CLIMATE
NET ZERO

2023 PROGRESS

Tea and coffee production depends on a healthy climate and environment. Climate change is an existential threat to our industry, which is why Finlays is committed to working toward having a positive impact on the world around us. From bush to beverage, we take a multistakeholder approach to mitigating the short and long-term effects of climate change on our operations and supply chains.

PROGRESS IN 2023

Completed the 2022 baseline for Finlays’ greenhouse gas (GHG) emissions
Submitted targets to the Science Based Targets initiative (SBTi) for validation (January 2024)
Energy usage decreased by 8% in 2023 versus 2022
Rainwater and recycled water usage increased by 18% versus 2022
Initiated our approach to good water stewardship by assessing our water data and risk profile
Began working on our no-deforestation approach
Conducted a climate risk assessment in line with the framework of the Task Force on Climate-Related Financial Disclosures (TCFD)
Completed a life cycle analysis of tea production in Argentina
Invested in a 470kWp rooftop solar system in Sri Lanka
Successfully trialled an electric vehicle in Kenya

ESTABLISHING A GREENHOUSE GAS (GHG) BASELINE

A key achievement for Finlays in 2023 was establishing a comprehensive baseline for our greenhouse gas (GHG) emissions. We chose 2022 as the base year for our calculations.

We quantify and report our organizational GHG emissions to the standards of the Greenhouse Gas Protocol and therefore report a location-based as well as a market-based figure for our Scope 2 emissions. In line with the GHG Protocol’s latest guidance, our report also discloses Scope 3 emissions and FLAG (emissions from forestry, land, and agricultural activities across our operations and value chain).

GHG emissions from the supply chain (Scope 3) account for 99% of our total emissions. Similarly, our Scope 3 FLAG emissions represent 91% of our total FLAG emissions. Work has started on developing robust roadmaps for our three workstreams (Scope 1 & 2, Scope 3, and FLAG) with a view to reducing our emissions in line with science.

As a crucial first step, we needed to submit our targets for validation by the Science Based Targets initiative (SBTi). Working toward this was our priority in 2023, and we successfully submitted our targets in January 2024.

Finlays submitted its targets for validation to the Science Based Targets initiative in January 2024

OUR GHG BASELINE
Scope 1, 2 and 3 emissions

(tCO2e)	2022	2022 (rebased)¹
Scope 1	14,758	9,248
Scope 2 - location-based	6,641	5,827
Scope 2 - market-based	5,370	4,556
Scope 3²	1,888,572	988,231
Scope 1 + 2 + 3 (location-based)	1,909,971	1,003,306
Scope 1 + 2 + 3 (market-based)	1,908,700	1,002,035

[1] This scope reflects the boundaries of the group as of January 2024 and therefore includes emissions from Finlays Tea Extracts Kenya, but does not include emissions from James Finlay Kenya (sold at the end of 2023) and James Finlay Guizhou (held for sale, pending completion of the transaction). [2] Scope 3 emissions includes emissions from purchased goods and services, capital goods, fuel and electricity-related activities, upstream transportation and distribution, waste generated in operations, business travel, employee commuting, downstream transportation and distribution, processing of sold products, use of sold products, end of life of sold products, and investments.

OUR GHG BASELINE
Foresty, Land and agriculture Emissions

(tCO2e)	2022	2022 (rebased)¹
FLAG - Land use change - Total	93,702	70,148
FLAG - Land use change – Scope 1	40,042	1,331
FLAG - Land use change – Scope 3	53,660	68,818
FLAG - Land management – Total	647,344	619,696
FLAG - Land management – Scope 1	27,4489	18,580
FLAG - Land management – Scope 3	619,855	601,516
FLAG - Scope 3 - Unknown	47,983	47,983
FLAG – Total	789,030	737,827

OUR 2023 ENVIRONMENTAL DATA
GHG emissions

Finlays understands the scale and urgency of climate change and the need to limit global warming to 1.5 °C, in line with the Paris Agreement. We are striving to increase both our energy efficiency and our use of renewable energy to drive down our GHG emissions. The table to the right shows greenhouse gas emissions in our operations in 2023. We are looking to expand our reporting and, from 2025, plan to also include our Scope 3 and FLAG emissions.

Scope 1 & 2 (market-based) emissions increased by 5% in 2023 compared with 2022. Scope 2 emissions rose at both Casa Fuentes and James Finlay Kenya due to an increase in the carbon intensity of the national grid in both countries (by 13% in Argentina and by 57% in Kenya). In 2023, we also improved the quality of our reporting, especially regarding electrical line losses, which further explains the increase in our Scope 2 emissions versus 2022. Our Scope 1 emissions are up due to more fuel being used in vehicles (following the acquisition of five new harvesters for our tea estate in Kenya) and improvements in the reporting of our refrigerant usage.

^{We have included environmental data from James Finlay Kenya as it remained within Finlays operational control for 2023.}

Our energy usage decreased by 8% in 2023 compared with 2022. This was driven by a fall in bioenergy use, specifically wood. In our operations, we commonly use two types of bioenergy: wood (or biomass) and biogas. In 2023, Finlays Tea Extracts Kenya saw a fall in production versus 2022 and as a result significantly reduced its consumption of wood.

During the same period, the share of wind and solar energy across Finlays increased from 2.6% in 2022 to 3.3% in 2023. This was primarily due to an increase in hydro energy consumption at James Finlay Kenya and a rise in solar energy consumption following the commissioning of solar panels at our Welisara packing facility in Sri Lanka.

OUR 2023 ENVIRONMENTAL DATA
Energy

^{We have included environmental data from James Finlay Kenya as it remained within Finlays operational control for 2023.}

The amount of rainwater and recycled water increased by 15% versus 2022, while our consumption of freshwater decreased by 6%. Several new water conservation projects were implemented in 2023, such as the installation of a new overflow control system at our facility in Kenya and a rainwater harvester at our factory in Haldummulla, Sri Lanka.

These projects aim to reduce water use and increase water recycling. More details about these projects can be found in the case studies section of this report.

OUR 2023 ENVIRONMENTAL DATA
Water

^{We have included environmental data from James Finlay Kenya as it remained within Finlays operational control for 2023.}

OUR 2023 ENVIRONMENTAL DATA
Waste

Our operations generated 37% less waste in 2023 compared with 2022. This was primarily driven by a reduction in green waste generated and reclaimed at our Finlays Tea Extracts Kenya and US sites, due to lower production.

The proportion of waste reclaimed across our operations stayed stable in 2023, at around 94%.

^{We have included environmental data from James Finlay Kenya as it remained within Finlays operational control for 2023.}

CASE STUDY:
Increasing the focus on sustainability in our US Extract business

With the cost of natural gas significantly lower than electricity in the US, businesses face substantial financial barriers to making the necessary shifts to address climate change.

Despite this, our US extracts business intensified its efforts in 2023 by focusing on understanding our key environmental impacts. We collected carbon data to establish a baseline and identified our emissions hotspots.

The team has pinpointed several opportunities to reduce emissions, including a solar panel project, in-line water and gas usage metering, increasing packaging recyclability, and offering electric vehicle charging points.

Exciting next steps lie ahead to begin realizing these opportunities.

JOIN THE CONVERSATION

What's the most important area of sustainability for your business?

Climate change
Sustainable packaging
Transparent supply chains
Social/community support

CASE STUDY

Making the switch to electric vehicles, Finlays Tea Extracts Kenya

Emissions from transport account for 35% of our Scope 1 emissions. Reducing our use of fossil fuel in vehicles is critical for achieving our emissions reduction targets. In 2023, Finlays Tea Extracts Kenya (FTEK) embarked on an exciting trial to establish the viability of moving its fleet to electric vehicles. As part of the trial FTEK acquired its first ever electric vehicle, a double cabin pickup truck.

This was found to have an immediate positive effect on our fuel consumption, maintenance costs, and carbon emissions, with the vehicle saving around 4 tCO₂e to date. Given fluctuating gasoline prices in Kenya, making the switch to electric also had a positive financial impact.

Based on these results, FTEK is now looking to move more than half of its fleet to electric vehicles by 2026, the main challenge being the availability of electric vehicles in Kenya.

JOIN THE CONVERSATION
Are you making the switch to electric vehicles?

Yes
No
We're thinking about it

CASE STUDY:
Enhancing energy efficiency in our Extract business in Hull

Natural gas is a carbon intensive fuel source, making its reduction crucial for meeting our emission reduction ambitions. In 2023, our extract business in Hull, replaced a 20-year-old boiler to improve energy efficiency and cut natural gas consumption.

The engineering team in Hull initiated the project with a comprehensive front-end study to identify the optimal technology. In November, with the expertise of McQuillan Boiler Services, a single dual-fuel wet back boiler was installed. The new boiler increased energy efficiency by 12%, from 83% to 95%. This enhancement has led to a substantial reduction in natural gas usage, saving £37,000 annually, equivalent to approximately 800,000 kWh. The new boiler is expected to consistently deliver these savings each year.

This project highlights the importance of adopting advanced technologies to improve energy efficiency, exemplifying a commitment to sustainability and operational excellence.

12% increase in energy efficiency

CASE STUDY:
Conducting a life cycle assessment of tea, Casa Fuentes

As well as reducing our greenhouse gas (GHG) emissions, Finlays is working on improving the accuracy of our GHG data. This requires collecting more accurate data and mapping it with more specific emission factors. Since 2020, our Casa Fuentes business has been collaborating with Argentina’s National Institute of Industrial Technology (INTI) on a pioneering tea life cycle assessment (LCA). An LCA is a phased approach for evaluating the environmental effects of a product across all stages of its life cycle. LCAs are used by many industries to appraise environmental performance and identify improvement opportunities.

Our study with INTI assessed the environmental effects of tea produced in the Casa Fuentes area and more specifically at the Campo Grande and Acaragua plants of Finlays Casa Fuentes. The analysis was completed in 2023, based on 2021 data. It covered all stages of tea production, from pre-harvest to packaging for shipment to customers. Seven environmental effects were assessed, including global warming potential, acidification potential, eutrophication potential, photochemical oxidants formation potential, abiotic depletion potential, fossil fuels usage, and water shortage potential.

Thanks to this work, we now know the global warming potential (GWP) of tea produced at Casa Fuentes equates to 898.99 kg CO₂e per ton of tea. The study also revealed that the main source of emissions is the use of non-renewable energy and nitrogen fertilizers. We are already using this insight to support our transition to renewable energy. The study only measured emissions, not CO₂ captured on our land through forest conservation and good land management practices. In the near future, Finlays will explore ways to develop a methodology that will enable us to accurately measure the CO₂ captured on land at Casa Fuentes.

CASE STUDY
Boosting renewable energy through solar panels, Finlays Colombo

In line with our Scope 1 & 2 emissions target, we wanted to increase use of renewable energy at our Welisara packing facility in Sri Lanka. As Sri Lanka does not have a renewable energy supplier, we took matters into our own hands and installed our own photovoltaic (PV) panels as part of a 470kWp rooftop solar system at the site. The system was completed in October 2023 and in the final two months of 2023 generated 85,099kWh of electricity, covering approximately 48% of the site’s daytime demand.

Thanks to technical improvements this has since risen to 84-86% of daytime demand. We expect to reduce our emissions by 421 tCO₂e a year as a result, equating to roughly 69% of the site’s emissions from purchased electricity (i.e., Scope 2 emissions). This will not only help us achieve our emissions reduction targets but also support our customers in reaching their own net-zero ambitions. In the near future, we hope to expand the capacity of the system, thus reducing our Scope 2 emissions even further.

The solar panels can generate approximately 85% of daytime electricity demand of the site

CASE STUDY
Taking action to reduce water wastage at Finlays Tea Extracts Kenya

In recent years, Finlays Tea Extracts Kenya has experienced recurring issues with water loss due to the factory’s main filtered water tank overflowing. This was caused largely by a lack of automatic controls, which meant the tank had to be managed through visual observation. In April 2023, we installed a wireless water control system to automatically monitor the tank’s water level and prevent overflow.

Thanks to this new system, the amount of water abstracted by the factory on a daily basis has fallen by an average of 24%. We will build on this as part of our good stewardship approach and continue our efforts to reduce, reuse, and recycle water wherever possible.

Water abstracted by the factory on a daily basis has fallen by an average of 24%

CASE STUDY:
Harvesting rainwater at Finlays Colombo

Water is essential to the beverage industry, and conserving and protecting freshwater supply is of major importance to our business. For this reason, we are looking at new methods of supply and storage that can help us reduce the impact on local water reserves and promote responsible use. Harnessing and storing rainwater is one of the best ways to achieve this.

In late 2023 we partnered with Dr Tanuja Ariananda, head of Lanka Rain Water Harvesting Forum, to initiate a project to decrease our reliance on external water sources (e.g., the common fountain outside the factory) and use rainwater instead, thereby conserving local water resources and promoting sustainable use. As part of the project, we installed a rainwater harvesting system at our green tea factory in Haldummulla that has the potential to draw 1,905 cubic meters of rainwater per annum and a current storage capacity of 30,000 liters. Initially, 25% of the rainwater harvested has been utilized for domestic sanitation and grounds maintenance.

Over the next three years, with more data on water collection and water quality, we plan to expand our usage of the rainwater harvested to cover the steam boilers used in tea production. In a second phase, we intend to increase the storage capacity of this system to supply water to the fire hydrant tank. This will mean less stress on local water resources and more responsible usage. After the initial investment and in the long term, the new system will also lower the running costs for water at our facility.

This system has the potential to draw 1,905 cubic meters of rainwater per annum

BEYOND CARBON REDUCTION

Climate risks
In 2023 our parent company, John Swire & Sons Limited (Swire), started to undertake a climate risk assessment in line with the framework created by the Task Force on Climate-Related Financial Disclosures (TCFD). This task force was created to improve reporting of climate-related financial information. The assessment will enhance Swire’s climate risk and opportunity assessment methodologies and give Finlays a better understanding of our own climate risks and opportunities. Following this work, our Corporate Risk Register (CRR) has been updated to include the most material climate-related risks to Finlays. The CRR will enable us to review our processes in line with best practice and inform our future disclosures. Further information on the CRR can be found in the risk management chapter of this report.

Good water stewardship
Water is essential to life and a basic human right – and it is increasingly under stress. Competing demands from agriculture, business, and communities, along with the effects of climate change, are putting growing pressure on this precious resource, prompting widespread regional and global concern. Water is also essential to the beverage industry and Finlays, and we take our responsibility seriously to preserve its availability and quality. As part of Sustainable Future 2030, we have started shaping our approach to good water stewardship. In 2023, we worked with our business units to identify their water balance and build our water risk profile using the WWF Water Risk tool. Similar to our work on GHG emissions, our aim is to develop an ambitious plan for good water stewardship, with credible targets in place by 2025.

Deforestation
Forests are one of our best allies in slowing down climate change, acting as a carbon sink by capturing CO₂ emissions. Deforestation is estimated to cause 10% of worldwide emissions.[1] With regulation advancing rapidly to tackle this issue, we are looking to partner with experts in this domain to help us structure our approach to no deforestation.

[1] Rainforest alliance - https://www.rainforest-alliance.org/insights/what-is-the-relationship-between-deforestation-and-climate-change/

CLIMATE NET ZERO DATA TABLES

Finlays GHG Emissions

(tCO₂e)	2022	2023
Scope 1	14,758	14,925
Scope 2 - location-based	6,641	7,507
Scope 2 - market-based	5,370	6,156
Scope 1 + 2 (location-based)	21,399	22,432
Scope 1 + 2 (market-based)	20,128	21,081

Finlays Energy Use

(GJ)	2022	2023
Renewable energy	1,485,372	1,340,783
Non-renewable energy	294,002	292,961
Total energy use	1,779,374	1,633,744

CLIMATE NET ZERO DATA TABLES

Finlays Water Use

(m³)	2022	2023
Recycled / Rainwater	3,068	3,528
Freshwater	1,103,817	1,035,126
Total water use	1,106,885	1,038,653

Finlays Waste Generated

(tonnes)	2022	2023
Waste to landfill	1,911	1,510
Reclaimed	35,625	22,297
Total waste generated	37,536	23,807