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In this Q&A, managing director Liam Dowd talks with Michael Alexander, head of water, environment, agriculture sustainability at Diageo, on Science-Based Targets, industry collaborations, supplier engagement and opportunities for the next 12-18 months
In the build-up to the 13th Annual Responsible Supply Chain Summit, I talked with one of our speakers, Michael Alexander, about Diageo’s supply chain work including; setting bold climate goals in line with science, how to help suppliers take action on key material issues to the business, the importance of accurate data, plus opportunities for Diageo in the coming 12-18 months.
Liam Dowd: What is your role?
Michael Alexander: I’m the global head of water, environment, and agriculture sustainability at Diageo. I work within the global sustainable development team. My responsibilities include strategy development across environment and water, specifically within our supply chain. I’m responsible for the strategy and implementation of our programmes across the 21 markets that we operate in.
...having a numerical KPI that related to science was important in terms of our operations and the implementation of strategies to address Scope 3 emissions
LD: In the build-up to this week’s Global Climate Action Summit there’s been an increasing number of companies setting Science Based Targets. Diageo has already aligned itself with climate science, setting a target to reduce GHG emissions across its entire supply chain by 30% (by 2020 – using 2007 as a base-year). These are bold targets. Why is it important that you made them and how did you convince the business to embrace them?
MA: Science-Based Targets were one of the initiatives championed by We Mean Business ahead of the United Nations Climate Change Conference (COP21) in 2015 and we were one of the first companies to sign up. We’re serious about addressing our total footprint in terms GHG emissions – not just Scope 1 and 2, which we set over a decade ago. Science-Based Targets have helped understand the depth, breadth and risks within our Scope 3 emissions.
Diageo were one of first companies to have its total supply chain targets approved, and certainly the first alcohol beverage company. Being science-based is critical. Firstly, within our supply chain we run on numerical KPIs, like many businesses do, so having a numerical KPI that related to science was important in terms of our operations and the implementation of strategies to address Scope 3 emissions. Secondly, as an external facing opportunity, we were able to understand, the impact that we could have on the overall picture and the Paris Agreement (COP21).
We’re proud to align ourselves with climate science by setting science based targets.
Michael Alexander of Diageo: 'We will continue to minimize our environmental impact.'It's about taking a stance and driving consistent progressive progress.'
LD: Have you worked with certain suppliers both before and since setting your Science-Based Targets?
MA: It was a rigorous internal foot-printing process to collate accurate data around Scope 3 emissions. Some of that was direct from suppliers through the CDP carbon supply chain program – approximately 150 of our Tier 1 suppliers.
We then supplemented this information with internal data and analysis across our three key areas of scope 3 impact within our supply chain; transport and distribution, packaging and agricultural raw materials.
We were of the firm belief that we needed to demonstrate progress and commitment in our operations before we could bring our suppliers on board. We needed to show that it was important to the business, not just from a climate perspective but also from a business perspective too.
Some our suppliers are bigger than us, so it’s not about scale. It’s about taking a stance and driving consistent progressive progress.
LD: How are you engaging your suppliers to help you take action? What have been the biggest hurdles and how are you addressing them?
MA: We tackle it two-fold. Firstly, we take it from a global perspective, using the data of our 150 or so suppliers on the CDP program. We supplement this with a more generic analysis, through publicly available databases – i.e. what’s the average GHG emissions of a tonne of barley in Canada?
We also take a local approach, understanding where the hotspots might be and where the opportunities for impact lie. For example, in India we worked with our top 25 liquid suppliers to understand where their water risk is and asked them to report to our India business on a six-monthly basis on their water performance. We’ve developed a tool-kit for those distillation and packaging suppliers in India, through our own learnings, to help them address their own water and climate change risks. Water is critical to our business – it’s the biggest climate change risk that we face in our business – so it’s important we help our suppliers reduce their impacts and support their adaptation within water-stressed areas.
Obviously a challenge with all this work is getting good, reliable data. Many of our suppliers will be delivering positive impacts for their own goals, as well as other customers. We want to ensure that we can accurately report the impacts of our work and engagement with those suppliers and that we are delivering additional impact through our work.
Another thing is continuity of relationships. These strategies and impacts take a long-term commitment, and inevitably in business people can come and go, leadership can change. It needs to be embedded in our strategic management process and constant theme with our supplier’s relationship management.
I wouldn’t say we’ve overcome all the challenges, it’s ongoing. What I would say is essential to all of this is engagement with our procurement function and giving ownership of this to our category managers. They have the relationship with our suppliers. Empowering them to have ownership of this and have as part of their regular KPI reporting has been a core part of our process – it’s been critical to overcoming any potential barriers.
Diageo is engaging suppliers to build water-resilience within their supply chains
LD: Looking at the collaboration aspect – a quick search of the companies listed as taking action on the Science-Based Target website – I can see the likes of AB InBev, Carlsberg Group among others – Are you working with them or others within the industry to drive greater impacts?
MA: There’s a formalised approach through the Beverage Industry Environmental Roundtable which includes all the large soft and alcoholic beverage companies, including; PepsiCo, Coca-Cola, Heineken, Carlsberg, AB InBev, Diageo. And for several years we’ve worked together on some of the technical challenges around addressing Climate Change, for example energy efficiency. Part of technical coalition has been looking at standardisation of our reporting methodologies. This has been a welcomed development as it ensures we are reporting against the same methodology for energy and water.
LD: And finally, what do you see as being the big opportunities to watch for in the coming 12-18 months?
MA: One of the biggest opportunities relates to finance. We need an open and honest conversation about finance. The Task Force for Climate-Related Disclosure is an important development. It’s a challenging opportunity in respect to the level of disclosure that is recommended. That is a good development. Both in terms of collecting data to understand risk, but also scenario planning to understand and be transparent about what the real issues and risks that lie ahead.
And finally, how we engage consumers is another big opportunity. Is there a role for well known and trusted brands to engage more with consumers on climate change?
Michael is speaking at our upcoming Responsible Supply Chain Summit alongside senior practitioners from the likes of; Unilever, UN Environment, UK Parliament, DSM, Neste, WBCSD, Coca-Cola European Partners, Greenpeace, Volvo and many more. The event is Europe's leading event focussed on tackling the key social and environmental issues impacting global supply chains. For more information click heresupply chain management science-based targets Diageo Management spotlight climate action