The significance of ESG (Environmental, Social, and Governance) principles has never been more pronounced in modern craft distilling.
Not only is the spirits industry continuing to evolve and raise its standards, the need to do better is ever more apparent too.
If you are looking to shift the dial and implement positive change – you’ve come to the right place.
For craft distillers and new distillery start-ups, by embracing ESG and instigating it across the board, the impact you can make is huge. It can also help build far more resilient businesses as well.
This article serves as a practical guide to ESG, providing key areas for distilleries to focus on this year. Ask yourself the questions raised in it and see how many you can implement!
There are huge wins to gain from doing so. Whether you’re a small craft producer or a well-established brand, integrating ESG into your business model can lead to operational efficiencies, enhanced reputation, and a deeper connection with your consumers and community.
Environment
The environmental aspect of ESG is one of the more obvious areas to address within distilling operations. It’s easy to understand what can be done, even though, it’s more of a challenge to implement that in real life.
That said, by focusing on the following areas, distilleries and spirit brands can significantly reduce their environmental impact. They apply almost universally across all sized operations and are quite simple to breakdown into manageable steps towards change.
Ask yourself these questions to get started…
Sustainable sourcing of ingredients
Could you switch to sourcing raw materials that are produced more locally to you? Could you switch to a supplier that implements organic and / or more sustainable farming?
By sourcing grains, fruits, and other ingredients locally, distilleries can reduce transportation emissions and support local agriculture. Using ingredients from organic or sustainable farming practices reduces the environmental impact of pesticides and fertilizers.
Energy efficiency and renewable energy
Could you replace equipment with something more energy-efficient? Can you switch your energy supply to a renewable source?
Investing in modern, energy-efficient distillation equipment can significantly reduce energy consumption. Meanwhile, using solar, wind, or biomass for energy needs can drastically cut down on a distillery’s carbon footprint.
Water & waste management
Could you reduce your water use? Could you implement a better wastewater treatment system?
Implementing water-efficient practices in production, such as reusing water for cooling systems leads to massive savings. Closed loop systems to feed the condenser, or entirely passive systems based on using bulk storage and natural heat radiation can save money and environmental costs.
Meanwhile proper treatment and recycling of wastewater to minimise environmental impact and comply with regulations is standard. Take it one step further – look to make your waste into a positive. If you have space, build natural irrigation systems and boost local wildlife habitats.
Spent grains can be repurposed as animal feed or compost. So can botanicals, bagasse and so many other by-products. What are you doing with yours?
It’s not just about the waste you are creating however. It’s also about what you are sending down the chain. Using recycled or biodegradable materials for packaging (and reducing unnecessary packaging materials) is a must.
Green building practices & biodiversity preservation
Ask yourself how eco-friendly your distillery design is. Could you improve it?
Constructing or retrofitting distillery buildings with sustainable materials, efficient insulation, and green technologies like solar panels can lead to big environmental gains.
Go beyond your own building footprint and consider land stewardship. Preserve and enhance biodiversity around the distillery by planting native plant species or creating wildlife habitats. Tap into the community projects around you and see how you can help.
Carbon footprint reduction
Have you reduced transportation as much as possible?
Optimising distribution to reduce emissions, such as using electric or hybrid delivery vehicles can be a good way to improve your emissions score. Consolidated shipments, reducing weight of packaging etc. are other factors to look into.
Look at both what comes in and what’s being dispatched.
Last but not least – look into carbon offsetting. Once you’ve exhausted all the ways to avoid, reduce and recycle, why not offset the rest? You could invest in projects that offset carbon emissions, like reforestation or renewable energy projects.
The social aspect of ESG for distilleries and spirit brands involves a focus on relationships with employees, customers, and the wider community.
By implementing social initiatives, distilleries and spirit brands can strengthen their impact, and better contribute to the well-being of their employees, local communities, and customers.
This approach not only fosters a positive brand image but also builds a loyal customer base and a dedicated workforce. Here are some specific actions and areas of impact…
Employee wellbeing and development
Ensuring fair wages, reasonable working hours, and safe working conditions is a good place to start. It’s so simple. What are your fair labour practices as an employer and have you implemented them effectively?
Training and education is another easy win. Offer professional development opportunities, including training in sustainable practices. When was the last time you put the entire team through training? (P.S. we have Courses that might be of interest!)
If it’s not something you want to source externally, an easy way is to implement cross team training. Distillers could teach the marketing team parts of their job and vis versa. Not only are such schemes good for learning and building leadership, it helps open dialogues and create a better understanding of how a craft operation works. It unites everyone.
Diversity and inclusion policies are mandatory, but how are you taking it one step further? Look at how you are promoting a diverse and inclusive workplace culture, with equal opportunities for all employees. It is always possible to find ways to do better.
Have you ensured that everyone is up to date with best practice around workplace safety?
Adhering to high standards of health and safety in the workplace, particularly in the fermentation and distillation process triggers so many other benefits. Efficiency goes up, errors and the cost of mistakes goes down. It literally pays to do the right thing.
Are you going beyond the physical? Try and provide mental health support through resources and support. Team building, coaching and activity days can go a long way in fostering a better workplace for all.
Community engagement and support
Could you find ways to support local businesses? Partnering with local suppliers and businesses for services and goods can boost the local economy. It’s a direct way to make an impact around your operation and in time, you will feel that tangible connection improves almost every aspect of what you do.
Are you taking part in community projects and charitable activities?
Engage in or sponsor community projects, like educational initiatives or environmental clean-ups. Support local charities or causes, particularly those related to social welfare, education, or environmental preservation.
“Supporting” doesn’t have to be a financial donation either – you could host cultural events that align with the brand’s ethos and local traditions.
Responsible marketing and consumer engagement
How are you actively promoting responsible consumption? Educate consumers about responsible drinking habits and the social impact of alcohol. Drink less but better is a good mantra, but how are you bringing that to life through campaigns?
How transparent are you being in your comms?
Be open about production processes, sourcing, and the company’s social and environmental impact. What is preventing you publishing gender pay gap reports, carbon scores etc.
Seek customer feedback. Actively seeking and responding to customer feedback, fostering a sense of community and belonging is an important part of ESG. Think about ways you could do this better.
ESG part three – Governance
The governance aspect of ESG ensures that distilleries operate not only legally and efficiently but also ethically and responsibly.
For spirit brands, it typically involves focusing on the internal policies, practices, and ethical standards that guide the company’s operations. Here are specific actions and areas of impact…
Ethical business practices
What anti-corruption policies do you have in place?
Implement strict policies against bribery and corruption, ensuring all business dealings are transparent and fair. You’d be surprised by what could be construed as bribery too and that a lot of hospitality goes close to the line in this area…
How are you delivering transparent financial reporting? Maintain accurate and transparent financial records, allowing for accountability and integrity in financial dealings.
Do you have a supplier code of conduct? Do you lay out your expectations of suppliers at any point? Requiring suppliers to adhere to ethical and environmental standards is a key part of ESG. Understanding the role you play can foster a better supply chain.
Have you conducted audits and assessments of your suppliers? Don’t just take their word for it, conduct regular audits of your suppliers to ensure compliance with the standards you have set out.
Compliance with laws and regulations
Adherence to industry regulations is an obvious part of good governance. Strictly following all legal requirements related to alcohol production, distribution and marketing requires evolving alongside new mandates. Are you up to date on what they are in your area?
Take environmental compliance for example, water companies, local government change their stance over the years. If you export to another country, they might have new requirements around bottle weight, paperwork, liquid documentation etc.
Good governance involves clear organisational structure and where suitable, strong board oversight. Establishing a knowledgeable and diverse board of directors to oversee and guide the company’s strategic direction can be a huge positive for many companies.
Yes, it surrenders control, but it also allows decision making to always be considered from a wide angle, as opposed to from those on the coal face. It allows for big thinking rather than reactive thinking and going with instinct – which will only get a distillery so far.
Risk management
Have you carried out a comprehensive risk assessment in the past 18 months? You should be regularly assessing operational, financial and reputational risks, as well as implementing strategies to mitigate them.
Have you got crisis management plans in place?
You should have robust plans in place to deal with potential crises, such as fires, contamination or product recalls, cyber hacks and more. It sounds like a lot of work to do for an unlikely event. It sounds like a lot to be doing around planning for the worst instead of planning for the best.
But the process is useful in that by acknowledging the risks and planning for it, you are far more likely to never have to deal with it occurring. Namely, as most plans tend to show ways to mitigate it in the first place…
Diversity and inclusion in leadership
Have you got diverse representation in your distillery leadership team? Do you implement an inclusive decision-making process?
Ensuring diversity in leadership positions, reflecting different genders, ethnicities, and backgrounds is key to any well governed distillery. Try and encourage inclusive decision-making processes that consider a wide range of perspectives before taking a vote on what to do.
Once done – stakeholder engagement via regular communication is the last step of that process. Keep open lines of communication with stakeholders, including employees, investors, customers and the community.
The ideal journey for big decisions is to solicit opinions and perspectives, discuss them as a leadership group, make a call on what to do and then feed that back openly to all explaining why the course of action is taking place.
This can apply to trivial things specific to certain parts of the operation, to big decisions that impact all. Feedback loops are part of good governance.
Last but not least in this ESG round up is Corporate Social Responsibility (CSR) initiatives. Have you got a CSR programme in place? Develop and implement CSR initiatives that align with the company’s values and contribute to societal goals. They tend to pay back far more than they cost in a multitude of ways.
Embracing change
Embracing Environmental, Social, and Governance (ESG) principles is a vital step for distilleries and spirit brands of all sizes.
As we’ve explored, ESG is not merely a trend nor a single action. It is a comprehensive approach that shapes the future of sustainable and responsible business practices in the spirits industry.
From adopting environmentally friendly production methods and enhancing community engagement to ensuring ethical governance and inclusive workplaces, the impact of these actions goes beyond compliance. They foster a culture of conscientiousness, innovation, and long-term thinking.
As distillers, the journey towards integrating ESG into your business model is both a responsibility and an opportunity.
It’s an invitation to rethink and reshape practices, ensuring that your operations not only thrive but also positively impact the world around you. By taking small yet significant steps today, you are paving the way for a more sustainable, equitable, and resilient future.
