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Peter Marshall Send an email September 12, 2023
6 minutes read

Greenwashing In The Drinks Sector Opacity Of Drinks Sustainability By: Kristiane Sherry

Introduction by: Peter Marshall

As we all know, environmental sustainability is the buzz phrase of the moment across the drinks landscape. But who’s getting it right, who needs to do more, and, ultimately, is the era of reporting just a front for out-and-out greenwashing? Kristiane Sherry takes a deep dive into the melee and has written an exceptional and well researched feature.

It’s the year 2024. Key legislation has come into force in many markets requiring corporations to declare their sustainability targets and publish progress against them. ESG performance is routinely published alongside financial results. It’s a new era of transparency. The climate crisis is being resolved. We’ve stepped back from the dystopian environmental brink. All is well.

This is how many governments and businesses would like it to play out. But in reality, reporting mandates are unlikely to achieve much. It’s a flimsy, roughly sketched-out system with bare-minimums that don’t tell consumers, or indeed the wider industry, much at all. And as we’ve seen recently in the UK, if culling green policies seems like a way to hold onto power, out goes the legislation. It feels bleak at a time when climate scientists issue warning after dire warning about the state of the earth.

But all is not lost. “There are some great examples in the drinks industry of absolute pioneers in sustainability,” says circular economy expert and Circuthon Consulting founder, Paul Foulkes-Arellano. For him, beer, wine and spirits are actually ahead of many others in the sustainability stakes – but progress is far from uniform.

“There are some giants within the drinks business in terms of what they’ve done and what they’ve been doing for years,” he cites Pernod Ricard as an example. The collaboration within Scotch as a whole, teaming up though the Scotch Whisky Association to share technical expertise, is a gold standard, especially compared to other sectors.

But more needs to be done, especially around transparent communication. “It’s bizarre to me that people talk about their improvements, but we don’t know where they began,” Foulkes-Arellano continued. He looks to the footwear industry, where companies benchmark by emissions per pair of shoes. “I don’t see anyone saying ‘I’m trying to produce the lowest emissions per litre’.” And when every business has a different baseline, it can be difficult to tell the green gains from the greenwash.

So which producers are doing the work beyond creative climate accounting? One to watch closely is Anora. The Helsinki-headquartered drinks group has committed to carbon neutrality across its operations by 2030, and at its Koskenkorva Distillery site by 2026. It’s impressive anyway – but especially so because it’s a promise that explicitly excludes offsetting. Also of note are its regenerative farming practices which capture carbon, and its new biopower plant at Koskenkorva, which has already cut emissions by 50%.

Rémy Cointreau is targeting net-zero operations by 2050. Diageo is looking to hit the same benchmark by 2050 “or sooner”, and to get its suppliers to halve the emissions in its Scope 3 supply chain.

Pernod Ricard is among those at the forefront of the industry, being the only wine and spirits company to be recognised as a Global Compact LEAD by the UN. By 2025 all its Scope 2 energy will be from renewable sources, and it will have achieved a 50% reduction in its Scope 3 carbon footprint by 2030. Off the back of stellar full-year results, it revealed its Chivas Brothers arm will be net-across its distillation operations by the end of 2026. “We have fast-tracked a number of sustainability initiatives to meet our own ambitious targets and remain committed to supporting the industry in ushering in this new era – as we demonstrated earlier this year by making our heat recovery findings open source,” said Chivas Brothers Chairman and CEO, Jean-Etienne Gourgues.

Some companies have shown through their reporting that they are well on the way to hitting their targets. This is not true across the industry. Beam Suntory published its 2022 Proof Positive report in July, which showed that its Scope 1, 2 and 3 greenhouse gas emissions increased by 3.9% year-on-year. The company said this was due to increased production and slower rates of decarbonization, which makes for disappointing reading. We are convinced that the company is set to put this right.

Brown-Forman hasn’t reported a change in its greenhouse gas emissions since 2021. It is targeting halving them by 2030 from a fiscal 2020 baseline, but there’s no mention of Scope 3 emissions in its reporting. It is however on the cusp of introducing a new 100% post-consumer recycled plastic bottle for Jack Daniel’s, which will be available shortly on board all US-based airlines.

It’s a move that will cut greenhouse gas emissions for those bottles by 33% compared to the existing pack. It is also worth noting that US inflight sales account for a tiny proportion of Jack Daniel’s global sales, which totalled 14.6m nine-litre cases in 2022, according to Brand Champions figures. “We anticipate extending the use of 100% PCR plastic to other products and package formats in the future,” said Andy Battjes, Brown-Forman Director of Global Environmental Sustainability, Global Supply Chain and Technology.

It feels similar to a trial from Bacardi, where it has partnered with circular economy firm ecoSPIRITS to trial closed-loop solutions for its Bacardí rum on board three Carnival cruise ships. The three-month long scheme will cut single-use packaging for the SKU by 95%. We all have to start somewhere – but it feels like small fry across the brand’s 24.3m nine-litre case sales, according to Brand Champions data.

Scope 3 emissions: where the key differences are

Scope 3 is perhaps where the difference between serious actors and bare minimum reporting lies: the willingness to disclose, and take action on, Scope 3 emissions. Because not only are they the hardest to control, they’re often the biggest part of the pie.

“Scope 3 is much more difficult to bring to net-zero,” Foulkes-Arellano continues. “But I would say that at the moment, the focus needs to be on one and two, because you can easily control that.”

Let’s take Anora – one of the most transparent drinks firms – as an example. It willingly discloses that 7% of its emissions come from Scope 1 and 2. That leaves an enormous 93% coming from the likes of raw materials and packaging. And this is broadly typical. “We have started the work on identifying how to operate better and cooperate with our partners on both upstream and downstream emissions,” the company said in a statement.

For Foulkes-Arellano, this is what sets apart companies that were already doing the work. “The drinks industry was not even talking Scope 1, 2, 3 in the latter half of the last decade. It was not really a major thing. Suddenly it becomes part of legislation.” Companies that weren’t prioritising sustainability have been left on the start line.

Turning the dial

Ultimately meaningful action on addressing the climate breakdown doesn’t have to be headline-grabbing to be effective. “It’s got to be about turning the dial,” a Scotch distiller from one of the big drinks groups told me. “It’s got to be about doing the things that will have the biggest impact first.”

For them, that looks like investing in ways to cut fossil fuel use altogether. A tricky task when many single malt distilleries in Scotland run on systems built at a time when oil was widely used to heat the stills. A lot of this work just isn’t ‘sexy’. Or easy to understand.

This is where Todd Weisel, founder of wine and spirits investment platform Baxus is. “The reports are very difficult to navigate for a layperson,” he acknowledges. “I think the complexity of the reports is more a byproduct of being a large public company than a deliberate attempt to obfuscate data from the public, although that may be an unintended consequence.”

Clarity, then, is what’s needed. Without it, it’s far too difficult to understand where companies are, least of all hold them accountable to their own targets. “There needs to be rules,” Foulkes-Arellano concludes. “Otherwise it’s like running a world record but not taking into account the tail wind.” Now’s the time to campaign for easily comparable criteria – for the sake of consumers, and, most urgently, the climate.

Sustainability Speak

A lot of the challenges around sustainability reporting and greenwashing stem from the simple fact that many of us don’t understand the language used. Here’s a guide to some of the most common terms.

Scope 1 emissions: Emissions from sources directly owned by the company – for example, distilling.

Scope 2 emissions: Indirect emissions from the company an energy uses, for example the power used to light the distillery office.

Scope 3 emissions: Indirect emissions not covered in Scope 1 or 2 – for example, from the production of packaging materials.

Carbon-neutral: Removing the same amount of carbon emissions as the company produces.

Net-zero: Removing the same amount of all greenhouse gases released into the atmosphere.

 

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Peter Marshall Send an email September 12, 2023
6 minutes read

Peter Marshall

Founder: trunblocked.com/Marshall Arts
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