How Chivas Brothers balances long and short-term thinking to finance sustainability projects
EXCLUSIVE: Chivas Brothers’ chief financial officer Ed Fells explains how the whiskey business frames strategic environmental priorities and facilitates cross-functional working to finance the delivery of its ambitious sustainability goals.
Around 18 months ago, Chivas Brothers outlined plans to invest £60m through to 2026 on distillery equipment and processes that will enhance energy efficiency and reduce emissions. 2026 is the year by which it hopes to achieve carbon-neutral distillation, prioritising decarbonisation over offsetting.
This will be a milestone on the road to science-based emissions targets set by parent company Pernod Ricard. It has aligned with the Science Based Targets initiative’s (SBTi) Corporate Net-Zero Standard. This entails cutting Scope 1 (operational), 2 (power-related) and non-FLAG Scope 3 (indirect) emissions by 90% against a 2022 baseline.
Pernod Ricard also has 2030 targets verified by the SBTi – including a 54% reduction in Scope 1 and 2 emissions against a 2022 baseline.
With many businesses scaling back sustainability-related spending and/or tweaking targets due to geopolitical headwinds, edie asks Chivas Brothers’ CFO Ed Fells how his teams help the sustainability and responsibility (S&R) function to stay the course.
Fells explains: “Everything, I think, starts from an ambition… the future of whiskey is our kind of internal phrase around it.
“We prioritise our projects in terms of the biggest impact, which is not necessarily the biggest financial impact. There is that key element of the upfront cost, but we look at what it is going to contribute to our targets – like carbon reduction or water use.
“There are already many things which we have to look at not purely through a financial lens – investment in health and safety is not about financial payback.”
For any decarbonisation project, such as the CAPEX-intensive Mechanical Vapour Recompression (MVR) equipment rollout which will be key to delivering the 2026 goal, the S&R function within the business needs to draw up a plan, taking into account the impact on the group-wide emissions targets.
Fells’ teams then assess how projects need to be phased to maintain production levels – as some require temporary shutdowns at distilleries, or reductions in their output. Projects can then be integrated within the appropriate three-year CAPEX plan, which is reviewed by the group, and approvals are given. The plan is iterated annually.
Financial benefits of decarbonisation projects are tracked, as are environmental outcomes.
Avoiding the silo of short-termism
At times of particular budget constraints, Fells and his teams work with the S&R team to see which interventions could deliver the highest environmental impact for the lowest spend.
But whiskey businesses need to be thinking 20 or 30 years ahead due to the nature of the production process, so, in most periods, Fells’ teams do have the space to consider broader future risks and opportunities.
For sustainability professionals in businesses without these long-term horizons, Fells’ advice is to use the language of growth, productivity and innovation as well as risk.
This double-edged approach mirrors how frameworks which pair financial and sustainability disclosures, including the Taskforce on Climate-Related Financial Disclosures (TCFD) and less mature Taskforce on Nature-Related Financial Disclosures (TNFD), are taking shape.
Fells further says that some businesses may want to consider using a proxy like an internal carbon price, which prepares for the future risk of a carbon tax and forces thinking about pricing externalities. Chivas Brothers does not take this approach, but he acknowledges that it might be just the tonic for others.
Another useful instrument could be linking executive pay to sustainability outcomes – an approach taken by more than three-quarters of Europe’s blue-chip businesses. At Chivas Brothers, executives have a mandate to deliver financial performance and other facets of brand health, as well as environmental targets.
Working across functions
Fells emphasises profusely that the finance function is not the only one controlling whether the S&R function is able to deliver its strategy. Delivery also hinges on factors like having the right people with the right skills, which necessitates the involvement of HR, to give just one example.
To that end, a sustainability steering committee was launched within Chivas Brothers in 2024. The committee meets quarterly and all operational functions are represented. It meets quarterly, with S&R colleagues chairing.
Fells says: “If [a sustainability issue] is a group priority, and it is set out that it is absolutely fundamental, and it is replicated in your company strategy, this forces you to have a broader consideration.
“There are so many different departments getting involved, and which have skin in the game, around some of the S&R issues. We really needed to have this committee to ensure that decisions are collaboratively taken and that we are all informed of the same things consistently.”
With three meetings under its belt, the committee is still “in a forming stage”, Fells says – but he can already see “incredibly positive” outcomes in terms of aligning priorities and avoiding misunderstandings.
One of the committee’s priority initial workstreams has been reviewing the company’s first TCFD-aligned disclosures. In April 2022, the UK became the first country to mandate TCFD-aligned reporting for large businesses. The mandate, which covers around 1,300 organisations at present, is set to expand this year.
Chivas Brothers prepared by hiring a reporting specialist, who sits in the S&R team but “loops in very, very closely” with Fells’ team.
Fells concludes: “Finance is involved in a much bigger picture now. You need to make sure that you have the forums where those things come to the fore correctly.”