Michael Alexander, head of environment at Diageo told BeverageDaily.com that the world’s largest alcoholic drinks company first invested seriously in water efficiency measures from 2009. He was speaking after Diageo released its 2012/13 Sustainability & Responsibility Report on August 10.
“We collaborate with soft drinks industry, a much larger user of water than we are – since our beer volumes are only 20% – and also work with SAB Miller, Heineken as well as Coke, PepsiCo, Nestle Waters and Danone,” he said.
Collaborative work on water efficiency – savings, cleaning and reuse – had really taken off in the past three to four years across the whole beverage industry, Alexander added.
“And rightly so, since brewers and spirits companies are big users of agricultural commodities that need a lot of water, and there are important climatic changes associated with different growing areas,” he said.
Coke, PepsiCo ahead of the game?
Similarly, Alexander explained that soft drinks and water companies now hit high standards in terms of water efficiency, with results tied to their overall business performance.
“This really took off 3-4 years ago, but in truth began many years ago. I’m sure Coke and PepsiCo in particular were investing ahead of the game given their high volumes and the location of some production units,” Alexander said.
In water-stressed regions of Africa – where Diageo has 20 breweries – half its volumes are produced in water stressed areas, Alexander said, and the group sets absolute targets on cutting water use.
It does so by recycling water, better management of process water during brewing, and using effluent treatment plants to improve water quality.
Diageo is also saving water in its packaging operations via rainwater harvesting and reusing water for processes such as cleaning, Alexander added, while dry lube was used more and pumps run less.
Diageo takes long-term view on payback
Discussing links between sustainable production and operational efficiency, Alexander said: “Certainly with carbon – it’s reasonably straightforward to say: If you’re saving energy, you’re saving money, and you’re saving carbon.
(Diageo recently invested £65m ($100m) at its largest distillery in Cameronbridge, Scotland – where Johnnie Walker, Bell’s, Smirnoff, Tanqueray and Gordon’s are distilled – in a bio-energy facility that combines biomass combustion, anaerobic digestion and also water recovery technologies.)
“We’re in the whisky industry and that’s stored in warehouses for 10-15 years. So we have to take a longer-term outlook, and some of our bigger investments are made with longer paybacks in mind,” Alexander said.
Cost savings were less apparent in areas such as process water, Alexander explained, if, say, you don’t pay for this commodity on a per liter basis. But he stressed that taking action to safeguard supplies was crucial in terms of social responsibility and to safeguard the industry’s long-term future.
Emerging markets refresh sustainability targets
Turning to the general impact of developing markets on Diageo’s sustainability and responsibility targets, Alexander said the firm had moved from an importer and distributor of products to an indigenous producer of beverages, buying many local brands and production sites in recent years.
For instance, Diageo now has relatively new operations in countries such as Turkey, China, Ethiopia, China, Brazil, etc. and Alexander said this entailed new responsibilities.
“These are all countries where social and environmental issues can be much more difficult or complex to manage, and the expectations of large global business investing in a local community are high as well,” he said.
“These areas pushed us to refresh our strategy. In 2015 50% of our NSV (net sales value) will come from our emerging markets, and I think we’re sitting at around 42% now, which is a big change from 3-4 years ago,” Alexander explained.
“With that comes responsibility – sustainable agriculture and climate change can be more important priorities in these markets.”
Aside from reducing environmental impact of operations, close attention to sustainable and responsible operations allowed Diageo to better manage long-term costs, ensure better security in its energy supply and build relations with suppliers, Alexander added.