Against a backdrop of declining consumption, trade hurdles and uncertainty, over the past year environmental sustainability might have taken a back seat in drinks industry boardrooms.

In recent weeks, Nestle’s recently installed CEO Philipp Navratil reportedly said the broader political environment was to blame for the company having gone quiet on sustainability.

In a video seen by The Financial Times of a company event in December, Navratil noted that though he should take some responsibility, it was “also President Trump’s fault”. He also said ESG was a topic that had become less important in investor meetings now compared to three or five years ago.

Reflecting on Nestle’s position, the chief executive stressed: “We have not stepped back from it but we have to talk about it more.”

The past 12 months have also seen some major drinks players scale back on ESG targets. Diageo, and PepsiCo are two big names in the sector that have tweaked their goals or the deadlines initially set for reaching them.

Announcing changes to its sustainability targets in August, Diageo said: “Climate resilience is complex and key systems like regulation, policy frameworks and infrastructure have not advanced at the scale required.”

One might see the revised targets as a sign of waning commitment at a corporate level to ESG but setting realistic goals are no simple feat and sometimes require significant shifts to happen both inside and outside the business in order for changes to occur.

Within this context, delegates came together at the Eco Drinks conference in London late last month, held by Just Drinks‘ sister events arm Arena International, to delve into a range of themes around environmental sustainability, including decarbonisation, regenerative agriculture and packaging circularity.

Tackling decarbonisation

Businesses across the drinks industry have, or are in the process of, setting targets to reach net zero emissions. But with deadlines being moved, targets being changed or scrapped altogether, it begs the question whether enough companies have set feasible goals.

One of the opening panels at Eco Drinks focused on the hurdles and opportunities that come with building a decarbonisation strategy.

For Tiphaine Aries, associate director at climate change consultancy The Carbon Trust, a company that sees success from a decarbonisation plan is one that can pinpoint the risks it has in its value chain, invest in solutions and support their suppliers.

“They’re the ones who are going to be better able to cope with economic changes, with severe weather, with changes in consumer behaviour. They’re also the ones that are going to be able to implement solutions before issues occur within the value chain”, she said.

“A lot of companies see identifying risk is not actually value creation or linked to value creation. But actually, if you do it really well and then you action in those really targeted areas, it can be an economic benefit as well as decarbonisation benefit.”

The companies that are seeing tangible benefits are the ones that have really capitalised low carbon as part of their brands

Tiphaine Aries, The Carbon Trust

Aries argued there was a commercial advantage to decarbonisation. “The companies that are seeing tangible benefits are the ones that have really capitalised low carbon as part of their brands,” she said, pointing to Diageo as an example. The business has used lightweighting for the packaging of some of its brands in a way that is “almost premiumising products that are lower carbon because they’re using less glass, less material”.

She added: “Those brands that are able to really connect that story to their consumers generally do see a commercial benefit.”

There’s a growing number of technologies and techniques available to producers to help them cut down on carbon emissions. Renewable energy sources, precision irrigation and alternatives fertilisers are all becoming more widely available. But, in establishing an achievable net-zero strategy, businesses are still facing multiple obstacles, especially around being able to afford the changes they need to make.

Reflecting on the situation in the UK, Dan Soper, sustainability policy manager at trade association The Food and Drink Federation, stressed government-funded support was hard for businesses to come by, pointing to the Industrial Energy Transformation Fund that was scrapped last year.

“There is very little by way of government incentives to decarbonise,” he said. “And on top of that the food and drinks sector has just been set fairly high targets to decarbonise under the climate change agreement (CCA).”

The voluntary CCA initiative lets producers in the UK receive a discount on a climate change levy tax, which is added to electricity and fuel bills, providing they meet specific targets on CO2 emissions and energy efficiency. A new CCA scheme was launched in January with the baseline year for targets being changed to 2022.

Soper said that updating the targets “is the right thing to do” but stressed “without the support for people to get there, the incentive to join those schemes is somewhat undermined”.

Sourcing sustainably

One part of the supply chain where drinks companies can lower their environmental impact is sourcing. This might be done through techniques like regenerative agriculture and technologies that can limit the impact of using specific ingredients or choosing an ingredient for its low-carbon properties.

Aries said that having larger players on board could help make it easier for other businesses in the sector to get involved.

“When you have big players like that starting to fund and implement some of these things, it really creates kind of momentum in the sector and helps also to bring cost down of technologies,” she said.

Soper at the FDF agreed. “Generally there’s probably a bit of a trend here where actually the bigger companies, because they do have deeper pockets and direct relationships with suppliers, will find it easier to make to take these actions,” he said.

French spirits giant Pernod Ricard is one business that has been investing in sourcing and backing suppliers to help them implement techniques like regenerative agriculture, with the goal of making their processes more environmentally friendly.

At the group’s whisky arm Chivas Brothers, one third of the group’s carbon footprint comes from the sourcing and processing of ingredients, Sandrine Ricard, director of sustainability and responsibility communications at Chivas Brothers and Pernod Ricard told the audience.

Incentivising farmers is one of the routes the business has taken to try and lower its carbon impact, Ricard said. Chivas has helped some of its farmers achieve FSA-certified goals. This, “means they have high standard ingredients where they manage the soil… crop covers, biodiversity”, she said.

“That’s one way we find ourselves to be conveners. Get them together. There’s nothing better than the ripple effect.”

But encouraging farmers to adopt new ways of working is not easy and some might be hesitant to take the risks associated with implementing new techniques or technologies.

The financial risk that farmers face in making changes is a major barrier to transitioning toward regenerative practices, Ricard said. “It’s a big economic risk for them to make that change. I was visiting a farm where one of the farmers was saying ‘Yes, we have to go through a little bit of a dip before things get much better.

“It’s how we accompany those farmers in terms of capital support… and to make them more comfortable.”

Regenerative agriculture: what’s the buzz?

Regenerative agriculture has become a trendy phrase in recent years. Larger drinks producers have been using the term more and more in their communications on ESG.

For some, the process is being incorporated into product development. In June, Carlsberg launched a beer called Grobund, brewed with 100% barley malt that it claims is “regeneratively grown”.

When it comes to how consumers associate the term, it seems they can’t quite make sense of the phrase just yet, according to Mandy Saven, head of the consumer insights team at Just Drinks’ sister trend forecasting business Stylus.

Under the FAO’s definition, regenerative agriculture refers to “holistic farming systems that, among other benefits, improve water and air quality, enhance ecosystem biodiversity, produce nutrient-dense food, and store carbon to help mitigate the effects of climate change”.

They are also farming processes that “work in harmony with nature, while also maintaining and improving economic viability”.

But there are plenty of other definitions out there, according to Saven, who added there’s still a while to go before the phrase chimes with consumers and significantly influences sales.

“It’s certainly nowhere where ‘organic’ is or even ‘clean label’ is; whatever that means, that’s quite a confusing thing as well. Consumers will generally think, ‘that’s something that sounds quite positive that I can buy into.’ They don’t really understand what it’s about,” she said.

While the phrase is starting to be used by some businesses in marketing claims, Saven argues it’s “few and far between” and typically in food categories as opposed to drinks, like snacking, or products that use wheat and flour.

Future formats

When discussing environmental sustainability in drinks, it would be remiss to leave out a mention of packaging.

One of the final sessions at Eco Drinks looked at how packaging formats might evolve and the challenges producers face when trying to adopt more sustainable options.

Circular packaging is a format the industry is being encouraged to move towards. In Europe, local soft drinks association UNESDA has a series of voluntary commitments in place for the industry in the EU, Switzerland, Norway and the UK, to help make packaging “fully circular” by 2030.

These commitments include ensuring PET bottles are made from 100% recycled and/or renewable PET and that over 90% of its packaging will be collected and that producers will use more refillable formats.

But circularity is not something that can be adopted overnight and it’s important the formats can deliver the expected quality and drinking experience consumers are after.

As Jack Gething, southern sales manager at UK distributor Mangrove explained, when it comes to making a spirit product more sustainable, quality isn’t necessarily something that consumers are prioritising right now when they’re deciding what drink to buy.

This equally applies to packaging. “If it affects financially or it affects people experientially, then it breaks down,” he said.

Looking further ahead, Gething said he expected packaging spirits in bulk would become “the norm” in multiple different formats” and that “single use is the main enemy”.

He added: “We will probably, I believe, move back to things like bag-in-box. Small, independent brands are doing it but, on a macro level, I think it will start becoming the norm, purely because financially, it saves on cost.”

For Canned Wine Group, as its name might suggest, the single-serve, canned format is a core part of its portfolio. And when it comes to what’s attracting consumers, it isn’t necessarily the level of sustainability of the packaging.

“When you come to the consumer level, the two drivers for canned wine at the moment are convenience and moderation,” co-founder Ben Franks said.

The business does focus on environmental sustainability but, as Franks noted, Canned Wine Group’s focus is on working “upstream” with suppliers around the production of the wine, as opposed to the canned packaging specifically.

“The sustainability [angle] is when your consumer is already engaged in purchasing small-format wine. Then we can deliver in can an argument that makes us better than a small glass bottle and looks better than a small plastic bottle because of plastic waste and the connotations around micro plastics, “Franks added.

“It gives us advantage in that segment but I don’t think people come to a canned wine category because it’s the recyclable, lower-carbon product.”

Aside from cans, Canned Wine Group is also looking to push an alternative format to bottled wine in the UK on-trade, through draught wines, which it sells to pubs in a keg format.  

The group launched its 20-litre kegs to the on-trade last year but, as Franks explored in an interview with Just Drinks last month, to make the keg system circular, it needs greater scale and, crucially, a distributor to support it and collect and refill the KeyKegs.

Speaking at Eco Drinks, Franks said: “At the moment, our leverage of wine and spirits into that dispense space is too low. It’s owned by beers and soft drinks. We either need one of the big distributors or one of the big names in our space to pull that trigger early and work with us, or we need to make it too big to ignore.”

Gething said Mangrove was also facing hurdles in pushing a similar circular distribution system for spirits in the on-trade.

The importer and distributor partnered with circular packaging maker EcoSpirits in 2020 to bring the format to London and other UK cities.

Several spirits majors have taken interest in the packaging supplier in recent years. In 2023, Pernod Ricard took a minority share of the group and the following year entered a five-year global licensing agreement to distribute its brands with EcoSpirits in the on-trade. Rémy Cointreau also took a minority stake in the packaging business the same year.

One challenge Gething said Mangrove has faced in adopting the packaging system was making sure stakeholders are all engaged and invested to the same level.

“If every single stakeholder in the journey is not aligned with what the vision is, things get left, things get broken,” he said.

“The issue we have is that there is a real status quo challenge around people not wanting to – especially now we are in difficult economic times – necessarily dig in their wallets. Having to pick up an eco-keg spirit as they’re picking up the beer kegs is an additional cost.”

He added: “The main cog that’s probably missing is the large national distribution companies, wholesalers. Unless there is real alignment in terms of what the next step before this bulk format looks like, the closed loop system will always struggle.”