- 6 months ago
Scotch whisky is enjoyed across the world and there are still vast opportunities to reach new consumers, particularly with the recent UK-India trade deal. But the world is constantly changing, so it’s vital that Scotch stays relevant to ensure its continued success in the years to come.
A new episode of The Scotsman’s Sustainable Scotland podcast delves into the topic of ‘The future of Scotch whisky in changing times'. This reflects on an event Scottish family business McLaren Packaging held in association with The Scotsman earlier this year at Barnbougle Castle on Dalmeny Estate in Edinburgh.
A new episode of The Scotsman’s Sustainable Scotland podcast delves into the topic of ‘The future of Scotch whisky in changing times'. This reflects on an event Scottish family business McLaren Packaging held in association with The Scotsman earlier this year at Barnbougle Castle on Dalmeny Estate in Edinburgh.
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NewsTranscript
00:00:00Hello, I'm Rosemary Gallagher and welcome to our Sustainable Scotland podcast brought
00:00:07you by The Scotsman. Scotland's national newspaper since 1817 and I bring you fresh and relevant
00:00:13content of the 21st century. Sustainable Scotland looks how we're all doing in our efforts to be
00:00:17cleaner and greener for the next generation. In this episode, in partnership with McLaren
00:00:22Packaging, we're delighted to share some discussions on the future of Scottish whisky
00:00:25and changing times from an event we held at Barnburn Castle on Domeney Estate. The event
00:00:31we delivered with McLaren Packaging featured two panel sessions. The first panel focused on the big
00:00:36picture and the future of Scottish whisky and the second one looked at sustainability in its widest
00:00:40sense. So to our first panel on the future of Scotch, Sebastian Burnside, Chief Economist at
00:00:46Royal Bank of Scotland, Sarah Videsha, Head of Engineering at Chivas Brothers, Piers Lawson,
00:00:52Client Partner at Contagious Design and Mark Stevenson, founder of CUR8 Carbon Removals.
00:00:58To start us off, we asked a panel for their views on how Scottish whisky is performing in the global
00:01:02marketplace and the impact of trade deals, especially the UK-India agreement. He began
00:01:08a sparse here in Burnside, Royal Bank of Scotland who gave his views on the economy.
00:01:12So I'll try and structure my remarks into sort of three components really. First of all, tariffs,
00:01:19because they're the big thing which are moving a lot at the moment. Secondly, where we are from
00:01:24a sort of cyclical perspective before finally touching on some of the structural themes which
00:01:30I'm sure we'll build on later. So in terms of tariffs, very encouraging frankly to see, first of all,
00:01:42the broad trajectory of negotiations happening. The UK-India trade deal is something which many parts
00:01:53of the economy have been looking for for a long time. And it's something which in the UK more broadly,
00:02:02actually we really take for granted the deepness of our links with India, culturally through people
00:02:13and through the potential markets. It is absolutely, those links are absolutely the envy of pretty much
00:02:20every other country in Europe. So it's really encouraging that the politics have aligned to be
00:02:29able to get a deal and even more encouraging that clearly Scotch was a big part of the specifics
00:02:39and will hopefully benefit from a good increase in demand from those reductions of tariffs as well.
00:02:45Scotch and Scotland in itself as a brand deserves an enormous amount of credit
00:02:53for punching above its weight in terms of its prominence and significance in people's minds and hearts
00:03:03and perceptions right away across the world. We do see longer term this trend of people caring more
00:03:13about where they choose to put their money in particular in what they choose to consume and where that's a high value transaction.
00:03:24They want a sense of connection to the product and the entity. And Scotch is a brilliant example of how we can connect
00:03:33the product to the product to the place to the history and deliver a really high value experience for customers when they're making that choice in that consumption.
00:03:47So I think there's great potential for that to grow and for that to be a really rich experience that different brands exploit in different ways and connect to different things.
00:04:01But as a whole, I think that's a trend which puts us in a really good place.
00:04:07It's not the only trend in the market. And I think I've been fascinated to talking to customers in particular in the drinks market about how they are responding to not just the younger generation,
00:04:22but changing tastes around changing attitudes around alcohol in general.
00:04:29I learned a new term recently called zebra striping where apparently this is trying to capture the behavior of reducing your overall alcohol intake by in particular in the beer market by having a kind of real drink followed by an alcohol free one,
00:04:47followed by a real one, followed by a real one. And that's the idea you don't end up with a headache the next morning.
00:04:52So phenomenal innovation happening to try to introduce some new behaviors and respond to the pressures that people feel.
00:05:04I don't think it's a big challenge for the spirits and industry in general, but risky in particular on that side.
00:05:10But the final structural point I'd make back in the more economic zone is, you know, back to the global future as well.
00:05:19And to your point about the deal with India, globally, we do have a rising number of people around the world full stop,
00:05:28but a particular rising number of people who you would class as middle class and are concerned about their consumption.
00:05:37That puts Scotland in a great place to capitalize on that growth and to continue to be one of the leading exports from Scotland and from the UK and a really strong contributor to that.
00:05:52So I'm really, really encouraged about that future and delighted to learn as much as we can about how we're facing into the challenges as well.
00:06:00Thanks, Seth. That's really interesting. I'll try some zebra striping this weekend as well.
00:06:04So in terms of building on what Seth was saying there, obviously you've analysed the drinks industry.
00:06:10Could you expand on the points around Scotch that said perhaps in terms of the deal has been done recently with the UK, India and US and also consumer trends,
00:06:18that sort of normal alcohol, sort of, you're not drinking as much as there were probably before.
00:06:23So your insight on that and what it means to the future of Scotch.
00:06:26Sure. So I'm afraid, Rosemary, I've got some good news, but I've also got some bad news.
00:06:34The good news, well, take a step back. Our research has really focused on how alcohol trends are going to change in the next decade or so.
00:06:42It's very simple. I think a lot of people who forecast these things look at what happened historically and then suggest that that's what's going to happen in the future,
00:06:50which may be the case. But we try to identify what markers we can look at to predict the future.
00:06:58And one of the best ones we've got is looking at demographic changes.
00:07:01And the great thing about demographic changes is we know exactly how many 80 year olds they're going to be at the end of the century.
00:07:06They're already born. And so the way we've identified this is try to correlate how
00:07:13demographic population or how populations have influenced alcohol consumption in the countries that they're in.
00:07:20And we've noticed that volume grows. The amount of alcohol people consume is really dictated by the number of young people.
00:07:26I mean, it makes complete sense. We all kind of instinctively know that it's young people that are driving volume.
00:07:31It's really the age of about 25 to 45 year olds. When we look at premiumization, how much high-end consumption,
00:07:38that's driven by economic factors. So whether people have high GDP per capita, whether there's lower unemployment,
00:07:44actually the Gini coefficient, the inequality in any country, has correlation to the amount of premiumization.
00:07:52What that means, we can look at how countries' demographies are changing in order to predict whether
00:07:58that's going to be a healthy alcohol market in the future. And what's great is there are some fantastic countries
00:08:04where that is still relatively healthy, where you've got a growing young population. And so the good news story is the US.
00:08:10The US being one of the most important alcohol markets in the world still has a growing young population,
00:08:16unlike much of the West. So you could make the comparisons to Western Europe, where most countries are now
00:08:22in an aging population structure, and now have a declining young population. The US is the opposite of that.
00:08:28But what the trouble is, is there's plenty of debate as to whether there's a structural problem in the
00:08:34alcohol market. And what I mean by that is, for the past century, we have seen rising per capita
00:08:40consumption levels of alcohol. There have been two times when that's not true, after the Second World War,
00:08:46and after America introduced the 21-year-old legal drinking age. And that happened in the late 70s,
00:08:52state by state, and 1984 at the country level. And we did see a decline in alcohol consumption in the 80s.
00:08:58But by the early mid-90s, per capita consumption has taken a relatively steady increase over the past
00:09:05three decades. But what's happened during the pandemic was this incredible boom in consumption. And not
00:09:12every country saw this. Many countries that have a lot of out-of-home consumption and on-trade consumption
00:09:18saw a decline in per capita consumption. But the US, with about 80% of sales happening in supermarkets
00:09:25and off-licenses and the like, saw a giant boom. So 2021 was the peak alcohol consumption. And for the
00:09:31last three years, four years, we've seen quite a major decline. And so there's plenty in the industry
00:09:37that are saying, well, actually, we've seen the end. It's all over. Young people aren't drinking as much.
00:09:43GLP-1 drugs, the ozempics, and this sort of thing, they mean that people don't drink any alcohol.
00:09:48Cannabis is being legalized, and that's causing substitution effects for alcohol.
00:09:54The good news story is, I don't think there's much evidence that any of those are true.
00:09:59Well, at least, there is some truth in them. The fact that the young people not drinking is,
00:10:04that there is some truth to it. And the truth is, underage consumption is going down.
00:10:11And we can see this clear as day, 50 years worth of data. We've got data going back to the mid-70s,
00:10:17looking at under-21 consumption. And it used to be about 70% of people would drink on a regular basis,
00:10:23and today it's about 25% of that population. And so yes, it's true that young people aren't drinking.
00:10:29But the worry would be then, well, if you don't drink when you're 18, you don't also drink when you're 22.
00:10:34And that's simply not supported by the evidence. If you look at the age group of 21 to 30-year-olds,
00:10:40since the mid-90s, it's a pretty static line. And that's a, did you drink in the last 30 days?
00:10:46Did you drink in the last 12 months? Both of those are looking pretty static.
00:10:50Where there, again, is some truths, is when you look at heavy consumption occasions.
00:10:55Did you drink five drinks in a row? Did you drink 10 drinks in a row in the last two weeks?
00:11:00Did you drink consecutively for the past 30 days? Those have all been declining really since about
00:11:072010. And therefore, it's quite difficult to explain the recent three-, four-year change
00:11:14in a change that's been happening for 15 years. And so I would argue that actually,
00:11:20the US still has a very favorable demography. It's still one of the fastest growth economies in the
00:11:25world, at least along to the Western world. And we've seen these three decades of growth in alcohol
00:11:32per capita consumption, particularly since the last minor dip with the 2007-8 financial crash.
00:11:39And so for the past 15 years, we've seen an increase in per capita consumption. We've seen this very
00:11:43recent decline, which I put down to much more the economic factors, that we've observed things like
00:11:50higher inflation levels, higher interest rates, and therefore disposable income have been impacted.
00:11:56But that does not mean that people don't want to consume alcohol. And so I believe that over the
00:12:00next few years, we will see the bottoming out of that. And we will go back to a growth in per capita
00:12:05consumption because of the growth in young people and because of the growth in the economy.
00:12:10And so then people say, but what about these weight loss drugs? Weight loss drugs mean that
00:12:14people don't drink alcohol. And these are growing at an alarming rate. About 12% of Americans have
00:12:20consumed these drugs ever. And about 6% of them are currently taking them. And all the studies,
00:12:26you know, going back a few years, we've been looking at this for, well, five years or so now.
00:12:32The earlier studies were generally rodent studies or studies based on alcoholism. And we can,
00:12:38we know with some certainty that mice drink a lot less if they take these drugs. And they're very
00:12:43effective at curing alcoholism. And so everyone thought, well, that means that alcohol consumption
00:12:49is going to decline because everyone's taking these drugs. But recently, we just got some data
00:12:54on actual, I guess, human studies. Cornell University did this in December, where they worked with a panel
00:13:01data source called Numerator. And they looked at if you have a person in your household that takes these
00:13:06drugs, how does that impact your shopping basket? And what they found is they studied these people
00:13:11for about two years. And they determined that your shopping basket declines by about 5.5% in value
00:13:17if you have a family member that takes these drugs, which sounds bad. And in fact, if you're a higher
00:13:22income, which would be more interesting for the alcohol consumers, over $125,000 per year in income,
00:13:29your basket declined by 8.5%. So bad news. But then they also looked at how your basket changed.
00:13:37And it's hardly surprising that the things that really declined were things like frozen foods,
00:13:42packaged meals, salty slacks. Alcohol was just the same level of bottled water at minus 1%
00:13:50if you take these drugs. It was about the lowest it could be. So if we sort of extrapolate those data
00:13:56and say that they gave a very optimistic growth of GLP-1, something like a percent growth a year,
00:14:02we were 6% today, let's say we're 7% next year, 8% the following year. And it has a 1% impact on
00:14:09consumption. That's a single basis point worth of change in growth. So let's say the spirits market
00:14:17historically was growing at about 5% in the US, that means a change to 4.99%, which I think is a change we
00:14:24could all deal with. And then of course, the study also said if you take these drugs for more than
00:14:29six months, your basket was returned to pre-GLP-1 levels if you were taking them for weight loss
00:14:37reasons. If you're taking them for diabetes reasons, then you did also have a sustained change. But
00:14:43that's not really what people are worried about. So I'm not worried about GLP-1 drugs either. And
00:14:46that's, you know, show me a new set of data, I'll change my mind. But that's what it currently looks
00:14:50like. And we've done similar work on cannabis, we've looked at how American states have changed
00:14:56with regard to legalization, how that's impacted credit card data in the liquor stores in those
00:15:02states, and there's no correlation. We looked at countries that have had legal cannabis, so places
00:15:07like the Netherlands or more recently Canada, how their consumption is and has changed and doesn't seem
00:15:14to have any impact. We've looked at age groups that have taken alcohol and cannabis and see if there's
00:15:19any relationship. And again, there isn't one. I've looked at medical data where people have looked
00:15:25at the relationship between alcohol and cannabis. And some scientists suggest that cannabis increases
00:15:32your alcohol consumption. Some scientists suggest that it decreases, but there's certainly no consensus
00:15:37unless you're taking cannabis for medical reasons. Then it decreases your alcohol consumption.
00:15:41But there's no structural reason in any of this. And it's obviously very difficult to me to prove a
00:15:47negative. And there may be something else happening that could be impacting things. But so far,
00:15:52I come down on the side that this is an economic malaise. We've had two, three years of difficulties
00:15:58at household levels. We've had the inflation and interest rate changes. And as soon as the economy
00:16:03improves, we should see an improvement. So that's sort of the good news story. The bad news story is
00:16:09what's happening in other parts of the world. And by that, I really mean China. China has been an
00:16:14extremely important alcohol market, particularly for the cognac, scotch, and beer for the sort of
00:16:22European companies. And China is facing some of the worst demographic changes of any country in the
00:16:32world. And just to put this in context, the Chinese birth rate back in the 1960s and 70s was about six
00:16:39babies per woman. By the early 90s, that had fallen to one and a half. So you've got this key 20 year
00:16:45period where you had this dramatic change in the demography or in the birth rates. And if I said
00:16:51earlier that the key demography we care about is the 25 to 45 year olds. But if you were born in 1990,
00:16:57you're now 35, right in the middle of this. And so right now, we're seeing a decline in young people
00:17:05in China over the next decade of nearly a quarter. And to put that in context with the US, the US is
00:17:11growing at about 4%. UK is declining by about 1%. The worst in Europe is Germany, declining by about 11%.
00:17:18China is declining by about a quarter of the next decade. That's our consumption base. And that has
00:17:23economic consequences. I did a lot of work with our Hong Kong based economists, looking at how the
00:17:28country's GDP would change with this impact. Because of course, the young people, the ones who work,
00:17:34they're the ones who earn the taxes. They pay for the old people who are not working and require
00:17:40care. Back in 2010, when China was delivering GDP growth of double digit, China had a working age
00:17:47people to retired ratio of six to one. Today, it's less than three to one. In a decade, it's going to be
00:17:551.7 to one. That speed is about four times the pace of how America is aging. Just to put this in
00:18:04in context. This is an unprecedented level of aging. And that's going to have consequences
00:18:09to the cognac industry, to the Scotch whiskey industry, to the beer industry. And so a lot
00:18:13of the companies that have been expecting this growth in China, and I've been having these debates
00:18:17with the companies in the space for the last three years now, and they've all been saying,
00:18:22no, we're going to get back to double digit growth in China. It's going to be fine. And therefore,
00:18:27they're aging their products. Because of course, we all know that whiskey and cognac will require
00:18:32aging to be drunk in future, to be those products. And it's only recently that people are realizing,
00:18:39actually, this economic malaise in China is lasting a lot longer than anyone thought.
00:18:43And we think, well, there's a demographic reason for that. And it's very difficult to change the
00:18:47demographics overnight. Of course, it takes about 21 years to grow a 20 year old. So this is not something
00:18:53we can really change very quickly. So I would be certainly very cautious about looking at China
00:18:59as a future market. And then that goes into what's happening in the real estate space and the amount
00:19:04of empty homes there are in the country and the declines in real estate values because of 70% of
00:19:09wealth is held in real estate in China. So that's the sort of the bad news story. And we'll finish,
00:19:16I guess, with a good news story to your question, Rosemary, about the trade deals and India in particular.
00:19:23And India is almost where China was 20, 30 years ago. As Seb said, one of the best middle class
00:19:29growth parts of the world. It's got a very healthy growth in young people. And very importantly,
00:19:35it's a whiskey drinking country. It's overwhelmingly a spirits market. So naturally, you would have
00:19:44very healthy levels of growth. It also has quite a low per capita consumption. It's only about one and
00:19:49a half liters of alcohol drunk by each person. There's certainly opportunity to grow. Now the
00:19:56trade deal, 75% down from 150% down to 75% and actually down to 40% after a decade. And we're
00:20:03awaiting a bit more information of how that works. But that's about as good as we were hoping for.
00:20:09If we do the maths on that, and of course, it's quite difficult making a few assumptions,
00:20:14but we think that could probably double Scotch volumes out to India. And so there have been
00:20:21assumptions that go into that number. But if the number one export market suddenly doubles its
00:20:25volumes, that's a pretty healthy opportunity. And it has great volume implications for the companies
00:20:31that are out there. It also has margin implications because it's not just your Johnny Walker's and
00:20:37Chivas's that are sold out. And you obviously probably sell a few more of those cases. But the
00:20:44more premium element of Indian whiskey uses Scotch whiskey in the blend. Often, 10%, 20% of Scotch
00:20:50will go into some of the Indian whiskeys. And so that will increase. But then there's also an impact on
00:20:57the barrels of Scotch that are currently out in Scotland today. Supply-demand economics
00:21:04suggests that the value of those barrels is going to go up. So I think it is a very healthy move
00:21:11for the industry. Fingers crossed it could be exploited to the best. And I think that's probably
00:21:17the best news story that we've got. Thanks, Lawrence. And just look at a bigger global economic
00:21:23political uncertainty in the world, especially of what's coming out of the US. We've had President
00:21:27Trump, when he came to power, saying things like drill, baby drill, which obviously doesn't help
00:21:31people's sustainability agenda and net zero ambitions. And that affects everyone. So, Mark,
00:21:37you work with pop stars, Bono, Billie Eilish, you work with governments around the world. How is
00:21:45it happening in the US and closer to home as well, for rolling back in the sustainability
00:21:50agenda and net zero policies? How is that affecting us and companies? And what's the future,
00:21:56given this move away from sustainability and sort of Dean Hushing, I think it's been called?
00:22:02That's a nice, simple question. What is the future?
00:22:06Well, anybody who says they can predict the future is a vainglorious buffoon.
00:22:10You should ignore them. Because actually to Lawrence's point, you know, trying to get the
00:22:18future based on what's happened in the past is often a fool's errand, but we find it very comfortable.
00:22:22One of the things that is very clear at the moment is that
00:22:27the future is going to be very, very different than any of us can imagine. So we might have had this
00:22:33acronym VUCA, the volatile, uncertain, chaotic, ambiguous world.
00:22:38And that, you can, that's an academic way of saying, but I think we all feel it.
00:22:42So if you look at, you know, COVID, what's happening in Ukraine, what's happening in the Middle East,
00:22:48suddenly all of us begin to realize that these things are not disconnected. And what's happening
00:22:54with democracy, you know, with reform here, with Trump in it, these things are not disconnected.
00:22:59In fact, John Muir, John Muir Clark is just on the route, the great ecologist. He said,
00:23:05the trouble is when you pick anything in the universe, you find it's attached to absolutely
00:23:08everything else. And so the problem we're all feeling at the moment is that we have
00:23:13come to the conclusion in our hearts, but not yet in our minds, that the systems upon which this
00:23:18system, which our civilization is built, don't work anymore. And they fundamentally don't work.
00:23:24And they're failing consistently. Democracy hasn't been updated for 200 years. The economic system,
00:23:30which, you know, Seb and Laurence do their best within is completely devoid from ecology or social
00:23:37justice. Democracy doesn't democratize health, wealth, opportunity. So you've got, and you've got
00:23:44increasing conflicts staying around because we're all thinking in our own little bits. And what we've
00:23:49built is a world of vested interests, masquerading as moral convictions.
00:23:54And we've all realized that's wrong. And the problem is we're all thinking, great, okay,
00:23:59I understand that the world is not sustainable. I understand that the way my business works,
00:24:04the way my economy works is somehow damaging the future. But it's also how I pay my mortgage and
00:24:09feed my kids. And that's a deep cognitive dissonance that we all feel. And it's going to break.
00:24:15And it is breaking now. If you look at the wildfires in Los Angeles, if you look at what's happened to
00:24:22the water table around the world, if you look at the health of our soils, which are degrading at
00:24:27a terrible rate, there will be going, there will be no Scotch whiskey in 30 or 40 years if we carry
00:24:32it like this. So if you ask me what's going to happen, what's going to happen is one of several
00:24:36things. I don't know which one it is. I know which side I'm on. One is wholesale economic and
00:24:41civilizational collapse, which is the route we're on. And with due respect to, you know,
00:24:47Lawrence has said, if you carry on talking about people as consumers and talking about demand
00:24:51and constant growth in a way that doesn't take account of
00:24:56fresh air and fresh water and social justice, then none of that works.
00:25:02So the point really is this question we have to ask ourselves. And one of the reasons I'm
00:25:05very glad to be here is because, you know, McLaren Packaging is one of the companies that does
00:25:08ask themselves that stuff a lot. The first time I met Michael, you know, it was because he was like,
00:25:14how do we build this company in a way that's even more sustainable? Can you, can you help us think
00:25:18about that? And there is this lie that we are told, which is having a sustainable and equitable
00:25:28and just world is too expensive. But actually the truth is not having it is way more expensive.
00:25:36And so what we have to do is find a route through from where we are to where we, where we're going.
00:25:42And the way I think you do that is for instance, with companies like McLaren and with things like
00:25:48Scotch-Wissey, because you kind of go, it's perfectly reasonable and able to do within the existing
00:25:53business models of the Scotch-Wissey industry to build a fully sustainable product.
00:25:58One that actually regenerates the economy and regenerates the ecosystem as well. And I've done a lot with
00:26:05luxury brands and they say, what are we supposed to do? Like our whole definition is around
00:26:08consumption, blah, blah, blah. And it's like, I believe that 20 years from now, talking about
00:26:12the demographic changes, that the most luxurious product, the most premium product will be seen
00:26:16as the most sustainable, the one that regenerates. When I drink this whiskey forest scrub in my,
00:26:20you know, somewhere else, you know, it will be seen as madness that previously luxury was
00:26:25defined by consumption. In the future, luxury will be defined by regeneration, because by drinking it,
00:26:30you're a good person. And you can fold the cost actually of building a very sustainable, indeed
00:26:37regenerative company and industry into the cost of a premium brand, because there's a lot of headroom
00:26:43in the pricing. It's just that the financial people, your CFO or whatever will tell you, yes,
00:26:49but I could do that. But then short term, it's going to affect this over here. And don't you want this
00:26:55shiny little thing here next year? And your job is to resist those blandishments because it's going
00:26:59to destroy your children's future. So the actual answer to your question is everybody in this room,
00:27:04whether they're willing to look into the mirror and look into that cognitive dissonance and go,
00:27:07given the business I own, am I going to choose my CFO, whose job is to tell me that, you know,
00:27:12that's going to cost a bit? And am I going to accept that cost? Not only am I going to accept his,
00:27:20his advice or her advice, and not have that cost in the short term, but have a huge cost to my soul
00:27:26and my future as a consequence.
00:27:29Good, that's smart. In terms of obviously water whiskey here in 20, 30 years time,
00:27:34how do you think the industry can learn from other sectors you work with? You work with the music
00:27:39industry and many others, artists, you've an artistic background yourself, and just how do you think
00:27:45whiskey can take learnings from those different parts of the world and ensure a sustainable future?
00:27:52Well, you know, you can take learnings from all sorts of places, but also I think you have to look
00:27:54at look at what you are uniquely. And I mean, I'm a huge fan of Scotch whiskey. And, you know,
00:28:00I live by a mantra, which is life well lived on a planet well loved. So, you know, I cannot,
00:28:05cannot believe in the future or even sell the future. And of course, it would never succeed where you say
00:28:09in the future, the only way you can have sustainable or regenerative Scotch whiskey introduced
00:28:13for it to be massively expensive. And you're going into, you know, like a drama Christmas.
00:28:17You know, you can't say to recording artists, the only way you can go on tour is not to tour,
00:28:22because it's just, because there's too many emissions of the audience. So, so you have to try
00:28:27and I, what, so a lot of what my work is doing is like, how do you tie the economics of a business
00:28:32also to the cultural impact that it can have in changing the narrative of how we live into the future?
00:28:36So music is a really good example of that. So if you, last year I created, along with a number of
00:28:42other organizations, the first carbon removed concerts at the O2 arena, four nights where we
00:28:48got the emissions down as much as possible and a bang called the 1975. They're like the cure for
00:28:52young people, but rubbish because they just wind. Anyway, but they came in, they did four nights
00:29:00and folded it, folded into their ticket price. The audience was the cost of actually removing the
00:29:05carbon, which is not an offset. It's actually taking it out of the atmosphere and storing it away
00:29:08forever. Um, and we worked out that even though the cost of removing carbon per tonne is still
00:29:13quite expensive and it's something, one of the problems I'm trying to solve, it's about 150 pounds
00:29:18a tonne. Uh, if you amortize that across the entire audience, 15,000 people came to less than a pound
00:29:24a ticket. So, you know, you're paying at least 70 quid for a ticket of the O2 anyway. Nobody noticed,
00:29:31nobody complained. A lot of people when they found out with us is brilliant. I'm, I just don't,
00:29:34that sounds great. Why aren't all concerts net zero? You know, why, why do all my pleasures have
00:29:39to be guilty? Why can I not have a, this is a non-guilty play. And in fact, they said, I much
00:29:44prefer that to this venue's facilities fee at £12.48, which I have no idea what that is.
00:29:49I understand what that is. Thank you very much. So if you're very explicit about what people are
00:29:53paying for, people say, oh, you can't have, can't have sustainability or carbon removal or whatever.
00:29:57When you're very explicit, no, this is what you're paying for. And you're paying to make sure that the
00:30:00thing that you're drinking does not just try to destroy your own future. They're like, I don't mind paying that.
00:30:04As long as you're being honest about it. Okay. Now, Scotch whiskey, if you were able to say,
00:30:09every time you drink this whiskey, something gets better. That's a, that's a massive marketing thing.
00:30:15And you have the ability within the Scotch whiskey to actually fold that stuff into the existing
00:30:19business model. And at the same time, tell the story of drink, the smell, the idea that I, as I move
00:30:28into the culture that I want, the future that I want, this thing, this, this premium product that,
00:30:32that is what I go to, to not to escape or, or to enjoy my life or to escape the horrors of the
00:30:37nine to five, whatever. It is indeed itself part of the solution. How wonderful would that be?
00:30:43You know? And so I'm also working straight. So I'm also, so that's why I work with music,
00:30:46because when I'm trying to work on how we take the whole of this model out to a whole live music
00:30:52industry, not just because the music itself needs to decarbonize like everybody else does,
00:30:58but then I enable artists to stand on stages. And if they want to talk about climate,
00:31:02because the moment they feel hypocritical, they can't. Hey kids, take the climate seriously.
00:31:06And I see 40 trucks with a massive light. Did you ride onto the, onto the stage in a big pink tank?
00:31:13You look like a hypocrite for an artist, that's death. And the same for any, any brands, if you look
00:31:16like a hypocrite, so this is why greenwashing is so bad. But are you going to be properly honest about it and say,
00:31:20actually, we're going to take that hit. We're going to take that because we believe in a future
00:31:23where you drink that drink and the world gets better. And I think scotch whisky in particular
00:31:27has that sort of built into it, the poetry of a better world is what you see in the glass.
00:31:34I think that's really interesting. What's happened in the music industry?
00:31:36And then it goes on to Sarah, you work for one of the world's biggest scotch whisky producers.
00:31:40So you know exactly what's happening in terms of what you're doing in terms of sustainability
00:31:44and preparing for the future. So there's also challenges out there, as well as the environment,
00:31:48there's many challenges with political and economic headwinds we've touched upon,
00:31:51about the supply chain as well. I know you're investing for the future,
00:31:55just a bit more of what you're doing to stay competitive in this changing environment.
00:31:58And where you're investing, for example, in new facilities, decarbonisation,
00:32:01you can explain some of the work that's going on with Shivers, but is that really useful to hear?
00:32:05In terms of bottling, we tend to feel the headwinds a lot more quickly than you would feel
00:32:10at distillation because you're obviously, you're making for the future, you have to then lay it down in
00:32:15Egypt, whereas we are obviously selling to the markets immediately. So if we've seen
00:32:19the changes that we've seen recently, and we've obviously faced some challenges,
00:32:23and I think across the industry we're facing them. But what at Shivers Brothers we are continuing to
00:32:28do is we've got a big investment programme, particularly our flagship site in Dunbarth.
00:32:34So we're looking to invest over 60 million in terms of modernising the facilities. So it's,
00:32:40it's the plant, the first plant on that site was built in the early 80s. And we've got a lot of
00:32:47vintage kit, and the ages from that time, and essentially to maintain our position and be the
00:32:54right choice for bottling, which is also important in terms of distillation, and actually doesn't
00:32:59probably employ significantly more people right out into the supply chain. We need to be competitive,
00:33:05we need to be at the forefront in terms of technology. So the reason that we're investing,
00:33:10we have safety as a driver. So the more that we can automate and take risky activities out of the
00:33:18workplace, then the safer people are. But equally productivity and try and use latest technology. So
00:33:25some of the examples, we're basically rebuilding both of our older factories on the site. We have,
00:33:30we have essentially three factories on the site, one of which was built in 2020.
00:33:34It's pretty flagship, we've had most of our competitors over to see it to understand what
00:33:40it looks like. But we're now investing in that. So there's a couple of things we're doing. Our
00:33:45portfolio ranges from like the really high volume stuff from Chivas, Valentines, right up to hand-filled
00:33:53products that sell for hundreds of thousands of pounds. So our manufacturing facilities are probably
00:33:59not set up to do that really effectively. So one of the things that we're doing is really
00:34:04looking to focus our prestige and luxury and more than the factories. Looking to automate and really
00:34:10looking to replace risky assets so that we can continue to supply. We're midway through it.
00:34:17Some of the other stuff we're looking at is slightly less bespoke because we need a lot of flexibility
00:34:22in that area. We need to be able to really deliver what the consumer wants and be innovative.
00:34:28We're looking to bring like robotics rather than traditional things that run the same products
00:34:34all the time. We want stuff that can be really flexible and move. So on our Royal Salute line,
00:34:40it's a product with a lot of heritage. Recently, we moved away from ceramic flaggings, which weren't
00:34:46sustainable, they're not recyclable, to coated glass. But on that line, we're also now installing robotic
00:34:52and machinery both bespoke both ends of the line, both in terms of lifting the flaggings on the line
00:34:58and packaging at the end. So you're taking something that's heritage, but then you're applying modern
00:35:03technology to make it effectively safely into the highest quality of the cash. So yeah, we've got,
00:35:11I think it's a big vote of confidence in terms of bottling in Scotland and a vote of confidence
00:35:17for the company, despite the fact that it's facing the same headwinds as the rest of the industry,
00:35:23that that investment is still going ahead, up into our necks at the moment in construction phase.
00:35:31It's like saying, you mentioned both heritage and automation there and robotics. Obviously,
00:35:35it must be quite a difficult balance because like Scotch is very traditional. People like the whole
00:35:38bagpikes and tartar side of things as well, especially some export markets. So how do you balance
00:35:43that innovation with protecting the history and heritage? It's something that Shivers Brothers
00:35:47has. So interestingly, because we're now redeveloping our Clyde Tractory, we were digging
00:35:53through the archives and pulling out some pictures from A when it was built, but also some of the ways
00:35:58that we used to produce. So, you know, hand-drapping bottles and packing them and things. But that's,
00:36:03that's not, it's not sustainable, but it's not sustainable from a cost point of view either.
00:36:08Interestingly, automation quite often brings more consistent quality.
00:36:12So we have parts of our portfolio where we'll always hand fill it. We'll hand polish,
00:36:17we'll hand inspect, but we augmented that within 360 degree cameras so that we know when it's going
00:36:23out to produce our, then it's fully and utterly perfect. And you can automate inspection because
00:36:30for the best will in the world and no matter how well trained someone is, they're only human
00:36:34and there's human error, it becomes a factor. And then it gives us consistency in terms of operation
00:36:40as well. So consistency in terms of like location of labels and things like that that are
00:36:43purporting to the quality of the product. From a liquid point of view, whiskey obviously has quite
00:36:50a kind of traditional image in the UK. But within the Valentine's range, we've got multiple flavored
00:36:57whiskeys, not whiskeys flavored drinks that are whisky based. And we've got some cool innovations
00:37:04coming out as well, which are really quite new to industry for us that I'm not going to talk about
00:37:08just now because they're just about to relaunched. But part of that means that we need to be able to,
00:37:14so our plant was built to like make whisky standard product, high volume, very little kind of
00:37:21differentiation. We've seen the market grow by segmentation across the brands. So part of that
00:37:27is being able to handle multiple spirit types, being able to clean between products in a way that's
00:37:33effective, efficient and gives you the right quality so you're not getting any contamination. And even from
00:37:38a spirit processing point of view, our blending development team are continually challenging us from
00:37:45an engineering perspective to answer like, yeah, you can produce it on a lab scale, but now we need
00:37:51to scale that up and be able to produce it and hopefully see growth in it as well as allowing us to
00:37:56tap into different markets globally as well. Okay. You also mentioned the competition being
00:38:01to see your plant and what you're doing. Does that make Scotch-Risky different? Do you think that
00:38:04collaboration across the industry doesn't happen in many industries? I think at the distillation end,
00:38:11many of the distilleries have changed hands over the years. So whilst they are part of one company,
00:38:17they may be previously were part of others. And I think they tend to come together again, not my clear
00:38:21area expertise, but they'll come together because they share resources. So they share barley, etc. Water's
00:38:27always like a keen resource. And from a bottom perspective, we are relatively open. We tend to,
00:38:33so if we're buying kit that exists, they'll do reciprocal visits across sites. So it does tend to be,
00:38:40it's not so much of a secretive industry like in terms of showcasing what's new and what's possible
00:38:47as well. But the people are quite open. We've obviously got the Scottish Whisky Association
00:38:51and most of the big players go and they'll share information there about how to move forward together.
00:38:57OK, that's good to hear. Thanks, Sarah. But I'm looking more closely at consumers now and peers.
00:39:03Whilst you work with lots of different whisky brands and drinks brands. So how do you think
00:39:07whisky in particular is staying relevant to the change in consumer? People drinking less,
00:39:11we're drinking higher quality, drinking at different times. So what are they doing to move with the
00:39:16times and innovate when you're experienced as advising clients what they should do to keep pace and lead the
00:39:21the way? Yeah, definitely. And it's a very fast, fast moving situation with how to balance luxury
00:39:28and sustainability and these kind of things. And that comes with changing consumer demand as well
00:39:34as our stakeholders is changing a lot. So what we're doing lots of at the moment is it's working with
00:39:38our clients to redefine new codes of luxury within Scotch. And Scotch has fantastic codes for
00:39:45whether that's kind of craft, heritage, prestige. But from a sustainability point of view, those need to
00:39:50sit alongside kind of transparency and sustainability. So yeah, no, it's an interesting pace that we're
00:40:01kind of really, really seeing at the moment. Yeah. And I think it was Lawrence mentioned that young people
00:40:06might not be drinking whisky, but they might in the future. Do you think that'll happen? I think millennials have
00:40:09switched to whisky as they've got older and their tastes as well and matured. Do you think that'll happen to
00:40:14younger drinkers that won't start switching towards whisky? Yeah, I think so. I mean,
00:40:19what we see more and more with younger drinkers is that, you know, they're not loyal to brands or
00:40:24even categories anymore. They're very kind of promiscuous with their panics, but loyal brands
00:40:28whose values they share. So it's a hard thing to track, but I think that's the key there. It's tapping
00:40:35into emotional connection and storytelling with brands. And if we can do that and brands can really take
00:40:41that in their stride rather than focusing on kind of logical, educational kind of product information
00:40:48and lean into the more emotive storytelling. It appears to be balancing the demand for luxury
00:40:53packaging for an expensive product with sustainability. How are you seeing that happening in practice
00:40:58in terms of what you do with clients and what they're looking for? Yeah, definitely. So, you know,
00:41:02there's a huge amount out there and we're definitely seeing, you know, consumers are kind of
00:41:07never being more and more informed these days. You know, they really delve in. So, you know,
00:41:13from a sustainability point of view, you know, if you look kind of 10 years ago, sustainability was
00:41:19a bit of a whisper. You know, it was a word that was bounded around. It was a bit of an afterthought,
00:41:23maybe. And, you know, what's more important than ever now is that sustainability is a hygiene factor
00:41:29for any brand or business. And what I mean by that is that if sustainability is baked in from
00:41:35within the DNA from the ground up, regardless of whether that's a key proposition that you put out
00:41:39into the world or not, because consumers are wary, they are looking into these things. And, you know,
00:41:45it's really, really important to cover that off. And so, yeah, no. And so from a packaging point of view,
00:41:52you know, consumers are interested in looking at how brands are minimizing packaging waste,
00:41:58looking into kind of innovation and packaging and the limits like that to see kind of where it's
00:42:03come from and how it's being kind of what decisions are being made by these brands to help the
00:42:08environment. You're listening to the Stable Scotland Podcast. This episode is brought to you in partnership
00:42:12with McLaren Packaging. And now to our second panel, looking at sustainability in its widest sense.
00:42:18Taking part in this panel were Donna McLaren, managing director at McLaren Packaging,
00:42:23Kristin Hughes, Head of Global Sustainability, Greening to Glass at Diageo, Jessica Stewart,
00:42:29Sustainability Manager at Inch Diarney Whiskey, Professor Tim George, Director of International
00:42:33Barley Hub, and Sally Anne Kelly, Abner, Children's Charity, Chief Executive. We began the panel discussion
00:42:39by focusing on the environment. So, turning first to environmental sustainability,
00:42:44I could hear more about what you're doing to address challenges around climate change and net zero,
00:42:49and also how your work has been impacted by the pushback against net zero and stability in general
00:42:54from some parts of the world that's unfortunately spreading. So, perhaps I'll start with you first,
00:42:58Tim. Could you have a bit of insight into how the impact of barley in production,
00:43:03how that affects resources and the environment? Just put that in some kind of context, what the
00:43:07issue is there? Yeah. So, our priorities, the research that we're doing is trying to prioritise
00:43:14a number of things. One is to reduce the Scope 3 emissions or the greenhouse gas emissions associated
00:43:24with barley production. We're also interested in how we can improve the resilience of barley production
00:43:33systems and barley in general to the stresses associated with climate change. So, these are our
00:43:38focuses in the sense that we want to improve the sustainability of the system by allowing it to
00:43:44be resilient to stress, but also by reducing the impact it has on the wider environment. So,
00:43:50there's a lot of interest in working on understanding what the impact of the production system is on soil,
00:43:57water, air, for example, and reducing the detrimental environmental impacts of those production systems.
00:44:06So, understanding how regenerative agriculture, for example, can improve the environmental
00:44:14credentials of the production system in general. Okay. Can you give us some examples of what you're
00:44:18doing with the whisky industry, some projects you're working on or things in the pipeline that you can
00:44:22tell us about, show how it's all working in practice? Yeah, sure. So, I mean, one example, I mean,
00:44:26on the panel here as well is Diageo. So, Diageo is funding some research that we're doing,
00:44:31particularly looking at the impact of changing the agricultural production system to be a more
00:44:38regenerative system and what impact that has on soil health, for example. So, trying to understand
00:44:46how we can improve the system so that we end up with a healthier soil system compared to what we had
00:44:52before. So, reducing inputs, but also maintaining quality and maintaining production at the same time.
00:45:02So, obviously, there's a large component of this, which is to do with the agronomic practices,
00:45:10the management of the system. So, understanding how a farmer can change the way that inputs are put in,
00:45:17or the way that they rotate with different crops, which can have impacts on the sustainability. But
00:45:23there's also a large and important impact of the genetics of barley itself. So, understanding
00:45:30how we can improve the varieties that we use in these systems so that they use less resource,
00:45:37so that they reduce the amount of greenhouse gas emissions produced, and that they're more resilient
00:45:42to change and variability. As we can see, it's a beautiful day today out there, and it's been a
00:45:48very dry spring, early summer. But last year, we had the complete opposite. It was very wet. And so,
00:45:55having a system which can cope with that variability, which is going to be, which is a sort of key to,
00:46:03or a key output of the impact of climate change, then we need to be able to cope with that kind of
00:46:09variability. Thanks, Tim. Good to hear about that. And I'm turning to you, Jessica and
00:46:13Kristen. You both work for Scottish Whiskey Producers. I think you have the challenges and opportunities
00:46:17you're facing in terms of climate change, sustainability in general. So, Kristen, perhaps
00:46:21that with you, working for the world's biggest Scottish Whiskey producer. What sort of things are
00:46:25you focusing on at the moment in terms of sustainability and coping with what's happening in the world?
00:46:30Yeah. Well, again, I think what Tim says here, when we think about all of our carbon emissions,
00:46:36we look very much at scope one and two, and I'll come to that, but also, of course, scope three,
00:46:41and that regenerative approach. So, our raw materials, and barley, of course, being one of
00:46:45those key raw ingredients, makes up about 30% of our scope three footprint. And yet we know that we
00:46:52can't impact that alone. So, we work with researchers to try to find how can we work with farmers,
00:46:57researchers, academics, and also government to incentivize farmers to use fewer inputs to have that
00:47:03regenerative approach to the landscape. And then also then that it supports us with our carbon
00:47:09numbers. However, right now, it's really tough to measure the data and understand where that soil
00:47:16secret in the carbon sequestration is coming in. So, we'll continue to invest in that with partners
00:47:20like this and with others across the Scotch Whiskey Association. However, with our scope one and two
00:47:26emissions, so those where we have direct impact and that are in our own distilleries,
00:47:30we're taking a very direct and aggressive approach and investing quite a bit of CapEx into our own
00:47:37sites. So, really driving the decarbonization. Let's say Cameron Bridge just up the road here,
00:47:43we've invested in biogas, biomass boilers. In a way, then we can use the spent grains to also heat the
00:47:50boilers. So, really trying to create a circular approach to this as well. Leaving just further up the
00:47:57road a bit there, we also invested in around 7,800 solar panels. In the winter, that can provide 22%
00:48:04of the energy we need to actually fuel. Leaving in the summer up to 60%. I mean, a day like today,
00:48:10I'd like to take those measurements. So, really exciting to see that move forward. And then some
00:48:15of the smaller sites, and I'm sure some in the room here can speak to this, they're a lot more complex.
00:48:20So, when you think about Telescope and Isle of Skye, it's really tough for us to think about getting
00:48:24the renewable energies there. But we are working with others to try to be creative and to address
00:48:30that problem. In addition to Scope 1 and 2, then we have Scope 3. Again, I mentioned raw materials.
00:48:36Packaging is another one of those. So, how can we reduce our footprint and ensure that the packaging is
00:48:41also potentially highly recyclable? The rates are also, the material is recycled and that we drive
00:48:49our carbon numbers down. And then finally, I'd also say one of the key, key points for us in the climate
00:48:55space is water. It is by far the most critical ingredient. It goes to absolutely every one of the
00:49:01products that we make. And so, we're working really, really diligently to reduce the amount of water it
00:49:07takes to create a litre of whisky. And at the same time, then we're working with others to replenish
00:49:13the water that we use. And we've been looking across the globe at predominantly water-stressed areas,
00:49:20and you wouldn't think that Scotland is a water-stressed area. But actually, we had to work
00:49:23with probably, again, a handful of folks in the room on some of the water that was available here.
00:49:29So, some of the Speyside whiskies, we really had to be thoughtful because could we get quality water
00:49:34because of the number of distilleries that were all pulling from that same water source. So, a number
00:49:39of different challenges, but collectively, I feel like we're addressing the cereal issue,
00:49:43the water issue, and even that decarbonisation issue. There are quite a few challenges there.
00:49:47We've had business your size as well, so much to juggle. As you see, you don't expect Scotland to
00:49:51suffer from droughts, but it does. There's a lot of different wilderness recently. So, a challenge there.
00:49:57So, Jess, turn on to you. It's also a fairly new distillery, smaller scale in Diageo, but doing great things as
00:50:03well. I've been to your site and seen some of the work that's going on. So, what are you doing to
00:50:06tackle sustainability from a new distillery? Is it easier, in a way, to start from scratch,
00:50:11to build a distillery with sustainability in mind? Yeah, so it's a good question. So,
00:50:16coming into the distillery a year and a half ago, it's an amazing place to start because when the
00:50:23distillery was built in 2015, the founder and the managing director then were like, how can we design
00:50:29a distillery that overcomes a lot of the challenges that we have faced in the industry over the decades?
00:50:35Because they've got decades of industry experience. And so, what they've gone for is a huge amount of
00:50:40innovation. And that builds in a huge amount of opportunity to get flavour and efficiencies. So,
00:50:49energy and water efficiency alongside flavour have been absolutely at the core of the business. And that
00:50:55has been great because I've come in and seen that there's this huge amount of work that's been done
00:51:00over the years. And it's shown that being a new distillery, you can put these measures in place
00:51:05straight away. So, we're not having to retrofit and spend that money later on that a lot of other
00:51:10distilleries are struggling with now. So, we started at a really strong point. So, in terms of energy
00:51:18efficiency, back in I think 2016, when there was some SWA benchmarking data gathered for energy
00:51:26efficiency, we were using about 43% less energy than malt distilling average, which is amazing.
00:51:34It's fluctuated over the years, but now the industry is catching up. In the last kind of benchmarking
00:51:40data in 2022, we're using 30% less energy. So, on the one hand, it's fantastic that the industry is
00:51:47catching up. There's loads of big moves. We heard Sarah talking from Shivers. They're putting in
00:51:54MVR in a lot of distilleries. There's a huge amount of effort going on in the industry,
00:51:59which is really impressive. But for us, almost, it's like difficult when we've started in such a
00:52:05good position. We've got the low-hanging fruit, where do we go? So, we need to look at the data in
00:52:09a more granular way and look at specific areas on site if we're looking at energy efficiency.
00:52:15Water efficiency, the same. I mean, the SWA had a target for 2025. As soon as we were built, we met
00:52:23that target. So, again, we want to not rest on our laurels. A challenge really is thinking, I mean,
00:52:31if we're still thinking about energy and emissions, climate targets almost expect that you are at a
00:52:37high emissions baseline. So, if you've already been kind of born efficient as we are, it's quite
00:52:44unachievable to meet the targets that are set in line with agreements. So, that's just what we need
00:52:49to work on. Obviously, sustainability is much bigger than energy and emissions, but that's been
00:52:55our focus primarily because the whiskey industry, obviously, two real material issues are energy and
00:53:01water. So, that's what we went for right from the get-go. We're starting to build a more comprehensive
00:53:09sustainability strategy, but one of the key things which I think a lot of distilleries will be looking
00:53:14at is potentially moving to green hydrogen. So, we have our kind of strategy for energy and emissions
00:53:22is minimize energy use, maximize energy efficiency. That's been the same since 2015. Then the third
00:53:29one is embrace cleaner energy. So, we're still using gas for distillation. Can we switch 100% of that gas
00:53:36to green hydrogen? The answer is, in theory, yes, but we need to work out whether it's feasible and
00:53:43within what timeframe. And that would be the kind of next logical step if we're looking at our own site.
00:53:50Yeah, and Jess, B Corp status. Can you explain briefly what that is? Some people might not know
00:53:54and what turned you on to get to B Corp? Yeah. So, B Corp, for those of you that don't know,
00:53:59B stands for benefit. It's an external certification scheme that looks at sustainability
00:54:06in its broadest sense, so social and environmental. It was started in 2006. Basically, these guys that,
00:54:12as far as I'm aware, had worked in the corporate sector for a long time and thought, okay, why have we got
00:54:18businesses that are only caring about profit? And then we also have kind of not-for-profits charities
00:54:23that kind of have a broader purpose for doing good. Is there something in the middle? So, the idea
00:54:30is profit with purpose. And we have been working on this for the last year, or actually maybe since I
00:54:38started it started. It's basically what we want to do is have a framework that allows us, or at least
00:54:45encourages us, to continuously improve. So, B Corps are not perfect. They never will be perfect.
00:54:54Nothing in sustainability is. But the benefit of it is that you are accountable to someone or something
00:55:01else. You are willing to measure, report, and improve across the board. It provides the framework
00:55:09that you, you may be able to develop yourselves internally, but it looks at how you treat your
00:55:14staff. It looks at how you engage with your supply chain. How are you measuring, setting targets for
00:55:22water and climate? So, it's huge. It's across the board. There's a handful of whiskey companies,
00:55:28who are either B Corp certified, who are on the journey to B Corp certification. And we just see
00:55:35it as, so far, hugely beneficial, even just using it to help you undertake activities. We haven't been
00:55:42certified yet. We've not even submitted for it. It's hugely comprehensive. It's going to get more
00:55:48comprehensive soon. But we see, so far, that it's actually kind of adding a huge benefit to the company.
00:55:54It's interesting to hear. We talked about supply chain, and obviously, Donald is a packaging company,
00:55:59a very important part of the supply chain. What's McLaren packaging doing in this area,
00:56:02in terms of sustainability and eating targets, and over and above that?
00:56:06So, packaging finds itself right in the centre of this, partly because it should be, but also because
00:56:15it's so prominent to consumers when they buy the product. So, a bit of context, I mean, we see our
00:56:22customers wrestling with three challenges just now around sustainability. With respect to packaging,
00:56:30we see cost has always been a driver and a priority. But with sales under pressure just now, cost is
00:56:39becoming a bigger driver. 90% of whisky is exported. There's a real complexity around that. There's
00:56:48different attitudes that we touched, the previous panel touched on, in different parts of the world.
00:56:55There's different legislation in different parts of the world. And a lot of legislation has been driven
00:57:00here in the UK and Europe, and that can be complex to navigate. And then the third area for me is,
00:57:08there's a huge amount of information. There's a huge amount of new terminology that we're all having
00:57:14to learn with respect to sustainability, you know, scope one, two, three. Most people in this room,
00:57:20they were familiar with that. But 10 years ago, I'd have to guess most people would not have known what
00:57:24people would go on. That really was. And with misinformation, there is also misinformation.
00:57:31And misinformation can come about deliberately or accidentally. And companies are very concerned
00:57:40about greenwashing because it's reputation. So what are McLaren packaging doing to help our customers
00:57:49and in these things? And, you know, it's my job and Michael's job to steer our business
00:57:55in a direction. And, and we, we focus on three main areas. We're local. So we're here in Scotland,
00:58:03and we produce low impact. And secondary, we want to be open and collaborative and share our expert
00:58:10knowledge that we have developed, and we continue to develop, because as we've been touched on here,
00:58:17sharing is so important, and sharing horizontally and sharing vertically, and to really get a full
00:58:23understanding of, we've got limited, limited resources, you know, where should we put those
00:58:27resources to really address sustainability? Is it in packaging? Is it in grain? Is it in transport?
00:58:33You know, we all have to work together on that. And, and, and then the, the, the third area we're
00:58:42positioning, and is, is around our independence. So we're an independent company, and we can partner
00:58:53and move with who we choose for raw materials. And our scope three emissions are 95 to 96%, 94 to 96%. So
00:59:05a huge amount of our carbon that we are passing on is from our suppliers, because the raw materials
00:59:11involved for us in paper based packaging, and there's a lot of energy required to make those raw
00:59:16materials, like there's a lot of energy required to make glass or steel and other components. And
00:59:25as an independent, we can partner with suppliers and producers of those raw materials who've invested in
00:59:32low carbon, low impact ways of producing the raw material, we can convert it and deliver it to
00:59:38our customers at pace. So that's how we set the business up, you know, some examples of what we've
00:59:45done, what we've done that I think are, are, are not worthy. And we created our own sustainability
00:59:52strategy six years ago, with our own internal knowledge, we've developed a skill we've not used
00:59:58consultant, we've done it ourselves. And we've committed to report our carbon emissions and our
01:00:06financial results. And we're not obligated to do that, we're not big enough, but we've chosen to
01:00:11do that voluntarily. And we've had a 30% reduction in our carbon intensity ratio for the last five years.
01:00:18And, and the third area for me, and this is our employees, we employ 300 people in Scotland,
01:00:26how do we engage and motivate them to, to think and do better. So we have EV chargers on all of our
01:00:33sites, we offer payroll loans, soft loans for employees who want to buy an electric car, because
01:00:40it's more expensive. And the real bonanza is that we offer free electricity for anybody who has an
01:00:46electric or hybrid car. So any electricity they use to commute is free. And last year, we dispensed 120,000
01:00:54miles worth of energy to our employees. So that's interesting. Yeah, definitely. Yeah. And you
01:01:01mentioned people there has been very important that brings on to diversity and inclusion a very
01:01:05big part of sustainability. So we talked a bit about the workforce in the future in the first session.
01:01:10But I'd like to see how you're all seeing diversity and inclusion developing in practice. And has it got
01:01:14tougher, given what's about the US and spreading to other parts of the world, including here about
01:01:19pulling back of D&I policies and the whole department's been closed down. So it's a question
01:01:23for all the panels. Where do you see diversity and inclusion now on the business agenda? And how
01:01:27is it affecting what you do day to day? So perhaps Sally, I'm bringing you in on that from a third sector
01:01:32point of view. Yeah, I mean, diversity and inclusion is at the heart of what we do. And so I don't see us
01:01:40rolling back from diversity and inclusion anytime soon. It's also a requirement in the law,
01:01:45for much of what we do as well. But I suppose some of the challenges we face actually is working
01:01:51in communities where they are getting very difficult messaging, actually, about the othering
01:01:58of other people in their communities. So we work, for example, one of the things that we do is we
01:02:04support any child who arrives in the country unaccompanied. And so we currently support about
01:02:11a thousand unaccompanied asylum seeking children. And they've come from all over the globe, made their
01:02:17way to Britain through hugely problematic and difficult routes. And so we need to support that
01:02:25group of youngsters and the best way that we can. And they on a day to day basis are hugely motivated
01:02:32young people, but who hold with them huge amounts of trauma. And because many of them have come from
01:02:39conflict zones from across the world. And they are highly motivated to learn, highly motivated to work
01:02:48if they ever receive status, because they can't work if they don't have status. But they also experience
01:02:55day to day racism in Scotland. So part of what we need to do is try and support them. So it's really
01:03:01important to us to hold on to those inclusive values. We're a very values driven organisation.
01:03:09I would get political, but there are certain politicians who could learn from that.
01:03:14We work with children in poverty. We know part of what we do is we link our work to research. We see
01:03:21the impact of poverty on some children, the impact that it has on relationships in the family,
01:03:27on the impact on mental health, on educational attainment, on the use of drugs and alcohol.
01:03:36We want to learn from that and support families to find a different route out of that.
01:03:42We address the shame of people living in poverty, because as a society, we still have huge shame
01:03:48associated with being very materialistic. And we need to address the violence that is present in
01:03:57some families where there is poor mental health or alcohol and drug use. So we also,
01:04:03so we're not a fluffy charity, we work at the hard end. So we also have a couple of mother and
01:04:10baby houses where we want to open more for women that have got significant problematic alcohol and
01:04:16drug use who are pregnant, who have lost children to the care system previously. So we currently have
01:04:2226 women who need help in recovery. In between them, they have lost in excess of 50 children to the care
01:04:32system. The losing of those children develops more trauma in those women. So we're working with those
01:04:38women with our new babies to try and see if we can support them in a different way. So inclusion and
01:04:44diversity is absolutely at the heart of all of that. But we also need to really intentionally look at
01:04:51what that means for our workforce, because we are a predominantly female workforce. Our balance in our
01:04:57senior team is tipped towards female managers, female chief executive to three female directors. But we
01:05:08purposefully look at that and how we include members from a range of diverse communities, including
01:05:14black and minority ethnic and also people from from the LGBT plus community and also children, people
01:05:22affected by disability. We're not there yet, but we work really comprehensively with investors and people on
01:05:28some of this stuff. So we're a platinum employer in terms of investors and people. We're in the top 100 of the
01:05:36Sunday Times best places to work. So we intentionally look at how we actually improve the kind of
01:05:44organisation we are, how people understand their values, how we link what we do to addressing poverty,
01:05:54but also looking at the sustainable goals, the incorporation of the United Nations Convention on the
01:06:01Rights of the Child, a whole host of things that we need to intentionally pay attention to in the
01:06:07organisation.
01:06:09Thanks Sally. I'll come back to some of the work of our brother later in this question. But obviously the
01:06:12whisky industry is male dominated still. So in terms of inclusion, diversity, obviously not just from
01:06:19female, like gender perspective, diversity inclusion in general, what are your organisations doing? Do you think
01:06:25that's working and that you'd like to share with us?
01:06:30Yeah, I can start. So again, B Corp is helping us kind of formalise some things that we may have been
01:06:38doing in practice, but hadn't really kind of written down. And it's also pushed us to do things that we
01:06:42hadn't even thought about. One of the things that we're going to start to do is blind application reviews.
01:06:49So then you're taking away gender, name, et cetera, and these identifiable characteristics
01:06:54so that someone can shortlist based purely on the credentials of the CV and their experience.
01:07:02So we're just about to implement that. And I think that that will be quite a good step forward.
01:07:10We've got, I mean, obviously I've been employed, we've just employed an assistant distillery manager
01:07:15who is a female in her twenties. So bringing young and female people into the industry.
01:07:22And I think that, yeah, the distillery is fully of the belief that we can be doing more and we will
01:07:28do. So it's positive. Diversity and inclusion have been at the heart of our business for a long, long
01:07:33time. And I think more than anything, it helps us to also basically to know who our consumers are,
01:07:38who our customers are. So if we just narrowed our own employment base, then we might be losing out
01:07:43on a whole host of others. So by employing that diversity, we also learn and we know then we
01:07:50could think about maybe even getting to some new consumers, new customers, as it were.
01:07:56I'd also say, I mean, I think Sarah was talking about workforce for the future and the engineering
01:08:02needs. And if we limited ourselves, we actually would also miss out on a lot that we need actually
01:08:07to get to that next stage. What we're seeing in Diage, especially in the sustainability space,
01:08:12is the need for data and data analysis. And it's amazing the kind of diversity that that ends up
01:08:17requiring and just people who understand the different ways to splice and dice data in order
01:08:23for us to track and watch that progress around the world. So we've got 200 sites, over 200 sites
01:08:30around the world. So if we limited our scope of employment, we would really miss out on being able
01:08:36to lead in sustainability or perhaps even at the business.
01:08:40Yeah. I think Tim, do you want to add something?
01:08:42Yeah, I was just going to say, basically, in science, diversity is absolutely key.
01:08:46We're interested in, you know, we need to attract talented people to the international body,
01:08:52for example, to apply themselves to this problem that we've got. Okay. And talent is everywhere.
01:09:02Talents, you know, there's no boundaries to talent. And actually, we have people from all over the
01:09:09world working in Dundee and Aberdeen on these problems. For example, we have a doctoral training
01:09:16program, which has 43 PhD students, or we'll have in September from September Romans. And these,
01:09:22there's people from all over the world in that. And it's absolutely, that diversity really helps
01:09:27generate the sort of creativity that we need to be able to deal with some of these issues.
01:09:33I'd say one of the problems we've got is that actually, we can't bring people from everywhere
01:09:40because of, since Brexit, there's issues with having, getting people visas to come in and work
01:09:46for us. So actually, that is a problem. And it stops us from being as diverse as we'd like.
01:09:52It's like, we have a problem right at the moment. Is that something that you're...
01:09:54I think it makes, it makes it really difficult to, well, it makes it difficult to bring in the
01:09:59most talented people.
01:10:00Matt, no?
01:10:02Would you like to add to that? We would want to...
01:10:04Yeah, I mean, I think, you know, it's a really important topic. I think, unfortunately,
01:10:10you know, with social media, and there's quite extreme views out there. I mean, sort of what's coming
01:10:14out of the US just now and the rhetoric, it's making this topic, you know, more difficult to talk about.
01:10:20But I think it's really important that companies focus and talk about it and continually seek to
01:10:26improve and take ideas that spark up on the panel and implement them. And, you know, we,
01:10:32we as a business, undertook an employee engagement survey a couple of years ago,
01:10:38or we already had wellbeing ambassadors in our company. But one thing that came out in our
01:10:44Invercline, where we mostly operate, has identified, I guess, a need and a demand for
01:10:53mental health support because of where we are in our communities, around us in our workforce.
01:11:00So we, as a company, have brought in specialist mental health support charities during work time to
01:11:05work with people. And without doing that, having that discussion, that engagement, we wouldn't,
01:11:10we wouldn't have found that. So I think talking is important. Again, sharing ideas and taking it
01:11:18forward. Thank you for listening to our Sustainable Scotland podcast produced by The Scotsman. This
01:11:22episode was delivered in partnership with McLaren Packaging. Please listen out for more episodes of
01:11:27Sustainable Scotland and all your main podcast platforms. This episode was presented by me,
01:11:32who is Mary Gallagher and produced by Andrew Mulligan.
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