Corporate Citizenship Report 2004 Diageo is... acting with integrity Highlights Launched anti drink-driving campaigns in 35 markets in support of WHO World Health Day Took a multi-stakeholder approach to combating alcohol misuse in Australia Improved scores in corporate responsibility and environmental engagement rankings Tomorrow’s People Trust independently evaluated at its 20th anniversary US airlift brought relief to flood victims in Dominican Republic and Haiti Launched Diageo Africa Business Reporting Awards Published local corporate citizenship reports in East Africa and Korea Made progress on all priorities set in 2003 Contents IFC Highlights 1 Investing in sustainability Background Additional information 2 Our business and our brands For greater detail on the issues raised in this report, 4 Impacts and responses particularly those connected with the governance 5 Vision and strategy of the business,taxation and financial performance, 7 Measuring and reporting please refer to the annual report.Further information Society available in the corporate citizenship report area of 8 Promoting responsible drinking and reducing harm www.diageo.com includes: 11 Understanding and serving consumers 12 Community investment and partnership > Our journey so far 16 Releasing the potential of our people > The benefits of good corporate citizenship Environment > Stakeholder feedback 20 Environmental management and performance > Performance data summary Economy > Focus on Africa 24 Investment and creating value > GRI content index Governance > Detailed assurance statement and commentary 28 Management and policy > The Diageo corporate citizenship report for 2003 32 External assurance statement and commentary > Country-level corporate citizenship reports IBC Future priorities > Benchmarking links and downloads 1Corporate Citizenship Report 2004 Investing in sustainability This second Diageo corporate citizenship report, Being a good corporate citizen is an ambition enthusiastically which has been prepared for everyone with a embraced at all levels within Diageo.Our board fully supports our actions in working towards sustainability goals – in particular stake or interest in our business,has a number of those contained in the UN Global Compact – and endorses the key aims.First,it shows how we have invested future priorities and specific targets we set out in our report last resources in ensuring that our business continues year. In this publication we have summarised the progress we to prosper sustainably and responsibly within have made against each of these priorities – in blue ‘future priority’boxes throughout the report – and we will continue to society and the environment.Secondly,it affirms follow them up in future reports.For Diageo as a whole,we will our commitment to corporate citizenship report on our corporate citizenship commitments and leadership in our industry and gives examples of performance annually.This will be supported by reports focusing the actions we have taken in supporting this on our businesses in important markets around the world,in which we can respond directly to local stakeholder concerns position.And thirdly it sets out the importance we and set out our impacts at a country level. place on the involvement of stakeholders in our The response to our first report,published last year,was very business – indeed the report itself is a positive.Many who shared their views with us appreciated the contribution to our engagement with comprehensive scope of the document and the example it set stakeholders and to the public debate on the in our industry by openly discussing the dilemmas we face.For whole area of corporate responsibility. us,the feedback we received was one of the main benefits of publishing the report.It is part of the active conversation with our stakeholders which allows the important issues to be aired, our impacts to be openly reported and the thinking behind our actions to be clearly understood.The work we have been doing to promote and extend this dialogue is described on page 6 of this report. We have prepared this report in accordance with the 2002 Guidelines of the Global Reporting Initiative and believe it represents a balanced and reasonable presentation of Diageo’s social,environmental and economic performance.We hope it shows progress against our objectives and urge you to share with us your views on our report and on the issues it raises. Lord Blyth of Rowington Paul S Walsh Chairman Chief executive hires image to retouch 2Corporate Citizenship Report 2004 Background Our business and our brands Diageo is the world’s leading premium drinks business with an outstanding collection of brands across spirits,wine and beer categories,and serving consumers in some 180 territories on five continents.The company is listed on both the London and New York stock exchanges. North America Europe Turnover £2,701m Turnover £3,922m Employees 3,742 Employees 11,373 Equivalent units sold 45.2m Equivalent units sold 42.1m Major brands:Smirnoff, Major brands:Smirnoff, Captain Morgan,Crown Royal Guinness,JεB Major market Key market Venture market Major production or distribution site Major office Latin America Africa and Middle East Asia Pacific Turnover £460m Turnover £812m Turnover £996m Employees 1,496 Employees 4,694 Employees 2,415 Equivalent units sold 8.8m Equivalent units sold 14.9m Equivalent units sold 11.1m Major brands:Johnnie Walker, Major brands:Guinness, Major brands:Johnnie Walker, Smirnoff,Baileys Smirnoff,Malta Bundaberg,Smirnoff 3Corporate Citizenship Report 2004 Background Diageo brands are manufactured by subsidiary businesses,joint How we compare ventures and licensed operators in many parts of the world.This We actively seek means of comparing our corporate citizenship report focuses mainly on those businesses in which we have a performance with that of other companies – for example,through controlling share – 35 distilleries,13 breweries and four wineries membership of the Global Leadership Network,the Corporate supported by 20 blending and packaging plants,18 warehousing Community Involvement Index (see page 12) and the London and ancillary sites and around 150 offices.Eight global priority brands Benchmarking Group.In addition,we try to complete the many head a wide range of products in all beverage alcohol categories.Our questionnaires which are sent to us to assess our performance for the markets are designated major,key or venture according to the scale benefit of particular audiences.In some cases,these assessments, of our operations in those territories and the business model we use with their published indices or rankings,represent a two-way there.The four major markets – North America,Great Britain,Ireland dialogue with a stakeholder group and can influence our policy or and Spain – generate more than 60 per cent of turnover. decision-making.For example,this year,in response to stakeholder questionnaires,we extended our human rights policy to cover the Global priority brands millions of equivalent units use of firearms by security guards employed by the company.Our 2004 2003 2004 2003 environmental strategy has also been shaped by the priorities of such Smirnoff 24.2 23.0 JεB 6.0 6.0 assessments. Johnnie Walker 11.7 10.8 Captain Morgan 6.0 5.3 Future priority Progress report Assessment Guinness 11.6 11.4 José Cuervo 4.2 4.2 Help establish corporate Leading beverage alcohol Baileys 6.6 6.2 Tanqueray 2.0 1.9 citizenship benchmarking companies in discussions for our industry over industry benchmarking model Establish group by Dec 2005 Turnover by region % 2004 2003 2004 Socially responsible investment indices Europe 44.1 42.2 Diageo is included in the Dow Jones Sustainability Indices North America 30.4 33.6 and the FTSE4Good UK,European and Global Indices,listings Asia Pacific 11.2 10.3 which help investors select companies with good records of Africa and Middle East 9.1 8.3 corporate citizenship.To be included,companies must be Latin America 5.2 5.1 judged to be working towards environmental sustainability, 2002 figures restated for FRS 17, UITF 38 and Application Note (G) to FRS 5. developing positive relationships with stakeholders,and upholding and supporting universal human rights. Total assets £million Turnover £million Dow Jones Sustainability Index 15,188 9,281 14,090 8,891 Diageo score % Social Environmental Economic Total 63 63 66 57 60 56 57 43 Financial figures are from audited accounts and include discontinued operations (Burger King). 2003 2004 2003 2004 Operating costs £million Operating profit £million 2003 2004 2003 2004 2003 2004 2003 2004 Beverage sector average 7,494 7,020 1,787 1,871 Business in the Community indices The second annual BITC Corporate Responsibility Index assessed social and environmental management and performance.Based on our worldwide business,Diageo was placed 34th out of 139 participating UK companies.In the Index of Corporate Environmental Engagement 2003 2004 2003 2004 which assesses environmental management and performance, Diageo was ranked 68th out of 176 companies. Products sold Corporate responsibility index Index of Corporate Environmental Employees millions of equivalent units Diageo score % Engagement Diageo score % 24,561 23,720 119.3 122.1 9182 85 73 73 68 64 An equivalent unit is that volume which contains the same number of servings 2003 2004as a nine-litre case of spirits. 2003 2004 2002 2003 1999 2000 2001 2002 2003 4Corporate Citizenship Report 2004 Background Impacts and responses Our responsibility is greatest for impacts that are