Dialogue 2017

Development of Medium- to Long-Term Environmental Targets

The Asahi Group has long engaged in activities to contribute to creation of a sustainable society. Recently, the Group held a dialogue with two CSR experts to confirm the direction to pursue in developing new medium- to long-term environmental targets. In the dialogue, in light of global trends in connection with environmental problems and corporate social responsibility, we received suggestions about future stakeholders requirements and an approach to “distinctively Asahi” CSR activities.
(Date held: May 2017)

Development of Medium- to Long-Term Environmental Targets

Participants

Experts (in alphabetical order)

  • Dr.Naoki AdachiDr. Naoki Adachi
    President
    Response Ability, Inc.
  • Mr. Yosuke Ikehara Mr. Yosuke Ikehara
    Climate Change and Energy Group Project Leader,
    WWF Japan

Asahi Group Holdings, Ltd.

  • Katsutoshi Takahashi Katsutoshi Takahashi
    Senior Managing Director and Senior Managing Corporate Officer in charge of production and procurement
    Asahi Group Holdings, Ltd.
  • Noboru Kagami Noboru Kagami
    Director and Corporate Officer in charge of CSR and research & development
    Asahi Group Holdings, Ltd.
  • Atsuko Suzuki Atsuko Suzuki
    General Manager, CSR Department
    Asahi Group Holdings, Ltd.

Topic Suggestions — “Post-Carbon Society” Trends and ESG Investment

Before starting the dialogue, we asked the two experts to suggest topics on the latest trends in sustainability from the perspective of their respective areas of expertise.
Mr. Yosuke Ikehara of WWF Japan spoke about global trends surrounding the problem of climate change. The Paris Agreement was concluded in December 2015, marking a distinct change of direction from a low-carbon to a post-carbon society, including announcement of the goal of achieving effectively zero CO2 emissions from human activities by the second half of the 21st century. Mr. Ikehara observed that post-carbon will likely become the basis for all economic activities, remarking that divestment from businesses that consume fossil fuels will rapidly gain impetus even as renewable energy prices rapidly decline.
Dr. Naoki Adachi of Response Ability, Inc. spoke from the perspective of ESG investment about corporate value, a topic at the center of investor attention. Old business models predicated on consumption of mass quantities of energy and resources are no longer sustainable, and currently only businesses capable of protecting nature and building good relations with society can be sustained. Dr. Adachi offered advice about the importance in these circumstances of telling stakeholders a story to explain how a company’s businesses will increase not only financial capital, but also natural and social capital.
Discussion in the dialogue took place in light of these remarks.

Financial Value and Social Value to Converge in the Future

Kagami: In the Medium-Term Management Policy, the Asahi Group aims to enhance corporate value, a topic raised by Dr. Adachi. To achieve this, we are now formulating a strategy and executing plans at each operating company for the purpose of increasing both financial value and social value.
Initiatives aimed at increasing social value include forest conservation at Asahi Forest and zero emissions activities at our plants. We want to more closely link these initiatives to corporate value enhancement. I feel that visualization of a “line” that links social value and financial value is necessary for accomplishing this.

Adachi: It will likely become difficult to increase even financial value using conventional approaches. That is to say, customers won’t accept unsustainable businesses, such as those with high environmental impacts, and will respect businesses that create social value. I think that, as a result, convergence of financial value and social value is a phenomenon that has begun to appear.

Adachi

Suzuki: You said that, as one would expect, the clear indicator of corporate value is share price. Does this mean that, in the extreme case, in the future increasing sales and profits alone will fail to increase share price?

Adachi: If profits increase, financial value will of course increase. However, if a company continues to deploy an unsustainable business model, the business model itself may come to a dead end: for instance, a company may be unable to procure materials even if it wants to expand production, or even if a company produces products, they may not be chosen by customers. I think that, in the end, profits will fail to increase and the company’s activities won’t lead to share price increases.

Kagami: In our integrated report, we disclose financial information and non-financial information. I think that to make it clear to everyone that financial and non-financial information are linked, we ourselves must be more aware of the linkage between financial value and social value when disseminating information and create a value creation vector as a corporate entity.

Kagami

Adachi: As you say, the most important thing in an integrated report is that story. In the case of the Asahi Group, I think it’s necessary to tell a story of how you protect raw material production sites and water for the purpose of continuing to provide delicious products to people around the world.

The Importance of Drawing a Big Picture

Takahashi: In that regard, I think the issue at Asahi is our internal mindset. Even though raw materials may well run short in the future, we tend to give priority to cost considerations. It can also be said that we’re unable to consider management over a very long time span, and I think it’s a question of whether we can consider management over a span of, say, ten years.

Takahashi

Adachi: Although examples of progressive management still tend to attract attention, I think that corporations that have a vision and engage in constant, steady activities eventually improve their ESG evaluation results. I think that a corporation can maintain a stable corporate posture and make it easier to win accolades from investors by carefully drawing a so-called “big picture” of its future vision from a long-term perspective, as you say, and continuously engaging in activities while checking the results against that vision.

Ikehara: Drawing a big picture is highly advantageous in communication with stakeholders. It facilitates communication of information to consumers, and makes explanations to investors persuasive.
The Asahi Group has several good initiatives, such as placing the Green Power Mark on Asahi Super Dry cans and using plant-based container materials for Mitsuya Cider. However, in the present circumstances, I think it’s difficult to convey why the Asahi Group engages in these initiatives.

Ikehara

Kagami: That’s what’s meant by drawing a big picture, isn’t it?

Ikehara: That’s right. That’s why indicating a clear long-term vision, for instance “The Asahi Group aims to be post-carbon by 2050,” and instilling this vision within and beyond the company while being mindful of a big picture that helps people understand individual initiatives are linked to the vision will make all initiatives far more convincing.

Kagami: That’s why we’re preparing medium- to long-term environmental targets. After we set the targets, I think it will be extremely important to continuously engage in initiatives while remaining aware of the targets.

Making Zero CO2 Emissions a Rule

Suzuki: A number of corporations have announced a corporate vision of reducing their CO2 emissions by 100% from their current levels by a certain year. However, although companies in the automotive and energy industries generate innovation that can be sold in the form of new products by pursuing emissions reduction, companies in the food industry lack that motivation. Although reducing environmental impacts makes it easier to obtain safe, secure raw materials, that’s somehow an indirect benefit.

Suzuki

Adachi: I think that zero emissions will become a rule rather than an exception, regardless of industry type. Thanks to conclusion of the Paris Agreement under the Framework Convention on Climate Change, the world now aims to limit global warming to less than 2ºC above pre-Industrial Revolution levels. It is said that this cannot be achieved without reducing worldwide CO2 emissions to near zero. However, the temperature increase target of less than 2ºC is based on rather optimistic estimates, and we don’t know whether the global environment can really be preserved even if it is achieved.
Given that, reducing emissions to zero will likely become a rule that all corporations are expected to observe, no matter the industry. From the start, the Asahi Group has comparatively low environmental impacts, and since you use lots of biomass, I think that zero emissions shouldn’t be a very difficult goal to achieve. Rather, isn’t it a challenge you should actively embrace? As Mr. Ikehara mentioned, conversion to renewable energy not only reduces environmental impacts, it also lowers costs.
Something that should be further considered is how to add value there.

Takahashi: The thing is, although you have said that renewable energy prices will decline worldwide, prices in Japan are currently comparatively high, and the use of renewable energy isn’t very widespread. In these circumstances, it’s difficult to move ahead with energy source conversion in some respects.

Kagami: A further shift to renewable energy will entail accountability to investors, won’t it?

Adachi: I’ve heard that when a certain environmentally advanced global corporation launched a major environmental initiative, some investors demanded that it pay higher dividends instead. However, management retorted, “We believe that this is the true path to success. If you object, we don’t mind if you sell your shares.”
Although such initiatives may appear to be environmental costs, since in the long term they are investments that return profits, I think that the number of investors who can invest with peace of mind in corporations with such a long-term perspective will increase.

all

Ikehara: It’s true that the price of solar power hasn’t come down in Japan, due in part to failed government policies. However, from a global perspective, renewable energy costs have definitely decreased. And, the target of reducing emissions by 80-100% that many corporations have set will be impossible to achieve from energy conservation alone and cannot be achieved without decarbonizing energy sources.
Therefore, in the near future advanced companies are certain to begin dialogues with energy suppliers. If major corporations across the board demand further increases in the supply of renewable energy, energy suppliers will change their supply sources. I believe that corporations should think from a long-term perspective.

The Concept of a Circular Economy

Takahashi: Of course, we, too, believe that we absolutely must engage in CO2 reduction and water resource conservation. We draw on the blessings of nature to manufacture our products, and since making them involves more than a little harm to the planet, we very much want to minimize, and if possible eliminate, that harm.
Hearing what you’ve said today, I think that the Asahi Group, too, should aim for zero CO2 emissions by 2050.

Ikehara: I think that’s a great idea. Furthermore, to involve lots of people and engage in reduction efforts cooperatively, I urge you to incorporate in the environmental vision not only quantitative targets, but also policy objectives such as “We will procure electric power in ways that contribute to the spread of renewable energy in areas where our business sites are located.”
This will lead to involvement of entire areas and communities, and some operators may decide to enter the solar power generation business if they think the Asahi Group will purchase power from them. I think it would be even better if the vision created this type of virtuous cycle. The Asahi Group has long been a leader in purchasing green power, and I think it would be important if you point the way toward how to utilize renewable energy in the medium- to long-term.

Ikehara

Adachi: The question “What kind of businesses will Asahi be engaged in 100 years from now?” may provide a hint when formulating the vision. The EU advocates the concept of a “circular economy.” When we consider the state of the Earth 100 years from now, we realize that we must create a circular economy. In those circumstances, how will Asahi be doing business and what sort of value will it provide the world in exchange for profits? Also, how will Asahi further invest the profits it generates? I think that as you ponder these questions, it will become apparent what you must do.

Suzuki: We are about to proceed with formulation of medium- to long-term environmental targets. With a view to corporate value enhancement, I want to take your advice and incorporate the concept of calculating back after drawing a big picture. I hope to continue to benefit from your opinions and advice going forward.
Thank you for your insights today.