Diageo’s new report shows some fizz but lacks real body

Diageo is a strong corporate brand with a stable of iconic drinks labels. Its 2010 corporate citizenship report, produced online in “rich media”, is housed within an engaging, beautiful website. And Diageo is a veteran reporter, having produced reports since at least 2003.

This is a report that contains a wealth of information but is burdened by pages of dense prose, fragmented performance data, and a disappointing lack of context. This, together with monotonous presentation and an accumulation of small missteps, overshadows Diageo’s cohesive approach to managing sustainability, as well as its progress on key issues.

That the report is organised along five priorities – alcohol in society, environment, communities, people, and compliance and ethics – is its strong suit. Those that don’t fit neatly within one of these areas are designated “cross-priority activities”. These include local economic development, sustainable procurement and Diageo’s Blueprint water strategy, which combines operational water efficiency with efforts to improve access to water in local communities.

This recognition that some of its most pressing issues have both social and environmental ramifications is refreshing. Most companies struggle to put their issues into discrete buckets, forgetting entirely the interrelationships among issues and stakeholders.

Now if only Diageo would make more explicit the links between these issues and its financial performance.

The report does demonstrate that Diageo has spent years thinking about and working on issues critical to its ability to forge on into the future. Its longest section is the discussion of how it manages sustainability. The company has developed long-range goals in its priority areas, has a lengthy track record of performance on key indicators, and has developed an organisational structure that supports its efforts. While these are impressive achievements, it’s disappointing that so little effort has gone into drawing direct links between Diageo’s sustainability efforts and its financial performance.

While failure to place Diageo’s sustainability efforts in a financial context is unfortunate, in other areas lack of context could be seen as intentional. For example, the report mentions more than once that half of its plants in Africa are in water-stressed areas; how many plants, exactly? And while Diageo tracks water withdrawal, it maintains that water efficiency is the better performance measure. Those stakeholders in water-stressed areas, who depend on the very water sources that Diageo uses to make beer, may see it differently.

Diageo rightly acknowledges that water is a key issue but seems either oblivious to its seriousness or unwilling to aggressively confront it. For example, even with several plants in water-stressed areas, it has increased the percentage of wasted water in those areas as a result of increased production.

Its transparency on this front is laudable: efforts have been centred mainly on information-gathering with a view to “position [Diageo] to evaluate actions” that will have the highest impact. To achieve its targeted 50% reduction in water wasted at these facilities by 2015, it will have to move fast.

GRI? Not quite

Diageo asserts that the report qualifies for a GRI application level of A, but the report fails to provide key ingredients necessary to qualify as a GRI report, let alone one bearing the coveted A-level logo. At the time of writing, Diageo had not produced a GRI index. Inquiries as to the existence of a GRI index were met with a statement that one would be forthcoming in a PDF version.

Diageo appears to have undertaken a materiality analysis, now a hallmark of credible sustainability reporting and required for A-level GRI reporting. The description of the process itself, however, could be more detailed to allow stakeholders to better understand the extent to which the company’s priorities track stakeholder concerns. With a new GRI protocol on materiality imminent, Diageo will have guidance for refining and reporting on its process in greater detail.

This report is something of a poster child for the premise that online sustainability reporting, while an exciting frontier, is exceedingly difficult to do well. Simply put, the report makes the reader work too hard. It is written as though in print but is neither printer-friendly nor available as a printable format such as PDF.

Navigation is inelegant, and now-standard features, such as a map showing scale of operations and a performance dashboard, are notably absent. All of this stands in stark contrast to Diageo’s mesmerising, highly produced “annual review”, which visually communicates the company’s business opportunities and brand equity – and mentions citizenship not at all. Perhaps the two could be combined.

Snapshot
Follows GRI? Self-declares an “A”, but lacks key GRI elements such as a GRI index.
Assured? To some extent, although no recognised assurance standard has been used.
Materiality analysis? Yes
Goals? Yes
Targets? Yes
Stakeholder input? Yes, though mainly positive.
Seeks feedback? Yes
Key strength: Organisation by priority.
Chief weakness: Fragmentation of data: no presentation of consolidated performance data.
Pleasant surprise: Highlighting of “cross-priority” activities, acknowledging, as few do, that all of these issues are interconnected in some way.

Kathee Rebernak is the founder and chief executive of Framework:CR.
krebernak@frameworkcr.com
www.frameworkcr.com



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