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We have a commercial, strategic and ethical interest in including our communities in our value chain – allowing the success of our business to support the stable economic environment of our communities, as well as our business needs.
For us, wealth creation means ensuring our business has a beneficial impact on local economies. We directly create wealth for local stakeholders through:
To maximise the economic impact of these activities, it is also important to support community programmes that address local concerns such as education and health, or advocacy that challenges the status quo on topics such as setting high standards of governance. Read more about these areas in community investment and advocacy.
Wealth creation is especially important in emerging markets, which now represent almost 40% of our net sales. Africa in particular provides significant growth opportunities for us as a business, with almost one in four of Diageo's total workforce employed in this dynamic and emerging market.
The economic value we created this year includes direct flow of cash to our stakeholders through jobs, contracts and investments as well as indirect impacts, which are harder to measure but can be the result of business decisions indirectly opening new economic opportunities.
The cash value added diagram below illustrates our total direct cash contribution to the global economy. Roll over the circles marked with a '+' to learn how our revenue flowed to stakeholder groups in our value chain.
More than 40% of our cash contribution comes from buying raw materials, packaging materials, logistics and transportation, marketing materials, advertising and information services and business support from tens of thousands of direct suppliers. This year procurement spend increased by 13% compared to last year.
Where possible and economically appropriate, we source locally to support local farmers, communities and economies. In Africa, we aim to source 70% of our raw materials from the region by 2015. At the moment, we work with thousands of farmers across the continent and source 56% of our raw materials locally.
We invested £28.7 million this year in community development that aimed to address local interests and needs. In total, this amounts to 0.9% of our operating profit before exceptional items and represents a 3% increase from last year.
Recruiting, developing and retaining local talent is one of the more direct ways in which we can help develop local communities. We are committed to reflecting the diversity of all our local populations in our leadership teams and consider the long-term welfare of our employees in structuring benefits packages. This year we paid our employees £1,133 million or 8% of our total cash contribution in salaries and benefits.
Every year, our tax contribution accounts for a significant proportion of the value we contribute to economies around the world. This year it amounted to about 30% of our total contribution, including £3,832 million in alcohol taxes and £611 million in other taxes. This represents an increase of almost 19% compared to last year.
Our tax footprint is made up of direct and indirect tax payments. Direct taxes include corporation tax, local business taxes and excise duties on our sales, as well as other sales taxes such as VAT. Indirect taxes include, for example, the payment of income and corporate taxes by our employees and suppliers.
We work hard to add long-term value for shareholders and are pleased to report that our total shareholder return continues to outperform the FTSE 100. Diageo is committed to a sustainable and progressive dividend policy and this year recommended a further 8% increase in the annual dividend paid to shareholders. Diageo strongly believes in the value of our employees sharing in the company's success and we actively encourage our employees to become shareholders. As at 30 June 2012, 16,531 past and present employees held 1.16% (2011 - 1.17%) of Diageo's ordinary issued share capital.
As well as being listed on both the London Stock Exchange and the New York Stock Exchange, Diageo owns stakes in companies in various parts of the world that are listed on local stock exchanges including Guinness Nigeria, East Africa Breweries Ltd, Guinness Ghana Breweries, Seychelles Breweries and Red Stripe in Jamaica. This is another important catalyst for wealth creation in emerging markets.
Diageo is an active borrower in global debt capital markets. Investing in Diageo debt instruments allows investors to achieve attractive yields, while their capital is guaranteed by our strong cash flow generation and sound business model. This year, about 3% of our total cash was paid to lenders.
Regionally-focused innovation can help create local jobs and support local communities. In the last financial year, Diageo launched 24 innovations in Africa focused on creating new products that appeal to African tastes and embrace African cultures. One of these brands, Armstrong, is a locally produced spirit-based drink that is an affordable and credible beer alternative for lower income consumers. It was launched in Ghana in May 2012.
We are always looking for opportunities that fit with our business - whether new partnerships or new acquisitions - and this year reserved 11% of our total cash for this purpose. These opportunities for growth not only benefit us as a company but also the economies in which we do business. This year we made a number of acquisitions of brands, distribution rights and equity interests in premium drinks businesses, particularly in emerging markets such as Turkey, Ethiopia, Vietnam and Brazil.
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Working with low-income families and local governments, we’ve rolled out our bottle collection initiative to seven...
© Diageo plc 2017