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Water and the environment

This section details Diageo’s environmental reporting methodologies, and outlines the basis of calculation for the following metrics:

Setting baseline data and targets

Environmental data is externally reported on the basis of our financial reporting year, running from 1 July to 30 June. Diageo’s environmental reporting methodologies are reviewed and updated on an annual basis by Diageo’s environmental leadership team and ratified by Diageo’s environmental executive working group, chaired by the President of Diageo Global Supply and Procurement.

Reporting boundaries

Environmental data is collected and reported for all sites at which Diageo has full operational control, and as defined by the World Resources Institute / World Business Council for Sustainable Development Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, Revised Edition (WRI/WBCSD Protocol). Diageo believes that, by including environmental data from all offices and production sites under its operational control, its environmental reporting will be consistent with reporting on other operational activities. Environmental data from joint ventures and associates (where Diageo does not have full operational control) has not been included within the reported figures.

Baseline

Diageo’s baseline year was set as the financial year ended 30 June 2007, applies to all environmental targets with the exception of packaging, which has a baseline of 30 June 2009, and has been prepared in accordance with the internal reporting guidelines and calculation methodologies set out here. The baseline data is used as the basis for calculating progress against Diageo’s targets for GHG emissions, water consumption, BOD and waste to landfill, first announced in September 2008.

The continued relevance of 2007 as the baseline year is reviewed on an annual basis.

Restatement of baseline environmental data

Diageo will restate environmental data for the baseline year and intervening years to reflect changes in the company that would otherwise compromise the accuracy, consistency, and relevance of the reported information. Restatements are made in line with the protocols defined by the WRI/WBCSD Protocol, and the Beverage Industry Sector Guidance for Greenhouse Gas Emissions Reporting version 2.0.

The base year environmental impact data, and data for intervening years, are adjusted to reflect acquisitions, divestments, updates to databases for CO2 equivalent (CO2eq) emission factors, any errors in methodology and calculations, and any significant changes in reporting policy that result in a material change to the baseline of more than 1% as advised by independent sources. We will report acquisitions data as soon as practical, and no later than after we collate one full year’s financial data. We will also restate data where we can show that structural changes regarding outsourcing and insourcing have an impact of more than 1%.

The environmental impacts attributed to Diageo’s fiscal year 2007 baseline were adjusted in accordance with guidance from the WRI/WBCSD Protocol, and the methodology independently approved.

The protocol describes the need for companies to restate environmental impacts for consistent tracking over time when they undergo significant structural changes. This is necessary to make meaningful historical comparisons; in other words, previous emissions data is recalculated to compare ‘like with like’.

In fiscal year 2013, the environmental impacts for the base year 2007 and intervening years were restated due to the acquisition of four businesses: Mey İçki in Turkey, Meta Abo in Ethiopia, Zacapa in Guatemala, and Shuijingfang in China.

Additionally, where more up-to-date information on electricity emission factors is available, including revisions to International Energy Agency databases, the latest available data is applied.

The base year environmental impacts associated with acquisitions and bringing production in house are principally determined directly from the historical data records for production volumes, energy, water consumption and waste generated for the base year and intervening years. In certain cases where historical data is unavailable, the environmental impacts for the base year and intervening years are extrapolated from current environmental impact data, based on production patterns.

In the current financial year, the environmental impacts associated with acquisitions and in‑sourcing increased Diageo’s base year environmental impacts by between 6% and 8% for water and GHG emissions respectively. The impacts of these increases on 2015 targets will be absorbed, and Diageo reaffirmed its commitment to 2015 targets this year.

Uncertainty and estimates

While we make every effort to capture all information as accurately as possible, it is neither feasible nor practical to measure all data with absolute certainty. Where we have made estimates or exercised judgment, this is highlighted within these reporting guidelines.

Target setting

Diageo has set environmental targets based on a baseline year of the financial year ended 30 June 2007. The year by which Diageo aims to achieve these targets is defined as 2015.

Reviewing our targets

In 2008 Diageo set environmental targets based on baseline data from the financial year ended 30 June 2007, with the aim of achieving these targets by 2015. Since setting these targets and reporting our performance against them, we have included acquisitions and reset our 2007 baseline data using the principles of the WRI/WBCSD Protocol. Until 2011 these acquisitions were relatively minor in terms of our overall impact on the environment: typically less than 5%. However, in 2011 the company announced its intention to buy several larger businesses. Therefore in the Sustainability & Responsibility Report 2011 we confirmed a review of the implications of these proposed acquisitions for our environmental reporting methodologies in terms of the total volume of production and overall impact on the environment. This review was completed in January 2012, and concluded that there would be no change to the environmental reporting methodologies and that we would continue to incorporate these new acquisitions in our 2007 baseline with no change to our 2015 environmental targets.

However, given the scale of the investment in United Spirits Limited (USL) in India, Diageo will review the environmental impacts associated with this business during 2014 and reassess the implications and our approach to our environmental strategy and future targets.

Greenhouse gas (GHG) emissions

GHG emissions data has been prepared in accordance with the WRI/WBCSD Protocol. A summary of the key elements of this standard and their application to Diageo’s business is outlined below.

Scope

Scope 1 emissions (i.e. direct GHG emissions) from on‑site energy consumption of fuel sources, such as gas, fuel oil and diesel, are reported for all sites where we have operational control. Scope 2 emissions (i.e. indirect GHG emissions) from purchased electricity and heat is also reported for these sites. Diageo does not fully report on its scope 3 emissions at present. Carbon dioxide emissions from the fermentation process are not included within our reported environmental data as these emissions are from a biological short cycle carbon source (outside scopes 1, 2, and 3).

Calculation methodology

The GHG emissions data is externally reported in tonnes of CO2 equivalent (CO2eq). CO2eq is the measure used to compare the emissions from various greenhouse gases based on their global warming potential (GWP). Each year we also look at the GWP of minor sources of CO2eq such as hydrofluorocarbons (HFCs). However, the quantities are minimal, approximately 500 tonnes CO2eq, and therefore fall below the materiality threshold.

The GHG emissions data has been calculated on the basis of measured energy and fuel use, multiplied by the relevant CO2eq conversion factors. Fuel and energy use is based on direct measurement verified through purchase invoices for the vast majority of our sites (>99%). In certain limited instances (<1%), where invoices or meter readings are not available, it has been necessary to estimate energy and fuel use. All CO2eq is reported in metric tonnes.

The most reliable and up-to-date emissions factors, which are reviewed on an annual basis, are used to convert energy use to CO2 including:

  • kWh/CO2eq factor provided by energy suppliers where a contract is in place with respect to the energy supplied to the relevant site
  • Relevant conversion factors to the country of operation (for example, national conversion factors supplied by the relevant government)
  • International Energy Agency (2012) conversion factors.

Renewable / low‑carbon electricity

A number of sites have entered into contracts for ‘green tariffs’ or low‑carbon tariffs for their electricity supply. The CO2eq emissions from these tariffs have been zero-rated where the contract specifies that the supply onto site is from a 100% low‑carbon source such as renewable or nuclear energy. Otherwise we use the supplier’s CO2eq emission factor.

Water consumption

Diageo collects water consumption data from the production sites over which it has operational control, using internally developed reporting guidelines based on the GRI methodology. In addition to tracking total water usage, Diageo also collects information to calculate ‘water efficiency’, meaning the ratio of the amount of water required to produce one litre of packaged product.

As part of its continuing progress, using the World Resources Institute Aqueduct tool, and data from the United Nations’ definition of water-stressed, Diageo has designated 12 of its production sites as being located in areas which are water-stressed, identifying them as higher risk in terms of sustainable water supply. We define water wasted as water leaving a site as process wastewater.

Calculation methodology for water consumption

Diageo uses internally developed reporting guidelines which define the total quantity of water used in production as water obtained from groundwater, surface water, and mains supply less any clean water provided back to local communities directly from a site. Uncontaminated water abstracted and returned to the same source under local consent, water abstracted from the sea, and rainwater collection are excluded from water usage data reported. Water used for irrigation purposes on land under Diageo’s operational control is not currently included in Diageo’s total, since it does not influence water use efficiency within our production operations. It is our intention to complete a comprehensive review of irrigation water use, including establishing a robust methodology, to quantify use on land under Diageo’s operational control in order to determine materiality and impacts. The findings from this review will be reflected in future reporting. All water use is reported in cubic metres.

Wastewater polluting power as measured by biochemical oxygen demand

Much of the water used in brewing, distilling and beverage packaging facilities is used for cleaning process equipment, and such water becomes polluted with product residues. The strength of effluent is expressed as biochemical oxygen demand (BOD) or chemical oxygen demand (COD). BOD is a direct measure of the polluting strength of effluent, and quantifies the oxidisable organic matter present in the wastewater or effluent stream.

Diageo measures, reports, and controls the polluting power of site effluent from its operationally controlled sites and reports the final BOD load discharge to the environment, that is both directly controlled and treated by third parties, consistent with international methods and literature describing the determination of BOD impacts. The site effluent volume is determined from an on‑site flow meter or calculated using a ‘mass balance’ formula, and validated through industry standard correlation coefficients.

The concentration/BOD strength of the effluent is determined from:

  • On/off site BOD analysis
  • On/off site COD analysis and applying industry (or site specific) correlation coefficient to convert to BOD
  • Third-party/municipal treatment facility BOD data.

The final BOD load to the environment is determined from the volume in cubic metres of site effluent multiplied by the BOD concentration in mg/l, and is expressed as thousands of tonnes.

Waste to landfill

Diageo records the type and quantity of all waste to landfill from across the production sites over which it has operational control using Diageo’s environmental reporting methodologies and GRI protocols. Waste to landfill includes hazardous and non‑hazardous materials.

Calculation methodology for waste to landfill

The definition of waste to landfill includes all hazardous waste and all unwanted or discarded material produced in solid, sludge or liquid form. This includes all refuse, garbage, construction debris, treatment and process sludges, and materials that a site has been unable to reclaim, reuse, or recover. All waste to landfill is reported in metric tonnes.

Litres of packaged product

To calculate efficiency ratios, Diageo uses ‘litres of product packaged’ as the standard measure for comparison, as this measures the environmental impact associated with the production of our products.

Calculation methodology for production figures

Our calculation of litres of product packaged includes the total litres of product packaged which enter a finished goods warehouse at operationally controlled sites, together with any product sent to a third party for packaging (i.e. a non‑controlled site). Damaged product is not included in these figures.

Sustainable packaging

Diageo monitors and assesses the type and volume of packaging used and the alternatives available to ensure our brands are delivered to the consumer with the smallest possible environmental footprint. The methodology applying to sustainable packaging encompasses:

  • Pack weight
  • Recycled content
  • Recyclability.

All sustainable packaging impacts are quantified and expressed in terms of weight: grams/kgs; tonnes; or percentages.

Pack weight changes are determined by quantifying the weight reduction/increase in grams and multiplying by the number of SKUs affected on an annualised basis. Recycled content is determined by establishing the volume in grams/kgs of non‑virgin materials used to generate the pack components, and adjusting for in‑year changes to recycled content.

Recyclability is expressed as a percentage, determined by quantifying the weight of the final pack deemed to be non‑recyclable and multiplying by the total annualised volume of the SKU. Having set targets against a 2009 baseline, we input regional packaging data on each of our three metrics (weight, recycled content, and recyclability) on a monthly basis. They are then consolidated and internally verified.

We have established a sustainable packaging framework, implementation plan, and targets to ensure that, where practical, our packaging has the smallest environmental footprint consistent with the brand proposition, and our sustainable packaging team is working to implement this throughout Diageo.

Reporting frameworks in this section