Kim Marotta - Chief Environmental Sustainability Officer and Head of Enterprise Risk Management (ERM) at Suntory Global Spirits

Speaker A: Today's guest is Kim Morata. Kim is the Chief Environmental Sustainability Officer and head of Enterprise Risk Management at Suntory Global Spirits. A global premium spirits leader with iconic brands such as Jim Beam and Maker's Mark. Kim spearheads the company's development and implementation of long term sustainability initiatives through its Proof positive strategy, ensuring a comprehensive approach across the entire value chain. Kim also plays a crucial role in integrating risk management into the company's core strategies to drive growth and enhance organizational resilience. Uh, welcome to the Sustainable Nation Podcast. Our podcast brings you interviews with global leaders in sustainable and regenerative development. Our goal is to provide sustainability professionals, business leaders, academics, and anyone who's interested in joining the sustainability revolution with information and insights from the world's most inspiring change makers. I'm your host, founder and CEO of Sustridge Sustainability Consulting, Josh Prigge. Kim Morata, welcome to Sustainable Nation. Thank you so much for joining us.

Speaker B: It's great to be here. Thanks, Josh.

Speaker A: Great to have you on Kim, I gave, uh, our listeners a little background on your professional life, but can you start by telling us a little bit about your personal life and what led you to be doing the work you're doing today?

Speaker B: Absolutely. So I have been in the sustainability field for, you know, almost about 20 years and, um, have been engaged in sustainability working in the alcohol industry most of that time or all of that time. Um, started off at Miller Brewing Company, which became Miller Coors and Molson Coors, and then moved over to Suntory Global Spirits about four years ago. Prior to that though, I got my start, um, doing criminal defense work. So I was a public defender with the state Public Defenders Agency and had a really, really strong passion for social justice, social responsibility, that connection to the community, which kind of, you know, it seems like a weird path to get into sustainability, but I think when you grow up in a town and you're so connected to the community and what's happening, it was kind of a natural transgression when I moved over to the corporate world and was able to work within the corporate atmosphere and connect back to the community and try to do what was good and what really made a difference.

Speaker A: Interesting, interesting, uh, background there. And for our audience who aren't familiar, can you give us a little background on Suntory Global Spirits? Maybe some brands that folks would recognize, maybe some info on, um, the size and scale of the company and, um, the history of sustainability at the company?

Speaker B: Yeah, all great questions. So Suntory Global Spirits is owned by Suntory holdings, which is our parent company based in Tokyo, Japan and we are one of the operating units a global business business. We're one of the premium, world's largest premium spirits company. You most likely recognize our brands, everything from Jim Beam to Maker's Mark to Laphroaig to Hornitos to um, our wonderful Japanese, uh, whiskeys, um, from Hakushu to Yamazaki. Ah, and more. So we have operations all across the world and distilleries, um, and bottling companies. And we have a long term commitment and passion to sustainability. You can imagine our roots really come from our Japanese culture and our east meets West. But that realization that people are really living in harmony with nature and it's our responsibility to be great stewards of our environment and to really be a force for growing for good. So, um, I joined, as I mentioned, about four years ago. And when we talk about sustainability at Suntory Global Spirits or at Suntory holdings, we look at it both in the environmental area and in the social area, recognizing not only our response to our consumers from an alcohol responsibility standpoint, but also our commitment to our communities. I, um, in my world right now oversee the environmental space as well as what we do in global supplier inclusion. And I'm also the head of enterprise risk management. I think that. Nope, I didn't cover all the questions that you just asked. The size of the company. So we're about 5,000, 6,000 people globally, um, and we have more than 24 distilleries and operation sites around the world. We're about a $6 billion company and Suntory hold is significantly bigger. I forgot, uh, exactly. But I think we're about 30 billion. But I can, you can correct me if I'm wrong and I'll go back and look at that.

Speaker A: Great. You know, we hear a lot of different backgrounds from folks and uh, different companies have different departments managing sustainability. I don't know if we've interviewed somebody who's also in charge of enterprise risk management, uh, as well as sustainability. So that's interesting. Tell us about, about that. And kind of the intersection of sustainability and risk in an industry like yours.

Speaker B: You know, I think it's just really great opportunity. It's not only kind of part of what's happening in the world right now when we think about sustainability. You know, when you come into this, it's how do you manage the long term risk to keep your business resilient? So whether it's water or climate change, you know, those are just kind of the notions or the nature of what you do in sustainability. So having the ability to look, uh, wider than that and look at how we're managing all of the risks across the business and all of the opportunities across the business to ensure resiliency just goes hand in hand. So it's uh, really good opportunity, particularly when we look at the regulatory landscape, whether it's a corporate sustainability reporting directive that really is mandating that connection between what we're doing on sustainability and risk and bringing those to life. So I'm happy to be sitting in both seats and it gives me a good perspective because I can see enterprise wide what's happening and better connect our sustainability strategy. And then also I could take a sustainability strategy and better connect it to the enterprise wide mindset.

Speaker A: Great. And I know obviously for a lot of companies in the U.S. now, climate risk, um, and understanding that, reporting on that, managing that is becoming more important with the California uh, laws and TCFD framework and investors asking for this information, um, what have you identified in your industry and a uh, business like yours, the major climate change related risks and how is the company uh, managing or mitigating those risks or looking to take advantage of climate opportunities?

Speaker B: Absolutely. I mean, I think it's a great question and I love the fact that you bring up California. So many of us that are sitting right in the seat right now are thinking, okay, how do I get prepared to respond to the regulations in California? Whether you're a company that's been doing it for a while because you've been reporting to the carbon disclosure project and using the TCFD, uh, framework, or you're a newer company and you're recognizing, wow, I've got this obligation to really lean in and to look at, you know, what are the impacts of climate change to my business. So we're at that point, you know, right now where we've obviously been responding and prepared to respond using the Task Force on Climate Related Financial Disclosures framework, we've looked at our physical risks, our transitional risk, the impact from us, you know, the financial impact to us and really recognizing how we can help mitigate those risks. So for us, if you think about a spirits company, you know, we're really rooted in agriculture. We're also highly reliant on water and the impacts on climate change can be pretty significant. So when we look at um, you know, how we're addressing our watershed risks, ensuring that we have the long term availability of water so we can continue to distill our spirits, um, for generations to come, or how do we really look at the impact of, on you know, weather related events, we have Distilleries in St. Croix, uh, you know, in islands. We have, uh, distilleries in Kentucky where we're seeing more and more flooding and tornadoes. And we have distilleries that sit on the, you know, beautiful shores in Scotland, right on the banks of the water with, um, Laphroaig and Belmore. So all of those things are very important for us. And building in really strong risk mitigation plans is how we certainly are leaning in forward and not only prepared for our business, but, but certainly preparing to respond to California and other regulatory requirements.

Speaker A: Yeah. And those are really wrapped up into, you know, what you've identified there as, uh, risks or material wrapped up into your larger sustainability strategy. Proof Positive is the name of your strategy. Tell us a little bit about that, um, and maybe how that came about. What did the work look like to establish a formal strategy like Proof Positive and getting leadership buy in across the company? Um, what did that process look like? And tell us about that strategy.

Speaker B: Sure. Uh, Josh, that's a great question. And for so many of us that have been practicing in sustainability, it's probably that similar path. So when I joined Suntory Global Spirits, we'd had a long standing commitment to the environment and what we were doing around alcohol, responsibility and our communities. But we hadn't articulated in a way of setting their lawn goals. So we started off by doing some benchmarking, you know, what's happening in the space. What did we see our peers and our competitors doing? What's best in class? Where did we want to be on that spectrum? Do we want to be leaders? Do we want to be fast followers? And how do we want to lead in? Then we looked at, you know, what our stakeholders expected of us, and we did materiality assessments. At that time, it was just materiality as opposed to double materiality. Um, but we looked at what was most material to us as a business and where did we have the greatest responsibility to act. And, you know, from there then with internal interviews and external interviews, we were able to piece together what was the most material things to us as a business, which in the environmental space is water and climate and packaging and forests, because we rely on beautiful white oak trees to produce our white oak barrels to mature our bourbons, and then certainly fields, because we rely on agriculture and. And then my colleagues look over the other three pillars around how we engage with our consumers, on responsible drinking practices and nutritional labeling and information, and then how we engage in our communities, whether it's our volunteer work, our growing for good days, um, or investing in the communities where we live, work and play. So that's how we built that strategy. We have goals, our 2030 goals in reducing water and replenishing water where we have high risk watersheds, building natural water sanctuaries, certainly just like the rest of you, reducing our scope one, scope two, scope three greenhouse gas emissions, um, and then goals around packaging, making sure we have recyclability and recycled content and goals around forest, sustainable forest management and then you know, in our field area, 100% regenerative agriculture. It's probably a little bit quick but you know, I know many, I'm talking to people that are doing many of the same things, but that's our strategy and uh, what we talk about when we look at proof positive.

Speaker A: That's great. Sounds like some great, some great targets to work towards. Um, related to water. I saw that you've already um, achieved a target there, 50% reduction in water use per unit produced. Um, with another goal, ah, replenish more water than you use in your direct operations in water stressed watersheds by 2040. Um, would love to hear about a company like yours. How are you able to achieve that 50% reduction per, per unit. Um, what did that look like? And, and with water maybe not having the best ROI as you compare it to maybe energy efficiency projects which save a lot more money, um, at times. How is that pitched? Or you know, projects that maybe didn't have the, the best financial roi. Uh, I would imagine there were some of those in the path to a 50% reduction. Um, but love uh, to just hear how that was achieved.

Speaker B: Yeah, a little bit about, and I know this is a little cliche but a little bit is about the culture. So we have a culture that every drop counts. So when we're looking at water, certainly we're looking at the ROI and what's the return on investment. But it's about those process improvements, it's about the culture improvements. It's like really recognizing the importance and the value of water to us. You can't make great tasting whiskeys without great tasting water. And, and it's even more than that. If you look at the history of bourbon or the history of tequila or the history of scotch, all uh, of our distilleries, not just most, but all of our distilleries are located in areas where the water was important, where we had really high quality, um, pristine water. So just to kind of make that even a little bit more specific or particular, when our, when you look at our Kentucky distilleries, whether it's Jim Beam or Makers Mark. We have these fabulous limestone aquifers that are really important to the great quality water that we have in Kentucky. Or when you think about Laphroaig and Bowmore, as I mentioned, right on the shores in Scotland on Islay, which is an island where many Scotch distilleries are located, that high quality water is so important. So for us, you know, you really need to lean into water and we recognize it has to start with us first. It's important for us to reduce every ounce that we can to produce our really great tasting quality products. And that's about, you know, process improvements. We would do water war rooms and go through, okay, we thought about everything we need to do. Do we have the right metering? Are we looking at, you know, our cleaning processes, our clean in place, all the kind of non sexy, non interesting things but you can really make a difference in those process improvements. And then we have a business that was, wants to invest and um, made significant commitments in capital investments to also help make those reductions. So 50% since 2019 is something that we're really proud of. Um, and we, you know, even kind of put our money where our mouth is because our water reduction strategy is actually tied to what we call our um, annual incentive, um, bonus so our short term bonuses. So we set a commitment every single year to reduce our water reduction. And if we hit that commitment it's paid out in the, for all um, AIP eligible employees in their short term bonuses. So you can imagine that also helps drive some incentives and some excitement around it. But just absolutely, not to be geeky, but give you a couple quick little facts because when you think about water it's hard to quantify. But I uh, pulled these through. 50% means that we saved 5 billion liters of water. So I was like, okay, how do you quantify what 5 billion liters of water, that's the amount of water that 12,000 households in the US would need on an annual basis. And I was like, okay, that helps but let me quantify it even further. Well, I talked about Islay in Scotland. I can't remember the number. I think it's 11 or 12 distilleries are located there, of which two are ours. There are 3,000 people living on that island. So it's four times the amount of water needed for those households, um, um, on island. So we're excited about that, but we're not done. It's only 2025 and our goal is a 2030 goal. So we're going to continue to lean in and continue to push forward and even drive further water reductions across our distilleries and our site.

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Speaker B: Thank you.

Speaker A: All that great work. Um, and great to hear your tying incentives to sustainability goals. Um, that's ah, a great step that you know, these leading companies in sustainability are understanding, uh, ah is needed to really, to really push the needle forward. Any other sustainability metrics or targets, goals that are tied to incentives like that

Speaker B: or just water, you know, so in the environmental space or what we call our nature positive pillar, we actually have two and this year our goals are water and then energy reduction. And um, we get pushed. It's not an easy goal. It's always a goal that has a lot of stretch and one that we really need to lean in and there's a payout at 100% or 200%. And so our energy reduction is really pushing us. We're again focused on our process improvements, how we can change our practices. And obviously when you're reducing energy, you're also going to be reducing your greenhouse gas emissions. So we're on track, um, for our energy reduction. We're going to keep leaning in and hopefully we can get closer to that 200% target. But it'd be really an exciting win for us even if we hit our 100% target.

Speaker A: Wonderful. Um, yeah, um, on climate and emissions, again, ambitious goals. 50% reduction by 2030, 30% uh, that's for scope one and two and then a 30% reduction in scope one, two and three by 2030. Um, took a look at your last report. You're making good progress on both of those. Um, a 32.9% reduction in scope one and two and about 11% in scope one, two and three. Uh, what's been the keys to those making those reductions and with um, about five years left until 2030, what does it look like between now and then to uh, address that gap and achieve those ambitious reductions that you have?

Speaker B: Yeah, you know it's not as everybody who's probably listening to this call realize, it's not an easy task. So when we look at our Scope 1 and Scope 2 reductions, one of the investments that we're most excited about and super proud about is the anaerobic digester that we put in in our booker no facility. I believe it's one of the largest anaerobic digesters at a distillery in the world and it's fully up and operating right now. We just had our uh, uh, ribbon cutting ceremony very, very recently. So we'll start to actually see some of those reductions in our numbers. But we anticipate that it will reduce our greenhouse gas emissions by at least 50% at that distillery. We also though have really great benefits because we produce stillage, um, and we can use that stillage in our anaerobic digester and we'll get fertilizer that we'll be able to provide to our um, farmers and growers in the area that they can actually use on their crop. So it's a really great um, circular investment and one that will drive a lot of opportunities. We also are 100% um, on our scope two emissions. We currently buy renewable electricity credits so we have, you know, have reduced our scope two emissions down to zero percent and then we continue to lean in. Other investments, whether it's solar array at our distilleries, um, and ah, um, other technology. We're looking at TVR and MVR and looking at the long term and new technologies and new investments that we can bring to our sites as we continue down our path. So

Speaker A: and I saw you're also planning to um, you know, in the supply chain engage with suppliers. It's mentioned in your report at least 67% based on emission share. You want to encourage them to set science based targets as well. What does that process look like identifying um, which suppliers to engage? Have you begun engaging yet? And um, uh, what does that look like? Is it just a request that they Set science based targets and are there incentives involved or what uh, is that process for a large company like yours that wants to push these climate reductions up their supply chain?

Speaker B: Yeah. You know another really great question and something we're super proud of. I uh, think it's been about two years, it might even be three years. But we worked on what's called a supplier maturity mountain. And what we essentially did is we looked at every single category. So for us when we look at our Scope 3 emissions the most or our hot spots or the opportunities for biggest impact are in agriculture, in packaging, in transportation and logistics and so and then in our co manufacturing a lot of times we have co mans that either produce with us or for us, um, and we need to work with them in partnership. So then we got even a little bit more granular there in packaging. We know that our largest area is with our glass suppliers. So when we first launched what we call a supplier maturity mountain we started in two categories. Our glass suppliers and in our co manage and you think about it really like a mountain. And so we've got a pyramid that you need to go or a mountain that you need to go up. So if you are a level one, you are engaging with our suppliers and they're essentially tracking and measuring their scope one and their scope two, uh, commitments. And then as you go up the mountain, if you go to level two, it's your scope one, your scope two and your scope three. Click um commitments and we score them based on what they're doing in the particular areas. So for instance if they've set targets and they've shared those targets at a site specific basis with us, not just their global targets and they're engaged with us in reduction activities and or those science and their science based targets, they get more points as they move up the levels. So we try to move them from 1 and 2, 1, 2 and 3 with science based to setting reduction strategies and actually abatement success. And in there we work um, with our category buyers and our managers or sourcing managers. They're the ones that are engaging with their suppliers on these conversations. It's part of the um, top to tops that they're handling with the suppliers. It's how they evaluate them, it's part of the purchasing decisions and it goes into our new contracts and our new RFPs. So what's wonderful, it's not just our team, it's a really strong partnership with our sustainability team. M I mean our sourcing team can't even remember it's a different team I think of us as one and the same, um, and working together and working with our suppliers to really drive great commitments. So it's more of a carrot approach. Um, but you know, our suppliers so far have been very open. They're excited. Many of our suppliers, we share them with our peers and competitors. So they're probably hearing similar things. Um, but they like the partnerships, they like the collaboration and we look for those opportunities where we can work together and have win wins across our supply chain.

Speaker A: Yeah, that's great. And so it sounds like it's actually, it does go into some sort of a scoring matrix then, uh, where it's alongside price and, and other considerations, but it is a factor in purchasing decisions.

Speaker B: 100%.

Speaker A: Very cool. Um, you mentioned regenerative agriculture. What is, what is that looking like at your, do you have a lot of your own ag land, uh, that the company owns and operates, that you're kind of moving towards regenerative agriculture? Uh, or is that, is that more in the supply chain as well where you're looking to source from regenerative, uh, suppliers?

Speaker B: Yeah, it's more in the sourcing from regenerative suppliers. So it's working with our suppliers. We have gold 100% source from regenerative agriculture, regenerative acres, um, by 2040. So it's partnering with corn growers or barley growers or wheat growers in rye and putting in regenerative practices with them. Um, it's an exciting part of what we're doing and it's a really fascinating part. And um, we've had, you know, started from pilots and now we're at that part where we're trying to scale them up, bring in more partners, more land and more acres and overall seeing really great results. You know, investing in farmers livelihood, having better practices, better soil. And we're testing it right now because we believe we're also getting better quality, um, raw materials that are really enhancing the, our products as well.

Speaker A: Is that something the company has to invest in alongside those farmers? Um, obviously, you know, a lot of companies want to do this, but when they approach their, their suppliers, there's cost involved with moving, implementing these regenerative practices. Uh, what does that, those discussions and implementation actually look like as far as, you know, who's helping with these investments?

Speaker B: Yeah, so we have a couple different ways that we're doing it. But um, one of them I'll uh, talk about Maker's Mark. That might be a great way to do it. So Maker's Mark has a commitment. It's one of Our, you know, obviously one of my favorite brands. I shouldn't say that because it's like talking about who's your favorite child. But I Love Makers Mark 46. And Maker's Mark has a strong passion for being a force for good. So Makers Mark has made a commitment to be 100%. They use a third party called regenified, so 100% regenefied certified in their raw materials, and they currently have reached that status with their corn and their wheat, and then they're working on barley. Um, and so what does that mean is that they're investing alongside their farmers, whether it's investment in cover crops or investment in, um, training. They work with Understanding Agriculture, which is also a third party, to bring in practices, work with the farmers, talk about conservation, do education, and really be, uh, a partner that can help invest. They've also made a commitment to, um, it's called the Regenerative alliance, and they've committed to bring other partners in to actually achieve 1 million regenerative agriculture. Um, and that's also investment with farmers, with growers, with restaurants that do farm to table, and bringing, um, others into this Regenerative Alliance. So it's a really great, you know, put your money where your mouth is and, um, produce a better product and look at regenerative agriculture, but also be a solid investor and invest in the livelihoods of your farmers.

Speaker A: Sounds great. Um, Kim, this has been really great getting to know you and learning about the work being done at Suntory. Really appreciate what you're doing there. Congrats on all the, all the progress the company is making. Thank you for joining us and thank. Thank you for making the world a better place. Well, that's it for this episode of Sustainable Nation. We'd love to hear from you. If you have feedback on the show, have ideas for future guests, or have questions you'd love to hear us ask. Email them to joshustrich.com and if you enjoyed the content we're delivering, we would be so grateful if you would subscribe, rate and review our podcast. Thank you and we'll see you next time.

Speaker B: D.