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Adapting to Climate Change

ADAPTING TO CLIMATE CHANGE

Our consistent efforts towards the development of strategies to protect against climate-related hazards.

Adapting to climate change is part of our TTZAB strategy, which aims to achieve ZERO carbon emissions at our brewery by 2030 and net ZERO across our entire value chain by 2040.

Stakeholder Groups Most Concerned

NGOs, Industry Groups and Local Communities; Government Agencies and Regulators; Investors

Why It Is Important

Immediate action is needed to mitigate and reduce the impacts of climate change, which are currently one of the most pressing issues in the world. We acknowledge that our business operations are exposed to risks of climate impacts, such as heavy rainfall, flood and drought, as we rely on natural resources. Ignoring the effects of climate change may lead to higher operational costs and complexity, affecting the business’s profit and operational efficiency.

Our Approach

We are guided by our Environmental Policy, Production Policy and Group Sourcing Policy in adapting to climate change. Climate change remains the focal point of our TTZAB pillars and is demonstrated through our commitment to ZERO Carbon Footprint, ZERO Packaging Waste, ZERO Water Waste and ZERO Farming Footprint.

ZERO Farming Footprint represents our commitment to responsible sourcing, guided by our global headquarters' policy to progressively increase sourcing from suppliers that adhere to regenerative agricultural practices.

We adapt to climate change by identifying climate-related risks and opportunities and we strive to enhance our climate strategy and disclosures every year by aligning with national and global frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD). This will not only enable us to maintain our ESG ratings but also allows us to fulfil our pledges to the UN SDGs and the Ten Principles of the UN Global Compact.

Additionally, it helps us build climate resilience by addressing climate related risks and opportunities, positioning Carlsberg Malaysia Group as a thought leader in the ESG space.

Progress/Achievements

Task Force on Climate-related Financial Disclosures (TCFD)

The Group has progressively enhanced its climate-related data collection and disclosures, which allows our stakeholders to make informed decisions and enables the organisation to strengthen its climate mitigation strategy.

We have adopted a phased approach since 2021 to disclose our initiatives against the TCFD’s recommendations. In 2023, we further enhanced our disclosures by taking guidance from the latest global climate reporting standards, the International Financial Reporting Standards (IFRS) S1 and S2 disclosure standards.

Our enhanced reporting includes climate-related risks, such as physical and transition risks, and opportunities. We will continue improving our climate-related reporting practices to better adapt to and mitigate climate change.

GOVERNANCE

SUSTAINABILITY AND CLIMATE GOVERNANCE

The Group's Board of Directors has oversight of sustainability and climate-related matters that are significant to both the business and our stakeholders. These material matters were identified in a materiality assessment conducted in 2022, and further validated against Bursa Malaysia’s Sustainability Reporting Guide 2022 (3rd edition) and the Sustainability Accounting Standards Board (SASB) industry standards in 2023.

Sustainability matters, including climate-related risks and opportunities, are overseen directly at the full Board level. The Board is supported by the Risk Management and Sustainability Committee (RMSC), which updates the Board with quarterly reviews of the Group’s sustainability strategy, performance objectives, major capital expenditure and remuneration related to sustainability and climate-related performance.

Headed by the Chairman of the RMSC, co-led by the Chief Financial Officer and the Corporate Affairs and Sustainability Director, who serves as Chief Sustainability Officer (CSO), the RMSC is responsible for the Group’s financial and non-financial risks, including its overall risk management, internal controls and audit.

Supported by the Head of Internal Audit and the Supply Chain Director, the RMSC also oversees sustainability and climate-related risks and opportunities that include identifying climate-related risks and integrating those risks into the business and risk mitigation strategy and management practices.

The RMSC discusses the Group’s sustainability policies, governance, strategies and approach to sustainability and climate-related risks. This includes monitoring scenario analysis capabilities on physical and transition risks and reviewing sustainability progress against targets and reporting climate-related developments in both Malaysia and Singapore.

The CSO leads and drives the Group’s sustainability strategy and Together towards ZERO and Beyond (TTZAB) programme, and reports directly to the Managing Director and the Chairman of the RMSC.

The CSO works closely with the Supply Chain Director to drive the Group’s sustainability ambition to accelerate decarbonisation across our value chain. Members of the Management Team, including the Human Resources Director and the Legal and Compliance Director also share the responsibility of overseeing other sustainability matters related to labour and human rights, and anti-bribery and competition compliance.

The Board includes the sustainability agenda when executing its duties. This also applies to the Management Team, where sustainability key performance indicators are included in their performance and remuneration.

In 2023, we established the Sustainability Steering Committee to drive our sustainability-focused initiatives. Comprising functional heads who are responsible for the implementation of TTZAB priorities and co-led by the teams of Corporate Affairs and Sustainability, and ESG Compliance, the SSC keeps abreast of regulatory developments on sustainability and climate-related matters.

STRATEGY

Adapting to climate change involves a complex interplay of physical and transition risks and opportunity identification that is facilitated by climate-related risk assessments over the short, medium or long term.

Physical risks, such as heavy rainfall, can physically disrupt our operations and supply chains, while transition risks involve challenges we face when shifting to a low-carbon economy, such as changes in climate-related laws and policies.

We acknowledge that the journey to transition to a low-carbon economy will take time and require balancing trade-offs along the way. As such, we have designated periods shorter than three years as short term, four to ten years as medium term and more than ten years as long term, for the transition time frame. We are committed to leveraging our capital allocations and brewing expertise to provide secure, reliable and affordable energy while supporting the transition to long-term sustainable technologies.

Scenario Analysis

Scenario analysis is an important tool that informs us and our stakeholders about the implications of climate-related risks and opportunities on our business.

In 2023, we conducted a qualitative scenario analysis to gauge the impact of climate change. The process involved benchmarking against local, regional and global industry peers, using the existing Intergovernmental Panel on Climate Change’s (IPCC) Representative Concentration Pathways (RCP), RCP 2.6 and RCP 8.5, as a foundation to build an understanding of possible climate scenarios.

This enables us to prepare ourselves to identify the climate risks and opportunities related to the two pathways. We will remain guided by our TTZAB strategy as we continue to monitor and review our strategy periodically, ensuring that it stays resilient and effective.

Impacts of Physical Risks on Carlsberg Malaysia based on the two scenarios:

 

Impacts of climate change such as heavy rainfall and flooding can have serious consequences on our operations, including the manufacturing and distribution of our products. To mitigate such risks, we have identified the following challenges and the related risks and opportunities, alongside the potential financial impacts.

 

Impacts of Transition Risks

 

Our climate risk mitigation strategy is related to three material matters:
Adapting to Climate Change, Water Use and Management, and Sustainable Packaging and Materials

Climate-related Opportunities

The transition to a low-carbon economy presents five different types of climate-related opportunities to our business. These opportunities will not only enable us to reduce operational costs and increase productivity with lower climate risk, but also increase investor confidence and bolster our reputation among local communities.

 

 

Our Sustainability Steering Committee is responsible for identifying climate related risks. It monitors and deliberates on the Group's climate risk management and mitigation strategies on a quarterly basis.

In addition, climate-related matters that are significant to our business are also identified through our materiality validation process, which involved aligning our material matters with local and global industry peers.

Guided by the comparative study and qualitative data, we review our material matters on a yearly basis to ensure that they remain relevant and in line with industry peers.

 

Our sustainability strategy is deeply integrated with climate risk management, with the dual aim of achieving our greenhouse gas (GHG) reduction targets and bracing for the impact of climate change on our operations and value chain.

In our everyday operations, we embrace a mindset attuned to climate risks, underscoring the need for proactive management of these risks to fulfil our strategic ambitions. The volatile nature of climate-related factors necessitates our commitment to ongoing risk category monitoring, adjusting to external shifts and varying scenario projections.

In 2023, we were guided by comparative studies of Asian beer industry peers and IPCC global scientific guidelines to conduct a qualitative scenario analysis, enabling us to adjust to varying climate scenarios that present both risks and opportunities stemming from substantial political, economic or environmental changes.

 

Several climate-related issues were also deliberated by the Risk Management and Sustainability Committee in the year under review. This included mitigating water supply disruption by improving water efficiency and exploring renewable energy solutions by considering the cost and feasibility.