In Focus Interview: Paul Kelleher, Corporate Relations Director, Asia Pacific, Diageo

In the Society 2030 plan, Diageo pledges to work with the whole value chain – the people, resources and environment that contribute to success from grain to glass in a 10-year action plan to help create a more inclusive and sustainable world.

Kelleher shares more on how Diageo plans to achieve their goals and how they filter down from a global initiative to the regional and national level.

First, I’d like to share some context on Society 2030: Spirit of Progress, Diageo's 10-year action plan to help create a more inclusive and sustainable world. The plan aims to amplify our work in three strategic pillars which include promoting positive responsible drinking, championing inclusions and diversity and pioneering grain to glass sustainability. All 25 goals under this action plan are aligned to the UN’s Sustainable Development Goals and are continuously getting embedded into the way we do business, our culture and are now part of our definition of business success and performance.

This approach and strategy aligns and resonates across the whole organisation. Goals, policies and targets set at the global level are aligned with regional teams who actively work with markets to make sure they resonate and make the positive impact on the ground. We work together to put in place resources, processes and consistent programmes. We also have goals at the regional and market level that serve our local communities and contribute to the larger, global sustainability targets of the company.

Climate change is one of the most significant challenges the world currently faces, and we’re determined to play our part to tackle it. Environmental sustainability sits within our Society 2030 ‘grain to glass’ pillar where we focus on carbon, water, sustainable design and sustainable agriculture. Society 2030 targets in this pillar include to:

• Become Net Zero carbon in our direct operations (scope 1 & 2)

• Reduce our value chain (scope 3) carbon emissions by 50%

• Use 100% renewable electricity across all our direct operations

• Reduce water use in our operations with a 40% improvement in water use efficiency in water stressed areas and 30% improvement across the company

• Replenish more water than we use for our operations for all of our sites in water-stressed areas by 2026

• Invest in improving access to clean water, sanitation, and hygiene (WASH) in communities near our sites and

local sourcing areas in all of our water-stressed markets

• Achieve zero waste in our direct operations and zero waste to landfill in our supply chain

• Ensure 100% of our packaging is widely recyclable (or reusable/compostable)

• Provide all of our local sourcing communities with agricultural skills and resources, building economic and environmental resilience (supporting 150,000 smallholder farmers)

An example of how we translate global goals to markets can be seen in how we aim to achieve Net zero carbon in Scope 1 and 2 by 2030. The work to reach this net zero target is happening through our production sites in markets around the world where we’re making investments, changing processes and adopting innovations. In Australia, the Bundaberg Distillery is now powered 67% by renewable energy with “green steam” technology to recycle bagasse waste into steam power. In Scotland, the Brora, Oban and Royal Lochnagar distilleries are now carbon neutral and have been converted to use 100% renewable woodchips, or vegetable oil residue, as well as all operating using renewable electricity. All these efforts are helping us gain traction and so far, we have achieved a 50% absolute reduction in our Scope 1 and 2 emissions (from a 2007 baseline).

We recognise this work doesn’t stop at our doors and we need to work closely with our suppliers on Scope 3 or indirect emissions – widely accepted as being the greatest challenge, but also where there will be the biggest impact on climate change mitigation. That will be our next step.

One of the goals is to use 30% less water in producing your drinks. What are the steps to achieve this specific goal, as an example?

Water is our most important ingredient and water stewardship has been a longstanding priority for Diageo. We’re a global leader in sustainable water management by CDP, one of only 72 companies, out of 8,400 globally, to achieve an ‘A’ for Water Stewardship. This puts Diageo in the top 1% of companies globally.

Our 2030 ambition aims to further raise the bar. By 2030, our goal is to use 30% less water than today on every drink we make on an average. To put that into context, based on F20 production volumes, this is the equivalent to saving enough water to meet the needs of 2.9 million people in water scarce environment, or 2,000 Olympic sized swimming pools. It’s a significant target and our holistic ‘grain to glass’ approach will help us reach it, taking into the multiple inter-dependencies between our use of water and the impact on communities, supply chains and the environment. So, we’ll continue to support farmers (especially smallholders), improve water use in our operations, replenish water in water stressed catchments, provide clean water to our communities and strongly advocate for more collective action for a better water world for everyone.

Managing our impact on water and being good stewards of this resource is integral to our management of climate risk and we continue to make improvements in our operations. Over the past fiscal year, our global water efficiency improved by 9.4%. In India, we replenished 198,500m3 of water and this year, we launched our first WASH water replenishment programme in APAC at our Bali product site.

To an outsider, there are a seemingly infinite number of suppliers, wholesalers and retailers involved in the Diageo value chain. How does a company of this scale effectively track and hold others responsible for sustainability commitments?

Environmental sustainability is getting more important for long term business growth and success. We work with a lot of peers and trade associations who share a similar appreciation and value for sustainability– to create a positive impact in the communities they operate in and take collective action to bring about progressive change.

As part of compliance, we have the Diageo Partnering with Suppliers Standard which sets out the minimum social and environmental standards we expect of our suppliers. This includes due diligence across business integrity and ethical standards, human rights and labour standards, health and safety and environmental impact.

We also have Sustainable Agriculture Guidelines that set out the standards we expect in our agricultural supply chains and are applied in conjunction with our supplier code, Partnering with Suppliers. These also provide guidelines to help our suppliers work continuously towards more sustainable agricultural practices by treating farmers and workers fairly, improving environmental impacts, protecting natural capital and supporting wider economic benefits for farming communities.

The company’s sustainability goals, like the diversity ones, form part of senior management KPIs. How has this framework helped to deliver results compared to the more HQ-led approach often seen in other sectors?

Reporting transparently on our ESG progress and holding our senior management accountable play a vital role in delivering our 2030 goals. It sets the standard for the entire organisation, ensuring collective and individual responsibility to reach the targets. For example, Society 2030 and ESG reporting are now embedded as part of how we define our business success and performance. We have developed an integrated, quarterly reporting system that consolidates cross-functional non-financial performance data at market and regional levels, which gives senior internal stakeholders a clear view of our performance.

This has helped our progress in reaching our sustainability goals and it’s really encouraging that Diageo’s commitment and approach continues to be recognised externally.

Diageo was one of only eight beverage companies globally and 65 companies overall (out of 9,600) to achieve A for both Water Security and Climate Change. On the Dow Jones Sustainability Index, we’re ranked as one of the top four beverage companies worldwide.

At Diageo, reporting is not just about meeting regulatory requirements and stakeholder expectations, it’s also fundamental to attracting and retaining the best talent, building deep consumer loyalty, creating new partnerships, and increasing innovation, efficiency and resilience across our operations.

ABOUT THE COMPANY

Diageo is the world's leading premium drinks business with an outstanding collection of beverage alcohol brands. Their portfolio stretches across spirits, wine and beer categories including international number one brands such as Smirnoff, Johnnie Walker, Guinness and Baileys as well as leading local brands such as Windsor and Shui Jing Fang. Diageo is a global company, trading in around 180 markets around the world. Find out more at www.diageo.com.