Sustainable agriculture and local sourcing
We rely on raw materials from agriculture, so it is imperative that we focus our efforts on anticipating climate change and resource scarcity in partnership with suppliers and farmers.
Growing agricultural raw materials often requires resources that are under mounting pressure. Challenges such as water scarcity, unsustainable farming practices, competition for arable land from fuel crops, and climate change all pose potential risks to the supply of our raw materials and to the livelihoods of the farmers who produce them.
We approach our agricultural supply chain knowing that the future prosperity of farmers, suppliers and our business is closely linked with our ability to create partnerships and generate joint business value in ways that are sustainable, secure, and mutually beneficial. We support sustainable sourcing and, where appropriate, local sourcing of raw materials which meet our quality standards. In the United Kingdom and Ireland, our largest production region by volume, we source up to 90% of our cereal supply locally.
Increasingly, we are looking at alternative raw materials like sorghum and cassava, which are more resilient and better adapted to their local climates. For example, this year we successfully launched Ruut Extra Premium beer in Ghana, Diageo’s first cassava-based beer, providing local farmers with a commercial market for one of Ghana’s most popular crops. At the heart of our approach is the recognition that partnerships with farmers are the most effective way to promote sustainable farming practices and secure local supply networks. We have seen how these partnerships, when successful, can change lives and transform communities. Read more in our case study.
As a business, we aspire to the aims defined by the Sustainable Agriculture Initiative: ‘Sustainable agriculture is the efficient production of safe, high quality agricultural products, in a way that protects and improves the natural environment, the social and economic conditions of farmers, their employees and local communities, and safeguards the health and welfare of all farmed species.’
Our agricultural suppliers
We buy raw materials such as barley, sorghum, maize, and grapes from a diverse range of suppliers, from sizeable commercial businesses to smallholders whose area of sorghum or barley might cover no more than an acre. We deal directly with around 150 first tier suppliers and thousands of farmers; and we have an even wider network of suppliers whose produce we buy indirectly. While historically we have sourced the largest proportion of our ingredients from Europe, our business has grown significantly in other regions, notably Africa – a particular focus of our work in local sourcing.
Local sourcing is a deliberate choice to ensure a reliable supply of raw materials from close to our breweries and distilleries, while having a positive impact on the communities in which we operate.
For example, we use barley to make both beer and whisky, and it represents 36% of our total raw materials by volume. We source barley mainly from Scotland, Ireland, and Kenya, where it is processed locally.
Our ambition for Africa
Our brewing businesses have had close connections with farmers in Africa for decades: as our largest region by volume for beer, Africa is an important focus for our activities.
Our target is to source 70% of all our raw materials locally in Africa by 2015. By ‘raw materials locally’ we mean all materials within Africa and used in our African operations to produce our brands, which includes raw materials of both agricultural and non‑agricultural origin. We currently source over 52% of agricultural raw materials locally throughout Africa, which approximates to 180,000 tonnes per year. The 52% understates our total performance against our target, which should also include non-agricultural raw materials. We plan to report on these going forward.
Sourcing agricultural and other raw materials locally provides a reliable source of income for thousands of smallholder farmers and agri-businesses, which in turn benefits the economies in which they trade. Farmers benefit from longer-term supply agreements and access to advice, training, inputs and financing options. Our local operations benefit from a diverse, sustainable supply of high quality ingredients which underpin the success and growth of their brands.
Like barley, sorghum is an ingredient in many of our African beer brands and represents 4% of our raw materials. Sorghum is more drought-tolerant and therefore requires less water to grow than many alternatives, and offers a supply for our operations in water-stressed1 regions. We buy sorghum in Ghana, Nigeria, Kenya, and Tanzania, where we are working with local farmers and government agencies to increase the supply of sorghum through training and technical assistance to small-scale farmers.
- Diageo defines water-stressed sites as those locations that pose a higher risk for water insecurity now and/or into the future; the definition is based on an evaluation of physical or economic water scarcity as well as regulatory and social risk.
Sustainable agricultural partnerships
Where we have been able to establish longstanding partnerships with suppliers based on the principles of sustainable agriculture, we have seen significant benefits for our business and our suppliers.
In Kenya, for example, we have long worked with commercial barley farmers who supply grain to our malting facility. Our partnerships with these farmers aim to improve yields and develop scalable business models, linking larger farmers with smallholder communities. We are also working with financial services companies to provide farmers with credit facilities and basic insurance against loss of income due to drought.
Similarly, our barley development programme in Ethiopia, in partnership with the Ethiopian Government’s Agricultural Transformation Agency (ATA) and 764 smallholders, is designed to develop supply for our operations there.
In Ireland, our work with cereal farmers has included programmes linking seed houses, cereal growers, and the maltster. The programmes include fully traceable sourcing from seed to brewhouse, food safety education and accreditation, seed assurance validation, and advice on crop rotation, pesticides, and chemicals. We support these partnerships with an annual due diligence audit programme, and have worked with suppliers to use the spent grains which previously went to landfill as a valuable input to animal feed and fertiliser.
Cream is another example of an ingredient which has formed the basis of a partnership with a supplier. In 2011, we joined with our primary cream supplier to develop a sustainability strategy addressing quality assurance, animal health and welfare, carbon, biodiversity, water, and health and safety. In July 2012, they began a two‑year audit programme which will monitor progress and compliance in 4,300 farms.