Diageo has managed to cut its greenhouse gas emissions, total water use and the volume of waste it sends to landfill over the past year, but is still some distance from targets set for 2015 (see table). The UK-based drinks firm’s latest corporate citizenship report, published this week, also introduces new sustainable and ethical procurement policies.
Diageo owns an array of beer, wine and spirits brands including Guinness, Smirnoff, Johnnie Walker and Baileys. It operates 36 distilleries, 14 breweries and 13 wineries, and another 66 additional sites.
The firm has been praised by NGOs in the past for its efforts to improve water management, which extend beyond its own operations to the wider catchment and ensuring local people in developing countries have access to clean drinking water (ENDS Report, February 2010). It has struggled nonetheless to cut the water wasted by plants in water-stressed areas. This increased by 11% between 2008/09 and 2009/10, mainly because of increased production at these sites.
The greenhouse gas emissions from all Diageo-operated sites rose from 0.83 million tonnes of carbon dioxide equivalent a year in 2007 to 0.84Mt in 2008 but have since fallen to 0.74Mt. This figure includes emission reductions associated with the purchase of electricity through green tariffs and is not therefore in line with UK government guidelines on corporate emissions reporting (ENDS Report, November 2009).
However, the vast majority of the energy Diageo consumes is produced on site from gas and fuel oil, so the effect on total emissions figures will be marginal. Improvements in energy efficiency – from 3.9 million jules per litre of packaged product to 3.6MJ – over the past year proves emission reductions have been achieved on site too.
The improvements made by Diageo include new steam recovery systems at its Scottish malt whisky distilleries, the conversion of boilers at a Tennessee brewery from diesel to natural gas and the installation of a waste heat recovery system at its Nigerian brewery.
Nonetheless, Diageo seems to be coming up against the same conflicts between environmental sustainability and continuous economic growth as Sky, Tesco and others (ENDS Report, April 2010). This has prompted a switch among some firms from absolute carbon targets to intensity-based ones.
Diageo must reduce its annual emissions by more than 9% a year, more than twice the cut achieved last year, if it is to meet its 2015 target. This could be hard to do while still maintaining annual growth of about 5%.
This year, Diageo also plans to roll out a new set of agricultural sourcing guidelines covering environmental and social issues such as soil erosion, biodiversity and labour standards. Agricultural goods account for around 15% of the firm's annual expenditure and the guidelines set out the standards it expects producers to achieve.
Diageo has picked four priority commodities for special attention: cream, malting barley, sugar cane and sorghum. It will work with farmers in these supply chains to assess their current social and environmental performance and ensure improvements are made, starting initially with Irish dairy farmers.
In all, Diageo has about 30,000 suppliers. The sustainability of 700 thought to be of 'high risk' will also be assessed over the next year through the Supplier Ethical Data Exchange (SEDEX) system, which collates information from suppliers (ENDS Report, January 2008).
Diageo will commission more detailed audits of 50 of those with the highest risk and work with them to improve their performance. The environmental performance of key suppliers will also be included in the company's formal supplier management process.
However, Professor David Grayson, a professor of corporate responsibility at Cranfield University, who provides an external commentary in Diageo's report, suggests it should also be conducting life-cycle analyses of its products. This would help highlight the most important sustainability issues.