Budweiser Brewing Company APAC Limited (1876) Earnings Call Transcript & Summary

Welcome to Budweiser Brewing Company APAC Limited Bud APAC ESG webcast. Hosting the webcast today from Bud APAC are Mr. Jan Craps, Chief Executive Officer and Co-Chair of the Board; Mr. Ignacio Lares, Chief Financial Officer; Mr. YanJun Cheng (YJ), Chief Supply and Logistics Officer; Mr. Craig Katerberg, Chief Legal and Corporate Affairs Officer; Ms. Linda Qian, Chief People Officer; and Mr. Jan Clysner, Vice President of Sustainability and Procurement. Materials of this webcast can be found on Bud APAC website at www.budweiserapac.com under the Investor tab on the Results & Presentation page. Throughout the webcast, you may submit your questions in the Q&A box on the webcast screen. Before proceeding, we would like to remind you that some of the information provided during this webcast, including our answers to your questions, may contain statements of future expectations and other forward-looking statements. These expectations are based on management's current views and assumptions and involve known and unknown risks, uncertainties and other factors beyond our control. Please refer to Slide 3 of this presentation for the full disclaimer. It is now my pleasure to turn the conference over to Mr. Jan Craps. Sir, you may begin.

Thank you, [ Em ]. Good morning, good afternoon, everyone. I hope you're all safe and well. Thank you for joining our Bud APAC's ESG webcast. As you might have read in our 2021 ESG report published on the 25th of March, we further developed our disclosure framework and methodology last year, disclosing over 400 data points to offer a comprehensive picture of our ESG work. Today, I want to take this opportunity to walk you through our 2021 ESG highlights as well as the vision and initiatives we have planned for this year. I will be joined by the other members of Bud APAC's ESG Committee. This is the third year we hold an ESG webcast, and we are excited for the opportunity to discuss with you in a transparent manner about the material topics most contingent for the beer industry and share some reflections on our ESG journey. I would like to encourage you all to submit your questions, and we will answer as many as we can today. If not, my colleagues will reach out to you to follow up accordingly. Now let's begin with a brief introduction to Bud APAC. Bud APAC is a Pan-Asian Brewing Champion and part of the AB InBev Group. We are the largest beer company in Asia Pacific, operating in over 35 countries and territories. We continue to grow and have a regional footprint of 48 breweries and 51 distribution centers across our principal markets such as China, South Korea, India and Vietnam. A major milestone in our journey, we publicly listed our shares in Hong Kong on the 30th of September 2019, with a stock code of 1876, which commemorated the year the very first Budweiser was brewed. Today, we are well positioned for long-term growth and competitiveness, thanks to our portfolio of more than 50 brands as well as our operational efficiencies, scale, state-of-the-art facilities, powerful route to market and our people. We have more than 26,000 talented colleagues of 24 nationalities, 41% of them are female, assuming important roles across different functions and markets. Reflecting on 2021, I'm deeply inspired by the resilience of our communities across the region through the pandemic situation, despite which we continue to make solid progress and achieve strong results. Commercially, we delivered double-digit top and bottom-line growth and increased our market share in the major countries we operate, thanks to the success of our strategy and the agility and resilience of our colleagues and partners. Last year, we brewed and sold around 88 million hectoliters of beer and beverages. We generated a total revenue of USD 6.8 billion and normalized EBITDA of USD 2.1 billion, which represent a 15% and 27% year-on-year increase, respectively. Our purpose, we dream big to create a future with more cheers, reflects our top principles of always dreaming big. It is not only in our culture and heritage, but also a part of our future. The future that we can look forward to, the future where we create [indiscernible] in new ways, a future where we continue to provide opportunities for our people, support our communities and generate a positive impact. The future that everyone can feel a part of, celebrate and share, the future with more cheers. Our purpose is supported by our 10 principles based on Dream-People-Culture, where the first and most crucial principle is our Bud APAC dream, which is to be the most loved high-quality growth leader in beverage. As Asia's largest beer company, our ambition to lead and grow the beer category is reinforced by our strong belief and commitments to enabling a sustainable and inclusive future. I am proud of our ESG performance last year, none of which would be possible without our dedicated colleagues. Let me share some of our achievements. We are committed to transparency in disclosing our efforts as we align our performance metrics across key ESG ratings, including MSCI, Sustainalytics, DJSI and CDP. Last year, MSCI raised our ESG rating to A, acknowledging our efforts on the environment, governance, supplier engagement and product safety. Benchmarking our performance against key industry indices means that we see our ESG journey with increasing focus and clarity. We are proud to have an MSCI ESG rating improvement each year since our Hong Kong public listing in 2019. Additionally, Sustainalytics continue to rate us as low risk. Last year was the first time we participated in the CDP climate change and water security questionnaires. I'm happy that CDP recognized our performance as being among the leaders in the industry. Furthermore, we were included in the Dow Jones Sustainability Asia Pacific Index as the only constituent in the consumer-packaged goods sector last year. This recognition is a testament to our efforts to integrate sustainability into our business strategy so that we can most efficiently address social and environmental priorities across our value chain. We take parts in the science-based targets initiative to set our greenhouse gas reduction targets in line with the 1.5-degree pathway, demonstrating our commitment to mitigating the impacts of climate change. We are one of the few Hong Kong listed companies to disclose our Scope 3 emission with the breakdown of each activity. We are dedicated to providing meaningful disclosure on our business and ESG material topics. Our 2021 ESG report has been prepared according to the Global Reporting Initiative Standards: Core Option and United Nations Global Compact, adhering to the ESG reporting guide in Appendix 27 to the Hong Kong listing rules. Our ESG strategy, goals and programs come down to a simple vision. With our beliefs and values, our people and our commercial scale, we have a unique ability to create a future with more cheers, [ one ] we shared prosperity in the communities where we operate. This year, we elevated our existing ESG works to 8 ESG strategic priorities: smart drinking and moderation, climate, water stewardship, smart agriculture, circular packaging, entrepreneurship, ethics and transparency and diversity and inclusion. We believe these priorities are where we can drive the shared value for local communities and the planet under 3 cross-cutting themes. First, inclusive. For farmers, customers, suppliers to consumers, we strive to improve livelihoods and increase access to quality growth opportunities across our value chain. Second, natural. As a business that heavily relies on natural resources, we design our products with simple ingredients, nature-based solutions and healthy watersheds. Third, local. We champion local ecosystem development and focus on strengthening the economies and communities in which we operate. In addition, we will be amplifying our sustainability, entrepreneurship and diversity and inclusion initiatives this year as we see opportunities to lead and create value in our ecosystem across our value chain. We support the UN 2030 Agenda for Sustainable Development and strive to contribute directly to their goals to our 8 ESG strategic priorities. Our ESG ambition spans our entire value chain, working together with many key stakeholders. This gives you some idea about creating value from seed to sip. Now I will pass to Jan Clysner, VP of Sustainability and Procurement, to offer some highlights on our 2025 sustainability goals. Jan, over to you.

Many thanks, Jan. Last year, in 2021, through technological innovation and industry partnerships, we made substantial steps forward in achieving our 2025 sustainability goals for water stewardship, circular packaging, smart agriculture and climate action. Our 2025 sustainability goals are our most ambitious public commitments so far. Since March 2018, we have dedicated ourselves in creating real environmental and social impact and driving transformational change across the entire value chain. Knowing that no water, no beer, we've long pursued water-use efficiency and are very proud to lead the industry with our best-in-class water management practices. Last year, we lowered our water usage to 2.34 hectoliters per hectoliter of produced beer across our APAC breweries, representing a 22% decrease versus our 2017 baseline. Of course, we will continue to invest, not only in our breweries, but also in water availability and quality improvements for the communities with significant water stress. In India, our water program replenished 15.5 million hectoliters of water to our 5 high-risk areas by restoring ground and service water supplies, which is approximately 130% against our total water usage in the country. We collaborated with partners to implement community-linked integrated watershed programs to conserve and manage water resources, promote climate-smart sustainable agriculture and enhance clean drinking water and sanitation practices. We work closely with leading NGOs such as the International Crops Research Institute for the Semiarid Tropics, Let's Endorse and WaterAid to implement our on-the-ground actions. With reference to the World Resource Institute's Aqueduct tools and our internal custom-made water risk tool, we conduct a comprehensive water risk assessment to monitor water issues within our supply chain, including the areas where we source our agricultural commodities. Our Zero Liquid Discharge strategy in India aims to minimize our effluent by deploying state-of-the-art technologies. In China, we initiated the Community Water Replenishment program to reuse our reclaimed water in the community for greening and artificial lakes, improving the local ecosystem. Last year, we managed to return 19 million hectoliters of water to the community. In addition to relieving reliance on freshwater, this demonstrates the importance we place on enhancing the health and well-being of the environment and our surrounding communities. It is worth mentioning that our Nanning brewery in China began operating its new state-of-the-art recycling plant last year and that Nanning became the leader in water efficiency with 1.19 hectoliter per hectoliter, which ranks at #1 on both water and efficiency -- energy efficiency among more than 200 ABI breweries worldwide. It also set a new benchmark for the Chinese beer industry. As the world faces increasing resource scarcity, we're committed to improving the packaging material and eliminating waste. Our approach to packaging helps us reduce our impact on the world's limited resources [indiscernible] long-term financial cost benefits. We continue to make progress within circular packaging in 2021 at 65.1% of our total packaging volume was in returnable packaging or made from a majority of recycled content. 50.1% of our primary packaging was made of recycled content. For glass, the recycled content is 52.4%. And for cans, it is 18.3%. While used beverage cans were recycled and reused in China, they are not necessarily remade to become our cans. To increase the percentage of recycled content in our cans, we work with industry partners such as the food fermentation industry and others in the collecting and recycling chain. Within that chain, we build a [ closed-loop ] solution for [ UBC ] and thus enable can-to-can recycling. We continue to push ourselves to do better. In China, our Taizhou brewery became the first zero-waste brewery in APAC, which shows our ability to strike a good balance between environmental and economic benefits. Our threefold zero-waste approach emphasizes the reuse of water, intermediate products and effluent. In addition, leveraging the influence of our iconic brand, Corona, Bud APAC launched [indiscernible] project to protect the ocean biodiversity by reducing plastic waste, first in China and we will roll out across APAC. Aiming to cultivate Corona to be the first plastic-free beer, our company pledges to recycle 145 tons of plastic waste from the ocean by the end of this year. A vital part of growing Bud APAC's business sustainably for the next 100-plus years is to preserve critical ecosystem services and the availability of raw materials and natural resources such as barley, hops and other raw materials as our production and operation rely heavily on them. Last year, approximately 5,000 farmers in APAC benefited from our smart agriculture program, 4,000 in China and 1,000 in India. In China, we have 20 years of experience with specific focus on domestic barley breeding, the first and only beer company in China to do so. We're working with Jiangsu Nongken, one of our strategic malt suppliers, to support domestic barley. Last year, we purchased over 25,000 tons of domestic barley, which benefited over 4,000 farmers and their families. In India, 100% of our farmers were skilled, meaning the farmers have access to suitable barley varieties and technical training. 100% of our farmers were connected, meaning we are regularly in touch with them to share best practices and 99% were financially empowered, which means we help them to grow their business for the long term and ensure they have the financial tools they need so they can improve their livelihood and long-term sustainability. Each year, large quantities of high-end aromatic hops are imported to grow our beers in China. Together with a local partner, we managed to grow flavorful cascade hops in an indoor farm. It is the first time hops are growth indoor at this scale. The indoor hop growing helps us to save cost, to ensure consistent supply and shortens our supply chain. Doing so, we used 80% less water, 90% less land and 95% less shipping fuel. I'm very excited to share that amongst our many significant achievements in 2021, 13 of our breweries across APAC installed solar panels, which further convert our energy supply to renewable sources. In South Korea, we're pioneers in renewable energy. All 3 of our breweries in the country have started the installation of rooftop solar panels. These installations are the first at this scale nationwide. Looking at our market as a whole, we also have made significant process on our 2025 sustainability goals. 25.6% of our purchased electricity was powered by renewable sources. GHG emissions was reduced by 15.5% across the entire value chain and by 38% within our own operations compared to their respective baselines. By deploying EV heavy trucks and a smart power storage system in our Foshan brewery, we created an innovative closed-loop model that will recycle retired EV batteries to store green power from renewable sources. The charts on the right show our significant process. Overall, our goal is to reduce Scope 1 and 2 GHG emissions by 35% by 2025. It is worth mentioning that we have reached the 35% reduction of Scope 1 and 2 already, 4 years ahead of target. By 2025, we also aim to reduce our Scope 1, 2 and 3 emissions across our value chain by 25%. As you can see, the energy intensity of our operations has decreased, which is also alignment with our 2025 target. And of course, the success of our business is ultimately rooted in the communities in which we live and work. As we collectively face more challenging environmental and social issues globally, our business must support innovators and entrepreneurs to develop solutions and build a sustainable future more swiftly. It is only through collaboration and sustainability that we can solve problems. So we look for partners who can deliver breakthrough advancements to our 100-plus accelerated program and our APAC Procurement & Sustainability Innovation Hub. As 2025 draws closer, many have asked what our vision and goals are beyond. As part of our commitment to driving decarbonization and building climate resilience to our 2025 sustainability goals, we are proud to announce our ambition to achieve net zero across our value chain by 2040. We've been mapping our Scope 1 and 2 emissions since 2017, and we're the first to do so in the China beer industry. Now we're in the process of supporting our strategic partners [indiscernible]. We're leveraging our track record of carbon footprint calculation and our know-how to support the China Industrial Association and research institutions to set relevant standards. Now let me stop here and hand over to YJ, who will give some highlights on what we have accomplished, how we are achieving carbon neutrality and how we partner with our supply chain. YJ, over to you.

Thank you, Jan. Our natural is one of our most important initiatives we are leading across our supply chain. Our Wuhan brewery was certified as the first carbon neutral brewery in China and ABI globally. We continuously take action to reduce Scope 1 and 2 emissions year-over-year in the past 10 years. Here are some examples. Our energy consultant takes the lead in China beer industry and also benchmark [indiscernible] globally. Starting from 2015, we have invested biomass boiler to eliminate the use of natural gas in our breweries. Meanwhile, we also committed to use 100% renewable electricity by 2025. Besides Wuhan, our Ziyang and Kunming breweries also have achieved RE100 last year. In China, we also worked with our downstream partners like transportation company, wholesalers through our [indiscernible] program to reduce Scope 3 emissions as well. In 2021, we developed 335 green vehicles, including 30 electric heavy trucks and 5 hydrogen-powered trucks as part of our green logistic strategy. Starting from last year, we started our climate action journey to our upstream suppliers through our Supplier Strategic Allianz program. We coached our suppliers to implement [indiscernible] methodology and share their best practice with them to help them reduce their energy consumption. We also partnered with our suppliers to support renewable energy strategy. Huaxing Group, our largest glass supplier and a steady partner, they are installing solar panels to reduce their carbon emission as well. We have not only taken action to reduce Scope 1 and 2 emissions in our breweries, but also work with our up-, downstream partner to reduce our Scope 3 emission as well. This is all from me on climate actions. I will now pass to Ignacio, our Chief Financial Officer, to talk about our green financial loan. Ignacio, over to you.

Thank you, YJ. It's great to hear the boldness of our commitments to water stewardship, to circular packaging, to smart agriculture and to climate action. However, and as we well know, one of the defining characteristics is the way in which we tie our financial results as well as the compensation of our leaders and their teams to doing what we say we will do. On that note, we have for some time now already extensively cascaded individual targets linked to the achievement of these metrics. In 2021, we took this a step further. In July of last year, we announced a successful signing with a bank consortium of USD 500 million of sustainability-linked revolving credit facilities, also known as the green financing loan. This loan was one of the largest deals among publicly listed consumer goods companies in Asia Pacific. The green financing loan has a 3-year term with a tiered discount on the interest rate if we achieve predetermined ESG targets, which incentivizes improvement in 4 key performance areas contributing to our 2025 sustainability goals. The loan showcases our ability to drive incremental value for our shareholders as we deliver on our sustainability commitments as well as highlighting the appetite for such financial instruments in the region and serving as the invitation to others to do the same. Given the importance of transparency in this endeavor, we ensure an independent assessment of our green financing of all KPIs, which are reviewed by PwC as part of an annual process culminating in the publishing of our 2021 ESG report. In this vein, we will continue to look for new opportunities to leverage capital instruments to show them making our communities greener and our people healthier is not only the right thing to do, but also a great business. I'll now hand it over to Linda Qian, our Chief People Officer, to share with you how we operate to ensure our communities and people thrive with us. Linda, over to you.

Thank you, Ignacio, for the high-level update on our green financing loans. Now let me walk you through the work we have been doing in our communities as we continue to [indiscernible] inclusion and diversity. We believe that drinking beer should be a positive experience. We have engaged with multiple stakeholders to achieve our Smart Drinking goals and develop a program tailored in the different local contexts since 2008, the first in China to do so. We aim to improve both social norms and individual behaviors to reduce harmful use of alcohol across our market. [indiscernible] through dedicated social marketing campaigns and a relative program, we built an international partnership with International Alliance for Responsible Drinking and supported global standards for online alcohol sales and delivery. Through this partnership, we aim to raise standards in alcohol e-commerce to prevent sales to minimize and reduce harmful drinking. In South Korea, we had the Show ID campaign to raise awareness about preventing illegal drinking among teenagers. As part of the campaign, we distribute promotional materials and encourage restaurants to check customer's IDs if they order alcoholic beverages. Our Korea [indiscernible] OBC reached out to the target audience to distribute educational materials to prevent underage drinking. We need to raise awareness of the dangers of drinking and driving. And our business advocates road safety through enormous initiatives to protect our consumers and communities. As we also have a significant operation of road transportation fleets, we promote road safety in our communities. Working with local partners help identify and implementing programs where they will be most effective. We evolved our previous one-day campaign into a Global Smart Drinking Week. The immersive week aimed to raise public awareness of dangers of drinking-driving and promote smart drinking. More than 10,000 of our colleagues in China participate in this event. We have currently partnered with the Korean Road Traffic Authority since 2016, promoting stricter road safety enforcement. During the 5th Award Ceremony for Dedicated Polices of Drunk-Driving Prevention to appreciate officers for their dedication to drink-driving elimination. We received a recognition award from the Korea Road Traffic Authority for our road safety programs' positive impact on the local community. Our non-alcohol beer and the low-alcohol beers aim to ensure non-alcohol [indiscernible] at least 20% of our total beer volumes by 2025. Our portfolio for this has more than 80 offerings for different consumer occasions such as [indiscernible] 0.0 and Cass 0.0. In addition, we placed a guidance label on all our beer products that are sold in our APAC market by the end of 2021. We are committed to contributing communities, building [indiscernible] business goals. For instance, we work together with our communities to represent our disasters and aim to be one of the first to provide essential aid such as clean drinking water. To that end, we have donated over 1.5 million cans of emergency drinking water to communities in need since 2015. Last year, we have had 33 events across 29 Hope Schools in China. I would like to thank our suppliers and our company's support during this difficult time as we go through the pandemic together. In China, more than 1,200 employees received the first company care package. Our private management team provide a Bud APAC food basket to our employees and families during the recent COVID-19 pandemic in Shanghai and other province in China. We believe that helps our community and volunteering is one of the best ways to create a future with more cheers. We have several initiatives in place to financially empower, upskill and connect the direct farmers who grow the ingredients used to beer -- brew our beer. In 2019, we launched the Budweiser China Lime Project in Anyue, Sichuan Province to stimulate the local economy. By the end of 2021, we have helped Anyue Lime to become available across China with sales exceeding 25,000 kilograms. In 2021, our employees also spent more than 73,000 hours volunteering in 171 events under various initiatives. Beer has been bringing people together for centuries, and we want to make sure this continues. We are building a business where people are at the core of our success and recognized as our greatest asset. We are happy to share that Bud APAC has been recognized as a Top Employer in China, India and South Korea by the Top Employer Institute for the company's excellence in delivering an outstanding employee experience in 2021. The direct correlation between diversity and financial performance is becoming more [indiscernible] in recent years. And we understand the fact women remain underrepresented in many regions and settings. But for us, promoting diversity and inclusion is not just a social impetus or a financial drive. It is a way to celebrate our people. We treat our colleagues fairly and equitably, regardless of gender, ethnicity, sexual orientation or any other characteristics that they have. As ever, our goal is to build a platform that empowers them to enrich their potential in their career and life. In April 2021, we've become the first publicly listed company in the beer sector in APAC to sign the Women's Empowerment Principles, a joint initiative between UN Global Impact (sic) [ Compact ] and UN Women. Becoming a signatory solidifies our commitment to empower and inspiring women in the workplace and society and [indiscernible] business environment where women can work, lead and excel in their career. We have 43% female representation leading Bud APAC Board, the highest among the Hong Kong listed companies according to Financial Times. Our workforce is 41.1% women overall with 31.8% female representation among our management. 33% of our new hires are women. It is important to demonstrate our commitment to do gender pay equity. We reinforce our commitment to [indiscernible] diversity and inclusion with a gender-neutral and based on the principles of meritocracy pay policy, we'll reach gender pay equity by the end of 2022. This is all from me on how Bud APAC works and generate value to our communities and how we promote diversity and inclusion. Now let me pass the floor to Craig Katerberg, our Chief Legal and Corporate Affairs Officer, to share some updates on Bud APAC's governance.

Thank you. Linda just mentioned our Board diversity and I'd like to share further details about our board composition. We're honored to have a reputable and experienced Board of Directors. Our Board consists of 7 Directors: 1 Executive Director, 3 Nonexecutive Directors and 3 Independent Nonexecutive Directors. We are committed to delivering strong Board governance and maximizing shareholder value, having a balanced yet diverse composition of skills and experience at the Board level brings a range of perspectives and insights, which enables the Board to discharge duties and responsibilities effectively. This also contributes to a sound decision-making process that considers all facets of the company's governance, strategy and long-term plans while supporting succession planning and development of the Board. Ethics and transparency are vital to how we operate our company and how we maintain trusted relationships with stakeholders. We're committed to upholding high standards of business ethics with honesty and integrity, creating a corporate culture that promotes fair business practices. We actively monitor Bud APAC's compliance with applicable laws and regulations to ensure that all business activities are ethical and legally compliant. We have dedicated ethics and compliance teams located in 4 markets to address relevant, locally specific issues. With direct oversight from senior management, our cross-functional ESG Committee, which makes up the webcast speakers today, supervises Bud APAC's overall ESG strategy and progress. Jan Craps, our CEO, chairs this ESG Committee, which is responsible for overseeing, planning and implementing initiatives related to our ESG journey and 5 of the direct reports of our CEO serve on the ESG Committee. Six of our chiefs have our compensation tied to the company's performance on ESG-related targets such as achieving our 2025 sustainability goals and other ESG-related targets. And 20 of our direct reports also have ESG-related targets, providing financial incentives to drive improvement in ESG performance. In addition, relevant employees at breweries and operational levels have specific annual targets and ESG drivers, which are also linked to their compensation. We have developed and implemented a set of policies and procedures to guide business decisions in a professional, fair and honest manner. Relevant departments and teams are responsible for reviewing these policies and updating them periodically. BrewRIGHT is our award-winning, state-of-the-art analytics platform for detecting and addressing compliance risks. We spent several years developing machine-learning technology that can identify risky business partners and potentially inappropriate payment such as third-party due diligence, which reviews vendor master lists; diligence accuracy, which helps attract vendors after the approval process; travel and entertainment comparisons in expense spending; and data pollution, which assesses quality of data across our enterprise-resource-planning systems. This is all from us, and I hope that we've given you a better understanding of our ESG performance. Thank you for your time today. We're ready to answer any questions you may have.

The floor is now open for questions. Please enter your question in the Q&A box on the webcast screen. If you know who you would like to address your questions here, please state their names as well. Thank you.

Thank you, [ Em ]. So I see first questions coming in. Let me maybe take the first one. So we noticed your overall ESG rating improved in 2021. Could you share how you link the pay to your ESG performance and any metrics or model? So I can take this one. So actually, today, you met all our ESG Committee members, and they all introduced their specific responsible areas. So they all have specific ESG-related targets this year. And actually, when you look in the direct reports team, there is another 20 senior leaders who also carry specific ESG targets. So I actually believe we are probably one of the few Hong Kong listed companies to have our compensation linked to ESG performance initiatives and also disclose it. When you look down in the breweries, we have many colleagues who have specific targets, linking their annual appraisal and compensation with our sustainability growth. So these are targets like carbon emission, energy efficiency, water management, health and safety. So actually, when you look at the type of targets we set, they are all linked with the 8 ESG strategic priorities. They are the key metrics. So actually, you will find in our ESG reports various short-term and long-term goals that we disclosed for each of these priorities. So let me maybe go to the second question that came in. While we note Bud APAC's progress in cutting its own operations emissions, the Scope 3 emissions is still rising. When does Bud APAC expect its full scope, including Scope 3 greenhouse emissions, to peak? So let me maybe pass this question to YJ. YJ, can you take this one?

Sure. Thank you, Jan. To clarify the question, actually, our Scope 3 carbon emission percentage also decreased 12% versus the 2017 baseline year, although [indiscernible] slower by Scope 1 and 2 reductions. It's quite understandable we take more initiative for faster reduction in Scope 1 and 2 in our brewery first. We will further speed up Scope 3 reduction target. That's why we partner with our steady supplier, wholesaler and transportation partners to share our best practice and work together to develop carbon emission reduction plan across the entire value chain. All in all, we are leading and build one sustainable supply chain. Thanks for the question.

Thank you, YJ. Let me take the next question. So we note the company's commitment to biodiversity. In the meantime, any plans on commitments to deforestation? This sounds like a question for Jan Clysner. Jan, go ahead. Jan, can you take this question?

Sorry, Jan. Thank you. I'm happy to take this one. Well, we definitely have a strong commitment to biodiversity. And I'd like to refer to our biodiversity policy as well that we launched -- published last year. There is a clear link with biodiversity and water stewardship and smart agriculture; water stewardship, where we're focusing on quality and quantity of the water for our breweries but also for the communities; and smart agriculture, where we're actively working with our farmers to improve the soil health, which should increase both the quality and the yield of the crops. But we're not stopping there. A few other examples I have is in both China and Korea, we have 3 planting projects. For secondary packaging, more precisely for our folding cartons, we are pushing to use and to increase the FSC-certified paper, which is Forest Stewardship Council certified paper, to be more specific. But we're also working on our corrugated boxes. Since last year, we are using barley straw as one of the raw materials for our corrugated boxes. So together with Jiangsu Nongken, we develop local barley, we localize barley using that barley in the malt house, and the barley straw goes to the pulp mill, which then they use it as one of their raw materials for the boxes, which we then use to bring our products back to our consumers. Another one I already mentioned is Corona, of course, where we targeted to be the first plastic-free beer brands. And last but not least, I mean, we keep on looking for innovations and new technologies. And one technology is the one that YJ referred to is the biomass boiler that we implemented last year in Wuhan that helps us to considerably lower the emissions as well.

Thank you, Jan. Next question, I think, will be for Iggy. Are you TCFD ready? Iggy, I think that one is for you.

Sure, Jan. I can -- happy to take this one. Look, perhaps let me start with TCFD itself. We understand the Hong Kong Stock Exchange requires issues to begin reporting in a way that is aligned with the TCFD framework by 2025. We've actually already started to follow the framework as we illustrated in our 2021 ESG report, which should allow us to be ready for the current framework and any revisions in the future as well. Maybe to give you an example, we've leveraged our internal knowledge and the governance structure that we have in place for sustainability to map our climate-related risks, and we align these with a 1.5-degree pathway scenario. Finally, we're also working internally to develop financial disclosure models to further align with the TCFD framework. So thanks so much for the question.

Thank you, Iggy. Next one, I think, will be for Linda. That question is, can you elaborate on your initiative to reach gender pay equity? Is there any financial impact for the company? Linda, this one is for you.

Thank you, Jan. I would like to elaborate more on this topic. Bud APAC started to involve Mercer, an independent, world-class compensation specialist to tackling the gender pay gap. And the compensation difference was minus 3% for women in 2020. As the compensation differential in 2020, it was not that significant. So we have been executing our 3-year remediation plan to close the gender gap by targeting and improving our salary review process to prevent potential bias in our compensation division. Bud APAC are committed to reaching pay equity. We will further execute our 3-year plan to reach gender pay equity by the end of 2022. In addition to that, during the presentation, I mentioned that the direct correlation between diversity and financial performance has become more evident in recent years. Actually, believe gender neutral and the compensation [indiscernible] performance in different dimensions.

Thank you, Linda. Let me take next question is, for your sector, have you [ observed ] a shift in consumer behavior towards more sustainable products? If yes, do you expect this trend to continue, intensify or weaken? If not, do you expect the shift to occur in the short, medium or long term? How is your company positioning itself to gain from a potential shift towards more sustainable products? Maybe -- let me maybe give this one to Craig. Craig, can you answer this question, please?

Yes, definitely. Thanks, Jan, and thanks for the question. There's a lot in this question, but the short answer is yes. We are seeing that trend that consumers are generally preferring to buy eco-friendly products. And actually, the thing that's interesting about this is that consumer behavior that we're seeing across Asia Pacific. It's not like it's one market. So we've designed and offered carbon-neutral beers as one example. We constantly pursue water and energy efficiency projects. We're supporting farmers in improving their livelihood as Jan Clysner talked about, reducing carbon footprint in the value chain and then really applying technology, innovative technology when it comes to circular packaging. The thing about a lot of the work that we've been doing is that this is sustainable work that takes a long time. And we've been working together with strong government, nonprofit and other partners to really develop localized Smart Drinking and Road Safety campaigns across Asia. So one example in China, for example, right, has been that we've activated for the last 14 years around smart drinking and road safety. We also have voluntary guidance label. That's a project we have in Asia to share health information through packaging labels. And we really aim to improve alcohol literacy, including advice about how to avoid harmful consumption. And it's -- all of our products in Asia are using those guidance labels since last year. So we have quite -- we've also seen the trend in terms of non-alcoholic beverage market that's rapidly emerging and our portfolio actually includes more than 80 non-alcoholic and the alcoholic products. Some of those examples are Bud 0.0, Cass, Hoegaarden 0.0, but there's quite a few of them. And our no- and low-alcohol beer. We're aiming to actually have that represent 20% of our total beer volume by 2025. So a lot in that question. Thanks for the question.

Thanks, Craig. Because of the time, we have time for one last question. Thank you.

Okay. Thank you, [ Em ]. So then the last question that I see and the other ones, we will follow up the other -- the ESG team and IR team. For the last question we'll take on the webcast is, I think probably one for Jan Clysner. So we note the challenges in managing supply chain emissions and their sustainability practices. What's Bud APAC's plan for sustainable sourcing and managing the suppliers' ESG caliber. So over to you, Jan, for this one, please.

Thank you, Jan, and thank you for the question. Well, we have our Responsible Sourcing Policy, right? And it's one of our fundamental policies that we look at and is valid for all our suppliers. But we also have our SSA program, Strategic Supplier Allianz program, and YJ referred to it earlier on, is where we very closely work together with our key strategic suppliers. And this is a program, one of the key pillars in that program is sustainability. So through that program, through SSA, we're not only sharing our best practices, but we're also helping our suppliers to really build that baseline and then develop together with them an action plan to get to carbon neutral, to get to net zero. One example is the [indiscernible] Group, one of our key bottle manufacturers. And today, they are installing on more than 7 of their plants, solar panels. And it's through our support that they got this started and are really developing it very fast. So -- and that's where our SSA program is helping us not just to cascade our targets to our supply base, but to really help them build a baseline to really help them by sharing best practices and to really help them even by building an action plan going forward for the weeks and years to come.

Thank you, Jan. I think this concludes our Q&A session today. I would like to turn the conference over to Mr. Jan Craps for the closing remarks.

Thank you, [ Em ]. And thank you for all your questions. As I mentioned earlier, we appreciate the opportunity to have this conversation with you, and we look forward to future occasions where we can share more on our ESG journey. Again, I'm proud of our ESG achievements, and I would just like to add that our progress would not have been possible without every colleague's tenacity and dedication at Bud APAC. In 2022, this year, we can, and we will continue to do better in creating a sustainable and inclusive future with more cheers. Thank you very much. Stay safe and well. See you next time.

This concludes today's webcast. Please disconnect now. Thank you.