Toward Equity: Keeping the Focus on the ‘S’ in ESG
March 2023
A pandemic. A racial reckoning. Riots on Capitol Hill. Heated policy battles over school curriculums and reproductive rights. All within the past three years.
Any scan of the headlines points to the demands corporations are feeling to engage and respond to social problems. While some corporations may choose to “hush” and others may choose to jump in, the pressure doesn’t seem short-lived. According to the recent Edelman Trust Barometer, corporations are the most trusted institutions in the U.S. To maintain that trust, they will have to navigate continuing polarization, economic anxiety and the push and pull of employee and consumer pressures to respond to social issues that are both relevant and not relevant to operations.
When I took this role at Diageo, a global beverage alcohol company home to over 200 brands, I knew a big part of my charge would be to help the company navigate these topics. Diageo’s Society 2030: Spirit of Progress offers a compass. It’s ambitious but rooted in measurable goals that address the issues that matter most to the business, our stakeholders and consumers.
Within the Diageo Society 2030 strategy, the role of “S” in ESG (environmental, social and governance) focuses on what we define as our social sustainability, or how we work to build human and social capital within our employee base, suppliers, customers and communities. When we think about human capital, we are pointing to the knowledge and skills of an individual. With social capital, we consider the networks and relationships, and the related norms and values. If we can use our defined technical expertise and brands to help ensure the long-term well-being of the social groups that are core to our operations, then that is ultimately good for business. We need “S” strategies that invest in programs and partners that have a measurable impact building human and social capital in the education and hospitality sectors.
Below are some of the strategies and lessons we have pulled from our work in advancing the “S” agenda. We hope our plan, or parts of our plan, can be used as a blueprint for other organizations looking to develop or strengthen their own “S”-focused priorities.
Build a Data Case to Demonstrate Value
This is an important place for a company to start. In developing Diageo’s Society 2030: Spirit of Progress ESG plan, we carried out a rigorous materiality assessment. This forced us to, among other factors, deeply look at the breadth of social and environmental external trends shaping our operating landscape and how we can most effectively align our work with the United Nations Sustainable Development Goals. Our plan is made up of 25 ambitious targets and is focused on three core pillars that are most material to our business: promote positive drinking, champion inclusion and diversity, and pioneer grain-to-glass sustainability.
We publish our Integrated Annual Report and ESG Reporting Index at year-end, maintain updated information on our ESG work on our website, and submit information to leading ESG ratings and index organizations. Together, these actions offer a comprehensive and transparent narrative to a broad set of stakeholders.
With the growing investor and stakeholder attention around ESG performance, we have also seen these accountability structures help support executive and board engagement, generating momentum to deliver on the corporate ESG agenda. This becomes a feedback loop; executives enable the cross-functional groups needed to accelerate target delivery, and those groups ensure the ESG program is socialized across all parts of the operation.
Make It Core to the Business
Investing in sustainable growth means supporting and empowering the communities where a company operates, sources and sells. It’s been widely reported the U.S. is soon expected to become a majority-minority nation. Whenever possible, try to authentically reflect your multicultural consumer base and future talent. This is a priority for Diageo.
Yet, despite these demographic trends, alcohol industry entrepreneurs and executives currently do not reflect the diversity of our nation. Black Americans represent 12% of today’s consumers but only 7.8% of the sector’s labor force from line to executive and are inequitably represented among brand owners. In response to this disparity, in 2021 Diageo became an anchor investor in Pronghorn, a stand-alone business venture to cultivate the next generation of Black entrepreneurs, executive leaders and founders in the spirits industry. Through Pronghorn, we are looking to build capacity for individuals and entrepreneurs and have invested in 12 Black-owned spirits brands.
The hospitality sector functions as an important opportunity ladder. Seeing the disparities in our sector, we have designed programming and partnerships to attract the next generation of diverse talent for the bars and restaurants where consumers enjoy our products. Our Learning Skills for Life (LSFL) program is an industry-leading effort that works to meet people where they are — from both a skills and access perspective — and is available both online and in person in major markets. The program offers job readiness and employability skills and hospitality training, with a particular focus on women, veterans, second-chance and ethnically underrepresented workers. This past year, over 900 people completed the training.
In 2021, we announced a new endowment and development program to address educational inequities and support career pipelines opportunities for historically underrepresented groups in the U.S. Today, the investment of over $11.75 million in 29 historically Black colleges and universities and minority-serving institutions will support career pipelines for students, and build technological, physical and financial resources at these institutions.
While there is much, much more work to be done, we are focusing on building a sustainable partnership ecosystem of educational, community and commercial entities to drive scale and future-proof the talent pipelines for our business.
Define Your Social License to Operate
Ensure that the purpose of your service or product prioritizes the safety and best interests of your customers. Our purpose is to “celebrate life, every day.” Embedded within that purpose is our belief that no matter how you celebrate, if it involves alcohol, it must be done responsibly and in moderation. The commitment we have made to responsible consumption is intrinsic to our social license to operate and how we maintain trust with our customers.
Our long-standing commitment to addressing impaired driving means working with law enforcement, local authorities, road safety organizations, and distributors to stigmatize impaired driving. While we educate people through platforms such as “Wrong Side of the Road,” we also work with nonprofit groups such as Responsibility.org to further initiatives on illegal and irresponsible behaviors.
Through our DRINKiQ platform, we provide information about alcohol and its effects on the mind and body, empowering people to make the right choices about alcohol. We leverage the reach and influence of our brands and partners, such as Major League Soccer and the National Football League, and via creative, brand-led social campaigns s “Drops of Advice” to connect with consumers through responsible drinking campaigns. We have reached over 300 million people in the past two fiscal years in the North America market. As a brand-led company, we will continue to leverage brands to maintain our social license to operate. Our brands have the power to speak to consumers about responsible consumption, and we are actively exploring innovative ways for them to deliver that message authentically.
In 2021, we established the Multicultural Consortium for Responsible Drinking (MCRD) in partnership with key Black, Latino and Native American law enforcement, community, faith-based and media organizations. Our work in this space aims to increase awareness on the risks of alcohol-related harm and provide education across communities that have historically had disproportionate issues with alcohol-related harm. Our focus on partnerships challenges us to stay connected to communities where we source, sell and operate. This approach helps drive trust and accountability.
Advocating moderation for those adults who choose to drink and addressing harmful uses of alcohol (including underage drinking) will continue to be a priority for us.
I welcome other companies or organizations developing their own version of their “S” strategies to reach out to me with any questions.
Reach Jayant at [email protected].
”Ensure that the purpose of your service or product prioritizes the safety and best interests of your customers.
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