Sustainability & Responsibility Strategy
Putting the principles of sustainability and responsibility into practice means accounting for our most material social and environmental impacts in every aspect of what we do – from sourcing raw materials, to running our manufacturing safely and efficiently, to influencing how our brands are sold and consumed.
Diageo’s business strategy is to drive top line sales and profit in a sustainable and responsible way so that we create consistent, long-term value for our shareholders. While our wide range of brands and the expertise of our people are central to our commercial success, no less important are our values and our commitment to meeting the evolving expectations of our stakeholders.
We know the world’s expectations of business are continuously progressing. New legislation is being passed for multinationals around the world, for example requiring greater human rights transparency in the United States or stricter environmental controls in China. We adapt to these changes to secure our licence to operate, but also take account of the expectations and interests of other stakeholders around the world – be they our employees, our local communities, non‑governmental organisations (NGOs) or business partners.
There are certain basic issues that any food and beverage company should address, from health and safety, human rights and diversity, to environmental impacts, sustainable agriculture and good governance. Moreover, every company should be committed to openness and transparency in its dealings with stakeholders, including clear and accurate reporting.
We will continue to address these as a matter of course. Beyond this, there are certain social and environmental activities that we believe are particularly important to focus on given the nature of our business, where we operate, with whom we do business, and our global and local stakeholders. Identified this year following a materiality study described in more detail below, our strategic priorities are:
- Alcohol in society – as our highest priority, we will broaden our approach to communicating about alcohol responsibly and tackling misuse through effective programmes and policies
- Water stewardship – we will work to protect watersheds by continuing to maximise efficiencies in our operations and supply chain, investing in infrastructure in our communities, and advocating more broadly for change
- Skills and empowerment – we will expand our skills-building community programme Learning for Life to support and empower stakeholders upstream and downstream from our operations.
We are now in the process of setting new targets for all areas of sustainability and responsibility, and will announce them next year. This year, however, we continue to report on our original targets across the five impact areas our programmes have focused on to date: alcohol in society, water and the environment, socio-economic development, governance and ethics, and our people. As in previous reports, we look not only at our own operations, but also at the impact we have across the value chain – from our suppliers through to our customers and consumers.
Refreshing our strategic priorities
Our central theme has always been ‘shared value’, by which we mean that everything we do should bring benefits to the stakeholders who are affected by our operations as well as to Diageo. In refreshing our strategic priorities, we determined what social and environmental issues were most ‘material’ by engaging internal and external stakeholders to understand their views, as well as by looking at the business risks and opportunities associated with sustainability and responsibility performance.
Last year we ran materiality workshops in three key markets (United Kingdom, Kenya, and China) with managers who have worked with, and know the concerns of, our major groups of stakeholders.
Using the findings from these workshops as a starting point, we conducted a global study this year. Central to our approach were interviews with our own senior managers and with more than 40 external stakeholders. We invited global NGOs and multilaterals for their expertise and wide geographical scope of work in our key impact areas, while stakeholders such as investors, customers and suppliers were invited because of the importance our businesses have to each other. We also included local NGOs and government representatives to gain insight into stakeholders’ expectations in areas of new business activity such as India and Brazil.
Results of the global study
Three areas were revealed as most significant for stakeholders: alcohol in society, water security, and skills and education.
Within alcohol in society, stakeholders raised the continuing importance of communicating the risks of excessive drinking to consumers and society at large. They also mentioned working actively to tackle misuse itself through programmes and partnerships. A common piece of feedback was that all major players in the alcohol industry should collaborate to have a greater collective impact on reducing alcohol misuse.
Within water security, stakeholders noted the need for alcohol producers to work on the issue both within their own operations and with local communities and raw material suppliers, particularly those operating in water-stressed areas. Finally, empowering stakeholders in our value chain through skills and education – particularly for smallholder farmers and women – was frequently cited as important for contributing further to socio-economic development.
Other issues ranked relatively highly by external stakeholders were industry collaboration, gender equality, and transparency in the supply chain. In internal interviews with senior managers, a few others came up frequently as important to address: workplace diversity; health and safety; and sustainable packaging.
The business case – risks and opportunities
Having collected feedback from stakeholders, we assessed the risks and opportunities associated with each issue they identified to determine our strategic priorities. Interestingly, many of the issues considered most important by stakeholders correlated with our view of Diageo's most important sustainability risks and opportunities.
For example, activities to promote a positive role for alcohol in society both mitigate risk and provide opportunities. First and foremost, working to ensure that our products are consumed responsibly is core to securing our licence to operate around the world. However, responsible drinking programmes, such as our ‘Conoscere l’Alcol’ campaign in Italy, can be meaningful ways to engage customers and consumers.
The security of our raw material supply, which relies heavily on water, is another key risk. As such, we focus on improving water efficiency, reducing water wasted and increasing the quality of the water we discharge to local water sources. This is particularly important in Africa, where 50% of our operations are in water-stressed areas. Reducing water use, along with emissions such as carbon and waste, also makes our operations more efficient; some of our environmental investments, such as water efficiency projects in Kenya, have paid for themselves in as little as six months.
Finally, demonstrating a positive impact on socio-economic development not only meets broader stakeholder expectations, but also can engage business partners and consumers, for example through cause-related campaigns such as Buchanan’s Time to Share in Latin America. We also know that the work we do in this area motivates our own people and helps us retain and attract talent.