‘Transformational’ improvements at its distilleries stand the global drinks giant Diageo in good stead in the face of ongoing carbon and water issues. But securing its long-term supply chain is front of mind for David Croft, the company’s global sustainable development director, finds Tom Idle
Just 10 months into the job and David Croft is fully aware of both the challenges and opportunities for a company like Diageo to be a positive global citizen in the 21st century.
The company is a drinks behemoth, which owns brands such as Guinness, Smirnoff, Bailey’s and Johnnie Walker. And with manufacturing sites the world over – from Australia to Ypióca in Brazil – and supply chain tentacles that reach far down to thousands of smallholder farmers in the developing world, it has a scale and reach that brings, what Croft says, is extra responsibility to not only significantly reduce its own socio-environmental impacts, but to help those it so relies on to bring its products to market.
Speaking from Paris – where he was engaged in the UN COP21 debate and finding ways to work with partner organisations in the fight against the impacts of a changing climate – Croft says the business is running out of the so-called ‘low-hanging fruit’ of water and energy efficiency opportunities across sites, depots, distilleries and plants. As has been well-documented, it has invested heavily in new technologies and processes and implemented “transformational” improvements at a number of sites.
For example, as part of its climate change mitigation strategy – which is reported on quarterly – a £40m investment in renewable energy at its Roseisle Scotch whisky distillery in Speyside, Scotland in 2010, set new standards for producing Scotch in a responsible fashion. Around £17m of that money went towards a state-of-the-art, on-site bioenergy plant which makes use of by-products from the distilling process as a feed source of renewable energy for the plant. Half of the plant’s energy needs are delivered by this renewable source, more than 10,000 tonnes of CO2 is now not entering the atmosphere. It was the first new major distillery to be built in Scotland for 30 years and it has, quite rightly, won plaudits from some quarters.
Investments like this will continue as the business case gets stronger and the drive to generate greener energy increases, says Croft. Of course, the technology and process at Roseisle, while unique to the site, can be adapted and applied to other sites too.
But there is also a recognition that small and medium-sized companies throughout Diageo’s extensive supply chain have barely started their own resource efficiency journeys. “We have been continuing to improve our performance on carbon and water – and have created some transformational improvements, particularly on carbon with our investments in alternative energy,” he says. “But we also have to look at how we can help activate the same improvements through our supply chain.”
And this “responsibility to show leadership” is not necessarily about helping Diageo’s 30 biggest suppliers – who are no doubt already making good progress. It is about supporting the smaller companies to become more efficient – something Croft says will help to secure Diageo’s future supply chain.
In Ethiopia, the Diageo-owned Meta Abo Brewery has a direct relationship with more than 6,000 farmers which supply the business with barley to produce its beer. By helping to train the farmers in the best agronomic production techniques, and providing them with a package of seeds, fertiliser and crop insurance, productivity has been improved by between 50-100%, resulting in better incomes for farming communities. It’s a strategy that works and Diageo plans to source 80% of all raw materials locally in the same way across Africa by 2020.
Croft’s thinking is that if we can help smallholder farmers in this way, “perhaps we can do the same for our small and medium-sized suppliers which we are also dependent upon as a business”.
“We already work with CDP to map carbon and water risks in our supply chain. But we can do more, particularly in facilitating improvements in energy and water for those hard-to-reach small companies so that they can go through the same process we have been through,” he says. “The business case we apply is the same for them. But they don’t have the resource. So, we want to look at how we can leverage our role in the supply network to help make that happen.”
Of most pressing concern – as reinforced by the company’s latest materiality assessment – is water use. It is an issue exacerbated by the climate change impacts being felt most acutely in water-starved parts of the world, some of which play host to Diageo’s fairly water-intensive manufacturing operations. It is a challenge that will only be effectively solved through collective effort, says Croft.
Working up water stewardship plans across specific catchment areas demands a range of organisations – from big, water-consuming businesses, to governments and NGOs – working together.
“It’s not easy,” he says. “As with any successful relationship, each party needs to accept that in order to create a common-good outcome, there has to be some compromise on all sides.” Collaboration – building the right partnerships, having the right conversations, finding out what compromises Diageo and others are willing to make – is what’s keeping Croft busiest right now, hence his trip to Paris and what sounds like a choc-a-bloc diary ahead of the Christmas break.
So, what sort of business will Diageo be ten years from now, with consumers increasingly antsy about the social impact of alcohol abuse, the water issue not likely to go away any time soon and ambitious global growth plans? “Our aspirations are very clear,” says Croft. “We want to make a positive social and economic contribution. And, maybe not in 10 years time but not long after, we want to have a net positive environmental impact.
“For us, sustainability is not about our licence to operate. It’s a platform for growth.”