Diageo scores some successes in its reporting, but this only highlights shortcomings in its sustainability performance

Diageo, one of the world’s biggest alcoholic drinks companies, has published its second integrated annual report, positioning sustainability side-by-side with business performance. Based in London, Diageo owns giant brands including Johnnie Walker, Smirnoff, Captain Morgan and Guinness.

Diageo’s “something for everyone” approach targets direct and effective messaging to specific audiences across multiple channels. In its annual report, investors receive greater insight into sustainability risks and opportunities and the potential impact on business success. A Sustainability and Responsibility Addendum provides sustainability professionals with an indexed resource for detailed information specific to industry standards, based on GRI and UNGC, while Sustainability and Responsibility web pages provide a wider audience with high-level strategy put in simple terms. Overall, Diageo’s integrated approach is ahead of the curve. Now the same attention should be paid to creating compelling storytelling.

Successful integration

Key to Diageo’s successful report integration is the weight given to sustainability performance. Diageo’s annual report places non-financial performance indicators – including alcohol in society, health and safety, water efficiency, carbon emissions, and employee engagement – alongside standard financial metrics. The Risk Management and Principal Risks section of the annual report signals the importance of sustainability issues for business success. The risk associated with sustainability, talent and alcohol promotion and consumption are evaluated alongside business acquisitions, cyber threats and critical industry developments.

While Diageo’s report succeeds in integrating key sustainability issues into business performance, bigger picture sustainability strategy lacks follow-through on performance targets. Diageo’s sustainability strategy emphasizes the issues it has deemed most material, focusing on three key areas: leadership in alcohol in society, building thriving communities, and reducing environmental impacts. Two of its three chosen focus areas meet the sector’s most material sustainability issues – alcohol in society and water conservation (within reducing environmental impacts). But coverage of the agricultural supply chain – workers and environmental impacts – is a surprising omission.

Within its priority areas, Diageo reports its performance against targets transparently and follows with insightful narrative explaining the issues. With 2015 targets expiring, Diageo established 2020 targets, which it will report to in subsequent years. Diageo has met only one of its 2015 targets – improving water efficiency by 30% against a 2007 baseline. Its goal to make all packaging 100% recyclable/reusable is nearly met at 98.6% against a 2007 baseline.

Missed targets

Significantly, Diageo fell short of its 2015 target to reduce absolute carbon emissions by 50% against a 2007 baseline – reducing emissions by only 33%. As explanation for missing the target, Diageo cites increased total production and operational footprint combined with these being “stretching” goals. Due credit to Diageo for setting ambitious, absolute targets for carbon emissions – but goals without follow-through miss the mark.

In the area of alcohol responsibility, the number of alcohol responsibility programmes supported decreased in 2015 due to an increased emphasis on impact over quantity. Diageo’s 2020 goals will align with key performance indicators established by a group of leading global alcohol beverage producers collaborating to increase responsible consumption. The shift will be a noteworthy improvement for tracking performance.

Looking ahead, Diageo’s 2020 Performance Goals also promise refinement of strategy, notably an increased emphasis on water stewardship. This includes an additional target for replenishing water used in its products –supporting projects that return water to watersheds through wastewater treatment and other processes. Quick movement toward these goals will put Diageo closer to sustainability leaders such as Coca-Cola, which has set and already surpassed its ambitious goal to replenish 100% of water use by 2020.

Diageo’s Sustainability and Responsibility web pages at first appear to employ creative design and communications to engage a broad audience. The landing page uses a great photo overlaid with hand-drawn illustrations for each of six focus areas. Unfortunately the appeal dissipates as soon as you leave the landing page.

Text-heavy subsection pages are dull to look at, lacking interactivity and rich media content. Even case study pages with text and a single photo beg for increased interactivity and more engaging media use to bring these stories to life. But overall, Diageo executes its integrated annual report to make a compelling case for sustainability as fundamental to business success.

Sarah Volkman is a consultant at Context America

sustainability  responsibility  environmental performance