Sustainability Risks & Opportunities for Alcohol Companies - McDermott

Key Takeaways | Going Green: Environmental and Sustainability Risks and Opportunities for Alcohol Companies


In this recent webinar, Alva Mather, Jacob Hollinger, Carl Fleming and Parker Lee guided attendees through the unique energy-related challenges and opportunities for alcoholic beverages companies presented by current megatrends relating to environmental, social and governance (ESG), carbon and sustainability.

Below are the key takeaways from the discussion:

  1. Sustainability Trends: Climate change regulation, ESG-driven investing and plastics regulation will continue to be major trends. The alcoholic beverages industry is likely well-positioned with respect to plastics regulation, given that most alcoholic beverages are not packaged in plastic. Climate change regulation and ESG-driven investing may also present unique opportunities for the industry.
  2. Related Trapdoor Risks: The sustainability trends present opportunities, but also trapdoor risks, including:
    1. New climate change disclosure requirements: When reporting emissions, entities need to be mindful that different government agencies have different reporting rules and methodologies. Regulated entities may get caught up in the friction of those rules (such as differences between Securities and Exchange Commission (SEC) rules and US Environmental Protection Agency (EPA) rules) if they’re not careful. Regulated entities should be transparent about which regime they are reporting under to mitigate that friction.
    2. Claims about sustainability: There may be increasing government scrutiny of company statements about sustainability, such as claims that a company is “carbon neutral.” The scrutiny could come not just from the Food and Drug Administration (FDA) or Federal Trade Commission (FTC) but also from other agencies such as the SEC. Generally speaking, companies making such claims are better off making the claims as precise as possible and ensuring that they have factual support as backup for each claim.
    3. Carbon and Renewable Energy Credit programs: Each credit program has different types of opportunities and different risks; there is no uniformity in programs. Entities need to weigh the options carefully as they get into this space.
    4. Enforcement regimes: Companies should be mindful that there are in essence two different enforcement regimes for sustainability-related matters: government enforcement and public scrutiny from consumer and/or environmental advocacy organizations. With respect to government enforcement matters, it can be helpful to remember that while government agencies typically have very broad information-gathering authority, the scope of their enforcement authority is often much more limited.
  3. Sustainability Opportunities Across the Alcohol and Other Industries: Outside of the alcohol industry, most leading tech companies, Fortune 500 companies and other corporations are focusing on sustainability. This is influencing some of the top companies in the alcohol industry to follow suit, making the following tasks a priority:
    1. Set corporate net-zero goals;
    2. Agree to meet the United Nations Sustainable Development Goals;
    3. Determine the need to reduce and/or stabilize input (energy) pricing; and
    4. Decide to install renewable energy projects or make energy efficiency upgrades to plants.

    Many of these companies have been achieving these goals over the past decade via procurement of “green energy” from clean energy projects. Some immediate opportunities for the alcohol industry include corporate power purchase agreements (PPAs), which allow for the procurement of clean energy and stable costs for energy, the largest input for many alcohol companies.

  4. New Tax Opportunities Under the Inflation Reduction Act of 2023: For the first time, the Inflation Reduction Act and its new federal tax credit transferability feature will allow corporations to buy federal tax credits from clean energy projects. This gives corporations the opportunity to both reduce their federal tax liability (as far as three years back and 10 years forward) and achieve their ESG objectives via extremely simplified structures.
  5. Case Study: Beam Suntory’s Renewable Energy-Powered Jim Beam Expansion: McDermott represented Beam Suntory Inc., a world leader in premium spirits and producer of Jim Beam® bourbon, in the execution of a Renewable Energy Services Agreement with 3Rivers Energy Partners for the development of a $400 million renewable energy expansion. As a result of this agreement, Beam Suntory will build a facility across the street from the Booker Noe distillery, Jim Beam’s largest Kentucky distillery, to convert spent stillage into biogas. The biogas development project will use still from the whiskey distillery process as feedstock to produce renewable natural gas, which will then power the expanded distillery and assist Beam Suntory in achieving its goal to cut its company-wide greenhouse gas emission and water usage in half by 2030.

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