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Lindsey Hall: I'm Lindsey Hall, Head of Thought Leadership at S&P Global Sustainable1.

Esther Whieldon: And I'm Esther Whieldon, a senior writer on the Sustainable1 Thought Leadership team.

Lindsey Hall: Welcome to ESG Insider, a podcast hosted by S&P Global, where we explore environmental, social and governance issues that are shaping investor activity and company strategy.

Esther Whieldon: In recent episodes, you'll have heard us talking about the S&P Global Sustainable1 Summits in Paris and New York. Corporations, financial institutions, investors and academics came together at both events to discuss net-zero targets, biodiversity, the energy transition and the challenges of ESG data collection. We'll include links to those episodes in our show notes.

Lindsey Hall: Now I attended the Paris event, and one of the highlights was the discussion with Jan- Willem Vosmeer, who is Manager of Sustainable Development and Stakeholder Engagement at Heineken. And he described how the brewer is seeking to embed ESG throughout its entire business, including net-zero goals, addressing responsible drinking and diversity.

Esther Whieldon: Our Paris-based colleague, Jennifer Laidlaw, had the chance of speaking to Jan-Willem a couple of days after the summit to discuss Heineken's ESG strategy in more detail. So  Jen, what did you hear from him?

Jennifer Laidlaw: We talked about a wide range of subjects ranging from how Heineken is working with suppliers to reduce emissions, the challenges of working in a water-intensive industry, and how to make agriculture sustainable.

Before we dive into the interview, I just wanted to flag a few points for our listeners. You'll hear Jan- Willem talk about Scope 1, those are direct emissions from operations, and Scope 2, those are indirect emissions primarily derived from purchased energy. He also mentioned Scope 3, or the emissions that occur up and down the company supply chain as well as when customers use the company's products. You'll hear him refer to Heineken 0.0. That's the brewer's nonalcoholic beer. Here's our conversation.

Well, Jan-Willem, thanks very much for agreeing to talk on our podcast. It's really great to have you here after meeting you at the S&P Global Sustainable1 Summit.  There were some really interesting comments that you made at the summit about net zero and why it's important for a beer company like Heineken and what pathway you have to take to get there. And I just wondered if you can just explain to us what are your objectives to get to net zero.

Jan-Willem Vosmeer: Yes. And thanks for having me here. It was lovely to meet you very spontaneously during the conference. Heineken has set for 2030 and beyond a quite ambitious time frame and goals to become net zero. So our objective is to become net zero in our production by 2030, so that's for Scope 1 and 2, and by 2040, for the entire value chain, so that's Scope 1, 2 and 3, with an intermediate reduction of 30% absolute reductions by 2030 compared to 2018.

Now that's quite ambitious and bold because the 2040 target is 10 years before the Paris Climate Agreement target in 2050. And there's a lot to do because, yes, if you look at our global footprint, our global carbon footprint, then 10% is our own production, but 90% is outside. So you can imagine that's a huge challenge we took up.

Jennifer Laidlaw: Yes. I mean that seems to be like one of the huge challenges because 90% we're talking about Scope 3 emissions, right?

Jan-Willem Vosmeer: Yes, correct.

Jennifer Laidlaw: Okay. And I just wondered, what are you doing to try and get to that net zero by 2040 to reduce the Scope 3 emissions?

Jan-Willem Vosmeer: Yes. So of course, you start with your own production, and that's what we're already doing for a longer time. That's the 10%. But still, you need to do it yourself first before asking others to join.

So let me start first on the production side. There, of course, what you do is to reduce the amount of energy you use. That's the first thing you need to do, and we do that through all kinds of actions.

Because the moment you don't need to use energy, you don't need to make it renewable.

But then, of course, you go into the next phase, and that is making energy use renewable. And we use both electricity and thermal energy. And at the moment, the electrical energy is renewable for more than 50%, 52%, which is great. So we are making good progress there.

The bigger portion is thermal energy. And there, we are still having a way to go because you need to find local solutions to make thermal energy renewable. Think about, for instance, using biogas, that is, for instance, linked to our wastewater treatment. Also think about using biomass. We, for instance, work in Spain, together with farmers, in olive growth, their waste, which they normally, yes, need to get rid of.

We now buy their olive waste and turn it into biomass. And that makes, for instance, our brewery Jaén, which is actually the center of olive growth in Spain, makes it carbon-neutral. And actually, it's the biggest carbon-neutral brewery in Europe at the time. So that's the production part.

But indeed, what you say, it's also about the rest of the carbon footprint. And then you think about agriculture, packaging, cooling, transport, those are all the elements we are working on and that we also need to take up with our suppliers. And it's the suppliers and the relationship with the suppliers which is very important.

So that's the reason why we invest in having conferences with our cooling partners. And actually, this week, we had a conference with our packaging suppliers to discuss solutions, but also to stimulate them to sign up for science-based targets as we did. Because in the end, you would like to change the system with all the partners you have. Because in the end, yes, their Scope 1 and 2 is our Scope 3 and the other way around.

Jennifer Laidlaw: Beer is 95% water. And obviously, with concerns about climate change, water scarcity is going to become more and more important. And you use a lot of  water when making beer. And I'm just wondering, what are you doing to sort of mitigate maybe the impacts of water scarcity to protect the water supply around the world?

Jan-Willem Vosmeer: Yes. It's indeed what you say, 95% of beer is  water and we use water for producing beers. But we, of course, also use water for growing the raw materials, for growing barley, for hops, et cetera. And so it's actually quite natural for us as a company, and I think  that counts also for a lot of other beverage companies that water is already on our radar for a very long time. I think our first environmental report was already in 1998. And in that report, we already talked about water and taking care of water next to taking care of energy.

I think what we learned throughout the years is that you can focus  a lot on your  own water efficiency. But if you really want to make an impact, you need to look beyond the fences of your brewery. And that is also where our current water strategy is built on. So we have that, let me say, overall Brew a Better World strategy. It is quite a holistic strategy where we focus not only on our environmental but also on the social part and on the responsible part, specifically responsible consumption. And in the environmental part, we set as 1 of the 3 ambition pillars that we want to support healthy watersheds.

So for that, we have a strategy where we have 3 core elements. It's a kind of a triangle which all work together, specifically for breweries that are in water-stressed areas. So one thing is, of course, water efficiency. And we always try to become more and more water efficient, but it is not enough. So we also said, "Okay, for all the breweries in water-stressed areas, they need to maximize circularity."

And that means that more and more breweries in water-stressed areas are setting up water reclamation plants. And these plants are actually upcycling the wastewater up to drinking water quality again so that you can reuse it in your production process, not necessarily in the core brewing process, but for all the other supporting processes like cleaning or you could also reuse that treated wastewater in whatever level for other users outside the brewery. That is still a little bit in a very early phase.

But instead of bringing treated wastewater, because that's also one of the commitments, we want all our wastewater, having been treated, but rather bringing it back into the river, for instance, which ultimately will end up in the sea, you could also reuse the treated wastewater for other users like farmers or industry that is nearby your brewery, for instance, a paper factory.

Jennifer Laidlaw: Jan-Willem then described to me the third part of Heineken's plan in managing water stress, which he calls water balancing. He explains what that means and how it works.

Jan-Willem Vosmeer: Then the third element in the triangle is what we call water balancing. And we also said, for all those breweries in water-stressed areas, "You need to bring the water back into nature which is used in the product itself." The water goes into -- it goes to the consumer, so it leaves the local watershed. We say, "Okay, you need to balance that water. You need to bring it back in that same watershed."

You can do that through, for instance, nature-based solutions. Think about reforestation or think about restoring wetlands or think about restoring lagoons. It is very contextual. So you need to find out, "Okay, what is needed in that area to restore nature?"

It could also be what we call gray infrastructure. So for instance, water pipelines. That infrastructure, most of the times, have leakages, which is a very normal thing, but you can leak so much water that actually it totally makes sense to repair that. So we did that, for instance, we helped a water company in Egypt with that.

So -- and through certain science-based calculations, you can calculate, "Okay, how much water is being saved by these interventions?" And we would like to go to that 100% and even more than 100% water balancings.

Jennifer Laidlaw: Heineken, you are like all over the world. You work in Asia, Africa, all over the place, basically. And I just wondered, how do you approach sustainability in different geographies in terms of sustainable agriculture? Do you have any specific examples of how you work maybe differently in different regions?

Jan-Willem Vosmeer: Yes, it's a good point. Well, there's, of course, the difference between selling our products and producing our products. If I look at the Heineken brand, it's sold in more than 190 countries. There are almost no countries where you can't find the Heineken brand, but we produce in around 70 countries, and it's indeed spread out all over the world, as you said.

If I look at our sustainability agenda, our sustainability strategy is, in essence, in terms of commitments, quite a global agenda, but there is a local take-up. We just discussed water. Water is -- we do have the global targets, as I just mentioned, but it is very local, it's very contextual. So whenever you have actions you take in Mexico, it will not solve problems in Indonesia.

For the CO2 agenda, it's a little bit different because CO2 is a global agenda. And there, we now focus in our journey on our bigger OpCos. Because the bigger the market than the OpCo is, the bigger the impact you can have on the CO2 outcomes and the reduction of CO2 if you compare that to water, because water you need to localize those actions.

So global, very much,  CO2. Water, very local, very contextual. Yes, it depends  from topic to topic how you approach it. But of course, everything what we can do on  a global level we'll  do so. Everywhere, local context is more important or also entrepreneurship. Think about communities, social impact. There are global targets, but there is a lot more flexibility for our local OpCos and colleagues to set up local partnerships.

Jennifer Laidlaw: Jan-Willem also went on to explain how Heineken is seeking to reduce its carbon footprint in agricultural production.

Jan-Willem Vosmeer: Agriculture is a big portion of our carbon footprint, around 30%. We are now working together with our suppliers and farmers that are delivering to the suppliers to see, okay, what kind of actions we can take to reduce CO2 emissions in agriculture and also to increase carbon sequestration in the soil.

And it's very interesting. I've been in one of those pilot farming projects in France, it was 1 hour drive from Paris, where I've been meeting together with our procurement team with farmers who are using cover crops on their land. And normally, you have 2 seasons of harvest, harvesting barley. And in between, nothing is happening. But now they're experimenting to put all kinds  of  cover crops in between. And these cover crops will continue to lay on the ground. So they will sow it, but they will not remove it from the ground, and that actually can help increase the health of the soil. And hopefully, also on the longer term, that farmers can reduce the amount of fertilizer, for instance.

And we do this all kind of pilot programs with farmers around the world. We now have these programs running in 15 countries involving 300 farmers. We do see some very promising results in terms of carbon emission reduction and carbon sequestration. And hopefully, in the course of the years, we learn what is working in what region, what is not working in what region so that we can scale up these practices.

Jennifer Laidlaw: Now we've talked a lot about the “E”, and I just want to go sort of more into the social side of what Heineken does. And one of the things that you're looking at is like responsible drinking and how to address alcohol abuse, which does have social implications. I wondered, what kind of things are you doing to actually make drinking like more responsible?

Jan-Willem Vosmeer: Let me start with what I think is very interesting is where the business and sustainability really comes together because that's where you can really make impact and longevity. And that's the 0.0 agenda. Years ago, we launched Heineken 0.0. It was actually the first serious extension of the Heineken brand since Heineken was established more than 150 years ago. And it was immediately taken up. And now all these years later, Heineken 0.0 is being sold in over 100 markets.

Now that's, of course, nice to tell because it creates business opportunities. But also, it is really a foundation or it's becoming a foundation of our sustainability strategy. Because when we developed our 2030 strategy, we said we really want to give consumers always a choice. So wherever consumers come to buy a beer, in our opinion, they should have the choice between a regular beer and a 0.0 beer.

And the only thing to do that is to really invest in that category and to make it available. So one of the commitments in our strategy is that by 2023 already we want the majority of our markets having, at least for 2 strategic brands, a 0.0 variant available.

0.0 is one of the commitments using our brands to make moderate consumption aspirational. And our target is to spend every year at least 10% of the Heineken brand media budget for these responsible campaigns. And we want to reach at least 1 billion consumers every year. And last year, that was the first year, in 2021, we reached over 1 billion consumers, and we will continue to do that.

Next to that, we also want all our operating companies to have a partnership with NGOs or with governments or maybe multi-stakeholders to address harmful use in that local context. It could be linked to drunk driving. It could be linked to underaged drinking. That's very contextual, so we leave it up to the operating companies to come up with these ideas and partnerships.

And then, of course, you also have transparency towards consumers. We already started in 2015 with making our labels more transparent. And that was actually ahead of the industry, ahead of regulations. We thought that each and every consumer should know what's in their beer, what are the ingredients, what is the alcohol percentage.

Jennifer Laidlaw: Just was interested in a point that you made during the conference. You were talking about the beer industry being a very male-dominated industry. And what steps are you taking to get around that?

Jan-Willem Vosmeer: Yes, indeed. And also when I started a long time ago, I think it was in 2005 at Heineken, indeed, there were more males than females, specifically in senior management positions. In 2011, I think we were around 11%. That has doubled by 2021 to 23%, 24%, but we need to do much more.

So that's why we said, when we developed our 2030 strategy, "Okay, let's have under the social pillar a specific gender diversity target." So we want to go to 30% of females in senior management positions.

And I'm not talking only about, let me say, the executive team, but it's the whole group of senior managers below that. It's around 900 people. 30% by 2025, 40% by 2030. It's quite ambitious because you need to have time, you need to have a pipeline filled.

And only focusing on diversity is not enough. You really need to invest in the “I” of inclusion and diversity. Inclusion, this is very important, making sure that there is a climate that people feel safe to be themselves. It's not only about gender. It's about all kinds of elements of diversity. It could either be disability. It could be LGBTQ+. It could be age. It could be ethnicity.

And also here you see context plays a role. So the gender commitment is a global commitment and everyone is working on it, but it is also depending on local context, which other elements of diversity OpCos would like to focus on.

Jennifer Laidlaw: ESG is something that kind of goes right through the company. For example, I think you have targets as well for your management?

Jan-Willem Vosmeer: Yes. Good question. When we developed the 2030 strategy, we were also developing our business strategy. It's called EverGreen. And in EverGreen, actually, 1 of the 4 focus area of the balanced growth strategy is sustainability responsibility.

And you also now see it coming back into the remuneration package. It has just been approved by the Annual Shareholders Meeting, where we said, "Okay, 25% of the long-term remuneration package for senior managers should be related to sustainability, to our sustainability strategy."

And we have chosen 3 KPIs that could be related to everyone in the OpCos, the operating companies. It's, one, reducing CO2 emissions. Of course, very important because it's very much linked to our net- zero agenda. The second one is on water efficiency. We already talked about that, how important that topic is. And the third one is gender diversity. So the percentage of females, women in senior management positions. And these 3 KPIs together are 25% of long-term remuneration package for all senior managers, including our executive team and board, yes.

Jennifer Laidlaw: Okay. Is there anything else particularly that you wanted to add about Heineken and about your ESG commitments and objectives that we maybe haven't touched upon that you would like to talk about?

Jan-Willem Vosmeer: Yes. I think -- personally, I think it's important for any company and sustainability agenda is that, of course, there's a lot of focus on the environmental part. But for me, it's really always a holistic agenda. So the “S” of social is as important as the environmental part. And they are also interlinked. I do think that even the social part will become more and more important. That's why we also have included other targets like having a fair wage for all our employees, but also making sure that our third-party employees … [that are] part of our supply chain, also get a fair wage, equal pay for equal work, increasing local sourcing in Africa that will support small to farmers, making sure that each and every operating company have a social impact program in place. It is as important as the environmental part and the responsibility part. So if you look at our agenda, we have in total 22 commitments. It's not easy. It's quite challenging to have so many commitments, but you see that there is a lot of linkage between those commitments, and I fully believe in that holistic approach.

Jennifer Laidlaw: Yes. And I think we can't have the “E” without the “S”, they're like equally dependent on eachother like you were saying. So...

Jan-Willem Vosmeer: Yes, indeed. And also the governance part is important. And also, we are finding our way in that governance part, okay, what -- how can we approach it in the best and efficient way? What is the relationship between global, regional and the operating companies, what do we coordinate on the global level, what do we give more to the flexibility of the operations? But also, we have set up a sustainability responsibility committee at supervisory board level and at executive team level. So they come together, these twocommittees come together on a regular basis, which is a great addition of our sustainability plan because it really closes the loop.

Lindsey Hall: And Jen, it was really interesting how Jan Willem talked about taking a holistic approach to ESG with this idea that we can't take a siloed approach to sustainability. That's actually something I heard a lot of people talking about at the Paris event.

Jennifer Laidlaw: Yes, there seems to be a general consensus that a company's ESG approach needs to be embedded throughout its business strategy.

Esther Whieldon: Thanks, Dan, for taking the time to talk to us today. And for our listeners, we'll be sure to bring more on the sustainability plans of other corporations.

Lindsey Hall: Thanks so much for listening to this episode of ESG Insider and a special thanks to our producer, Kyle Canjelosi. Please be sure to subscribe to our podcast and sign up for our weekly newsletter, ESG Insider. See you next time.

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