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Carbon

The growth of our business must not come at the expense of future generations. Our long-term sustainability depends on reducing our reliance on the fossil fuels which contribute to climate change.

Our approach

Changes in climate caused by human activity have the potential to create unprecedented social, economic and environmental challenges. Like any responsible business, we are addressing our greenhouse gas footprint as a priority.

We have committed to halving our carbon emissions in absolute terms by 2015, which has required a significant review of the relationship between production and the use of fossil fuels in our operations.

We believe we can grow our business while reducing the carbon emissions associated with our value chain, as well as reducing our exposure to the risks of energy insecurity and rising costs, through four main activities:

In 2008 we committed to an absolute reduction in greenhouse gas (GHG) emissions. We believe our willingness to take the lead in this area will position us well when all companies listed on the London Stock Exchange are required by law to measure and report their GHG emissions in 2013.

Performance

We reduced our total carbon emissions by 4.1% this year, and overall by 26.3% compared to our 2007 baseline. This included a reduction in direct emissions (scope 1) of 3%, and indirect emissions (scope 2) from purchased energy of 14%. This reduction in absolute terms has been achieved even though production volume has grown, particularly in the most energy-intensive area of our business, distilling; in fact, our carbon reduction initiatives reduced emissions by 9% in 2013, but were partially offset against the increased emissions from greater production. Overall, with our current portfolio of projects to reduce emissions, we are well over halfway towards our 2015 target.

Worldwide, over 170 energy-saving and renewable energy initiatives in our operations contributed to these reductions. For example, a new combined heat and power unit commissioned in April of this year at our US Virgin Islands site, and fuelled by natural gas, will reduce site emissions by 14,000 tonnes of carbon over the course of a full year.

Scope 3 emissions – the carbon footprint of our value chain beyond our scope 1 and scope 2 emissions – were not included in our 2015 target-setting process. However, as our carbon strategy has broadened, we have increased our understanding of where our scope 3 impacts are greatest, and we are concentrating our efforts on these areas, namely logistics, key packaging and agricultural suppliers, and product refrigeration at point of sale.

We believe the best approach to monitoring and managing carbon emissions in our supply chain is through collaboration with others, as our work with the Beverage Industry Environment Roundtable demonstrates. In addition, since 2006 we have disclosed our emissions to the Carbon Disclosure Project (CDP), an independent not-for-profit organisation which holds the largest database of primary corporate information on climate change in the world. Diageo outscored all other beverage companies in the CDP’s rankings for climate change strategy, emissions disclosure and performance in 2012 – and was ranked in the top 10 of the world’s largest companies.

Last year, we joined the CDP Supply Chain programme and invited 125 of our key suppliers, representing approximately 80% of our total spend, to disclose their carbon emissions data to the CDP. The CDP Supply Chain programme enables us to engage with our key suppliers on measuring and managing carbon emissions, and through their disclosures gain a greater insight into our own supply chain emissions. We had a high rate of response from our suppliers, and the results will form the basis for future collective action to reduce emissions.

Improving energy efficiency in our operations

Improving the energy efficiency of our operations reduces carbon emissions, cuts energy bills, and reduces our exposure to energy risks. This year, measures such as improving insulation on cookers and stills, the installation of variable speed drives and low energy lighting systems, and improvements to air condensers and boilers helped us create significant efficiencies. While in total energy use was 8% lower than in our baseline year of 2007, this year, compared with 2012, energy use increased by 3% to 13.4 tetra joules due to increased production, particularly in the more energy-intensive processes.

Generating renewable energy at our sites

Alcohol production creates a number of by‑products which can be exploited as sources of renewable energy, and we have continued to invest significantly in the bio‑energy potential of our distilleries and breweries.

For example, we have built a £6 million anaerobic digestion plant at our Dailuaine distillery in Scotland which generates biogas from draff and pot ale condensate. This will supply 40% of the site’s electricity, while reducing CO2 emissions by 5%. A new biomass plant recently commissioned at Glenlossie, also on Speyside, is expected to generate 50% of the site’s energy, saving 6,000 tonnes of CO2.

Sourcing renewable/low‑carbon energy

Renewable and low‑carbon energy from bio‑energy, nuclear, wind, and hydro-electric sources can contribute significantly to reducing emissions. This year we sourced 54% of our electricity from low‑carbon sources, with some regions, like the United Kingdom and Ireland, approaching 100%.

Often, sourcing low‑carbon energy can be combined with measures that help us meet our targets. For example, at our Douala brewery in Cameroon, where we make Guinness and other beer brands, converting our boilers from oil to natural gas reduced carbon emissions by 30% when combined with better insulation and heat recovery. Read more about Douala in our case study.

In Canada, our Valleyfield distillery switched its primary fuel source to bio‑methane during the year, contributing to a further reduction in GHG emissions.

Carbon emissions by weight by region (1,000s tonnes CO2)1, 2
Region 2007 2011 2012 2013
North America 217 130 68 53
Western Europe 363 322 317 331
Africa, Eastern Europe and Turkey 293 295 294 273
Latin America and Caribbean 26 23 21 17
Asia Pacific 30 16 15 12
Corporate 23 13 17 15
Diageo (total) 952 799 732 701+
  1. CO2 figures are calculated using the kWh/CO2 conversion factor provided by energy suppliers, the relevant factors to the country of operation or the International Energy Agency, as applicable.
  2. 2007 baseline data, and data for each of the five years in the period ended 30 June 2012, have been restated in accordance with the WRI/WBCSD Greenhouse Gas Reporting Protocol and Diageo’s environmental reporting methodologies.

+ Total tonnes of CO2 included in this table in respect of the year ended 30 June 2013 are covered by KPMG’s independent assurance report.

Reducing carbon from transport/distribution

Our understanding of the emissions associated with distribution – both of raw materials and packaging to our sites, and of our brands to market – is growing, and we are focusing increasingly on the GHG footprint of those parts of our value chain that lie outside our direct operations. This year we significantly improved how we measure emissions from the distribution of finished goods, by including ocean freight shipments as well as road and rail transport. Our estimated CO2 emissions for this part of our value chain in 2013 were 288,167 metric tonnes.

With over 40% of these emissions coming from our North American operations, we have implemented several reduction initiatives there. For example, we have established ourselves as leaders in energy-efficient distribution through our use of compressed natural gas (CNG) fuelled trucks and our four‑year membership of SmartWay, a public/private collaboration between the US Environmental Protection Agency and the freight transportation industry. SmartWay helps freight shippers, carriers, and logistics companies improve fuel efficiency and save money – our primary logistic company in North America improved its carriers’ carbon efficiency by 3% (as measured by grams of CO2 emitted per mile travelled).

We are also helping our employees reduce their carbon footprint, by encouraging them to use video- and tele‑conferencing instead of travelling to meetings; to work from home when it makes sense to do so; and to take part in bike-to-work schemes.

Renewable and non‑renewable indirect energy consumption (TJ)1, 2

indirect_energy_consumption_new_300x234

  1. Indirect energy consumption refers to the energy used from purchased electricity consumed and which generates scope 2 emissions as defined by the WRI/WBCSD Greenhouse Gas Reporting Protocol.
  2. 2007 baseline data, and data for each of the five years in the period ended 30 June 2012, have been restated in accordance with the WRI/WBCSD Greenhouse Gas Reporting Protocol and Diageo’s environmental reporting methodologies.
Direct and indirect sources of energy (TJ)1, 2

direct_and_indirect_sources_of_energy_new_300x234

  1. Direct and indirect energy sources refer to those that generate scope 1 (direct) and scope 2 (indirect) emissions as defined by the WRI/WBCSD Greenhouse Gas Reporting Protocol.
  2. 2007 baseline data, and data for each of the five years in the period ended 30 June 2012, have been restated in accordance with the WRI/WBCSD Greenhouse Gas Reporting Protocol and Diageo’s environmental reporting methodologies.
Renewable and non‑renewable direct energy consumption (TJ)1, 2

renewable_and_non_renewable_direct_energy_new_300x234

  1. Direct energy consumption refers to energy sources that are owned or controlled by the company and generate scope 1 emissions as defined by the WRI/WBCSD Greenhouse Gas Reporting Protocol.
  2. 2007 baseline data, and data for each of the five years in the period ended 30 June 2012, have been restated in accordance with the WRI/WBCSD Greenhouse Gas Reporting Protocol and Diageo’s environmental reporting methodologies.
Direct and indirect energy efficiency (MJ/litre packaged)1, 2

direct_and_indirect_energy_efficiency_new_300x234

  1. Direct and indirect energy sources refer to those that generate scope 1 (direct) and scope 2 (indirect) emissions as defined by the WRI/WBCSD Greenhouse Gas Reporting Protocol.
  2. 2007 baseline data, and data for each of the five years in the period ended 30 June 2012, have been restated in accordance with the WRI/WBCSD Greenhouse Gas Reporting Protocol and Diageo’s environmental reporting methodologies.
Direct and indirect carbon emissions by weight (1,000s tonnes CO2)1, 2

direct_and_indirect_carbon_emissions_new_300x234

  1. CO2 figures are calculated using the kWh/CO2 conversion factor provided by energy suppliers, the factors relevant to the country of operation or the International Energy Agency, as applicable.
  2. 2007 baseline data, and data for each of the five years in the period ended 30 June 2012, have been restated in accordance with the WRI/WBCSD Greenhouse Gas Reporting Protocol and Diageo’s environmental reporting methodologies.

Reporting frameworks in this section

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