Message from Senior Executive Officer of CSV Strategy
June 5, 2023
Securing a “Global Leadership in CSV” through enhancing Environmental Management and Human Capital
Ryosuke Mizouchi
Senior Executive Officer
Kirin Holdings Company, Limited
Reinforcing human rights measures while demonstrating our commitment as a global leader in environment
——Please give us a look back on 2022 in terms of the 2022-2024 Medium-Term Business Plan.
In 2022, we made solid progress toward becoming a “global leader in CSV” set out in the Kirin Group Vision 2027 (KV2027) long-term management vision. This is a result of material achievements in environmental management.
In July 2022, the Kirin Group acquired a certification of SBTi Net Zero Standard by the Science Based Targets initiative – a world’s first in the food and beverage sector. This is in recognition of our long-term targets set out in the Kirin Group Environmental Vision 2050 being based on science matching the Paris Agreement standard. Currently, the Kirin Group is reducing GHG emissions in the value chain to achieve its mid-term targets by 2030*1.
In January 2023, Mercian Corporation’s Mariko Vineyard was selected as an approved socio-ecological production landscapes and seascapes (SEPLS) site by the Japanese Ministry of the Environment. The ministry is certifying areas with high biodiversity as SEPLS sites in order to achieve the 30by30 target*2 based on the G7 2030 Nature Compact. Beginning in 2023, SEPLS are scheduled to be certified as OECMs (Other Effective area-based Conservation Measures) if they are deemed to be worthy of certification through the demonstration project.
While many of the SEPLS sites approved this time are covered in forests, mountains, and spring water ponds, Mariko Vineyard is the only farmland among them being used for business. In addition, Mariko Vineyard is highly praised as a winery, and it is the only Japanese winery to be recognized as one of the “World’s Best Vineyards” three consecutive years. In other words, Mariko Vineyard provides not only social value through its protection of biodiversity but also economic value as a winery, making it a perfect example of CSV in action.
In light of these achievements, the Kirin Group participated in the 15th Conference of the Parties (COP15) to the United Nations Convention on Biological Diversity (CBD) held in Montreal, Canada, and had the opportunity to present to the world the nature positive initiatives of Mariko Vineyard. European countries and the United States were both pleasantly surprised and appreciated Japan’s and Asia’s unique perspective on nature, in which humans and nature co-exist, and its efficiency. In the field of natural capital, Japan has the potential to be a global leader. The Kirin Group will make best use of the knowledge it has gained over the years and participate in global initiatives as a leader in the field.
Lion Pty Ltd. in Australia participated in a pilot test for the Scope 3 reduction. The GHG emissions in Scope 3 are disclosed as an estimated value determined by multiplying item-specific usage by the standard emissions amount. Tracking actual performance values would be ideal, but is not common yet as exchanging large amounts of data with a large number of business partners is heavy lifting. An additional disincentive to disclose accurate Scope 3 performance values is even if the supplier reduces GHG emissions through the reduction of raw materials and rationalization of production, buyers could use the reduction in resources as a reason to start negotiating lower prices.
Therefore, Lion worked with four key value chain partners to pool actual GHG emissions numbers in an independent third party on a confidential basis to other companies in order to accurately measure GHG emissions throughout the value chain. As a result, it turned out that the measured value was about 11% lower than the estimated value. In addition, by reflecting each company’s reduction plans, Lion was able to lower the 2030 reduction prospect by 35% more than the original plan. This initiative was presented as an advanced case study by Lion’s CEO at the United Nations Framework Convention on Climate Change’s 27th Conference of the Parties (COP27) held in Sharm El Sheikh, Egypt in November 2022. I believe these contributions allowed the Kirin Group to become one of the world’s leading environmentally-advanced companies.
On the other hand, we are aware that our human rights measures are still in progress. In January 2023, we completed our withdrawal from the Myanmar business. We conducted human rights due diligence when starting business in Myanmar, but we never could have predicted the military’s coup d’état. We want to utilize our experiences and lessons learned in Myanmar to improve our human rights initiatives. We joined the Japan Center for Engagement and Remedy on Business and Human Rights (JaCER) late last year and implemented a human rights grievance (report) system. This year, we plan to revise Kirin Group’s human rights policy and to reinforce our human rights governance system.
As a part of our value chain human rights initiatives, the Kirin Group joined Sedex*3 (Supplier Ethical Data Exchange) on a global level. In Australia, 97% of Lion’s primary procurement consists of Sedex-member suppliers. In Japan, there are not so many Sedex members yet, but more and more food and beverage companies are joining the system. We hope to collaborate with them in human rights-conscious procurement and create a positive impact.
Transforming business through growing immunity-related products and advancing non-financial disclosure
——Please tell us about your long-term outlook toward achievement of KV2027.
In 2022, the World Health Organization (WHO) strengthened regulations, including lifting the goal of its GAAP (Global Alcohol Action Plan) to reduce harmful drinking from 10% to 20% by 2030. It is expected that regulations will be further strengthened at the 4th High-level Meeting of the United Nations General Assembly on the Prevention and Control of on NCDs set for 2025, so expanding the volume of alcoholic beverages will become more difficult.
Meanwhile, the pandemic has made the world more conscious about immunity. The application of Lactococcus lactis strain Plasma (LC-Plasma), a core ingredient of our Health Science domain, is steadily expanding, not only within the Kirin Group, but being licensed to Coca-Cola (Japan) Company, Limited as well as being researched in order to develop a pharmaceutical.
The Kirin Group has worked on immunity for many years. It was involved in the foundation of the La Jolla Institute for Immunology, the world’s top-class immunology research institute in the United States, which will welcome its 35th anniversary this year. We continue to support the Institute. The Institute contributed to the discovery of the lead antibody of KHK4083, a medicine for atopic dermatitis, which Kyowa Kirin is currently developing and of which Kyowa Kirin has made a co-development and co-marketing agreement with Amgen.
These research achievements in immunology over the years have led to results in both the Pharmaceuticals and Health Science domains of today. We will continue growing steadily by cultivating LC-Plasma and other specialty ingredients such as HMOs as well as citicoline, expanding our business portfolio beyond alcoholic beverages while playing our role as a responsible alcohol producer.
In recent years, the disclosure of non-financial information has been attracting a lot of attention. In 2022 and 2023, the Government Pension Investment Fund (GPIF) published the results of “Excellent TCFD Disclosure” survey in which the asset managers for GPIF for Japanese domestic stocks voted for companies with excellent TCFD disclosures, and Kirin received the highest number of nominations for two consecutive years. We published a trial disclosure based on the LEAP approach in our 2022 Kirin Group Environmental Report in July, 2022, conforming to the beta version of TNFD’s framework, and became the world’s first to apply the approach in corporate disclosures. As the world's first case study, the disclosure was featured in the Financial Times.
In anticipation of the spread of disclosures adopting the TCFD framework, with the sustainability disclosure standards of the International Financial Reporting Standard (IFRS) Foundation’s International Sustainability Standards Board (ISSB) leading the way, we aim to establish a de facto standard by continuing to disclose information ahead of other companies. We believe this will lead to the Kirin Group's structural advantage in ESG and non-financial information disclosure.
LEAP approach focusing on “Location”
The LEAP approach involves analytical activities in the following order: Discovering the nature interface (Locate), diagnosing dependencies and impacts (Evaluate), assessing risks and opportunities (Assess), and preparing to address nature-related risks and opportunities and reporting back to investors (Prepare). This is a new approach to assessing and prioritizing natural capital dependence and impacts, with a focus on “Location”.
The Kirin Group intends to use the LEAP framework to organize and deepen the initiatives it has been pursuing as a company dependent on
natural capital, and to make appropriate disclosures.
The Japanese wine where “Location” determines the characteristics of the product.
Mariko Vineyard (A)
- Locate
- An important factor that determines the taste of wine is “terroir” or the character of the land.
The vineyard is an area that remains natural and inhabited by rare species of plant and wildlife. - Evaluate
- Expansion of vineyards is necessary for the expansion of the Japanese wine, and the target is derelict land.
- Assess
- Joint research with the National Agriculture and Food Research Organization (NARO) revealed that converting derelict land into vineyards creates high-quality grasslands and contributes to a rich ecosystem.
- Prepare
- Contributing to Nature Positive and 30 by 30.
“Locations” where water risks are high and water resource management is particularly important.
Production plants in Australia (B)
- Locate
- All Kirin Group Australian brewery locations are in water-stressed watersheds.
- Evaluate
- Water stress in Australia is very high both empirically and when measured with such tools as Aqueduct. Once every few decades, when flooding occurs due to torrential rains, the damage is significant.
- Assess
- Water-saving technology is the best in the Group, but there remains a possibility that production could be disrupted in the event of a severe drought.
- Prepare
- Contribute to the development of the SBTs for Nature methodology and set new goals in line with this. Widely publish joint research results in environmental reports, and on the Web..
“Locations” that have a significant impact on our businesses and are important in terms of the natural
and social environment. Sri Lankan tea farms (C)
- Locate
- The delicious taste of Kirin Gogo-no-Kocha is supported by tea farms in Sri Lanka.
Water sources of large coastal cities exist on the farms. - Evaluate
- Approximately 25% of the Sri Lankan tea leaves imported by Japan are used by Kirin Gogo-no-Kocha.
Tea production areas face increased water risk and stress due to climate change, while heavy rains run off fertile soils. - Assess
- If Sri Lankan tea leave on which Kirin is highly dependent, cannot be used sustainably, the product concept will fail.
- Prepare
- Supporting Sri Lankan tea farms in obtaining The Rainforest Alliance certifications since 2013. Widely publish the number of farms obtained the certificate and the number of farms trained in environmental reports, and on the Web.
Strengthen the competitiveness of the Kirin Group and contribute to society by enhancing human capital
——Please tell us about the Kirin Group’s initiatives from 2023 onward.
Focusing on the achievement of KV2027, we will continue to grow our Food and Beverages, Pharmaceuticals, and Health Science domains as outlined in the CSV Purpose.
In 2022, we were able to produce material results that could be communicated to the world in the areas of biodiversity and climate change. This is the result of our continued proactive response to a wide range of social issues. We will continue to proactively respond to changing circumstances and will work harder than ever to produce results and communicate them globally.
Regarding reinforcing human capital development, Kirin Holdings President & CEO Isozaki is working as promoter at the Human Capital Management Consortium, established in Japan in 2022. We are steadily advancing our efforts, including forwarding the disclosure of human capital in our annual securities reports.
Expanding investment in human capital also means increasing the value of employees, which are assets entrusted to us by society. This is the basis of CSV, as it leads to the enhancement of a company's competitiveness as well as the society's assets. Through the betterment of human capital as well, we will achieve our goal of becoming a global leader in CSV.
- Reducing the total Group’s Scope 1 and Scope 2 emissions by a total of 50%, and Scope 3 emissions by 30% by 2030, compared to numbers in 2019.
- A declaration to preserve 30% of the earth’s land and marine areas by 2030 to contribute to the preservation of biodiversity.
- A nonprofit organization based in the United Kingdom that provides an online platform for businesses to manage and improve working conditions of the global supply chain. It is the world’s largest supplier ethical information sharing platform for universal suppliers to conduct self-assessment questionnaires in the four fields of labor, health and safety, environment, and business ethics so that businesses and organizations can improve responsible and sustainable business practices and procurement activities. The platform is being used by more than 65,000 businesses, foundations, factories, and the self-employed, etc. in 180 countries and regions around the world.
- Abbreviation for Taskforce on Nature-related Financial Disclosures. An international organization that develops and provides frameworks for businesses to disclose information on nature-related risks, and so that the flow of funds can be redirected to bring about Nature Positive - a concept that aims to halt the decline of nature and set a course for recovery by 2030