Introduction
Diageo plc is a worldwide corporation specializing in producing and distributing alcoholic beverages, with its headquarters located in London, England. This firm has been operating in areas where water is limited for the whole population, and its brewing, distilling, and other non-product activities need water as a crucial input (Diageo, 2022e). Approximately 80% of the overall energy need connected with brewing and distilling is heat-related. Diageo’s production process entail using heat, a vital input to its brewing and distilling steps (Diageo, 2022a). Glass bottles have been used by many Diageo products for more than 150 years and are essential to the company’s operations while requiring a significant amount of energy to produce (Diageo, 2022d). This report aims to investigate a contemporary problem facing Diageo regarding responsible management and provide strategies for overcoming it. As a consequence of their influence on climate change and the environment in general, these activities provide a challenge for responsible management. To address these concerns, this company must evaluate the performance of its sustainability, procurement, and manufacturing operations to develop an effective approach to reduce emissions and investing in renewable energy.
The Company’s Background
Due in large part to its decentralized organizational structure, Diageo has positioned itself as one of the most successful beverage manufacturers on a global scale. It has established its global business organizations worldwide, with operations in more than 180 countries and production in 140 locations throughout the globe (Diageo, 2022b). Additionally, with its large production capacity and international presence, the company is steadily cementing its position as the industry leader in manufacturing a broad range of alcoholic drinks (Diageo, 2022b). For example, the firm’s consistent expansion and growth demonstrate how excellent strategic management concepts contribute to the increase and development of big establishments (Diageo. 2022c). Similarly, Diageo’s operational strategies have contributed significantly to the company’s success, and the company is now considered the world’s leading producer of spirits and other types of alcoholic drinks (Diageo, 2022c). Thus, Diageo’s position as a significant player in the industry is an example of the continuous growth brought by the company’s thoughtful expansion decisions.
Responsible Management Challenge
Environmental Impact
Most enterprises in the modern global economy have decentralized their manufacturing to take advantage of cheaper labor and resources in other locations worldwide. On the other hand, this strategy may damage the company since it does not do business entirely in a single country. Moreover, the other countries may be geographically far from the target market (Bressanelli et al., 2019). It is an issue that may be linked, in part, to the emergence of globalization as well as the expansion of global markets and customer demands. Diageo’s worldwide dominance in the distribution and sale of luxury drinks is thus loaded with risks and problems. Consequently, Diageo, the world’s top manufacturer of alcoholic beverages, has its fair share of challenges, many of which directly influence the environment and the broader sustainable aims of maintaining and safeguarding the environment.
An environmental impact is any alterations made to the environment, regardless of whether the change is positive or negative. Diageo gathers water use data from all manufacturing facilities with direct oversight, leveraging independently designed investigating criteria in conjunction with outside sourced guidance (Rudebeck, 2019). Alongside measuring overall water use, Diageo gathers data to compute “water efficiency,” which is the proportion of the quantity of water necessary to generate a liter of a packed commodity. Accordingly, the company has categorized twelve manufacturing facilities operating in “stressed” zones, designating them as having a greater risk of losing self-sustaining water supplies (Davis and Rosenblum, 2021). Accounting rules published by Diageo specify how much water is utilized in manufacturing, whether groundwater, surface water, or pipe delivery, minus all pure water supplied to residents straight from a facility. Provided the water does not undergo any chemical transformation, it is not included in the water usage statistics. Instead, it is reverted to the source with the approval of the local community (Rudebeck, 2019). Cubic meters are used to measure all water usage data.
Based on the information discussed above, it is possible to assess Diageo’s water challenges in “stressed” regions. Diageo’s manufacturing facilities are located in various parts of the globe where water is limited for the whole population. The firm’s brewing and distilling processes and other non-product activities like cleaning all need water as an essential input (McMullen and Bergman, 2017). For instance, this incidence may be seen in India, where Diageo has extensive operations in water-scarce areas. The enormous plant in India will need up to 2,000 cubic meters of water daily (Collin et al., 2018). Furthermore, Diageo’s smallholder agricultural channels in places like south of the Sahara struggle to consistently produce the amount and quality of output due to the unpredictable water supply in such areas (Addisu, 2018). This water unavailability is a challenge for Diageo because the company relies on these farmers to supply its ingredients.
The availability of water that can be relied upon is a crucial underlying issue that is getting much more difficult due to the effects of climate change. Adding more complex layers to the situation ensures that crop development receives the appropriate quantity of moisture at the appropriate growth stage (Tefera et al., 2020). For instance, the water supply’s unpredictability and the smallholders’ dispersed nature make it difficult to implement and finance solutions to address the challenges (Addisu, 2018). This challenge happens mainly when solutions including sensors, and software should be implemented since equipment is usually expensive. Thus, the resolution of this issue will benefit the broader agricultural community, resulting in a favorable effect on livelihoods, resistance to climate change, and overall production.
Correspondingly, heat is integral to Diageo’s brewing and distillation operations. Given that Diageo’s brewing and distilling operations need at least 80 percent of their total energy consumption to be heat-related, this input is evident (Diageo, 2022a). There are batch procedures and continuous processes, with steam acting as the dominant heat transfer medium in most instances. The operations need heat (moisture) in the range of 120oC to 200oC, and they create waste as hot water or steam condensate from 30oC to 90oC and flue gas at 150oC to 160oC (Diageo, 2022a). Regarding the carbon footprint associated with Diageo’s industrial heat, the firm impacts both cities and countryside. It is because the business maintains various facilities worldwide, some located in industrialized regions and others in small rural communities.
The usage of glass bottles is firmly rooted in the history of many of Diageo’s products. It takes a substantial amount of electrical power to produce glass bottles. Still, they can be recycled indefinitely and are manufactured using large quantities of recycled glass cullet (up to 80 percent, depending on availability and new bottle color or finish needs). There are several glass-bottle shapes and sizes (Diageo, 2022d). However, the present designs and supply chains for glass bottles make it challenging to ensure that they are recycled, limiting the availability and consistency of the cullet. It has become an issue since recycling glass bottles is essential to the longevity of the glass industry (Diageo, 2022d). Furthermore, the rise of e-commerce and general changes to supply chains have stretched the possibilities of the already available glass design as a product packaging material. As a result, all these productions are related to the increasing and excessive production and use of waste, energy, and water.
Business Functions
Sustainability
Unfortunately, many instances of unsustainable decisions are made by large corporation. The sustainability team of the company being discussed is responsible for creating and attaining emissions reduction goals. Engaging external stakeholders on climate change challenges, Diageo collaborates with all business divisions to identify means of reducing emissions and enhancing energy efficiency (Etzion, 2018). However, the world’s businesses, proprietorships, hospitals, schools, voluntary groups, and other institutions rarely seek sustainability as the primary purpose, and they are often indifferent to or even hostile to it (Etzion, 2018). This situation is problematic since many negative consequences on sustainability and chances to resolve them lurk in organizationally fundamental systems.
Examples of organizations that engage with sustainability include a multinational conglomerate that sees the circular economy as a business opportunity. It comprises a university divesting its financial holdings from fossil fuels to undermine the legitimacy of carbon-based energy sources. Another illustration is the Girl Scouts conducting child-centered interventions to promote household energy-saving behaviors enacted by both the Scouts and their parents (Etzion, 2018). Instead, organizations should be viewed as spaces from which various significant actions toward higher sustainability might emanate.
Procurement
To reduce emissions, it is the responsibility of the procurement team to identify renewable energy sources and develop agreements with suppliers. The organization works with its suppliers to design contracts with emission reduction obligations (Andrecka, 2017). Moreover, Diageo partners with many utilities to get renewable energy for the organization’s activities. Throughout the public sector in Europe and beyond, sustainable procurement has grown and expanded during the last decade (Gelderman et al., 2017). Sustainable procurement has reached a crucial turning point, and Diageo has not been left behind. It is shown in how the company achieves its goals in a way that creates value for money over time and facilitates the delivery of elements besides capital investment, such as environmental and social goals. This description depicts the occasion as a watershed moment because it ushers in a new age of sustainable procurement (Andrecka, 2017). It is no longer debatable that it has value as a strategic tool for promoting sustainability and redesigning markets (Fayezi et al., 2018). Hence, there is no doubt that incorporating sustainability issues into procurement is practicable and has facilitated the incorporation of renewable sources into Diageo’s operations.
Manufacturing
The manufacturing division is responsible for reducing the total carbon dioxide emissions created by the company’s activities. Sustainable manufacturing creates environmentally responsible manufactured goods, conserves energy and natural resources, and minimizes negative environmental impacts (Carvalho et al., 2018; Kishawy et al., 2018). Many organizations are directly reaping significant financial and ecological advantages from implementing environmentally aware business practices (Machado et al., 2020). Diageo recently partnered on an invention experiment to produce the most ecologically friendly glass Scotch whiskey bottles available. The company collaborated with tech organization Glass Futures and glass maker Encirc and conducted research in this field. The concept utilized a waste-fueled kiln to reduce the carbon emission from making bottles by up to 90 percent (Diageo, 2021). To preserve one’s market position, it is essential to show a solid commitment to ecologically responsible manufacturing (Moldavska and Welo, 2017). Therefore, enterprises in the industrial sector should compare the profitability of their current operations to the potential market value of sustainable manufacturing practices.
Recommendations
Diageo significantly affects the surrounding environment due to its global expansion. As a result, for the company to lower its negative impact on the environment, it must strive to reduce the amount of emissions it produces (Augusto, 2021). Significant investments will be necessary for renewable energy sources, industrial process upgrades, and supply chain management to reduce waste generation. Further, to positively affect sustainable practices, it is essential to include all stakeholders, including customers and suppliers (Augusto, 2021). Increasing the amount of money invested in renewable energy sources, such as solar and wind power, will make the industrial process use less energy overall.
Consistently, Diageo needs to establish a sustainable development team to drive improvements in water efficiency across its brewing and distilling processes. This team will assist in deploying technologies that increase water production, the efficiency with which it is consumed, and the reuse of water for operational purposes (Reis, 2021). Since the company’s sustainability group is responsible for determining and achieving emissions reduction targets, this method is essential (Reis, 2021). Furthermore, the team will interact with all business divisions to implement such practices as reducing emissions and enhancing energy efficiency as well as engage with external stakeholders on issues relating to climate change.
The procurement group is responsible for finding renewable energy and collaborating with suppliers to minimize emissions. The team collaborates with suppliers to build contracts with emission reduction goals and utilities to obtain renewable energy for business operations (Atiase et al., 2022). Moreover, combining the advantages of utilizing global procurement size with the agility of market-facing business units that interface locally with customers has proved essential to the operation of a complex global multinational corporation that is now decentralized (Atiase et al., 2022). Notably, Diageo should make the process of acquisition of farmed crops for the brewing and distilling business more sustainable. It will allow to substantially improve resource efficiency and predictability of crop yield from smallholder farms in water-stressed areas and harsh climates. Thus, it is essential to find low-cost and adaptable solutions for individual smallholder farms and communities (Copestake et al., 2020). Overall, although Diageo is working with its suppliers in the fields and communities to enhance the energy efficiency, it will contribute to reducing emissions and limiting pollution from its activities along the entire supply chain.
The manufacturing division is in charge of reducing emissions from the company’s operations. The organization aims to decrease energy use and waste creation by sourcing things with low environmental impact from suppliers (Copestake et al., 2020). To that end, the firm should set manufacturing emission reduction objectives. These objectives will help to suggest what production goals are based on the latest scientific evidence and what is needed to mitigate the worst consequences of climate change. Furthermore, heat generation and reuse reduce the carbon footprint associated with this company’s industrial demands (Atiase et al., 2022). Hence, to ensure that all organizations’ activities run concurrently, significant expenditures on renewable energy and modernization of industrial processes and logistics will be required.
Communication with suppliers, consumers, and other stakeholders should contain a mandate to promote sustainable practices for this process to be successful. To increase the long-term viability of glass bottles, waste reduction and encouragement of greater recycling must be integrated into the long production objectives of reducing energy, water, and effluents and promoting increased recycling (Reis, 2021). Furthermore, the ongoing search for solutions throughout the entire glass bottle value chain incorporates enhanced raw materials, labeling, shipping, filling, handling design, and improved end-of-life processes (Augusto, 2021). These methods will improve operational effectiveness and efficiency, lowering the environmental impact.
Conclusion
In summary, Diageo’s activities entail using heat, a crucial component of brewing and distilling processes. Numerous products of this company require glass bottles, which are vital to the firm’s operations but demand substantial amount of energy. The worldwide dominance of Diageo in the distribution and sale of premium beverages is fraught with hazards and difficulties. For example, Diageo’s worldwide operations demand substantial energy, 80 percent of its heat-related energy use. Since the company’s activities depend on steam, fixing these concerns would help the agricultural community and decrease carbon footprints. These activities challenge responsible management because of their impact on climate change and the environment in general. To address these issues, this company must examine the effectiveness of its sustainability, procurement, and manufacturing activities to devise a plan for lowering emissions and investing in renewable energy.
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