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Carbon

We want to cut the link between the manufacture of our products and the fossil fuels which contribute to climate change, reducing our carbon emissions and ensuring the long-term sustainability of our business.

Our approach

Making and distributing spirits, beer and wine uses energy – but we do not ignore the risks posed by carbon emissions to the environment, and to our business. We are aiming to reduce our carbon emissions by half in absolute terms, which has meant changing the relationship between production and the use of fossil fuels.

Through a variety of activities, we have been able to grow our business while reducing the carbon emissions associated with our value chain, as well as our risk exposure to energy insecurity and rising costs:

We monitor and measure our greenhouse gas (GHG) emissions in accordance with the World Resources Institute (WRI) / World Business Council for Sustainable Development (WBCSD) Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, Revised Edition.

Performance

On course to meet challenging targets

Our strategy for reducing the carbon emissions of our operations by 50% by 2015 is on course, with a reduction of 9.4% in the past year, and 22.0% compared to the 2007 baseline. We are particularly proud to have made this significant reduction in absolute terms at the same time as production volume has grown.

The savings this year represent a reduction of Scope 1 direct emissions by 7.8%, and Scope 2 indirect emissions from purchased energy by 19.1%. Our 2015 target does not apply to Scope 3 emissions from other indirect sources.

Our commitment to absolute reduction in our emissions means that every incremental saving becomes more challenging. The challenge is frequently most acute in emerging markets, like Africa, where some elements of a low-carbon infrastructure have yet to develop.

Nonetheless, it is encouraging that the pace of emissions reduction increased significantly last year – we made considerable savings through a variety of energy efficiency initiatives, and the use of low-carbon energy at our sites – and we are committed to pursuing the remainder of our journey to a 50% reduction in absolute emissions.

Direct energy consumption split by renewable and non-renewable (TJ)1

Direct_energy_consumption_300px

  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 World Resources Institute (WRI) / World Business Council for Sustainable Development (WBCSD) Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, Revised Edition.
  2. 2007 baseline data and data for the four years ended 30 June 2011 have been restated in accordance with WRI / WBCSD Greenhouse Gas Reporting Protocol and Diageo Environmental Reporting Guidelines.
Indirect energy consumption split by renewable
and non-renewable (TJ)1

Indirect_energy_consumption_300px

  1. Indirect energy consumption refers to the energy used from purchased electricity consumed and generate Scope 2 emissions as defined by the World Resources Institute (WRI) / World Business Council for Sustainable Development (WBCSD) Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, Revised Edition.
  2. 2007 baseline data and data for the four years ended 30 June 2011 have been restated in accordance with WRI / WBCSD Greenhouse Gas Reporting Protocol and Diageo Environmental Reporting Guidelines.
Energy efficiency (MJ / l packaged)

Energy_efficiency_300px

  1. Direct and Indirect energy sources refer to those that generate Scope 1 (direct) and Scope 2 (indirect) emissions as defined by the World Resources Institute (WRI) / World Business Council for Sustainable Development (WBCSD) Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, Revised Edition.
  2. 2007 baseline data and data for the four years ended 30 June 2011 have been restated in accordance with WRI / WBCSD Greenhouse Gas Reporting Protocol and Diageo Environmental Reporting Guidelines.
Sources of energy consumption (TJ)

Sources_of_energy_300px

  1. Direct and Indirect energy sources refer to those that generate Scope 1 (direct) and Scope 2 (indirect) emissions as defined by the World Resources Institute (WRI) / World Business Council for Sustainable Development (WBCSD) Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, Revised Edition.
  2. 2007 baseline data and data for the four years ended 30 June 2011 have been restated in accordance with WRI / WBCSD Greenhouse Gas Reporting Protocol and Diageo Environmental Reporting Guidelines.
Direct and indirect carbon emissions by weight
(1,000s tonnes CO2)1

Direct_and_indirect_carb_emissions_by_weight_300px

  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 the four years ended 30 June 2011 have been restated in accordance with WRI / WBCSD Greenhouse Gas Reporting Protocol and Diageo Environmental Reporting Guidelines.
  3. Total tonnes of CO2 included in this table in respect of the year ended 30 June 2012 are covered by KPMG’s independent assurance report.
Carbon emissions by weight by region (1,000s tonnes CO2)1
Region
2007 2010 2011 2012
North America 217.2 171.3 130.4 66.6
Europe 362.5 347.0 321.9 316.4
Africa 231.9 247.8 258.4 258.3
Latin America and Caribbean 25.5 20.3 19.5 18.3
Asia Pacific 15.4 10.2 10.5 10.2
Corporate 21.3 15.7 11.1 11.7
Diageo (total) 873.82 812.32 751.82 681.5^

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 the four years ended 30 June 2011 have been restated in accordance with WRI / WBCSD Greenhouse Gas Reporting Protocol and Diageo Environmental Reporting Guidelines.
^ Total tonnes of CO2 included in this table in respect of the year ended 30 June 2012 are covered by KPMG’s independent assurance report.

Improving energy efficiency in our operations

Reviewing and improving the energy efficiency of our operations reduces carbon emissions, cuts energy bills, and reduces our exposure to energy risks. This year, measures like process redesign, equipment improvements and retrofitting, and cultural and behavioural changes created global savings of 2.2% of total energy or 270TJ.

Our energy efficiency results represent the sum of many small improvements. Across the business, we implemented over 100 energy-efficiency and GHG emission-reduction initiatives this year. These included projects aimed at improving insulation on cookers and stills, the installation of variable speed drives and low energy lighting systems, and improvements to air condensers and boilers.

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 in the bio-energy potential of our distilleries and breweries.

In September 2011, we submitted proposals to Moray Council for a new, £6 million bio-energy plant at our Glenlossie distillery complex in Speyside, Scotland, which will harness the potential of burning draff (the spent grain remaining after whisky distillation) to create steam for the distilling process. The Glenlossie project, which is projected to save approximately 6,000 tonnes of CO2 per year, follows similar investment in renewable energy in 2010 at the nearby Roseisle distillery, where currently 50% of total energy demand is being met from on-site renewable energy generation.

Sourcing renewable and low-carbon energy

Renewable and low-carbon energy from wind, hydro, nuclear and bio-energy sources contribute significantly to reducing emissions. This year we sourced 52% of our electricity from low-carbon sources, with some regions, like the United Kingdom and Ireland, approaching 100%.

Finding innovative sources of renewable energy is a key part of our carbon reduction plans. For example, one of our biggest drivers of carbon reduction this year was at our Gimli distillery in Canada, where we make Crown Royal. Here a project began this financial year to use green biomethane gas which has reduced our fossil fuel carbon emissions at that location by more than 99%.

Reducing carbon from distribution

We set our carbon emissions target partly to improve the efficiency of the parts of our business over which we have most control – production. But we are also committed to reducing emissions associated with distribution – both of raw materials and packaging to our sites, and of our brands to market. For example, our estimated CO2 emissions in North America for distributing finished goods in 2012 were 122,000 tonnes.*

A number of initiatives are aimed at reducing these emissions. For example, we have established ourselves as leaders in energy-efficient distribution in the United States through our use of trucks fuelled by compressed natural gas (CNG) and our three-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.

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. We’ve also set up a car-sharing scheme – for example at our Leven packaging facility, where 88 employees registered, saving a projected 44,618 road miles, equivalent to a reduction in emissions of 14.7 tonnes of CO2.

*For North American-based distribution, we use the US EPA SmartWay programme calculation methodology which you can find on http://www.epa.gov/smartway. For transport in the rest of the world, we developed an in-house modelling programme. This programme applies specific emission factors for each mode of transport (road, rail, inland waterways, deep sea, and ferry) calculated against number of cases shipped and kilometres travelled.

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