1 Sustainability & Responsibility Report 2011 Full Report 1 Contents Overview 3 Chief executive’s introduction 5 About our business 7 Performance highlights Our approach 10 Sustainability & Responsibility Strategy 12 How we manage sustainability and responsibility 13 Engaging stakeholders 14 External credentials Our impacts 16 Alcohol in society 25 Water 32 Environment 40 Community 48 Our people 59 Governance and ethics 66 Our suppliers 72 Our customers and consumers About this report 79 Scope and boundaries 80 Principles of management and reporting 81 Reporting methodologies 84 Assurance 87 GRI index This is a PDF version of our interactive online sustainability report found at http://srreport2011.diageoreports.com. We welcome stakeholders’ views on our report and on our approach to sustainability and responsibility in general. To give your comments on this report please contact us at sustainability@diageo. com or fill out our online survey at http:// srreport2011.diageoreports.com/top/ contact-us.aspx#feedback. 2 Overview Diageo’s approach to sustainability is becoming an increasingly important element of our business strategy. Last year we refreshed our Sustainability & Responsibility Strategy; this year has been about refining and embedding it throughout our operations, and continuing to develop targets to allow us to measure performance consistently across all our impact areas. We believe that financial success is only achievable in the long term if the way we achieve that success – the way we do business – is sustainable. This includes how we treat our people; the culture we promote internally; how we live our values in all our business relationships; how we use the natural resources that we rely on; and the effects we have on the communities in which we operate. As we reorganise our business to focus on new areas of growth, it is more important than ever that we ensure we have sustainable business practices that will allow us to achieve long-term success. In this section: r Chief executive’s introduction – page 3 rAbout our business – page 5 rPerformance summary – page 7 3 Chief executive’s introduction This has been a year of progress for Diageo. Our business is strong and becoming stronger. We are on track with the majority of our sustainability and responsibility targets. We have also instituted a significant reorganisation of the business, and our new configuration reflects our strategic focus on high-growth opportunities in traditional and emerging markets. Supporting our commercial strategy Diageo does not operate in a vacuum. Long-term investment in water and Creating value for shareholders must be a To succeed, we require the goodwill and the environment principal concern of any business. At Diageo, support of a multitude of stakeholders, Our decision to build a state-of-the-art we also recognise that our business must be ranging from our investors and employees bio-energy plant at our Cameronbridge sustainable in every sense – an important to the governments of and communities in distillery in Scotland is an illustration of this pre-condition for our commercial success. the locations in which we operate. We are point. I am proud that we did so by investing Our financial results for the year ended determined to be consistent, long-term in significant capital in efficient, new, green 30 June 2011 illustrate that we have delivered outlook, and true to our values. We believe technologies for a long-term environmental performance that is both successful and that this is the key to maintaining the trust and gain. With a £40 million expansion programme enduring. For the tenth consecutive year we confidence of all those stakeholders. We want underway, we took the opportunity to invest grew our organic top and bottom lines. Our net excellent relationships with them all because a further £65 million in a renewable energy sales were over £9.9 billion, and we had an that offers us the best environment for our facility which uniquely combines a waste water operating profit of £2.6 billion1. We continued business to thrive, and because it is the right treatment plant, biomass boiler and steam and to deliver operating margin improvement. thing to do. electrical generation plant. There are other important measures. They The environmental benefits will be significant. Sustainability performance: a driver include our culture and the way in which we The facility aims to remove virtually all effluent of growth treat our people. They include the way we live discharge from the site, provide almost a third This performance demonstrates an inherent our values and our business conduct – in of its water and, crucially, supply 85% of its strength in our business and a sustainable particular compliance with our Code of power from a renewable source. We also hope model for value creation. A large part of our Business Conduct and operating in a wholly it will remove 56,000 tonnes of carbon each success is based on our financial strength, on ethical way everywhere. They also include our year – the equivalent of taking 44,000 cars the diversity offered by the 180 markets around commitment to being a good corporate citizen. off the road. the world in which we operate, and on our All these are also drivers of growth. We make such investments to preserve wonderful collection of brands. Moreover, a We have pursued a strategy based on this the resources that our company, and the very strong supply chain and effective routes approach. We have honoured commitments communities in which we operate, rely on. to market both contribute to our ability to grow. to international frameworks such as the UN As a beverage company, this is particularly true Nonetheless, I am sure that our focus on the Global Compact and CEO Water Mandate. for water. We have set challenging operational social and environmental impacts of the We have done so in good times but also when targets to reduce water wasted in water- business gives us a competitive edge. circumstances have been more challenging – stressed regions and complement this work Since 2004 we have described this as ‘holistic because we aim to manage our business with with programmes such as ‘Water of Life’ that performance’. By this we mean that success an eye to the long as well as to the short term. has brought clean water to approximately as a company is determined by more than That means, for instance, being prepared 5 million people since its launch in 2006. I am simply the achievement of financial targets. to continue to make bold and innovative particularly proud of the contribution of our investments which will create a longer- employees to these programmes. term return. 1 After exceptional items. 4 Our role as a global beverage Sustainability in a changing market alcohol company In the years to come there will be a shift in As a responsible company, we want to ensure the balance of economic power from the that drinking alcohol continues to play a developed world – principally North America positive role in the life of our consumers and and Western Europe – to the emerging markets communities. This is core to Diageo’s purpose of Africa, Latin America, Asia and those in to celebrate life every day, everywhere. Eastern Europe. Growth in these regions in We recognise that different cultures and the next decade is likely to outstrip that in the religions have a range of views about the role markets in which we have traditionally been of alcohol in society. This dictates that we strong. Very soon I expect them to represent work in partnership with stakeholders in our at least half of our business. communities to tackle alcohol misuse. This year, This shift in global economic power will in an effort to help contribute to effective benefit Diageo and its stakeholders over the policies and programmes to reduce harmful long term, and in May 2011 we announced a drinking, we have worked in co-operation with reorganisation to position ourselves and our other companies and organisations to support resources to take advantage of this opportunity. the implementation of the World Health In the immediate future the changes we have Organization (WHO) Global Strategy to Reduce made will have some significant and difficult Alcohol Related Harm. consequences for a number of our people, Diageo also provides employment and particularly in Western Europe and North contributes to the economic development of America. We will support our employees the communities in which we operate. In those through this change and, at the same time, communities our impact comes not simply build relationships with stakeholders less from our operations. Through our Learning familiar with us. Above all our aim is to ensure for Life programme we have invested in the that stakeholders new and old will always long-term future of local communities, helping appreciate the value of doing business many who might otherwise be unemployed with Diageo. gain valuable skills to find jobs either in the hospitality industry or beyond. Since we launched Learning for Life in 2008, more than 50,000 people have benefited. Paul Walsh Chief executive 5 About our business Diageo is the world’s leading premium drinks business with an outstanding collection of beverage alcohol brands across spirits, beer and wine. Our great range of brands and geographic spread mean that people around the world can celebrate with our products on every occasion. This is why ‘celebrating life every day, everywhere’ is at the core of what we do. Our business – key facts Group numbers