World Environment Day: Diageo India CEO on the roadmap to creating a more sustainable and inclusive society

On the occassion of World Environment Day, Hina Nagarajan, MD and CEO, Diageo India and Member, Global Executive Committee, Diageo highlighted the company’s commitment to shaping a more sustainable and resilient future through the global alcohol beverage company’s 10-year environment, social and governance (ESG) plan -- Society 2030: Spirit of Progress.

Nagarajan elaborates on the progress made by the company across the three pillars of its ESG plan, including in pioneering grain-to-glass sustainability, championing diversity and inclusion, and promoting positive drinking. She also delves into key initiatives being undertaken by Diageo India in partnership with the government and sustainability champions to drive sustainable water solutions and accelerate carbon neutrality.

Excerpts from the interview:

Talk to us about Diageo’s ‘Society 2030: Spirit of Progress’ plan and how it aims to create a more sustainable and inclusive society?
Our ‘Society 2030: Spirit of Progress’ is a 10-year ESG plan. It reflects upon the most material issues affecting our company, our people, our brands, our suppliers and our communities. Our strategic priorities are to promote positive drinking, champion inclusion and diversity, and pioneer grain-to-glass sustainability, all underpinned by doing business the right way. This is how we continue to celebrate life, every day, everywhere. As the head of one of the India’s largest beverage alcohol producers, I believe that we are ambassadors of our industry and we aim to be the best we can - at work, at home, with friends, and in the communities we serve.

We’ve made progress across our three pillars of Society 2030: Spirit of progress plan. Under the first pillar of pioneering grain-to-glass sustainability, we focus on ensuring that people, suppliers, communities, customers, consumers and society thrive as a result of our business by:

• Preserving water for life: Diageo India is working to replenish more water than it uses in the water-stressed sites across its operating locations in India through wetland restoration, desilting ponds, building check dams, rainwater harvesting and tree plantation. On water stewardship, we have launched collective actions in Maharashtra and Rajasthan. And we are targeting to replenish 225,000 cubic meters of water this year. Our water use efficiency metrics are well on track as per the targets of this year.
• Accelerating to a low carbon world: We continue to drive down greenhouse gas emission, and it has reduced from 27,000 tons to 2,800 tons, a 90% reduction over the F '20 emissions. And we are sustaining zero fossil fuel use across our distilleries.
• Becoming sustainable by design: During the year, over 99% of the packaging material used was widely recyclable and we are well positioned to achieve our target of 100% by 2030. In addition, over 55% of the packaging material purchased was made of recycled material- this is against the 60% goal mapped for 2030. We have also launched regenerative agriculture programme in Punjab and Haryana in partnership with The Nature Conservancy India. The programme will initially equip over 5000 small-holder farmers with best practices, knowledge, and tools to help transform into regenerative agricultural practices.

Cutting carbon emissions in half from your supply chain is a significant challenge. In your view, what are the major hurdles you anticipate when attempting to achieve this goal and how do you plan to address them?
As part of the Society 2030 goals, cutting carbon emissions is a priority for Diageo. To make sure we can measure and monitor future progress against our ambitious targets, we are addressing climate change in a data-led and systemic way. We have worked hard to improve the way we collect data on Greenhouse Gas (GHG) emissions and are actively encouraging our suppliers to do the same.

We are working with our suppliers and advocating them to shift to renewable and low carbon fuels by helping them to adapt technologies and best supply chain practices. Over the last five years, we have worked with our spirit suppliers to transition them to renewable energy. As of last year, about 40% of the spirit we sourced was distilled with the help of renewable energy. We aim to source 60% Spirit distilled with renewable energy by 2026.

We will continue to focus on our target to minimize the weight of our packaging, increase its recycled content, implementing alternative formats, and enhancing reuse opportunities. This will also help us reduce energy consumption and emissions in our supply chain and own operation.

As part of India’s green revolution, the government has set a target of 500 GW of installed power through renewable energy. Out of this, 280 GW is said to come from solar. How important is solar power in your plans to hit net zero? How do you plan to work with governments to help facilitate your move to solar?

We have reduced GHG emissions by about 95% to less than 6,000 MT CO2e in FY22 from approx. 1,28,000 MT CO2e in 2007 (baseline year). We have also eliminated 100% use of fossil fuel for thermal energy requirement at all our plant locations in India and maintained this status by switching to biomass-based energy.

Using renewable energy to reduce our carbon footprint and reducing GHG emissions is a key priority for us. To achieve this we have put multiple targets at all of our plants and manufacturing sites to implement an efficient and impactful way to hit net zero:

• We aspire to achieve 100% renewable energy use status. We have doubled our in-house solar energy generation capacity from 1.3 MW to 2.6 MW and have achieved about 98.5% renewable energy use in operations.
• In order to sequester carbon equivalent to residual emission from use of renewable fuel, we have initiated an ambitious plan of afforestation planting more than 50K trees by now and targeting 200K trees over next 3 years.
• Towards reducing Scope 3 emissions (emissions outside of our operations occurring elsewhere along our value chain), we have started work on Regenerative Agriculture with a special focus on Rice and Barley.

Do you consider Diageo to be a participant in the circular economy with the strategies you aim to implement for achieving zero waste? Additionally, could you elaborate on why you believe the future economy needs to embrace a circular model?

We are committed for circular practices so we can shape a more sustainable and resilient future. Under our Society 2030 (ESG Goals) we have three Strategic Sustainability Pillars and one of it is “become Sustainable by design” and we have range of targets to be accomplished by 2030 which include

• Increase recycled content to 60%
• Make 100% of our packaging widely recyclable
• Achieve “Zero Waste to landfill”
• Help to develop regenerative farming practices

Powering circularity not only addresses the virgin resources intake from planet, but it also shrinks carbon emissions in the value chain. Our approach is underpinned with consumer choices, practical, environmental, and economic concerns. We are ramping up our efforts to realise these goals ahead of our commitment of 2030.

Considering Diageo's position as a consumer brand, how crucial is it for you to utilize recyclable materials for all your bottles? Could you elaborate on the importance of incorporating recyclability in your packaging and the efforts you are undertaking to achieve this goal?

Recyclability, re-use and reduction of packaging waste is of strategic importance to our ESG goals. We drive this in every aspect of our value chain. For example, on reduction, we have already embarked on a journey of the phased removal of mono cartons from our premium Scotch brands in India VAT 69, Black & White, and Black Dog, in line with our effort to be zero-waste to landfill from our own operations and offices by 2030. The removal of mono cartons is expected to save 10,000 tonnes of paper and reduce 7,000 tonnes of carbon emissions annually.

On re-use, we have a very diligent program in place to harvest used bottles from the market and re-introduce them in the value chain. Roughly 15% of our overall glass bottles by volume are part of the re-use system and we are constantly evaluating opportunities to increase the quantum.

On recyclability, the concept is being used in many ways across our packaging ecosystem. For example, almost all of the boards we use for our labels are made from recycled pulp. On brands like Godawan and Signature, we go the extra mile to use FSC certified stock which also ensures ethical sourcing of the raw materials. We are also invested in the EPR program through which we have harvested and recycled plastic waste from the market, equivalent to 100% of the plastic we use in our packaging. Increasing recycled content and ensuring we consciously invest in recycling protocols is a necessary part of our Spirit of Progress 2030 endeavor.

In recent times, ethical consumerism has experienced a surge in popularity, with customers being more conscious of social issues than ever before. For instance, a consumer intent study conducted by Open Text revealed that 88% of global customers prefer purchasing from companies with ethical sourcing practices. Given the current landscape, what message would you like to convey to CEOs worldwide regarding the importance of engaging in ESG (Environmental, Social, and Governance) and CSR (Corporate Social Responsibility) initiatives to maintain competitiveness in the marketplace?

Ethical sourcing practices have become increasingly important to consumers around the world. The statistic you mentioned highlights the growing awareness and demand for socially responsible business practices. Consumers today are more conscious about the impact of their purchasing decisions on various social and environmental issues. They want to support companies that align with their values and demonstrate a commitment to ethical behavior throughout their supply chains. Ethical sourcing practices encompass a range of considerations, such as fair trade, responsible labor practices, environmental sustainability, animal welfare, and more.

Companies that prioritize ethical sourcing practices can benefit from improved brand reputation, customer loyalty, and increased sales. By meeting the expectations and values of their target market, these businesses are more likely to attract and retain customers who actively seek out ethical products and services. CEOs across the board are not only looking at ESG and CSR to gain customer loyalty but also to unlock new market segments and opportunities. Many consumers actively seek out products and services from companies that prioritize sustainability, social impact, and ethical practices. For example, on Godawan, consumers can trace every single bottle back to its origins right from the six row barley sourced from a specific cluster of farms in Rajasthan right up to the liquid, bottle, cork, labels & the mono-carton that go into the making of the artisanal single malt.

Additionally, investors are increasingly factoring in ESG and CSR criteria when making investment decisions. Companies that demonstrate strong ESG performance and a commitment to sustainable practices are more likely to attract investment and secure funding.

Overall, engaging in ESG and CSR initiatives is crucial for companies to maintain competitiveness in the marketplace. By aligning with the values and expectations of customers, investors, employees, and other stakeholders, businesses can enhance their brand reputation, access new market opportunities, manage risks, and attract the resources needed for long-term success.