- Like many large manufacturers, Diageo found that a lot of its carbon footprint is produced early on in its supply chain, including from raw materials and in packaging, known as scope three emissions.
- In the U.K., it is mandatory for large companies to disclose their energy use and greenhouse gas emissions, but they don't have to include scope three in their reporting. In the U.S., there is no requirement to report.
- Diageo has set up an initiative to create bottles from paper, with a coalition including PepsiCo and Unilever.
Collaboration is the way to go when it comes to tackling climate change, according to one of the world's largest alcoholic drinks makers.
Like many large manufacturers, Diageo found that a lot of its carbon footprint is produced early on in its supply chain, including from raw materials and in packaging. These are classified as being emissions that the company does not directly control, also known as scope three emissions, or those that come from its "value chain."
Suppliers in that part of the chain might provide goods to several different companies, which means communication is key, according to Kate Gibson, Diageo's global director of society.
"As more companies have more focus on this, we're all asking each other (what we're doing) because we are all in each other's scope three, which is a very good thing. Because the only way that we can actually stop … catastrophic climate change and deliver the Paris Agreement is if we all really understand our full scope and work together on it," she told CNBC by phone.
In the U.K., it has been mandatory for large companies to disclose their energy use and greenhouse gas emissions since April 1, 2019, but they don't have to include scope three in their reporting. In the U.S., there is no requirement to report, although some corporations voluntarily release emissions data to the CDP (formerly the Carbon Disclosure Project), a nonprofit that collects environmental information.
Between 2007 and 2020, Diageo reduced directly produced greenhouse gas emissions by 50%, and reduced value chain (or scope three) emissions by just over a third over the same period.
One way Diageo is tackling its scope three emissions is via packaging, and it is set to launch a paper-based bottle for its Johnnie Walker whisky brand next year. Diageo worked with venture company Pilot Lite to create Pulpex, a company that will produce bottles from sustainably-sourced wood pulp, and invited others in non-competing industries to take part, including PepsiCo and Unilever.
Pulpex claims its products will have a carbon footprint that is 90% less than glass, and the bottles are different to other types of pulp packaging because they don't have a plastic-based lining, which is harder to extract and recycle, Gibson said. Instead, the inside of the bottles will be sprayed with a coating to stop them from becoming soggy.
PepsiCo is also set to launch products using Pulpex packaging in 2021, in a move that will help it lessen its reliance on plastic — its goal is to reduce the virgin plastic content in its drinks products by 35% over the next five years.
"Most companies, a lot of the carbon emissions are in their value chain. So you need to think a little bit more laterally, and what can we do in terms of design and packaging design to make beautiful products that people are excited by that are also reducing the carbon emissions?" Gibson stated. Diageo is also working with suppliers on innovations in its glass bottles, such as increasing their recycled content and decreasing their weight.
Other drinks industry players are testing new types of packaging too, with Pernod Ricard set to trial a paper-based bottle for Absolut vodka made of 57% paper and 43% plastic, it announced last month. It's part of an initiative by the Paper Bottle Company, which is also working with Carlsberg and L'Oreal on similar packaging.
Having shelf appeal is also important for Seedlip, the non-alcoholic spirits company that Diageo owns a majority share of. Next month it will launch a gift box with packaging made from mycelium, a thread-like structure that is produced by mushrooms, which Seedlip claims will biodegrade over a few weeks. Mycelium is quick to grow, according to the company's founder Ben Branson, and will add nutrients back into the soil when thrown out.
"Mycelium has been on our radar for some time. It was the ideal material for this problem, as it behaves like transit materials (such as polystyrene) and then simply breaks down in your garden in 40 days," Branson told CNBC by email.
Businesses are at a variety of stages with their environmental efforts. Beer company Brewdog released its first sustainability report in August and said it is working on a two-year plan to reduce its carbon footprint to zero, for its scope one and two emissions, or those that come from direct operations such as breweries. For scope three, it is working with suppliers to reduce emissions by 35% over the same time period. "We are changing every element of everything we do, and all of it is pretty difficult," BrewDog co-founder and CEO James Watt told CNBC in an email.
In the coming months, Diageo will announce its climate targets for the next 10 years, to align with the U.N.'s Sustainable Development Goals for 2030. Gibson is encouraged by the fact that more large companies are signing up to the U.N.'s "Business Ambition for 1.5 degrees," a campaign to keep climate change below 1.5 degrees Celsius as set out in the 2015 Paris Agreement. "Companies aren't hunkering down. They're saying right, actually, the direction is clear, and the urgency is now quite clear," she stated.