Good morning, everyone. I'm Jean Jereissati, Ambev's CEO, and I'm really happy to be here with you in this very special moment. Let me start by providing a visual description of myself. I'm a white man with brown hair, wearing a white shirt and brown pants. This is a very important event for us. Sustainability is our business, and is essential for our long-term growth and to be here for 100 years more. This is why, in the past two years, all of our officers, including myself, have our compensation directly linked with sustainability goals. Sustainability is part of our strategy, and I'm personally engaged in all relevant environmental, social, and governance topics. Today, you will be updated about our progress in these topics, and you see how everything is connected and evolving within our ecosystem and in our transformation journey.
There is no one better than Carla Crippa, our Corporate Affairs Vice President Officer, to start this conversation. Wish you a wonderful morning, and look forward to joining you later in our Q&A session.
Hello, everyone. Thank you very much for joining our Sustainability Update 2023. I am Carla Crippa, Corporate Affairs Vice President Officer. I'm a white woman, I have brown, long hair, and I'm wearing a black T-shirt and a skirt. I'm very happy to be here with you today, presenting an update on the most relevant topics in our sustainability program. Next year, we will celebrate 25 years since we announced the combination of Brahma and Antarctica, which gave birth to Ambev. It's been almost 25 years since the creation of Ambev, but the truth is that we have centuries of history in our brands and our products. During these 25 years, we've had over 9,000 days to do our best, many opportunities to learn, to improve, and to celebrate. Now we have 9,000 more days to do even better.
There are over 9,000 chances for us to continue creating a future with more cheers. To create a future with more cheers, we must work every day, diligently, with a strong commitment to integrity and responsibility. Building a better future is an everyday attitude. If we want to foster an inclusive growth for our ecosystem, with more jobs, more income, and the inclusion of 5 million people in 10 years, we must work hard every day, enhancing the availability and access to water for people in vulnerable situations and taking care of our watersheds. These are daily practices. Promoting responsible consumption of our products and providing more knowledge to our consumers is also an everyday task. Being there for our entire value chain, from the small farmers to the bar owners, this is a daily commitment.
Thinking, discussing, and creating solutions to address climate issues from our electric fleet to our breweries is a daily endeavor. Paying attention to the smallest details, from the field to the glass, from the ingredients in our beverages to the packaging of our products, is our daily work. Most importantly, having ethics and transparency as a non-negotiable value in our company is an everyday commitment. Sustainability goes beyond environmental and social commitments, and today, we will show our initiatives in these areas, too. Here at Ambev, we believe that sustainability is a daily commitment to never take shortcuts, because doing the right thing is an everyday attitude. There is no shortcut. Connected to this, I would like to talk about evolution. No one stays the same for 25 years, and over these more than two decades, the world has increasingly demanded more from companies.
Society expects a more collaborative and future-focused approach, and throughout this journey, we've always adapted to change. We've been able to do this because we have a very solid governance that supports our entire business. We are very proud of our origins, but from the beginning, we've built our own culture that evolves day by day. We've undergone a true business transformation and a culture evolution process that continues to evolve daily. We've adopted new values, such as long-term thinking, collaboration, and active listening, all with a vision of shared growth and partnership with our ecosystem. And that's what will take us forward in the next decade. We continue with the certainty that transformation is a journey, not a destination, and that we will get there without taking shortcuts. We have more 9,000 new days to continue living this purpose and making a difference in the world.
Getting closer and closer to the company we wanna be in the next 25 years, day after day. We dream big to create a future with more cheers. This is our purpose. And more cheers means shared prosperity for our communities, for the planet, and for our company. It's growth that's inclusive, it's value that's shared, and is a world that's truly worth celebrating. That is a future we can all celebrate. Sustainability is our business. It's been a fundamental part of our company, and we cannot exist without the farmers, without nature, without clean water supplies, without healthy community suppliers and clients. In other words, sustainability is much more than a number. It's part of who we are, throughout our purpose, our culture, and our processes. So let's look for the agenda for today.
I will start with an overview of our strategic priorities, and then our procurement and supply teams will present our environmental highlights, specifically focusing on water management and carbon emissions. Next, we will cover our social impact highlights, both inside and outside our operations. Following that, we will have a roundtable with members of our Board of Directors and Fiscal Council, and close with a Q&A session, when our leadership will answer your questions made on the web platform. Note that any topic that's not covered in detail in this presentation will be updated in our annual sustainability report that will be published by the Q1 of 2024. Let's begin. Our sustainability agenda has eight strategic priorities, as we presented last year: water, climate action, sustainable agriculture, circular packaging, ethics and transparency, entrepreneurship, diversity and inclusion, and smart drinking.
These are the topics for Ambev to focus on, aligned with our materiality assessment as well, and they're also where we can drive the greatest shared value for our communities and for the planet. In 2018, we launched a global set of sustainability goals for 2025. As you will see today, we are on track to achieve these goals. We significantly reduced our carbon emissions and already sourced 100% of our electricity from renewable sources, from solar and wind power, having launched 13 carbon neutral facilities so far. We improved recycling supply chains, we localized costs, eliminated waste, and lowered emissions, while innovating also across our primary and secondary packaging.
We've empowered thousands of entrepreneurs and small businesses in our value chain, and we are now a leader in sustainable innovation as we scale up our award-winning 100+ Labs accelerator program. In agriculture, we've invested in predictive analytics to improve supply security and enhance climate resilience, and we've adopted regenerative practices and digitally and financially empowered thousands of farmers across our direct sourcing. We also improved water efficiency, becoming the most water efficient global brewery. We set a new standard with our partners for measurable improvement of water quality and also availability in high stress watersheds. And also, we've empowered our consumers with choice and information, and are building a strong portfolio of no and low alcohol beer, like Bud Zero, like Corona, Corona Cero, Michelob ULTRA, and Labatt Blue.
We implemented a global voluntary labeling in all our markets and public/private partnerships to reduce harmful consumption of alcohol. With that mindset, I would like to invite Felipe Baruch, our Procurement Vice President Officer, to share how our framework is creating value in the long term, while also building resilience and contributing to the sustainable development of our ecosystem.
Thank you, Carla. I'm honored and really happy to be part of Ambev's sustainability update for the first time. I'm Felipe Baruch. I'm a white man with brown hairs. I'm wearing a white and blue long-sleeve shirt and a dark blue pants. I'm gonna have the privilege to share our great results so far, and how we envision our role on the journey to deliver a future with more cheers. At Ambev, we truly believe that sustainability is beyond a corporate responsibility practice. It's part of how we handle our daily business to create value and share prosperity with our communities, our planet, and our company. And how could we drive meaningful impact and real change, creating value at the same time? First, working with nature instead of against it, and understanding the true value of the planet's precious resources.
Therefore, our focus are: reducing consumption, using less materials and resources, innovating, and developing new ways to make things different and better. Please, allow me to provide few examples. Since 2017, we have invested heavily in renewable electricity as part of our strategy to reduce our Scope 2 emissions. And since then, we have saved more than $16 million in energy costs. And now, having our operations already 98% covered with renewables, and with a clear path to be 100% by 2025, makes us think about our next move on the topic, and bringing clean energy to our customers and clients is our next frontier. For that, we have partnered up with a renewable energy marketplace startup called Lemon. Today, we already have more than 6,000 clients receiving energy with reduction in their CO2 emission, and of course, in their costs.
Their expectation is to create almost $8 million of value per year for these clients, and make them more profitable every day. Another example is green logistics. As part of our efforts to reduce our Scope 3 emissions, together with our partners, we have bought 255 EVs and 440 electric forklifts. We have also implemented collaborative transportation with other companies. We have leveraged new models like trains and vessels. We have developed more efficient roads, consuming less fuels, and invested in green fuels as well. All those initiatives together have saved us almost $5 million in the last 18 months, and continue to be an important platform for us moving forward. These initiatives makes us more resilient, more efficient, and more sustainable.
To briefly talk about our circular packaging pillar, the main actions are focused on increasing recycled content, returnable mix, and boosting lightweighting projects. The combination of a balanced pack mix with structural recycling programs and a minimal usage of materials, reduces commodities volatility impacts in our cost, and can create positive impacts to our communities, in addition to a huge carbon emission reduction. Today, we already have more than 83% of our packaging portfolio being returnable or made from majority recycled content. To continue on this journey, we will boost our focus and efforts on improving our recycling supply chain. As market leaders, we know our potential to drive transformation and to change an inefficient and informal supply chain into an environment with positive social and financial impacts, not only for Ambev, but also for our communities and our partners.
The power of operating as a platform is exponential for these numbers to continue to grow. For example, we have started to use Zé Delivery to address one of our consumers' pain points related to returning the glass bottles. The solution looks obvious, but it's not easy to be implemented. The same driver can deliver an order and pick up returnable bottles in the same trip. The pilot results of this project are very promising so far, and some tests showed Zé Delivery can sell more returnable bottles than other off-premise channels. We know that this is a better solution for the environment and is a more affordable solution for our consumers, too.
All the examples that I have mentioned before are impacting positively on our climate actions KPIs, and combined with the great work of our operations team in reducing consumptions every day, are helping us to be in line with our climate transition plan to achieve net zero by 2040. Duarte will explain more in details our Scopes 1 and 2 progress next, and we are very proud of that. To complete the net zero plan, our team is also working very closely with our suppliers and partners to decarbonize our value chains together, addressing Scope 3 emissions. We already have over 200 suppliers that signed the Commitment for Climate Actions, an initiative to engage our value chain in climate action. Together, these suppliers represent around 70% of Ambev's emission in Brazil.
In addition to that, since the Q1 of the year, we have been working with key suppliers under the Eclipse Leadership Program, aimed to engage them to create increasing transparent and of carbon data, share best practices, collectively innovate, invest, and bring the ecosystem together on these topics. Thanks to all these initiatives and our consistent work, I'm proud to announce that Ambev has received the final approval from the Science Based Targets initiative. This means that the company's carbon emission targets are aligned with the best science available, proven by a long process of validation by experts from the most well-renowned organization in the matter. We are the first beer company to achieve this in Latin America.
As you can see, our sustainability strategy is another true example of how to operate as a platform, breaking the silos, connecting our ecosystem, improving livelihoods, and increasing access to opportunity. For sure, we do have a huge challenge ahead, but there are also plenty of opportunities, considering we play a unique role in enabling value growth through our sustainability initiatives together with our ecosystem. Now it's my turn to invite Valdecir Duarte, our Industrial Vice President Officer, to tell us how we can create value using our main capabilities in our operations. Thank you very much!
Hello, everyone. I am Duarte. I'm tall, white man with brown hair, and I'm wearing a blue shirt and blue jeans. It's a pleasure to be here with all of you. At Ambev, sustainability is our business. Our commitment to sustainability began over 25 years ago when we initiate the implementation of environmental and safety management program across all the operations. These program are consistently evolving, enabling us to standardize our practices across the plants. Our first priority is the well-being of our people, which include both our dedicated employees and our suppliers. We have established strong safety protocols and continuously foster our safe culture. Climate action is a key element for our purpose of creating a future with more cheers. The primary objective is to minimize our emissions to the greatest extent possible and only offset the residual.
Ambev strategy is based on two main fronts: increase renewable energy metrics in electricity and steam sources, and reduce energy consumption in the production. On electricity sourcing, we committed to have 100% coming from renewable until 2025, and as Baruch said, we are almost getting there, with 98% of achievement up to now. Our steam generation strategy, our renewable, started in 2003 with the acquisition of our first biomass boiler. Then, we implemented other renewable fuels in our matrix, and we keep improving on that. Today, we have 11 plants using biomass, 9 using vegetable oil, and 1 using biomethane from landfill as fuel in Brazil. With energy consumption efficiency, we improve our total purchase energy through monitoring and managing in real time.
Therefore, since 2017, we have reduced 13% our indicator, bring positive environment and financial impacts. As a result of this strategy, in 2021, we announced our first carbon neutral brewery. Keeping this journey, we successfully neutralized emission from 2 more breweries this year, reaching an expressive number of 13 carbon neutral operations. We continue to follow our plan roadmap with a challenge for the coming years as we strive to reach our ambition goals to become Net Zero by 2040. Our environment program goes beyond. Another example is our strong waste management, in which we have targeted to reduce losses and improve recyclability. Today, we recycle more than 99% of the discharge materials in our operations. Also, we create value from our co-products through uptrades, upgrades, and upcycle initiatives. Now, let's deep dive our water strategy.
I would like to introduce Renata, our Supply Environment and Safety Director, who will take us to tour in a brewery to demonstrate that.
We find ourselves in Guarulhos, located in the state of São Paulo, Brazil. The Mountain Waters Brewery has been in operation for a remarkable 45 years. Its name derives from the water source that originates in the surrounding mountain. We are proud to own 850 hectares of environmentally protected area in this region with a high biodiversity significance. We highlight that this forest allows us to return more water to nature than what's used for Guarulhos Brewery's production. Following the methodology of the World Resources Institute for Volumetric Water Benefit Accounting, this underscores our commitment to sustainable water management and ecological preservation. Water is essential for life, and it's a key ingredient in our products. We have a strong technical process standard to ensure the best brewing water quality to produce our products in all our operations.
Our water resilience strategy looks at the full cycle, including our sources, water efficient consumption, effluent quality, and watershed preservation. Within our breweries, we aim for the world-class level of water efficiency. Our internal environmental management system is aligned with four Rs: reduce, reuse, repurpose, and recycle. Let's go to the production areas to get to know how it's done here in Guarulhos. Our team measures consumption per area and main equipment. Through data analysis, ideas become good practice that we standardize and we share with other operations.... In the brewing process area, the team has several routines, such as production planning, modulation, losses identification, and problem solving, and optimize our cleaning processes while keeping our high quality standards. In bottling, water efficiency is directly connected to productivity. The team works to increase the volume output of our packaging line and reduce inefficiencies in general. Here, we recycle and reuse.
For example, the water discharges from the last rinse of the bottle washer is used for the first rinse in effect. We also have a reuse station, where we treat some of the discharged water and reuse it for secondary needs, such as pasteurization, transport, lubrication, and floor cleaning. We ensure that this service water is never in contact with our products. Our effluent treatment system has the best level technologies in place to ensure high quality treated water is returned to the environment. In this and some other plants, a part of our treated effluents is reused in the utilities department, closing the loop of water usage. With this and other actions, Guarulhos managed to reduce water consumption by 6.4%, with consistent improvement year-over-year during the last three years.
Including our operations in the South America Zone has reduced water usage by 50% in the last 20 years. This journey has been promoting learning of new practices, technologies, and innovation, along with our suppliers, startups, and universities. But we know that our water challenges go beyond the walls of our brewers, which is why our water stewardship goal is to have 100% of our communities in high-stress areas with measurably improved water availability and quality by 2025. We have a water risk assessment tool to review our operational risk, to identify and prioritize our sites that are in high water stress areas. At these locations, we take a lead in the watershed programs, implementing a comprehensive seven-step watershed management process. The primary focus is on identifying local water challenges and potential solutions, often centered in natural approaches like reforestation.
Within the program, we actively implement agreed-upon solutions with established governance and financing mechanisms, engaging partners and other water users. We are committed to transparently communicating our progress and rigorously measuring the positive impacts we achieve. As the world's leading brewer, we are deeply committed to being an integral part of the solution to the water challenges facing our communities and supply chain. Our dedicated team remains engaged in this mission, recognizing its significance for our business, the environment, and the society.
Cheers! [Crosstalk]
Thank you, Baruch, Renata, and Duarte. We are very proud of our progress so far, and as always, we will continue to dream bigger. Now, let's move to another relevant priority in our strategy, which is our social impact pillar. Our progress in the social pillar is transparent and accessible to everyone in our annual sustainability report, and I will cover here some of them in more detail. We organize our social pillar with a mindset of inclusive growth or inclusão produtiva in Portuguese, enabling us to grow together with our communities and supporting them with the different social challenges that they face.
Two of the main challenges in South America are poverty and unemployment, and that's why inclusive growth is all about supporting and including people that are in a vulnerable situation in the economy and in the market, so that we help them generate income through work opportunities and entrepreneurship. Last year, we launched the BORA program with a bold ambition of including 5 million people within a decade. I will now show you the status of BORA, and also how our various social programs align and contribute also to our inclusive growth strategy. Inclusive growth and the fight against poverty is a long-term effort. As you can check on the screen, individuals can progress through various stages in breaking the cycle of poverty, but each stage requires different solutions.
The initial step is transitioning from extreme poverty to poverty, getting out of a state of chronic risk and indignity. And one way we do this in our communities is with our clean water access programs, AMA in Brazil, Somos in Bolivia, and Plasma Water in Chile. Since 2017, in collaboration with partners in regions including the Amazon Forest, the semi-arid region in Brazil, and also in Bolivia and Chile. Our company has initiated projects that have provided access to clean water for over 600,000 people, and the solutions include digging wells, purification and supply systems, filters, cisterns, and many others. Our commitment is to reach 1 million people by 2025, and I can tell you that we are on track for that.
Another way we help our communities to socially progress is our Fight Against Hunger program, which has already enabled us, along with our ecosystem, to donate over 1 million meals in Brazil and Argentina. Addressing hunger is an essential step in assisting those in vulnerable situations, because hunger prevents the individuals from concentrating on their studies and working, and it's impossible to climb to the next step when you're hungry. A complementary way to do that is through our volunteering programs, VOA in Brazil and VALOR in Argentina. VOA and VALOR serve as additional vehicles for expediting inclusive growth initiatives from poverty to dignity. By mentoring and collaborating with over 400 NGOs, we can effectively fight poverty by sharing what we know best: management knowledge and skills of our leaders who serve as mentors.
Through these programs, we are able to amplify the already significant positive impact they have on the lives of 10 million people. That is the population covered by those NGOs. They play a crucial role in preparing the individuals for the market and empowering them from the very outset of their journeys. And then we have BORA, our program that aims at allowing people to move from step three to step four, really including them in the economy and in the market. As I already mentioned, BORA program aims at reducing poverty and positively impacting society by reaching 5 million people in the next decade with work and income opportunities, such as employment or small and micro-entrepreneurship. Our first steps were given focusing on our direct ecosystem.
By sharing knowledge, creating connections, and financially supporting our small retailers and people looking at how to work with them, we help them to find the opportunity. Similar initiatives are being developed in Argentina and Chile, inspired by BORA. Our team created partnerships to deploy content to people in need, and those partners support our participants during the courses and offer them complementary mentorships. This moment may look basic to you, but we heard more than once that we gave them the first diploma of their lives. This is about dignity that's in front of us. Financial support is also another important pillar of BORA. We know that money is essential at this moment, so we use different approaches to different public. For example, microcredit, scholarships, BizMiles, or even support them with materials to support their businesses.
Then the connection between our clients, such as the small bars and restaurants, or our suppliers with people that are looking for work, is an essential step of our program. It's kind of a match of jobs and opportunities to them that makes a real difference in their lives. We have already impacted over 50,000 people in 2022. That was the first year of the project, and we already are over 150,000 people in 2023, adding up to 200,000 people in less than two years of our BORA, our BORA program between small and micro entrepreneurs and people with assigned work card. For me, for us, the most amazing way to see this impact is when we talk with the participants and see the difference that we are making in their lives.
All of them tell us that their children will have new perspectives for the future, so they impact past generations. Another way for inclusive growth is with more diversity and inclusion in our value chain. Since 2020, we have already included more than 700 black entrepreneurs as our suppliers, and I'm very proud to tell you that only this year, we have already invested over BRL 160 million in support and spending to those diverse group of suppliers, showing our dedication to inclusive growth from step three to four , also in our partnerships. And that's the spirit. By harnessing the power of our programs, we have the opportunity to provide growth and prosperity in the countries where we operate, really creating a future with more cheers. Now that we talked about the main highlights in our social pillar, let's talk about governance.
In our last update, last year, we addressed the most recent changes in our governance structure, from our new board members to the restructuring of the advisory committees of the board of directors. For that, I would like to invite Letícia Kina, our Legal and Compliance Vice President Officer, to the stage.
Thank you, Carla. It's a privilege to be here. I'm a white woman with brown and short hair, green eyes, and I'm wearing a blue blouse. I'm here to speak about governance, and I'd like to start by reinforcing that our corporate governance is at the heart of our sustainable practices. Only a strong, credible structure can enable us to produce the impact intended, not only inside our organization, but also in the community in which we are inserted. Having said that, we also believe that governance evolves and is subject to continuous improvement as the world changes and new risks are faced by the company and the society. In that sense, we have been actively working together, management, Board of Directors, and the Fiscal Council, to continue to review and update our policies and the bodies responsible for the most relevant decisions in our organization.
As a quick recap on our journey of continuous improvement, I'd like to flag some important changes in the past three years. In 2021, Claudia Woods, Fabio Barbosa, and Lia Matos joined the company board of directors, each with a different background and expertise, contributing with a new dynamic to the discussions on important business decisions. In 2022, the two advisory committees of the board were split into three: People Committee, Operations and Finance Committee, and Governance Committee. This restructuring focused mainly on enabling deeper and more technical discussions among the committee members, ensuring an even more thorough oversight by the board of matters such as talent management, compensation, cybersecurity, and sustainability. Now, in 2023, our goal has been to consolidate this new structure and its learnings. Also, it's worth noting that the board has appointed independent members to each of these committees.
Finally, earlier this year, Luciana Dias was elected an independent member of our board, enhancing the board's skills on governance and related matters. Robust governance is crucial to ensure sustainability in the long term. This is the pillar that dictates our ethics and transparency principles and enables the E and the S to move forward. To discuss a little bit more about governance and its impacts to companies in general, I'd like to invite our board member, Luciana Dias, and José Rezende, the chairman of our Fiscal Council. Luciana, Rezende, and Lucas, thank you for being here with us. Before we start our panel, I'd like to ask you to describe yourselves for the benefit of blind and visually impaired people.
Thank you, Letícia. I'm a white woman with brown eyes and brown hair, going gray, sadly, and I'm wearing a white blouse and a light blue jacket.
Rezende?
I am a white man with gray hair, using a green shirt and jeans.
Now, Lucas, could you please describe yourself?
Thank you. Hello, everyone. Great to be here. I'm Lucas Lira, a white male, 5 foot 6, wearing glasses, light brown hair, and wearing all jeans.
Starting with Luciana, can you tell us a little bit about yourself and also about your first impressions at the Ambev board?
Thank you, Letícia, for the question. I am trained as a lawyer, I'm a law professor, and I also have been working for more than 20 years with capital market teams. I spent eight years in the Brazilian Securities and Exchange Commission, three years as the head of the policy department, and five years as a commissioner. And since in 2016, I've been sitting on boards and audit committees of Brazilian listed companies. I think that one thing that surprised me very positively in Ambev, in the way the board of Ambev works, is how close is the contact between the board and the operational leaders. And I think there are two big advantages of this close contact of operational leaders and board.
First, the board can evaluate better how teams as culture, risk management, sustainability, are spread over the whole corporation. And also, leaders have to think how they want to discuss those teams with the board. So, leaders are somehow stimulated to think about risk management and to think about sustainability, culture, and strategy, because those teams are teams that will be discussed with the board. So I think allows both way, both ways, or both sides of the discussion to be more deeply involved and to get a better sense on what each other is worried about.
Luciana, you, you've participated in several discussions inside and outside the company, be it policy, be it other boards that you've served on and continue to serve. In your opinion, what are the main challenges relating to governance in a big company like Ambev? And what should be done to address these big challenges?
I think the two most important teams that have been spotted in the last few years are technology and sustainability. Speaking of technology, I think there are two aspects of it. First, most of the companies have to rethink their business and see how technology will change their business. So, even if you were in a company that was not technologically driven, you now have to think how technology will change the way consumers use your products and service, and how the experience of your consumers will be changed by technology. And this has been a very hard exercise for many companies, and I think that that's a very important aspect of thinking of a strategy for every company. The second way technology has been brought in boards is cybersecurity.
You have now a whole new world of criminality through the cyber environment. And boards are every day discussing more how to protect the companies from this type of wrongdoing. And so, in terms of technology, I would say those are the two aspects that have been brought to the board. And the second subject, sustainability. Some years ago, if a company had a department dealing with sustainability would be enough. But nowadays, we know that the sustainability teams have to be spread all over the decision-making process.
So, it's much more a question of culture, a question of how you embed those teams in every single process and in every single decision making, than to have people that understand the subject, but are not necessarily in touch with the whole business. So I think those are the two teams I would point out.
Thank you.
It's nice also to, to hear from you and to see that the main challenges are really spread in the company. So when we speak about technology, we can see, like, finance, legal, all the areas need to improve their knowledge in technology, and the same applies to sustainability in, in its broader sense. So thank you for your answer. And now, Rezende, thank you again for being here with us. Could you please also share a little bit about your background, learnings, and about yourself?
Hi. Thank you, Letícia. It's a very good pleasure to be here with you and Lucas and Luciana. I have worked for 25 years in an auditing and consulting company. I left it in 2016 to become a board member. So, I dedicate board member since then, and my background is I am accountant with post-graduation in administration and finance administration, and a master in agri-energy. I think the-
Yeah, and with your background-
Mm-hmm.
What do you see as the main attributes both to the effective Audit Committee and Fiscal Council, as you are the chairman who performs both responsibilities?
Interesting. Well, the first thing I believe to have a good Fiscal Council and audit committee is to have an onboarding by the new members. That's the beginning of things, in order to introduce them to the culture of the company, to the main senior executives. And after that, you have to have a very good work plan for the year.
Since we are a Fiscal Council and audit committee together, and we have a very detailed work plan in which we cover the main responsibilities according to the law for Fiscal Council, and we have the main responsibilities for audit committee in this work plan, and the good governance practice in order to observe during our work during the year. After detail this plan, we have to decide the frequency of each meetings we are going to have with the senior executives, and we spread it in our agenda during the year, in about 10-12 meetings per year, formally. Other things we have to pay attention is the preparation in advance for the members.
Actually, we have the materials distributed one week before our meetings, and I believe every member can read, can have more preparation in order to discuss the matters during the meetings. And other thing that's very important, our interaction with key executives of the company. And here in Ambev, we have very good access to the senior management in our meetings. And another thing is our interaction with the board of directors. We go to the board of directors three, four times a year in order to discuss their worries and our findings, our worries, too. And I think that is the main things in order to the attributes of the Fiscal Council.
Thank you, Rezende. You mentioned a little bit about the Ambev Fiscal Council, and if you could give us a bit more color in terms of what are the key themes that you, together with the rest of the Fiscal Council members, have been discussing in the past years?
In aspects covered by the Fiscal Council and Audit Committee, is internal controls, enterprise risk management program, and segregation of duties between the heads of these departments. And we have to make sure the segregation of duties between first line, second line, and third line of defense. We are following a lot about the SOX internal controls, mainly in this year that we have an implementation of SAP S/4HANA, and we have to make sure that we are not going to have problems with this implementation regarding SOX compliance.
We are paying attention this year, too, to ESG rules, although it's not going to be enforced this year, but we have to follow this theme, because we are going to have a report in the year 2005, 2006, according to the desire of the companies to adopt it voluntarily. Cybersecurity and data privacy is a matter very well discussed in our meetings, too. Another thing is about contingencies, because we have a change in the legislations, and we have to discuss it in our interactions. I think these are the main things we are paying attention this year.
Rezende, can you just speak a little bit more to the work around the financial statements, the preparation of the financial statements, the disclosure that comes along with it? Can you comment a little bit about how that work is performed, what have been the main points that you focused on as a Fiscal Council?
Actually, we review the financial statements by the end of the year and quarterly. And we receive the financial statements in advance. Each member of the Fiscal Council reviews all the documents, and we have a meeting specifically to discuss any appointments and any numbers that are a little bit different to that we expected. And in addition to it, Lucas, in order to prepare for the financial statements, we have some items, very important of the financial statements, discussed during the year in our meetings out of the quarterly meetings.
Thank you.
Now, I have a question for both of you. Feel free to jump in, in the other one answer, as we are covering a broader view of our governance structure. The question is: what do you both see in the future for the role of the Fiscal Council and the board of directors?
It's hard to think about the future. I think I would be more comfortable to answer how I see the board now. I think different from the past, the board has access and has to take in consideration a broader number of subjects. Maybe if you were good at finance and maybe if you are good at, at management, in the past, it would be enough to be in a board. And now board members have to be, comfortable with, a number of subjects that are different. So I think the boards now, and Ambev did this, did this shift. Ambev brought to the board a number of competence that were not there before.
So now you have to worry about culture, now you have to worry about sustainability, now you have to worry about risk management, integrity, communities, and this list is growing every day. And so I see that the boards are much more diverse now in terms of background, in terms of ability of its members. And I also see that the discussions on the board they address a number of aspects that were ignored before. So that's the way I see. I see this very much in the recent years, at least in boards in Brazil, that we are diversifying the way we look at problems, and that shows the company that we need different views on one subject.
... Perfect. Thanks.
In my view, in addition to the main responsibilities of the Fiscal Council and Audit Committees, we are going to have lots of responsibilities in the ESG reports. In order to prepare a ESG report, it's almost the same as a financial statement. You have to have internal controls for capture our information, and we are going to have auditing this kind of information. We have to go to interact a lot with the auditors in order to discuss the work plan of them and the main issues and the report itself that is going to be approved or recommended by the audit committees to the board or and the Fiscal Council. Other thing is about the cybersecurity.
There are lots of rules coming from SEC, and we are not going to—we don't know yet what kind of reports is going to to be required in the future. That requires an opinion of the board of directors, that the audit committee should help the board of directors to approve it.
Yes. Thank you both. Now we see the importance of having a strong group with different skills and different background. So to face what is coming, and we know it's impossible to cover everything. As Luciana mentioned, we can't talk that much about the future. We do not have the information yet. But again, I believe that's the movement of being prepared to deal with various demands and new technology, new attacks, new opportunities. So thank you very much for your contribution and for being with us in the Fiscal Council and in the board of directors. And thank you, Lucas, for being with us in this panel.
Thank you very much, Letícia, Luciana, Rezende, and Lucas, for sharing your experience with us and for your view on the improvement of our governance standards. Actually, thanks to all the team that participated and presented today. We are very proud of having such an integrated and collaborative sustainability team, and we will now enter the final part of our update with our Q&A session with our leadership, that will be presented by our Investor Relations team, Mariana Sabadin and Leandro Ferreira. Please come to the stage.
Hello, everyone. Welcome to our Q&A section. I'm a white woman with mid-brown hair, blue eyes, and I'm wearing a blue shirt with white stripes.
Good morning, good afternoon. I'm a Black man with short hair and beard, and I'm wearing a green and white shirt.
Our Q&A will be based on what was sent by our sell-side analysts. So let me welcome to the stage, Jean Jereissati, our CEO.
Lucas Lira, our CFO and Investor Relations Officer.
Carla Crippa, our Corporate Affairs Vice President Officer.
Letícia Kina, our Legal and Compliance Vice President Officer.
Felipe Baruch, our Procurement Vice President Officer.
Renata Van Der Weken, Supply, Environment and Safety Director.
So let's begin. The first question comes from XP Investimentos , and it is for Baruch. "Packaging accounted for the bulk of emissions, according to the company's greenhouse gas emissions inventory in 2022. To tackle this challenge, Ambev committed to having 100% of products in returnable or recycled packaging by 2025. Against this backdrop, how does the company plan to achieve this goal, mainly when it comes to the roadmap ahead, aiming to increase sustainability practices in packaging design and raise recycled content in plastic bottles?
Thank you, Mariana. Hello, everyone. Well, returnable bottles is the most sustainable option that we have, for sure. And then, we have been invested and focused on really put efforts to keep our mix and increasing our returnable bottles packaging in total. Recently, we have been expanded our portfolio of returnable bottles to go to the premium segment as well. And, we have been also launched a media campaign reinforcing the usage of RGB, and we've been tracking the progress, and currently, we have achieved already the pre-pandemic levels of returnable bottles pack mix. We are also piloting some promising ideas to also try to have returnable bottles in long necks, for example, in some of our brands that we're testing, like Corona.
Well, putting this aside, talking about disposable packaging, our main focus here is to increase recycled content year over year. We've been working hard on that, and our progress is something very material in all the packages. For some of them, we already crossed the barrier of the 50%, for a long time, like cans, where we have more than 80% of recycled content in Brazil and in average, around 70% in South America. But we keep progressing and fostering opportunities to increase that and to maintain cans in at the same level. When you go to PET, we crossed already the barrier of 50%.
We have some brands like Guaraná Antarctica, that was a pioneer on usage of recycled content in PET, and today is made by 100% of recycled resin in every single PET that we use for the brand. And we keep progressing on the recycled PET. For recycled PET itself, the main challenge now is to collect all the materials that currently we still have more than 40%, 45% of the PET bottles that goes to the landfill, and that's gonna be our next big effort, is how to avoid that to go to the landfill. And we are piloting some ideas together with some big partners on how we are gonna really avoid this material to become waste and to go to the landfill.
That's our next big effort, but we are already above the 50% and tracking very closely how to go at higher levels. Then our main challenge today, nowadays, in on circular packaging is glass. Is another material that we have been progressing as well. We are above 40%, and if you take our vertical operations, for instance, we already crossed the 50% and we are progressing very well. Now we are partnering with the rest of the sector to keep creating solutions together to reduce waste and losses in the system. Creating regional hubs to make the collection and the usage of cullet something more feasible, socially, economically, and environmentally, for the full ecosystem to increase the recycling rates.
We have good ideas, and for sure, we're gonna cross the 50% soon. The full circular packaging is trending very well, and we know that this is something very important for the sector, very important for the environment, and as well, has been something important as well to be aligned with new decrees and new regulations that has are popping up. We've been recently created together with SINDICERV and ABIVIDRO, a management entity to collect and all the data of the sector of glass collection, and as well, to organize these efforts to really change the level of the collection and usage of glass recycling, recycled glass in the full country. Well, overall, we believe we are trending well.
We are monitoring this very closely with the sectors. Overall, we have already a system to do that, a process that where we track this quarterly with all our main suppliers, receiving their recycling rates. And we track this as well, checking and crossing with their environmental reports as well, sustainability reports, to guarantee that we are trending in the same direction than our partners, and we are giving them the best the connection with best practices and everything that is needed to progress together with us. I think that's it. Let me see if I forgot anything, but I think that's it, and we are very confident that soon we are gonna be 100% covered on recycled content.
Can I add a comment here, Baruch? To have Guaraná Antarctica with 100% of its PET already recycled, it's something that made us very proud to accomplish that milestone in this journey. And together with that, we made a material decision to change 100% of the Corona long necks to returnable bottles. There is an important, massive investment in the supply chain for us to for the shape of the bottles, for the new bottles, and to prepare our company to get the bottles back. But as a material commitment, long necks is the big pain on the glass packaging.
And to have Corona leading it this way, being the first brand in Brazil to have 100% of its long neck being able to be reused, is another important milestone that we're gonna see along the journey, that investments are beginning to be made in our plan. So these two milestones made us very confident that we are in the right track to achieve this goal.
Yeah, just to finalize another very important point on this circular packaging. When you go deeper on the recycling chains, we see that we can be an important agent on the social aspect as well. Being closer to the pickers, closer to the cooperatives that collect the waste, and to make them to do in a more efficient way, can be something that also can change the situation, and we are gonna also pilot some ideas to be closer and to help them to be more efficient. The full system is gonna thrive, and we are gonna thrive together.
... Thank you both.
The next question comes also from XP Investimentos. It's directed to Carla and Lucas. We are seeing two potential headwinds for the company's case in the long term, especially in terms of regulatory push and changing consumer behavior. First, while definitive taxation rate is yet to be fully detailed, we are seeing ongoing developments within the proposed excise tax. Secondly, with awareness over physical and emotional well-being growing, especially among developed economies, a gradual shift towards non-alcoholic beverages is increasingly expected. From diversifying product portfolio to diverting marketing funding to other channels, how does the company plan to respond?
Thank you very much for the question. I'll start by saying that as a beverage company, it's part of our responsibility to lead the way and make the difference. So we have over 20 years invested in moderation, in prevention of harmful consumption of alcohol. So, showing to people that beer is the choice of moderation for those who want to drink. So when we look at beer, we see that we have around 4.5% ABV alcohol content in the beer. So comparing to other alcoholic beverages, beer is the choice for moderation. It's diluted in water. So how to help the consumers to understand the choices that they have, and how we build the portfolio and diversify the portfolio with more health and wellness options.
So for instance, launching no and low alcoholic products, that's part of our commitment, so we launched over the past years, a lot of them. We launched Michelob ULTRA, which is a low alcohol product, with 3.5% ABV. We launched Bud Zero, we launched Corona Zero, Hoegaarden Zero, Stella Artois no gluten and low carb, Labatt Blue, Stella Zero in other countries of Ambev as well. So, a lot of options, empowering our consumers through choice, and at the same time, having public-private partnerships with the government to also help with long-standing programs to help reduce harmful consumption of alcohol. So these are the two main ways that we do this.
And also, we have been working with innovation and a lot of research and development and launching what we call a Smart Drinking Lab. We launched this two years ago, and as part of the developments of the Smart Drinking Lab, which is a collaborative team with the supply team there, our Center for Innovation, our corporate affairs team, marketing team. We launched, for instance, a On by Beats bar, which is a protein bar, to avoid alcohol peaks in the body of people, and we give for free these bars in carnivals and big events to prepare and avoid these peaks. We also launched and we have the beta version ongoing.
We are about to launch officially for everyone, the Flow Voice app, which helps people to identify the alcohol content through the voice in this application. So sending messages to people and helping them to change behavior and, "Let's go drink a water," "Let's eat something," and so on. So we really understand this is our responsibility, and we have been working a lot to promote more options, as I said, to the consumers, more health and wellness in our portfolio, and also our actions in sustainability and partnerships to avoid and reduce a harmful consumption of alcohol.
Carla, just to add on the excise tax and the tax reform side of the question. We've been trying to respond in basically two ways. The first way is really around participating, engaging in the public debate around the proposed tax reforms. And so through trade associations, through industry associations, we've been trying to contribute to the debate, which is an important debate for the country here in Brazil. And the second way we've tried to contribute to the debate and responded is really around, as part of this debate, try to bring as much as possible, international best practices, international benchmarks, learnings from other jurisdictions.
This is one of the benefits of being part of ABI, is that we have the opportunity to learn from experience in other parts of the world, what worked, what didn't work, and we've been trying to bring all that to the debate here in Brazil so that the reform is... goes in the right direction for purposes of reducing harmful consumption of alcohol.
Thank you, Carla and Lucas.
The next question is from BTG and is also directed to Baruch, relates to Net Zero and Scope 3. On the Net Zero journey, the company had goals approved by SBTi. What are the biggest challenges in Scope 3? And, how to engage suppliers in both decarbonization and best social practices, and how to track and ensure that these best practices are happening? Well, Mariana
... Talking about, overall our progress on decarbonizing our, our chain. Scope 1, we've been reducing drastically, and we have a clear plan to, to be there soon. Scope 2, we are already done. We are 98% converted on, as we mentioned, and soon we're gonna be 100% renewable electricity, and that's something that's already almost behind us, let's say. Now we are putting all of our focus on Scope 3, and Scope 3 cannot be achieved, only by Ambev. We need, a joint force of the full ecosystem. We need all of our partners to, to go with us and, and to really make material changes on their supply chain as well.
What we're doing on that, we have different layers of connections with different layers of suppliers, but we have today already more than 200 suppliers that signed the climate action commitment to really implement carbon reductions and the good practices on overall sustainability. This represents more than 70% of our suppliers that committed to go in that way. That's material. Then we have a second layer that are key suppliers that we engaged, and we launched a global program that the name is Eclipse, where during the full year we've been training them, we've been mapping their carbon footprint, we've been developing together with them their roadmap to decarbonize, and we have been committing with them in a plan to be implemented to reduce their emissions.
Of course, then this is gonna impact on our Scope 3. These are big suppliers, big partners, that we have long relationship and that they really are committed to go in that journey with us. The good thing in this platform is not only for them to commit and to put the plan, but these suppliers start to cooperate and to share best practices with us, among them, with other players in the sector, and we are discovering a lot of innovations and a lot of opportunities, where sometimes a core product of one supplier can be a source of cost reduction or even carbon reduction for the other, and the full community is super excited with the results of this first year of these key suppliers' progress.
And now we have a roadmap to start reducing Scope 3, and now we know exactly what we're gonna do with these key suppliers. It was 8 in Brazil, plus another 30+ that are global suppliers, then our big suppliers. And now we're gonna expand this effort to more suppliers to bring the full ecosystem to the same direction. We know our responsibility, our role, and we're gonna lead that conversation to soon have all of our supply chain decarbonized, including Scope 3. What is our commitment?
Excellent. Thank you, Baruch.
We have another question on the team of suppliers. It comes from Goldman Sachs. I'd like to hear more about how this sustainability program is changing your relationship with the suppliers, especially in terms of bargaining power and the average payable terms.
Wow! Now, that's a good question, Leandro, because we truly believe, as I just mentioned in my speech and the presentation as well, that sustainability efforts cannot, or results cannot be achieved only by Ambev. We need the full ecosystem, and then we need to have different layers of cooperation and relationship with different suppliers. And this is something that we are learning, and we are adapting, and we are creating different programs to evolve in the direction that we want in a different pace with different suppliers, but bringing everyone to the same destination, let's say. Well, for example, what we did, we know that small suppliers, they have different cash flow needs, they have different realities.
Then we implemented, recently, or a couple of years ago, one year ago or something like that, what we call flex payment for them. And this is material for them to help them to have the right cash flow for their size. Then small and micro suppliers, that today are more than 60% of our suppliers, but represent less than 5% of our spend, they have a different payment term policy for them, and this helps us as well to have a more sustainable supply chain.
With the big suppliers, we have all these efforts that I mentioned on Eclipse and how to share best practices to give them access to our, eventually to PPAs or renewable energy electricity contracts that we have, and how we can help them to implement the things and to be as profitable as they should be. And then this is how we envision, and we believe, we really believe that we only achieve together and through innovation. When we started this journey, for example, for renewable energy, we didn't know that we would save $16 million implementing renewable electricity. And that's what happened through innovation, partnership, and focus on what we want to deliver. And that's how we see, for example, now packaging, through our lightweight programs that are accelerating drastically and recycled content.
We see that as a good alternative for our suppliers, for our communities, and for us as well, and for the world, and for the environment. That's a little bit how I, we see the future together, innovating to create a different future in the ecosystem.
And if I can, if I can add on that, I think it's what Baruch is saying is very connected, pretty much, pretty much connected to our ecosystem approach, and what we have been calling shared growth with our ecosystem. Because at the end, not only they are part of our targets, because our targets for sustainability, they involve the value chain, but also we help and we learn from them. So that's when the environmental, the social, and the governance parts come together. Because we have the commitments, we have the accelerator program, we have the innovation labs, we have Eclipse Project, and all these efforts. We have the more inclusive approach with diverse suppliers, as I presented earlier. So, I would like to point out this shared growth perspective, value chain approach, and this is also part of our culture.
We have one of our principles that say that growing together with our communities and our partners is, is what we should look for. So just adding that. Thank you.
Thank you both, for the clarity.
Carla, I believe the next one, you can begin with. It is also from XP Investimentos. What would you see as the main challenges in non-alcoholic from an ESG-based perspective?
Thank you for the question. There are a lot of challenges for ESG. I would say what we have been seeing this year, with the climate change, with the heat waves, in Brazil, with the flooding, with the drought in many countries in our zone, South America zone. So it's very challenging, not only for Ambev, for our planet, for the society as a whole. But I would point out another challenge from a different perspective, which is this value chain approach. When you look into the big companies that have a large value chain, and that's not something that's particular for Ambev, that's something that any big company faces. All the commitments, as we were saying, they involve our value chain.
But of course, having levels of requirements, training, development that we have inside our company, is more challenging to have the same level and requirements for our suppliers, for our clients. So it's a big challenge that we face, how to guarantee 100% of compliance as we guarantee internally, and that's our effort. How we can provide this in our value chain, risk mitigation actions, and this all of our part and mitigation plan that we have in place. So, I think Baruch can also add on that, but that's one of the challenges that I would mention.
Yeah, for sure. I think, having responsible practices and sourcing, it's key for us, and, being closer to the right way of doing things, and we've been progressing a lot on that. And, I think that's something, that we've been implementing good practices and being closer to guarantee that all the minimum aspects have been, checked and achieved. And, our progress on being closer to communities, closer to our suppliers, to teach them everything, all the good practices, and guaranteeing that good practices has been implemented is our responsibility, and every day, we are going deeper and deeper on that, implementing for more categories, more suppliers. We have a procedure where we've implemented to, guarantee that every supplier that comes to us connects with the same view, the same mindset, and the same principles in us.
It's part of our culture to have the suppliers together with us that understand the same way that we see the minimum requirements. We check their physically, we do audits, and also we guarantee with a check of documentations and check of the minimum conditions. We go there to check in some categories where the risks are higher to guarantee that we have partners that share the same principles, culture, and the way of doing things than us. We are going expanding this program to other categories. We have partners, good, big audit companies, together with us to guarantee that all the process is done, and that's it.
Thank you, Carla and Baruch.
Okay, we go to our last question, and it comes from BTG Pactual. Regarding the topic of reverse logistics, how are you approaching the goal of the sectoral agreement to implement the reverse logistics system for packaging in general?
Okay, I can start here. I don't know if someone wants to complete, but overall, yeah, as I mentioned, we have some regulations and some new decrees and things happening. For packaging, for glass, for example, recently, we've been engaged with SINDICERV, with ABIVIDRO, to create a managing entity to guarantee that the food sector, as I mentioned before, is organized to collect more glass and to use more glass in the right way. And to avoid people to look for glass where the glass is not there, and to avoid to go where the glass is sitting.
And then that's how we are doing, and then having an entity coordinating all of that, guarantee that we keep collecting more, using more, in an organized way, as a sector, and then we are leading this conversation to form and to create this managing entity, through SINDICERV, to really step up on the glass collection, in the next year.
Yeah, and also complementing that answer, our internal targets are aligned with the new targets that we have from the federal regulation. So at the end, when we achieve our targets and we help developing and building the capabilities and improving the management of the collectors and all the recycling chain, we are also helping addressing the public targets for recyclability and collection. So in particular, with glass, where we have a new federal regulation, that's what we are working together with SINDICERV and ABIVIDRO, to also help develop this chain and have more efficiency in the collection.
Thank you, Carla and Baruch. We came to the end of our sustainability update. We will directly address any remaining questions that have not been answered live.
Don't forget to respond to our NPS survey through the QR code available on the screen, as your feedback is really helpful for us to continue to improve our sustainability journey.
Thank you all for joining, and have a lovely weekend. Bye-bye.
Bye-bye.