Our supply chains create value directly for local economies and are one of the most important ways in which we support and build capability in our local communities.
They are also an important part of our contribution to driving higher standards in sustainability and business ethics, creating shared value for individuals, businesses and society.
From the farming and production of our ingredients to the manufacture and distribution of marketing materials or merchandising, each stage of every supply chain has an impact on our employees, local communities, the environment and other stakeholders. We want to integrate social and environmental standards into these chains and we have a clear commercial interest in ensuring that all our supply chains are sustainable.
Our strategy for achieving sustainable supply chains is focused on:
- Ensuring expected standards: Our supplier assessments are designed to help our suppliers improve their sustainability performance, including areas such as labour rights and environmental performance. While we have our own standards and guidelines, we also work with industry associations such as AIM PROGRESS, SEDEX, CDP and SAI Platform.
- Building capability: When we can, we help suppliers meet our standards by offering training to build their skills and capabilities.
- Supporting and creating value with local businesses: Working with local suppliers is an important way in which we create value and contribute to local economies, especially in emerging markets.
We will achieve our strategy through work in three core areas:
We invite our suppliers to be our partners in providing responsibly sourced materials and services, which have a positive impact on the communities and environment in which we operate.
Around 30,000 direct suppliers from more than 100 countries provide us with the raw materials, expertise and other resources that help us make great brands. Many of those direct suppliers themselves have an extensive supply chain, connecting us with thousands more farmers and businesses.
Standards and guidelines
We have clear sets of standards and guidelines as well as a defined process for managing social and ethical risks throughout our supply chain. Our Partnering with Suppliers standard sets out the minimum social, ethical and environmental compliance standards we require suppliers to follow as part of their contract with us, as well as aspirations for our long-term partners to work towards.
We have also developed a comprehensive but flexible process for identifying, assessing and managing social and ethical risks in our supply chain. This process involves:
- an initial screening
- a prequalification questionnaire which covers social and ethical risks
- a qualification process in which suppliers with the potential for risk are required to register with SEDEX
- independent audits of suppliers who represent the highest risk.
This allows us to focus on the areas of greatest risk and greatest potential benefit and to work co-operatively with our suppliers to mitigate the risk and maximise the benefits.
In order to support our suppliers as they embed our standards, together with industry partners in AIM-PROGRESS, we have developed a Supplier Business Toolkit to share best practice and learning and enhance standards across the industry. The Toolkit provides practical assistance on how to improve Productivity, Quality and Workforce Management – areas which are inextricably linked.
As part of our Sustainability and Responsibility targets for 2020 we aim to:
- Deliver our responsible sourcing commitments with suppliers to improve labour standards and human rights in our supply chains.
- Act in accordance with the UN Guiding Principles on Business and Human Rights.
We have evaluated our current product lines and identified the use of tin and gold within our production processes. We have determined that, to the best of our knowledge, the minerals necessary in the production of these products are not sourced from conflict zones, including the Democratic Republic of Congo or an adjoining country.
Reducing environmental impact
We are committed to embedding our sustainability principles throughout our supply chains, and helping our supply partners improve their practices as part of our wider environment strategy. We are taking specific measures in three key areas.
- Water: Our approach is to encourage improved water stewardship through reduced use and better management as well as promoting water replenishment-related activity in local areas and increased sourcing of rain-fed local agricultural raw materials well adapted to their local conditions (including climate, soil and water availability). These include sorghum and cassava, which are relatively drought tolerant.
Read more about our approach to water stewardship
- Carbon: Around two-thirds of the total carbon emissions associated with our products are found within our supply chains, so supporting and encouraging our key suppliers to measure, manage and report their carbon emissions is essential to reducing our overall greenhouse gas footprint.
Read more about our approach to carbon reduction
- Sustainable packaging: We have set ourselves the target of ensuring that 100% of the paper and board packaging we use is certified as sustainably sourced by 2020. We are working with our suppliers on this, including through our sustainable packaging guidelines.
Read more about our approach to sustainable packaging
Agricultural value chain partnerships
Challenges such as water scarcity, unsustainable farming practices and climate change all pose potential risks to the supply of our raw materials and to the livelihoods of the farmers who produce them.
We know that the future prosperity of farmers, suppliers and our business is closely linked with our ability to create partnerships that are sustainable, secure and mutually beneficial. We support sustainable sourcing and, where appropriate, local sourcing of raw materials.
Our Sustainable Agriculture Guidelines sets out the Standards we expect in our agricultural supply chains, and should be applied in conjunction with our supplier code, ‘Partnering with Suppliers’.
We believe that a common industry approach is the best way to support improvements, not just in our own supply chain, but across the agricultural sector. To support this common approach, Diageo is a member of the Sustainable Agriculture Initiative (SAI) Platform and have aligned our Standards to their Farm Sustainability Assessment (FSA) tool as our reference to assess sustainability within our agricultural supply chains and drive improvements. By aligning our approach with this common industry tool, we aim to avoid over-burdening suppliers and farmers with multiple company-specific audits and assessments.
We expect our suppliers to work continuously towards more sustainable agricultural practices by treating farmers and workers fairly, reducing negative environmental impacts, protecting natural capital and supporting wider economic benefits for farming communities.