Beverage industry off-track to meet net-zero targets

Freeths’ specialist Drinks, Hospitality and Leisure lawyers regularly advise the hospitality sector on legal challenges facing the industry and Freeths’ dedicated ESG & Sustainability teams regularly advise businesses on regulatory compliance and what they can do to be more sustainable in their day-to-day activities and implement their Sustainability policies.

A recent report by consultancy Kearney shows that the beverage industry is likely to miss its net zero emission targets for 2030 and 2050. The industry’s current pace of reduction in CO2e per litre is 0.7% per year. In order to get back on track for meeting its greenhouse gas emission reduction targets, this figure needs to be closer to 7.7% (an 11-fold increase).The report found that in 2021 the worldwide beverage industry’s emissions accounted for 1.5 billion tons of CO2e, which equates to 3.8% of global emissions. Within the industry, dairy products, soft drinks, beers, and ciders make up more than 80% of all emissions, with the dairy industry alone accounting for 45% of total beverage industry emissions (0.7 billion tons of CO2e).According to the report, the biggest contributors to the beverage industry’s emissions are raw and packaging materials, together accounting for 58% of the total. Kearney’s recommendations to the industry span six main areas; supply chain, raw materials, packaging practices, operations, transportation, and consumption. The report suggests that if ambitious measures are implemented across these areas in line with Kearney’s recommendations, these could lead the industry to net-zero by between 2039 and 2045, depending on how determined the industry is in its approach.

So, what can the industry do to get back on track?

• Enable and support supply chain partners in adopting sustainable practices. The report says, “beverage companies need to reach out to their suppliers and help them find and develop decarbonising solutions that are cost beneficial for both sides”. Meet with your key suppliers; explain the sustainability journey your business is on, find out where they are on theirs and and ask them to support you.
• Freeths can help you to contractualise obligations on your suppliers to use more sustainable practices – using a range of options from light touch to rights to benchmark your suppliers’ green credentials and terminate supply contracts if better alternatives are available in the market.
• For raw materials, the report’s recommendations centre around crops; reducing water use through precision irrigation and focussing on pest-resistant crops to lower pesticide use.
• Reduce water to reduce the amount of packaging required. The report suggests that “beverage products could be shipped to stores and consumers in the form of powder, concentrated cubes, or syrup”. The potential for reduction in this area is great given it accounts for 23% of the beverage industry’s emissions.
• For operations, switch to renewable energy supplies and move to green, lower-emission alternatives for operations, and for the transportation side, optimise routes and switch to greener modes of transport, such as rail.
• Upgrade or replace in-store coolers with more efficient versions to reduce GHG emissions. Newer coolers have emission factors over 1,000 times lower than older ones with high-emission refrigerants.

We would add:

• Increase the recycled content in any plastic packaging above 30% to reduce the impact on your business of the Plastic Packaging Tax.

Get ready for Extended Producer Responsibility for Packaging, expected to come in in 2024, by checking what your organisation will be required to do to comply with the regulations. For large organisations, this includes recording and reporting on about the empty packaging and packaged goods you supply or import in the UK, for example.

• Explore your options around using less packaging and where further reductions cannot be made, using more sustainable packaging and enabling your customers to re-use or recycle products you sell once the contents have been used.

Whilst some of the advice, such as shipping beverage products in forms without water, seem innovative and industry-specific, other recommendations such as switching to renewable energy sources and using greener transport might be considered to be easy wins that the industry should have made more headway with since 2018. Costs are cited as the reason why these changes have not progressed as much they might have but another reason will be that some of the sustainable solutions will be outside the industry norm.  Sometimes it comes down to whether you want to be an industry leader and an industry disrupter.Does the industry lack incentive? The report mentions consumer and media opinions being at stake, but the industry does not seem to be concerned about how its current flat pace is affecting its reputation. There is also the difficulty that to effect real change, consumer behaviours must change and that’s not easy.Kearney does not consider the lack of progress to date to be a reflection of industry reticence or ill will, rather this being a tough problem to begin to solve. Adrian Kirste, Kearney’s European food & beverage sector lead, said that is reassured to see that “achieving net-zero goals remains well within the beverage industry’s reach”.

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If you need advice on what you can do to achieve your business’ sustainability goals, contact Freeths Clean Energy, Waste & Sustainability team. We can offer practical help.