Carbon Emissions in Spirits Production

In today’s dynamic spirits landscape, businesses strive to deliver solutions and experiences which maximise economic potential whilst minimising environmental impact. The imperative to strike a balance between these two increases almost daily with both local and international pressure to understand, track and reduce carbon emissions. According to a federal government report released in 2023, Industrial processes and product use, which incorporates the Food & Beverage industry, emissions account for more than 7.1% of all national emissions. At a national estimate for 2023 of 459 MILLION tonnes of CO2-e, that allocates over 32.5 million tonnes of CO2-e to this sector alone.

The first step in the journey is understanding the impact of carbon emissions on businesses. Carbon emissions not only contribute to climate change but also pose significant risks and costs to businesses worldwide. In this article, we’ll delve into the various sources of carbon emissions most associated with spirits production operations, explore how businesses in the industry can proactively measure and reduce their emissions, and provide insights into the costs associated with carbon emissions.

Sources of Carbon Emissions:

Business carbon emissions can be broken into 5 main categories for accounting purposes:

• Emissions from goods & services produced by local industries;
• Emissions from imported goods;
• Emissions from fuel consumption by employees & visitors;
• Emissions from immediate visitor consumption bundles, usually food & beverage and electricity or energy consumption.

Each of these categories or carbon accounts is then recorded under one of three scopes. Scope 1 or Direct Emissions; Scope 2 or Indirect Emissions; Scope 3 or Supply Chain Emissions.

Direct Emissions (Scope 1):

These emissions come from sources that are owned or controlled by the business itself, such as company vehicles, industrial processes, and on-site energy generation. Once you have the data to show what you’re using and when, you can explore technologies or change processes to help you reduce the energy you use. Some of the simple steps you can take include:

• Use of shade
• Temperature settings and timers
• Building Management Systems (BMS
• Behavioural Education

Indirect Emissions (Scope 2):

These arise from purchased electricity, ventilation, and heating and cooling used in the business. Whilst solar panels and/or energy storage can help to reduce the emissions, taking steps to clean up your energy consumption and improve our energy efficiency can decrease your baseline emissions load before resorting to renewable generation or emissions offset investments.

Common Efficiency efforts undertaken include:

• Lighting
• Energy efficient appliances
• Use renewable energy
• Behavioural Education

Supply Chain Emissions (Scope 3):

Often the largest component of a business’s carbon footprint, these emissions result from activities related to the production, transportation, and disposal of goods and services that the business purchases.

Scope 3 emissions would include all greenhouse gas emissions associated with the activities of tourists, suppliers, and other stakeholders that are not directly owned or controlled by spirit producers.

1. Tourist Transportation
2. Food and Beverage
3. Activities and Excursions
4. Souvenirs and Retail
5. Supply Chain

Measuring and Reporting Emissions:

How a business measures and accounts for their carbon impact has changed over the years, and a surprising amount for a relatively new process. The Greenhouse Gas Protocol is a fantastic starting point for businesses looking to familiarize themselves with the concept. Some operators employ an environmental manager in some form, however, not all operators have the need or the budget for a dedicated full-time or even part-time employee. Partnering with an organisation who can support your needs can help to reduce the onus on the business.

Carbon Accounting:

Businesses can utilize carbon accounting methods to quantify their emissions. This involves collecting data on energy consumption, fuel use, and other relevant activities. Carbon accounting adheres to strict frameworks for quantifying and recording various emissions sources and scopes. Using greenhouse gas equivalencies calculators can help to speed up the process.

For example, 1 kWh of electricity consumed in a business is equivalent to 0.18kg of CO2-e. 1 Litre of petroleum burned is the equivalent of 1.975kg of CO2-e.

Carbon Footprint Assessment:

Calculating the carbon footprint helps businesses understand the extent of their emissions across various operational areas. Keeping record of monthly on-site fuel consumption, working out the volume calculations for regularly imported or exported goods can all help to reduce the reporting workload when it comes time to cash on the fiscal or brand/reputation benefits of your annual sustainability efforts.

From your carbon footprint assessment internal and external opportunities to reduce your greenhouse emissions can be identified and incorporated into your businesses strategic plan.

Reporting Standards:

Adhering to recognized reporting standards like the Greenhouse Gas Protocol enables businesses to communicate their emissions data effectively and transparently. The National Greenhouse and Energy Reporting Scheme is the singular national framework for reporting company greenhouse gas and energy production and consumption data.

Strategies for Emission Reduction:

When assessing emissions from your business and contemplating strategies or opportunities to reduce your emissions baseload, the Energy Hierarchy model provides a useful framework for how to approach your reduction strategy.

The Energy Hierarchy Model incorporates 5 core principles for optimising energy efficiency for any business, home, or project.

Energy Efficiency Measures:

Implementing energy-saving technologies and practices can significantly reduce carbon emissions from operations.

In production operations electricity consumption is not so easily programmable or controllable. When the distilling or bottling plant is up and running, the power simply flows and there isn’t much room to curb this usage. Ensuring plant & equipment is as efficient as possible can minimise the baseload required.

Renewable Energy Adoption:

Investing in renewable energy sources such as solar power, energy storage and green-purchased energy can help businesses decarbonize their energy supply. Storage solutions allow you to utilise more of the generated solar power increasing your emissions offset.

Supply Chain Optimization:

Collaborating with suppliers to identify and address emission hotspots within the supply chain can lead to substantial emissions reductions. As sustainability become more and more prevalent, many operators in the beverage sector, especially in the larger business pool, will now begin to demand evidence of positive climate action to maintain or secure supply chain agreements.

Carbon Offsetting:

For emissions that are challenging to eliminate, businesses can invest in carbon offset projects that mitigate emissions elsewhere, such as reforestation or renewable energy initiatives.

The Cost of Carbon Emissions:

Financial Costs:

Carbon emissions can incur direct costs in the form of taxes, levies, or emissions trading schemes. Additionally, businesses may face increased operational costs due to regulatory compliance or higher energy expenses. Already some businesses are paying up to 30% more per unit for renewably sourced energy, to cut out all scope 2 emissions in one motion.  

Reputational Costs:

In today’s environmentally conscious market, businesses with high carbon footprints risk reputational damage, which can result in decreased consumer trust and loyalty. The International Sustainability Standards Board (ISSB) announced in early 2023 that it intends to introduce a framework using a global consistent language in a bit to standardise emissions reporting globally.

Physical Risks:

Climate change impacts can disrupt business operations and supply chains, leading to financial losses. This ‘Permacrisis’ we are now hearing about renews the urgency to be proactive about your operational impact and in-house sustainability goals.

Transition Risks:

As global efforts to mitigate climate change intensify, businesses that fail to adapt to low-carbon practices may face obsolescence or regulatory penalties. Customer sentiment is crucial and customer experiences can make have significant impact on budding producers. As the world progresses towards carbon positivity, the public eye is going to increasingly zoom in on businesses who are ignoring the facts.

Conclusion:

The Australian industrial processes and product use sector contributes approximately 7.1% of all national greenhouse gas emissions, or some 32 million tonnes annually. Businesses are experiencing more and more pressure to undertake a sustainability plan to not only reduce adverse environmental impact but to undo decades of irresponsible operations and practices. Understanding and addressing the impact of carbon emissions is imperative for businesses to mitigate risks, seize opportunities, and demonstrate environmental stewardship. By measuring, reducing, and disclosing their emissions, businesses can not only contribute to global efforts to combat climate change but also safeguard their long-term viability in a carbon-constrained world.