Seeing the sustainability glass half full

 

Sandra Seru, head of strategy & reporting, sustainability & responsibility at Diageo tells Ethical Performance how the drinks group is tackling the social problem of alcohol misuse as well as the corporate issue of water stewardship

 

Sustainability impacts broadly on a business, how wide is your remit?

Our Sustainability & Responsibility Strategy is broad, covering what we’ve determined to be the most material social and environmental impacts of our full value chain.

This year, we refreshed our strategic priorities by speaking with stakeholders around the world about what was important to them, and determining which issues were most integral to the success of our company.  Many of the broad topics raised were not surprising.  For example the role of alcohol in society continued to be our most material issue and water stewardship surfaced as the most important environmental issue for us as a beverage company. We also reconfirmed other environmental, socio-economic development, people and governance issues that are foundational to our programme.

But one key finding related to this question of scope was the importance of working in more depth on these social and environmental priorities in our value chain. Many stakeholders identified the importance of examining our supplier impacts at the farm level. Others saw female empowerment initiatives in the wider industry as important to support. So our strategy with our business partners will increasingly focus on these areas.

 

Alcohol misuse is a key CSR area for Diageo, tells us about some of the group’s initiatives in this area.

Tackling alcohol misuse is the single most important social issue our industry has to address. We support over 300 programmes across more than 40 markets to prevent excessive drinking, drink driving, underage drinking and forms of misuse. Our focus is on evidence based programming and partnerships. For example, we support the training of doctors and other health workers in screening and brief intervention, a simple but proven approach supported by the World Health Organization (WHO). We are also using innovative social media and technology to reach consumers and are partnering with retailers to curb underage purchases.

To widen our reach, we also created DRINKiQ (see www.drinkiq.com), a comprehensive online resource in nine languages that we promote on all of our product labels. On DRINKiQ, parents, educators, retailers or anybody interested can learn about the effects of alcohol and find helpful resources to curb misuse. Also, more than 15,000 people have been actively trained with DRINKiQ curriculum, including hospitality industry trainers, students, traffic police, bus drivers, members of the lifestyle media and sports clubs.

 

Last October, we collaborated with 12 other global producers of beer, wine and distilled spirits to develop a set of ‘CEO Commitments. ’ These commitments focus on five issues: (1) reducing underage drinking, (2) strengthening and expanding marketing codes of practice, (3) providing consumer information and responsible product innovation, (4) reducing drink driving and (5) enlisting the support of retailers to reduce harmful drinking.

The CEO Commitmentswill be implemented over five years from 2013, and all participating companies will report progress annually, which will be audited by a third party. This is a particularly exciting development that will scale up the impact of the industry’s support of the WHO’s global strategy to reduce the harmful use of alcohol.

 

How does Diageo’s commitment to provide access to clean drinking water tie in with its activities?

Currently about 30% of our production worldwide, including 50% of our African operations, are located in areas considered water stressed. This means annual water supplies drop below 1,700m³per person at some point in the year.  As a beverage company that uses water as a key ingredient, this of course is a critical business issue, but it’s also a vital challenge for our local communities and ecosystems that we all rely on.

For this reason, water stewardship is a core focus in our Sustainability & Responsibility strategy. This includes rigorous water efficiency initiatives that we manage through global targets. So far we have reduced water wasted at water-stressed sites by more than 20% since 2007. Our operations in Africa have improved their water efficiency by 32% since 2007 – achieving our 2015 target two years early.

Our strategy, a holistic approach across our value chain, also includes active community work through our Water of Life programme that provides communities with access to clean drinking water and infrastructure. We aim to reach one million people a year in Africa through these programmes and are currently running 200 projects across 16 countries.

Finally, our work on water also includes advocacy and partnership with other businesses and local stakeholders. We believe about 90% of our total water footprint falls outside of our operations in the agricultural process of growing the natural resources we use. This makes working with our agricultural suppliers very important, particularly through our local sourcing programme, in addition to other partnerships to address water stewardship in priority watersheds.

 

Similarly, how does signing the Women’s Empowerment Principles fit?

Recognising that women make up a large part of the hospitality industry as well as our consumers, employee base and suppliers, Diageo has been promoting female empowerment for a long time. With 40% of our board of directors comprised of women, we received the Opportunity Now Female FTSE 100 award, given to the FTSE 100 company with the highest female representation on its board. For the fifth year in a row, we’ve been named in Working Mother magazine’s ‘100 best companies’ for women to work for and this year was included in the US National Association of Female Executives’ ‘Top 50’ list. And last year, we launched an exciting initiative to invest £6.4 million to empower 2 million women in 17 countries in Asia Pacific by 2017. This is a very large community investment programme for the region.

We know there is still more we and the alcohol industry can do to consider the unique needs of women. Stakeholders have suggested that we expand our educational programming around Foetal Alcohol Syndrome and other impacts of alcohol, efforts to empower female small scale farmers who represent just 5% of landowners in North Africa and West Asia, or trainings for women working in the hospitality industry that face risks men may not.

We are committed to these kinds of programmes not only for the women in our business, but to support the positive impact of the industry at large. This is why we think signing the UN Women’s Empowerment Principles was a natural fit for us.  We hope other companies in our industry and supply chain will also sign on

 

What would you say are the main highlights of the report?

This year’s report unveils our refreshed strategic priorities and the steps we took to get there.

It also highlights performance against targets in every element of the strategy. For example, despite an increase in production, we used nearly 1 million cubic metres less water this year – equivalent to the annual domestic needs of 50,000 people. This was coupled with our work in Africa to provide access to clean drinking water to approximately one million people. We reduced our carbon by 4% in the past year and the waste we send to landfill by more then 50%.

We also trained over 25,000 people through our Learning for Life programmes in Latin America and the Caribbean to support people in getting employment.

This year we are also especially proud of our indices rankings.  Diageo was ranked the best performing beverage company for climate change strategy, emissions disclosure and performance by CDP and also achieved the highest score in the beverage sector for environmental operational efficiency in the Dow Jones Sustainability Indices.

 

What have been the main changes you’ve seen in CSR reporting?

The field of CSR reporting has changed drastically since Diageo released its first GRI report in 2003. Back then, with only 200 other reports, it was impressive to just comply with GRI.  Now in a crowded field, companies are trying to distinguish themselves with longer and longer GRI reports. But interestingly, there has been a pushback by stakeholders unable to find the information they need. I know I feel frustrated sometimes when I’m reading CSR reports. It’s almost a lack of transparency through over-disclosing.

We’ve done our best to easily sign post all the critical information, including the GRI indicators and performance against targets, to balance comprehensive reporting with a user friendly style. We will be making more improvements following our strategic refresh this year which helped us further prioritize our material impacts.

 

What is your experience of the GRI reporting process and views of the guideline upgrade (G4 guidelines)?

The GRI is the best tool we have to try to make sustainability reports material, consistent and comparable, and GRI’s multi-stakeholder process helped ensure a variety of stakeholders had a voice in establishing G4. Many of the improvements, such as building out the materiality process, will help ensure people report consistently on the most important issues.

However, I still fear the changes won’t resolve some of the problems that non-financial reporting faces particularly around accuracy (many reports aren’t assured) and around comparability (the process for defining materiality and scope could still drastically differ across companies in the same industry).

What are the main challenges in CSR & sustainability today?

One of the biggest challenges that many consumer companies face is making a tangible business case for their sustainability initiatives. While some benefits are very straight forward (for example cost efficiencies through environmental efficiencies) others have intangible returns that are less understood across the company.

The holy grail for consumer companies continues to be attracting the mainstream shopper to ethical products. Despite optimism for decades, there is still a large ‘green gap’ between what consumers say they will do versus what they actually buy. Certainly consumer companies that are able to attract mainstream consumers to ethically made products will have more leverage in progressing their social and environmental agendas.

However, a different challenge actually stems from the promise of competitive advantage. Multi-stakeholder and industry partnerships are essential in making a real dent in many global challenges - be them climate change or socio-economic development or alcohol misuse – yet companies, particularly in the same industry, often act unilaterally on  their social and environmental solutions for fear it would give up their competitive advantage. This lack of collaboration if not addressed will ultimately diminish the potential impact the CSR field can have. Collaborative efforts such as the CEO Commitments are a welcome way forward to get the scale we need to make a difference.

Some say the CSR debate has plateaued, do you agree?

The field has changed drastically since I first got started when we were just defining what CSR and sustainable development meant to multinationals. Now you would be hard pressed to find a large company without a CSR department running multiple  programmes around the world.

While the quantity of CSR programmes has not slowed, it is true that many of the opportunities identified by CSR professionals years ago have still not been captured. Large companies still haven’t significantly attracted mainstream consumers or investors through their sustainability activities and very few have embedded S&R to the point of integrated reporting. Meanwhile social and environmental problems, such as climate change, water scarcity and economic inequality, are actually getting worse.

Interestingly one study by marketing agency Futures company said many consumers are developing a fatigue from the endless CSR information companies are putting out. Perhaps the best way to energize people, and get creative solutions to complex problems, is to focus on fewer things but do them with scale.

How do you see the evolution and future of CSR?

While CSR is, and needs to be, so much more than compliance with laws, it is interesting to see how some governments might be losing their patience with the pace of progress from voluntary initiatives. We are seeing governments increase regulation, particularly around reporting. For example, in the US, the Dodd Frank Act and California Transparency in Supply Chains Act ask companies to report on practices in their supply chain. In Europe, the European Commission is calling for greater accountability and proposing mandatory integrated reporting. The same is true in emerging markets as well with sustainability reporting requirements in countries such as Brazil and South Africa.  In other emerging markets, governments have passed additional and unprecedented legislation. For example, India is requiring large companies to dedicate 2% of their profits to CSR activities             .

While this regulation will change some behaviour, the biggest chance we have for the private sector to use its creativity and scale to address social and environmental problems is when it sees the commercial imperative to do so. With population growth putting increasing stresses on the security of natural raw materials and local communities, much of the business case is already there. However, I feel this will only get larger as multinationals rely more on markets that are disproportionately impacted by issues like climate change or income equality for their financial growth.