ESG in the Wine Industry: Navigating Challenges for Sustainable Growth

Wine Industry

(Credit: Canva)

by | Feb 15, 2023

Wine Industry

(Credit: Canva)

In the wine industry, the integration of sustainability into business goals and achieving sustainable growth is now being driven by the Environmental, Social, and Governance (ESG) strategy. Sustainable vineyards are gaining popularity due to the rise of environmentally friendly wine-growing practices. In order to ensure the well-being of the soil, communities, and industry, wineries and vineyards are adopting socially and environmentally responsible practices. Sustainable viticulture is being fostered by an emphasis on water efficiency, pest management, energy efficiency, waste management, and supply chain.

Recently, there has been a rise in organic wine without added sulfites for preservation purposes. Due to the prohibition of synthetic products in some countries, producers and farmers may be compelled to pursue organic farming. Additionally, biodynamic farming has gained popularity among winegrowers as it seeks to restore the health of the soil, farm, and plants. This approach can also promote soil fertility and create a harmonious ecosystem that benefits vine growth.

The significance of ESG performance will remain crucial in safeguarding diversity, reducing waste, cultivating nutritious wines, ensuring traceability, promoting transparency, and fostering job opportunities. Moreover, investors, shareholders, and other interested parties are anticipated to rely on ESG principles to gain traction in the international arena.

Environmental Perspective

To maintain the atmosphere and combat the impact of climate change on wine production, winegrowers are relying on environmental measures. This includes regenerative farming methods to reduce soil disturbance, improve soil health, and sequester carbon in the soil. Additionally, wineries are utilizing advanced water tracking devices due to a heightened need for water. Vintage Wine Estates is even exploring the use of NASA data and AI to forecast water availability.

To further its commitment to sustainability, the company is set to complete its first scope 1&2 carbon emissions calculations in 2022. Other strategies include the implementation of alternative energy, energy-efficient upgrades, and real-time tracking of energy use across wineries. Overall, brands in the industry are striving to increase their sustainability efforts and uphold a culture of environmental care.

Social Perspective 

Wineries and vineyards that prioritize workplace safety, diversity, equity, and inclusion have the potential to transform the global industry. Leading companies are increasing their investments in human rights to combat discrimination and forced labor. By 2022, the Asahi Group committed to conducting human rights due diligence with its suppliers and developed a Diversity, Equity & Inclusion (DE&I) statement in the previous year. The company aims to raise the percentage of women in leadership positions to 40% by 2030, from 22% in 2021.

Asahi Group is emphasizing the importance of building connections worldwide. It plans to launch the Environmental Think Tank to enable employees to propose and implement projects to tackle environmental issues in Oceania. Additionally, it could support hops farmers, barley farmers, and Campus Peroni. Prioritizing employee well-being and creating a culture of opportunity can enhance the company’s social impact and reinforce its brand position.

Governance Perspective

Companies that prioritize transparency, good corporate governance, and board diversity may gain a competitive advantage. This approach can optimize performance, provide management guidance, and fulfill legal obligations.

  • Pernod Ricard, for example, has a board of directors where 58.3% are women, 58.3% are independent, and 42.8% are non-French.
  • Treasury Wine Estates has eight non-executive directors and focuses on risk management and tax governance to build trust and confidence among stakeholders and invested $165 million in a production facility in Barossa Valley to adapt to changing weather patterns.
  • Asahi Group aims to shift all its breweries in Europe to renewable energy by 2025.

Market projections indicate that the worldwide wine industry is poised to expand by 6.4% annually from 2021 to 2028, with an estimated worth of $417.85 billion in 2020. The surge in demand for wine across all age groups, from youthful consumers to seniors, is a significant contributing factor to this growth.

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