The business case for sustainability and responsibility
We know that our commitment to being a sustainable, responsible company supports our ambitious revenue and margin growth targets. In this way, we can work to have a positive impact on society while sustaining our commercial success.
We have set many targets to quantify our social and environmental impacts, from reducing our carbon emissions to investing in the communities in which we operate. As well as being beneficial to our stakeholders, these programmes contribute directly to Diageo’s delivery of consistent revenue and profit growth over the long term.
The business benefits of our programmes come in many forms. A rigorous approach to sustainability and responsibility is part of good risk management – whether securing the supply of raw materials or creating effective regulatory policies. It also supports our competitive advantage – whether delivering business efficiencies or engaging our consumers, customers, suppliers and our own employees. And today it is an important driver of growth, particularly in building a social licence to operate in markets that expect companies to contribute to their own, broader sustainable development.
Using fewer resources usually translates into lower costs, and by encouraging efficiency in our use of resources, our environmental strategy is helping to contribute to savings of millions of pounds. Some of our investments start paying dividends very quickly.
For example, at our Cameronbridge distillery in Scotland, we have implemented a systematic programme of energy efficiency projects using a range of technologies. Taken together over the last two years these projects cost £700,000 and will reduce our carbon emissions by 3,000 tonnes (the equivalent of taking around 800 family cars off the road). But the annual savings of £1.4 million represent a payback period of just six months – an attractive return on investment which we can replicate in our other production facilities.
Similarly at our Tusker brewery, a water-stressed site in Kenya, a water recovery project also started paying returns in just six months. It cost £200,000 with savings of £500,000 per annum, while improving water efficiency by 5%. And a pasteuriser replacement at Kumasi Brewery, a water-stressed site in Ghana, cost £3 million with a seven-year payback generating savings of £400,000 per annum. Other investments have longer payback periods, but we view each of them as investments in our future.
Building loyalty and sales
External research has shown that consumers’ interest in sustainability and responsibility is growing fast in some sectors although it is still just beginning with alcoholic beverages. Nevertheless, we run a number of branded campaigns for social change and have found that they are engaging consumers.
As well as marketing campaigns, certain products themselves have created shared value – direct revenue for Diageo along with a beneficial social or environmental impact. One good example is Senator Keg, which was created to compete with illicit and sometimes dangerous brews in Kenya.
Securing our supply
Ensuring we have the natural resources such as water and barley that we need to make our brands and grow our business is a central tenet of risk management. Reducing our dependency on those raw materials – such as conventional fuel – which are supply-constrained or may become so, is important for our future success. Working with our agricultural suppliers to help them improve yields helps create sustainable business for them and a more secure supply chain for us.
Engaging our people
Experience tells us that our sustainability and responsibility programme is of increasing importance for retaining and recruiting the best talent, one of our most important resources and an area of increasing competition in emerging markets. In this year’s Values Survey, approximately 85% of employees told us that they believe we are effective in our sustainability and responsibility efforts. The total included answers to questions about responsible drinking, contributions to communities, environmental sustainability, governance and ethics as well as diversity. We know that this belief relates directly to how engaged our employees are with the business.
Building relationships and our reputation as we grow
It is imperative that the stakeholders on whom we rely trust and believe in our ability to operate in a sustainable and responsible way. This is true whether we are talking about governments supporting marketing self-regulation or our customers trusting the practices in their own supply chain, such as those to do with sustainable packaging, carbon emissions or human rights.
In emerging markets, a leading position on sustainability and responsibility issues can be a competitive advantage. Many countries in these markets look to the private sector, particularly to global companies like Diageo, to demonstrate an ability to contribute positively to sustainable development.
For example, we believe that our strong reputation as a sustainable and responsible company helped us secure our acquisition of the Meta Abo brewery from the Ethiopian Government. The British Ambassador to Ethiopia supported our investment and said: ‘… Diageo will bring its track record of ethical business, good governance, diversity, transparency and sustainability to the deal – including clean water projects that benefit a million Africans annually.’