The Suntory Group is promoting sustainable procurement with our business partners to contribute to the realization of a sustainable society as a company that has signed the United Nations Global Compact.

Basic Policy on Sustainable Procurement

In order to offer our customers high-quality products and services, at the Suntory Group we believe it is crucial to promote sustainability throughout our entire supply chain. This means to give due consideration to environment and society, as well as to safety and reliability.
In 2011, in order to promote sustainability, we established the Suntory Group's Basic Policy on the Sustainable Supply Chain that consists of six main pillars - legal compliance, human rights and labor standards, quality, environment, information security, and the coexistence with society - that address global issues such as child labor, forced labor, freedom of association and collective bargaining, working hours, the guarantee of minimum wages, etc. In order to promote sustainability, we are raising awareness and deepening understanding with our business partners.

In order to promote responsible purchasing practices and avoid affecting negatively the human rights of our suppliers’ workers we carry out actions such as agreeing on estimated lead times in advance with our suppliers, sharing our payment terms in advance, and implementing mechanisms and procedures so that payments are executed on the timeframe agreed with the suppliers, ensuring fair payments based on standard fares per each ingredient, and agreeing on fair lead times while avoiding sudden shortening of those lead times as much as possible Our average length of supplier relationships is 36 months, and 95% of supplier relationships last for more than 6 months.

Furthermore, if we assume that there is a high human rights risk in one particular ingredient, we review our purchasing practices and strive to reduce the risk. For example, in some of our business units we switch to sustainable-certified palm oil in order to minimize human rights and environmental risks. We also require SMETA audits for suppliers with high risk and low management capability based on Sedex risk assessment.

Furthermore, as stated in our Human Rights Policy, we require our suppliers to understand and comply with the ILO Tripartite declaration of principles concerning multinational enterprises and social policy and ILO Declaration on Fundamental Principles and Rights at Work. We expect compliance through the voluntary efforts of our suppliers, even if the ILO principles are not adequately protected by local law.

We established the Suntory Group Supplier Guidelines based on the Basic Policy on the Sustainable Supply Chain in June 2017 to contribute to the realization of a sustainable society while also accelerating sustainable procurement within the Suntory Group. These guidelines put in place specific compliance items required in each field from human rights and legal compliance to the environment for suppliers of Suntory in Japan and overseas to confirm the same ethical values are shared between the Suntory Group and its suppliers.
Compliance with our human rights commitments is a prerequisite for engaging in a business relationship with suppliers, and we require signing our Code of Conduct/Supplier Guidelines to both new and current suppliers. If a serious law-breaking human rights violation is discovered and it is recognized that the supplier has no intention of improving even after communication, it may lead to the termination of the contract. In order to comply with our Supplier Guidelines, we are promoting joint efforts with suppliers, such as sharing those guidelines at supplier meetings or sharing related information through Sedex.
In addition, in terms of human rights commitments, we request suppliers to cascade down those commitments to their own suppliers.

Suntory Group Supplier Guidelines PDF

* Self Assessment Questionnaire

Risk assessment of suppliers

Monitoring of suppliers on social issues

Reporting on the audit of suppliers

Conducting risks assessment on upstream supply chain

In order to expand our human rights diligence efforts to upper tiers of our supply chain, we are planning to formalize a partnership with Itochu and their local partner in Brazil Sucafina to start a pilot program to assess and support coffee farmers in the cerrado region of Brazil. The pilot leverages Sucafina’s responsible sourcing program "IMPACT", and its founded on 5 main pillars: carbon emissions, deforestation, human rights, living income, and regenerative agriculture. IMPACT standard verification ensures compliance with 80 social, environmental, and economic standards modelled on the Global Coffee Platform’s Sustainability Reference Code, with independent audits done every 3 years. Regarding human rights, IMPACT has key indicators such as health and wellbeing, forced labor, child labor, freedom of association, grievance, working hours, discrimination and land rights. Based on the preliminary analysis, we have not found strong concerns regarding forced labor or child labor, but we will continue to monitor the working conditions of the pilot farms during the initial 3 years of this pilot. Auditing and re-verification will be conducted every three years following the initial verification.

In our dealings with suppliers, we provide each company with an opportunity for equitable competition in keeping with our Purchasing Control Regulations and our Business Partner Selection Standards, based on the Suntory Group’s Basic Policy on Supply Chain Sustainability. At the same time, we fairly evaluate efforts regarding the quality and supply capabilities of the products and services, financial status, assured safety, environmental conservation, and social contribution of each company, when we select new suppliers or determine whether to continue business with our existing business partners.
We consider our business partners as trusted partners who combine their strengths with ours in order to provide products and services that bring joy to our customers.

Suntory Group Standards for Business Conduct

Bookkeeping System that Corresponds to the Subcontract Act

Suntory Group operates a bookkeeping system that corresponds to the Act against Delay in Payment of Subcontract Proceeds, etc. to Subcontractors (Subcontract Act), enforced by the government of Japan. The system prevents troubles such as payments delay through displaying warning on the administrator screen when payment process is not carried out according to the information such as payment conditions entered at the ordering of raw materials or packaging. There was no transaction of raw material or packaging that violated the Subcontract Act in 2020.*

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  The number of business partners targeted by the subcontract Act is 43 for the Purchasing Department (about 12% of the transaction fee) as of December 2020 and 116 companies for the Packaging Material Development Department (about 11% of the transaction fee) as of December 2020.

Procurement Ratio by Supplier Region

Suntory Group are purchasing raw materials from the suppliers in the regions below. We promote the sustainability of raw materials in cooperation with our suppliers.

In addition, in order to increase transparency in the supply chain, from a basic purchasing practice perspective, we have formal contracts with all 1st tier suppliers and obtain basic information about those suppliers. Additionally, we try to obtain information on 2nd tier and beyond suppliers via the 1st tier supplier when possible, and carry out on-site visits of those 2nd tier and beyond suppliers.

Promotion System of activities for stable procurement of raw materials

With regard to agricultural products and other raw ingredients that are essential to our products, we cooperate with business partners across the supply chain, identify social and environmental issues, and promote sustainability initiatives that enable us to grow together, thereby enriching our communities.
It is predicted that extreme weather, such as drought and flooding, occurring due to the rise in the Earth's average temperature due to climate change will have a major impact on production activities, including causing fluctuations in production volumes and creating the need to move to other locations which offer suitable cultivation. Furthermore, in with the increasing globalization of corporate activities, demand for right responses to social issues is growing, such as consideration for the human rights of people working in the supply chain. To offer our customers high-quality products and services, at the Suntory Group we believe it is crucial to promote sustainability throughout our entire supply chain. This means we need to give due consideration to environment and society, as well as to safety and reliability.
Based on this belief, Suntory Group is promoting long-term raw material strategy optimum procurement globally and deliver sustainable procurement throughout the Group.

Overview of long-term strategy

The TCFD framework is used to formulate the strategy, and it also utilizes open scenario such as RCP2.6 (scenarios below 2℃), RCP 8.5 (4℃ scenario) from the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA) scenarios, to draw up the future world and understand risks and opportunities. The documents, information, data, etc. referred to in this report are current as of the time of the review, and the analyses and calculations based on them are subject to uncertainty.
Furthermore, by focusing on our own policies such as Environmental Vision toward 2050 or The Suntory Group's Basic Policy on Supply Chain Sustainability and long-term trends specific to raw materials, we aim to create a vision of what we would like raw material procurement to be in the future world, and to find countermeasures based on the gaps between the current situation, so that we can respond to a wider range of social and environmental sustainability issues.

Activity Overview

The strategy development is based on the following steps:

1. Selection of important raw ingredients

• Identify materials that are particularly important for our business activities.
• Conduct risk assessment of materials handled in our business.
• Based on the results of the assessments, the materials category for which long-term strategies are to be formulated are selected through consultations with related parties.

<Risk assessment process>

1. Extraction of important raw materials

The impact is defined as the loss of product sales that the business would suffer if there were a problem with the supply of raw materials, and raw materials with a high impact were extracted as priority raw material, including agricultural materials such as coffee beans and corn, the material that undergo processing such as sugar, and vitamin C.

2. Risk Assessment

To evaluate the possibility of problems in the supply of the extracted key raw materials – the effects of climate change on yield and suitable areas for cultivation, which are considered to have the greatest impact on future supply, were studied and evaluated from the research and statistical perspectives. One of the results is shown in Figure 2. For raw materials that undergo a certain amount of processing, the risk assessment considers the impact of climate change on the production area of the base material and the ratio of raw materials used in the process. (Example: for sugar, see the results of climate change impact assessment for sugar cane and sugar beet)
Based on the above approach, we found that the yields of agricultural materials such as corn, and coffee beans will be Significantly impacted in several production areas. On the other hand, for green tea leaves procured in Japan, it was found that the suitable growing area will increase.

4℃ temperature increases scenario in 2050: Study of the effects of yield and suitable land on major raw materials and production area

* Include origin of processed material

3. Formulation of activity plan

By referring the results of the survey and considering the results of the Suntory group evaluation, the following raw material items were selected to implement the long-term strategy as a comprehensive decision in 2021.

2021:
Coffee, Oolong Tea, and Corn
2022:
Barley, Sugar, High Fructose Corn Syrup (HFCS), Vitamin C and Citric Acid
2023:
Lemon, Orange, Grapefruit, and Black Tea
2024:
Dairy

Note)
Coffee refers to the results of a climate change impact study on coffee beans. Similarly, sugar refers sugarcane etc. HFCS, vitamin C and citric acid are modeled by corn. Dairy is modeled by raw milk.

2. Creation of focused teams

• A team consisting of experts within the group from various departments such as research, development, procurement, and quality assurance is formed to work on the selected materials.

3. Building strategy

• Analysis of market, company, and trends by team of experts
• Analysis of future world scenarios and description of the ideal state within those scenarios
• Design of activities by backcasting from the future world back to the present to set issues

4. Strategy monitoring

• Monitoring of signs of scenario change and strategy revision based on prior assumption of change
• Revise road map of strategy building by reevaluating materials risk

Strategy Execution

The long-term strategy formulated by the team of experts is discussed regularly by the Sustainability Committee, an advisory body to the Board of Directors, and its activities are promoted.

Progress of Activity in 2022

Based on the aforementioned approach to strategy formulation, we have implemented the following activities in 2022.

1. Expansion of climate change risk assessment

We have introduced S&P Global Climanomics to quantitatively evaluate the impact of climate change on detailed production areas as Suntory Group. The Climanomics platform comprehensively covers recommendations in line with the TCFD framework with scientific data, and by entering corporate asset information (Spend in the case of raw materials) into the service, it will show potential financial impact associated with climate risk out to 2100. It is also enables the us to grasp information such as where the area which will contain future climate risk is.

2. Creation of new focused teams

Continuing from 2021, focused team for barley, sugar, HFCS, vitamin C, and citric acid have been formed based on the activity plan for 2022.

3. Strategy Development

We look ahead year 2050 for the raw material items for the task force was formed, while referring to publicly available scenarios from the IPCC, IEA, and other organizations, we envision changes in the future world at that time from an environmental perspective, including climate change impacts as well as from a social perspective, including financial impacts on human rights. Then, based on the trend analysis and the company’s own goals, the ideal state of raw material procurement in the future world is drawn, and the way to reach this goal is examined. We used the newly introduced Climanomics platform to conduct detailed analysis and evaluation of the impact of future climate change on business. (Figure.3)

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  Currency exchanged rate 1USD=139 JPY
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  For corn, for which efforts began in 2021, only estimates were made for alcoholic beverage use.

4. Promotion of activities derived from strategy

Next Step

Based on activity plans for strategy creation and ongoing dialogue with operation unit, we will keep forming focused team for important raw materials, build long-term strategies, and share formulated strategies within Suntory Group. In addition, based on the formulated strategy, we will consider and proceed initiatives for regenerative agriculture, which is expected to have mitigation and adaptation effects for high climate change risk material or high GHG emissions material in future.
In Strategy Monitoring, we will periodically check for the occurrence of events such as the junctures of multiple possible scenarios and the success of technological innovations necessary to achieve the desired goals. This will enable us to capture important changes as much as possible in advance and revise the strategy to incorporate them.
We will also revise road map of strategy building by regular reevaluating materials risk.

The Suntory Group strives to promote sustainable procurement together with all of its business partners in the supply chain. We are promoting better awareness and support so that the necessity of sustainability initiatives is understood through education for our company representatives and policy briefings and questionnaires for our ingredient suppliers, manufacturing outsources, logistic affiliates, and other primary business partners. In addition, Suntory Group participates in the Consumer Goods Forum Japan*, which promotes distribution networks of consumer goods across the industry, to reduce the environmental impact of the Suntory supply chain.

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  The Consumer Goods Forum Japan is an organization primarily made up of companies in the consumer goods distribution industry that engages in cooperative manufacturing, distribution and sales efforts to address common challenges in non-competitive industries in Japan.

We promote procurement of ingredients, materials and equipment that have low environmental impact through cooperating with each business partner.

Promoting Green Procurement

Green procurement is selecting items and services that consider the environment, such as by not including hazardous substances or efficient use of resources, when selecting ingredients, materials and equipment to purchase.
Suntory Group has established Suntory Group Green Procurement Standard (revised 2011) based on the Suntory Group’s Basic Policy on Supply Chain Sustainability and promotes procurement activities to lower environmental impact in corporation with each business partner.

Promoting Green Purchase

In purchasing goods, we are promoting green purchasing based on the "Green Purchasing Goods Guideline," which defines the criteria for green purchasing efforts, with the goal of achieving a higher purchasing ratio than in the previous year. We have also introduced an online purchasing system in which "green compliant products" are registered as standard items, and are expanding this system to the group companies.