and monitoring is carried out.

Environmental Vision toward 2050

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.

• *1
  Water intensity is the amount of water withdrawn per unit of production, which is 1 kiloliter of production
• *2
  Owned plants that manufacture final products and excludes plants for packaging and ingredients
• *3
  Reduction of water intensity of production based on 2015 baseline year

Suntory Beverage & Food Environmental Targets toward 2030

Suntory Beverage & Food has set the following environmental targets for 2030 to guide its efforts to help achieve the Suntory Group’s Environmental Vision for 2050.

• *1
  Water intensity is the amount of water withdrawn per unit of production, which is 1 kiloliter of production
• *2
  Owned plants that manufacture finished products and excludes plants for packaging and ingredients
• *3
  Reduction of water intensity of production based on 2015 baseline year
• *4
  Coffee, etc.
• *5
  5 million people is Suntory group's target
• *6
  Based on emissions in 2019

Suntory Beverage & Food Progress 2023

• *1
  Suntory Beverage & Food plants that manufacture finished products.
• *2
  The total of 1,070,000 people is the Suntory Group's progress.
• *3
  Sites of Suntory Beverage & Food.