The CEO of CDP Sits Down for a Second Discussion with the Senior Executive Officer and Head of CSV Strategy for Kirin Holdings.
Chief Executive Officer, CDP
Mr. Paul Simpson
Senior Executive Officer, Kirin Company, Limited
Senior Executive Officer, Kirin Holdings Co., Ltd. (Head of CSV Strategy, Group Environment Manager)
On November 27, 2018, the Senior Executive Officer and Head of CSV Strategy for Kirin Holdings took the opportunity to have a second discussion with Mr. Paul Simpson, CEO of CDP, an international NPO that offers an environmental information disclosure system, while Mr. Simpson was visiting Japan.
Mr.Mizouchi: It’s an honor to meet with you again and continue our conversation from last year. In that conversation you recommended we treat supplier-oriented initiatives as a highly important issue. One step we have taken in that regard is a two-week supplier conference that wrapped up last week. At that conference we explained our revised Kirin Group Supplier Guidelines, which are based on the UN Guiding Principles on Business and Human Rights. We invited roughly 250 companies to the conference, with over 500 attendees, meaning that the conference room at our company headquarters couldn’t manage a one-time event. Instead, we split the conference into four.
Mr.Simpson: That’s some wonderful news, and very impressive. I imagine that Kirin employs a large number of suppliers of varying scale.
Mr.Mizouchi: Yes, some are large and others small. One example of a difference between the two is that larger suppliers are taking steps to reduce their greenhouse gas emissions, but smaller suppliers still have some hurdles in this regard. It would be much easier to deal with large suppliers exclusively, but I don’t think we should take that course given that small companies are closely connected to the local economy. How to support these suppliers is one issue we are facing.
Mr.Simpson: Small-scale suppliers need support and information, as you say. There is likely a lot to learn from Kirin’s efforts to ensure sustainability. You are on the CDP A List for water security and are doing work at a high level.
Mr.Mizouchi: We spoke on this last year, but I believe the level of water security in Australia is high because water is a rare resource, whereas in Japan we have a rich supply of water resources, meaning that the importance of these resources is not fully understood.
Mr.Simpson: Speaking of water, I heard that Kirin utilizes hydroelectric power as a power source.
Mr.Mizouchi: Some of our factories make use of “Aqua Premium” power, which is a type of hydroelectric power that produces zero CO2 emissions. However, there is an extra charge for this option. To use renewable energy, it is necessary to solve the problem of cost.
Mr.Simpson: On the other hand, according to the IPCC*1 report and other sources, a large number of millennial consumers see emissions as a serious problem. They want to buy from a company they can trust, so I think it’s a case of shared value.
Mr.Mizouchi: In Christchurch, New Zealand, they have begun operations of a sustainable craft pub brewery that runs on 100% renewable energy. Raw materials are procured locally and spent grain and food waste is used as animal feed and fertilizer. It’s a small circular economy.
Mr.Simpson: It’s a highly interesting concept. Even major overseas beer companies have started operating breweries that utilize renewable energy.
Mr.Mizouchi: That’s a direction we’d like to take as well. The CDP platform is very strong in this sense. Starting from this year the CDP has incorporated recommendations from the Task Force on Climate-related Financial Disclosures (TCFD)*2 into its questionnaires. This has made it easier for us to take steps that show our support for the TCFD recommendations. I believe we will be able to actually take these steps toward showing our support in the near future. (After this discussion took place, Kirin became the first company in the Japanese food and beverage industry to declare its support for the TCFD recommendations, on December 14, 2018.)
Mr.Simpson: While almost every company is taking steps toward meeting TCFD recommendations, they are still in the process of implementation. With this in mind, and with the cooperation of the TCFD, we added 25 new TCFD-related questions to our questionnaire. These are still not mandatory. Instead, the aim is to encourage a large number of companies to subscribe to the TCFD recommendations.
Mr.Mizouchi: The CDP questionnaire has helped us further our understanding of the recommendations, and while we are still in the trial stages of following its recommendations, we were still able to disclose these initial results in our environmental report for 2018. In the future, we will need to run a variety of investigations that include assessing financial impact and migration strategies via scenario analysis. It’s not an easy task, but I think it’s important to demonstrate resilience to the market.
Mr.Simpson: Our team has undertaken similar efforts, so I can imagine the difficulty. However, I believe that the philosophy underlying the TCFD is to improve corporate management over the long term and manage risk in a rapidly changing environment.
Mr.Mizouchi: I agree. On that point, the most recent report from the IPCC was quite shocking. We intended to set a fairly high target for reducing greenhouse gases, but I felt that we needed a higher target to stop global warming.
Mr.Simpson: Climate change is already having a major impact. I think many countries are aware of this, which is why it will be a major theme of the G20 Summit held in Osaka in 2019.
Mr.Mizouchi: In Japan, the government is taking the initiative to hold TCFD-themed workshops and other means to spread awareness. I believe that the GPIF*3 is taking the initiative to promote the TCFD recommendations as well.
Mr.Simpson: That is some great work. Japan has the right idea and is one of the countries working to promote acceptance of the TCFD recommendations.
Mr.Mizouchi: The scale of ESG investment in Japan is still rather low relative to the rest of the world. However, under the leadership of the GPIF, I am convinced that it will expand, and I think that many Japanese companies are on the same wavelength. You are one of the major contributors to the growth of this trend, Mr. Simpson. I am grateful for your leadership and I very much look forward to keeping working with you.
Mr.Simpson: Our job is built on model companies like Kirin saying, “Environmental issues are important, and we will do this eagerly.” Your company has very ambitious goals, puts them into practice, and is an A-lister with CDP. I would like to increase our cooperative ties.
- Intergovernmental Panel on Climate Change. The IPCC was established in 1988 by the World Meteorological Organization (WMO) and the United Nations Environment Programme (UNEP), aimed at providing a comprehensive assessment of anthropogenic climate change, its impact, and adaptation and mitigation measures from a scientific, technical, and socioeconomic perspective.
- Task Force on Climate-related Financial Disclosures. An organization established by the Financial Stability Board (FSB), an international financial body with representatives from central banks, financial supervisory bodies, and the finance ministries of major countries and regions. The TCFD published a series of recommendations on voluntary information disclosure in June 2017 with the aim of understanding and disclosing the financial impact of the risks and opportunities posed by climate change. 513 organizations from 44 countries around the world have expressed their support for the TCFD recommendations (as of the announcement made by the TCFD at the One Planet Summit held on September 26, 2018).
- Government Pension Investment Fund. The GPIF manages welfare pension and national pension reserves from Japan’s public pension system.