Dialogue 01

The Visiting CEO of CDP Has a Dialogue with the Senior Executive Officer and Head of CSV Strategy for Kirin Holdings.

Paul Simpson, CEO of CDP, and Ryosuke Mizouchi, Senior Executive Officer of Kirin Holdings and director in charge of CSV strategy, held a dialogue on November 30, 2017, during the former’s visit to Japan. CDP is an international non-profit organization that provides environmental information disclosure systems. Its data are some of the most referenced data in ESG^*1 today.

Mr.Simpson: Kirin is displaying leadership with the many climate change and water initiatives it is pursuing.
Mr.Mizouchi: Thank you.
Mr.Simpson: For a large-scale global corporation like Kirin, supply chains are an important issue.
Mr.Mizouchi: We believe so. That is why we have set a target of reducing our greenhouse gas emissions including Scope 3^*2 by 30% from 2015 levels by 2030. This target has been approved by the SBT initiative as a science based target.
Mr.Simpson: I think a 30% reduction is extremely ambitious. The world’s leading firms have all declared science based reduction targets. Their targets are of a similar level and I think they are appropriate.
Mr.Mizouchi: Kirin’s objective in participating in CDP is transparent disclosure. However, disclosure alone is meaningless. It is important to set targets, develop plans, and execute them. If you think about in this way, setting science based targets and working to achieve those targets is the obvious step to take.
Mr.Simpson: I am very glad that you made that decision. I have heard that many firms have found that setting ambitious targets raises the motivation of their employees.
Mr.Mizouchi: At Kirin as well, our employees are engaging very enthusiastically in planning to meet the targets.

Mr.Simpson: What challenges do you envisage encountering in seeking the cooperation of your supply chain? Also, will it only be your supply chain in Japan that you will target?
Mr.Mizouchi: Of course, our entire supply chain, including overseas, will be targeted. There are various issues regarding the supply chain initiatives, but at the same time, these also represent an opportunity for Kirin. For example, in Japan, there is a shortage of truck drivers to deliver our beer and beverages. So what we did was to talk to our competitors, and we chose to solve this problem with joint delivery. This initiative is still confined to certain regions, including Hokkaido and Hokuriku, but we hope to extend it to the whole of Japan in future. As well as solving the company’s problem of a shortage of drivers, this initiative will also serve to reduce our CO₂ emissions. The only thing is that many of the companies in the logistics sector are small businesses, so the question will be how to support those companies. Overseas, in Australia, where we have large operations, the problem is rising electricity prices. To counter this, we decided to build a 10-megawatt solar power generation facility by 2026. For improvement of the supply chain, we have the same major problem as in Japan about how to obtain the cooperation of small businesses. In Asia, we invested in a beer company in Myanmar two years ago. The business is expanding, but the brewery is extremely outdated. As well as undertaking new investments to expand production capacity, we plan to achieve major reductions in CO₂ emissions by introducing state-of-the-art energy-saving equipment.
Mr.Simpson: As you say, challenges certainly have the potential to become opportunities for businesses. One thing that CDP is doing is to provide support. It is only natural that companies compete; that is how they create value. However, when it comes to sustainability, I think there are many opportunities to be captured through cooperation among companies from different industries and even, on occasion, competitors in the same industry. The presence of many small suppliers is a challenge, but some global firms are transferring their knowledge to their suppliers by providing training, and even investing directly in those small suppliers, as a means of reducing energy costs and sharing the benefits. Previously, it was common for the companies to treat the know-hows regarding these kinds of initiatives as confidential, but today, the notion that companies can learn from each other by sharing these know-hows as best practices is becoming increasingly common.

Mr.Mizouchi: We at Kirin hope to become a model among Japanese companies in terms of such solutions. CDP has a wealth of knowledge about best practice in the reduction of greenhouse gases, so it would be wonderful if you could share it with us.
Mr.Simpson: We would be happy to. Water is an important resource of Kirin, and you are undertaking leading initiatives in this area as well, I understand.
Mr.Mizouchi: To make the best beer, we need clean, high quality water, so the issue of water is our most important challenge. There is plenty of clean water in Japan, but in Australia, water is in short supply. We try to understand the regional nature of these kinds of water issues, and in Australia, we aim to implement more sophisticated watersaving measures.
Mr.Simpson: A survey that CDP conducted also revealed that, while water is plentiful in Japan and Northern Europe, water shortages and deterioration of water quality have become serious problems elsewhere, such as Southern Europe, the United States, China, India, and Australia. Meanwhile, the World Economic Forum has described water issues as the most serious global economic risk. Many people still consider climate change and the issues of water and forests to be separate issues, but they are actually inseparable.
Mr.Mizouchi: In Japan, there is a common recognition that water is a precious resource, but perhaps because it is so plentiful here, I have the feeling that Japan is lagging behind somewhat in its understanding that water is a global issue and that it is connected to many other issues. On the other hand, Japan imports much of its fuel and raw materials, so there is a sense that it would be easier to make progress in energy and resources issues. While it will be difficult to achieve 100% renewable energy immediately, we do have a policy to increase it steadily.
Mr.Simpson: Energy is something that everyone needs. Japan has made significant technological advances in the improvement of energy efficiency, so I have great expectations.
Mr.Mizouchi: Myanmar is a good example. We think that investment in technology will lead to major opportunities.

Mr.Simpson: Is there anything that CDP can do for you?
Mr.Mizouchi: Having received a high rating from CDP in the areas of climate change and water, contributes to attract ESG investments that will allow us to conduct our business in sustainable ways.
Mr.Simpson: I get the impression that Japan’s investment industry is somewhat behind in terms of ESG. The GPIF^*3 conducts many programs regarding ESG indices, so I think major progress will be made going forward.
Mr.Mizouchi: Kirin holds meetings of various sizes with investors and securities analysts on an annual basis, so we have gained a real sense that this is the case. Five or six years ago, there were virtually no questions about ESG, whereas today, we receive many questions about it.
Mr.Simpson: I’m glad to hear that things are changing. We are very grateful for the cooperation that Kirin has given CDP over the years.
Mr.Mizouchi: We are looking forward to the expansion of CDP’s activities. When more people have an understanding about CDP, I think there will be an increase in opportunities to invest in Kirin.
Mr.Simpson: CDP is only a small organization, but we hope to provide support so that dialogue between investors and companies will continue to lead to investment decisions.
Mr.Mizouchi: CDP is not small at all. We think it has huge influence. Thank you very much for coming to see us today.
Mr.Simpson: Thank you for inviting me. I understand Kirin has a craft pub brewery near here. Next time, I hope we can raise a glass together.

1. ESG investing: Investing made on the basis of whether or not a company gives consideration to environmental, social, and governance (ESG) factors
2. Emissions obtained by subtracting greenhouse gases directly emitted by the company, such as fuel and electricity, from greenhouse gases emitted across the company’s entire value chain
3. Government Pension Investment Fund. The GPIF manages welfare pension and national pension reserves from Japan’s public pension system.