Diageo: Corporate Crimes

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The ethical status of a giant alcohol corporation is inevitably questionable, simply because of the dangers of the drug. The World Health Organisation (WHO) states that alcohol causes 3.2% of deaths worldwide (and is responsible for between 8% and 18% of the disease burden amongst males in Europe and the Americas) and is estimated to cause 20-30% of oesophogal cancer, liver cancer, cirrhosis of the liver, homicide, epilepsy, and motor vehicle accidents.[1] This makes it the leading risk factor for disease in low mortality developing countries, and the third highest in the developed world.[2] It costs Europe between 2-5% of GDP[3], and the extensive cost it brings the NHS has been acknowledged.[4] The most important issue raised by the WHO is that, in direct contradiction to the claims of the industry, the greatest burden on society comes not from isolated individuals, but from the collective impacts of light to moderate drinkers.[5]
Alcohol badge.jpg This article is part of the Spinwatch public health oriented Alcohol Portal project.

For an analysis of how Diageo's commitment to solving these problems matches up to its practices, please see the Diageo: Influence section of this profile. This section will look at a number of other areas in which the image established in Diageo's CSR may not hold out to scrutiny, including its role in the increasing global trend towards the dis-enfranchisement of the workforce through a steady rate of staff cut-backs and the casualisation of labour.

Non-traditional innovations in alcohol production

Recent years have seen changes in the way alcohol is being produced and drunk in Britain and elsewhere, with Diageo, among other companies, but always at the forefront of changes in the industry.

Wine and Beer - Structural Changes

The drinks sector is polarised between a small number of huge multinational companies, and small local producers, particularly for wine and beer. In the case of wine, Diageo and Allied Domecq in particular have accelerated the big multinationals’ programme of investment in vineyards and branded wines, collecting wine brands and in doing so changing the wine industry from being very fragmented to being highly concentrated. [6]

The Campaign For Real Ale (CAMRA), a British beer consumer group, campaigns in favour of independent breweries not owned by one of the major multinational brewing companies. Beer is one of the products still regularly produced at a small local scale [7], and according to CAMRA this is under threat from the growing role of multinationals (particularly since the Beer Orders of 1989 eroded the brewery-tie system in which most pubs were owned by brewers) who neglect real ales thereby undermining the diversity of British beer. CAMRA also say that the major multinationals undermine local tastes, which it sees as an important part of local communities, as well as the ability of small-scale local producers to function.[8] Diageo, as producer of Guinness (whose popularity is at the expense of other stouts) and premium lagers like Red Stripe, has a significant role to play in this process.

Alcopops

Diageo has been heavily involved in the manufacture of alcopops, a new innovation in the drinks industry in the mid-1990s as it responded to changing consumer lifestyles and forms of entertainment in British society (as elsewhere). [9] These forms of drinks have been linked to the problems associated with binge-drinking, as they are designed to be easy and quick to drink, and, as will be examined below in the 'marketing' section, they have been linked to under-age drinking.

Marketing

Diageo invests heavily in marketing, with £1.04 billion spent on marketing of premium drinks brands in the year ended June 2004 [10]. In 2001 Diageo became the first company in 50 years to advertise spirits on American TV, with an advert for Smirnoff Vodka on NBC [11]. More worryingly, despite Diageo’s policy of responsible marketing [12], there have been claims that its marketing has been aimed at groups at risk, such as young people.

Diageo's Code of Marketing

Diageo does have a Code of Marketing. But the code, as distinguished from regulations imposed in legislation, presents the need to limit the scope of advertising in a way which ensures that these limitations will not damage sales. A central point in this code is that alcohol will not be presented in a manner associating it with destructive and anti-social forms of behaviour, which Diageo is keen to discourage. Advertising that associates alcohol with positive, non-bingeing forms of behaviour will, the code states, benefit British society as well as the company's sales:

We believe that brand advertising that depicts responsible drinking as a relaxed, sociable and enjoyable part of life, has a role to play in promoting a responsible approach to alcohol consumption... We will not depict people drinking heavily or very rapidly, or imply that such behaviour is attractive or appropriate... We will ensure that our marketing communications do not suggest any associations with violent or with anti-social behaviour [13].

The result is a 'responsible' marketing campaign for alcohol which refrains from depicting irresponsible or unattractive behaviour, encouraging a message which presents drinking as a desirable activity which can be part of a desirable lifestyle. For example, the code of marketing practices suggests that 'our brand advertising... frequently depicts responsible drinking as a relaxed and enjoyable way to socialise with friends.' [14] Though presented as a policy of social responsibility, this can actually be seen more as an effective way of marketing products, and thus increasing sales. Taken together with campaigns against binge-drinking, this very successfully plays a dual role of presenting the company as one that disassociates itself from undesirable behaviour, so can be viewed as 'responsible,' and of selling the product (including, potentially, to under-age drinkers), as something desirable. Indeed, the issue of presenting alcohol as something that can increase sexual ability is a slightly more sensitive issue: Alcohol Concern have suggested that drinks companies are using 'creative advertising' to bypass regulations forbidding advertising that links alcohol to sexual success[15].

'Don't be the drunken monkey': Marketing of ‘responsible drinking’ messages

It isn't just the selling of alcohol over which Diageo formulates marketing: the company, and SAOs it is involved in, have shared a role with government departments in investing in the promotion of what they define as responsible drinking.

In May 2004, the Portman group released an advertising campaign entitled 'Don't be the drunken Monkey,' presenting binge-drinking as undesirable and anti-social[16]. The adverts showed an irresponsible young drinker as a chimpanzee. The idea behind this was to disassociate the correct use of alcohol from violent and anti-social behaviour, so as to discourage such behaviour - but this also served to protect the product itself from an association with such behaviour. The message of the anti-binge drinking campaign portrays a platform that is not harmful to the company's aim of selling drinks, and is perhaps even beneficial to it. This platform is that excessive amounts and irresponsible use of alcohol, rather than the substance itself, are damaging to health and society. This message correlates well with the idea behind Diageo's Code of Marketing. Alcohol campaigning groups question the role played by industry groups, rather than disinterested health experts, in putting together this campaign:

It shouldn't be left to drinks manufacturers to decide what messages are conveyed about the dangers of alcohol, because their priority will always be to sell alcoholic drinks to the public. - Lee Lixenburg, Alcohol Concern [17]

There was also criticism of this advertising campaign from another perspective: the Captive Animals Protection Society (CAPS) called for the campaign to be withdrawn on the grounds that the advert's portrayal of an irresponsible young drinker as a chimpanzee was degrading to chimpanzees and damaging to their welfare[18].

In August 2003, Diageo was criticised by the Australian Drug Foundation and National Council on Drugs at the launch of a social responsibility marketing campaign for advertising its product in a campaign to discourage drink-driving. In the words of Paul Dillon of the National Alcohol and Drug Research Centre Diageo were 'still pumping out the product and still pumping out the problems.'[19]

And despite the messages being those chosen by the industry, Diageo still expects government funding to be available to finance these campaigns. In October 2004 they called on the British government to fund a campaign against binge drinking, holding a series of meetings with ministers.[20]

Marketing alcopops

Alcopops provide the clearest indication that drinks may be being marketed to young people. Called FABs (flavoured alcoholic beverages) or RTDs ('ready-to-drinks') by the industry, these drinks specifically target young and inexperienced drinkers and are prominent amongst under-age and young people. Their penetration by age group in Britain across the industry is 42% amongst 25-34 year-olds, 60% amongst 20-24 year-olds, and 64% amongst 15-19 year-olds[21]. They were innovated and rapidly expanded in the mid-1990s, designed not to taste very alcoholic so as to appeal to those not used to drinking and to those seeking to consume a large amount of alcohol in a short amount of time. As such they have been linked to binge-drinking[22]. The recent resurgence of spirits is due in part to the interest in cocktails and alcopops, both of which constitute a youth market for spirits such as vodka. The percentage change of FABs has been a rise of 51.1% 1999-2003 compared to 35.7% for wine, 13.9% for spirits and 4.8% for beer. The percentage change in market value of FABs 1999-2003 was 227%[23]. Marketing spent on FABS is extensive, with £32.9 million spent 2002-3. The top brand is Diageo’s Smirnoff Ice, which together with Bacardi Breezer constitutes over 50% of the market, and Smirnoff Ice was also the brand with the highest amount spent on marketing in 2002-3, a sum of £8 million.

Instances of investigation into Diageo's marketing

In several other instances, Diageo's marketing of products has been criticised or investigated, in some cases for breaching its own or regulatory codes of marketing practice.

Legal action in the US

In 2004 a series of putative class actions were filed against Diageo in US federal district courts (in Ohio, North Carolina and the district of Columbia), and one in Colorado state court. These actions filed for recovery of profits made through allegedly advertising and marketing products to underage drinkers[24]. Diageo pledged to defend itself against these allegations[25].

Guinness adverts in the US

In March 2004, the Marin Institute in the US claimed that Guinness adverts for St. Patrick's Day violated Diageo's own Code of Marketing, by depicting St. Patrick's Day as 'Christmas morning with a keg,' which 'apparently starts with binge drinking in the morning' and 'unambiguously evokes a child's delight.'[26]

Cardhu Affair

In March 2004 Diageo were forced to withdraw their brand ‘Cardhu pure malt,’ which was marketed under the name of the Cardhu distillery despite the fact that it was being made from a number of distilleries. Traditionalists in the Scotch Whisky Association claimed that this undermined the top end malt of whiskeys which ought to be single malt, and constituted false marketing[27].

Sports events

In 1998 the Amsterdam Group (an SAO in which Diageo plays a leading role) asked the EC to let it take court action against France’s regulations banning screening of sports featuring alcohol advertising[28]. The World Health Organisation has judged that sporting events featuring alcohol advertising and sports promotion and sponsorship by alcohol companies are a major forum in which the alcohol industry are targeting marketing towards young people.[29]

Causing offence: Taiwan

In January 2003, the Taiwanese government voted to criticise Diageo and considered a ban on its brands, for an advert for Smirnoff disseminated on the London Underground which they deemed to be offensive to Taiwan. The poster campaign depicted a Christmas present saying on the label: ‘Warning. This gift will break down on Christmas morning. Replacement parts available from Taiwan. Allow three hundred and sixty-five days for delivery.’[30] [31]

Norway

In July 2002, Diageo’s license to sell alcohol in Norway was revoked for six months for its marketing of an alcopop in breach of Norwegian law. ‘Smirnoff Black Ice’ was promoted to trade officials but members of the public entered the event and got hold of free promotion material, making Diageo in contravention of Norwegian law. Diageo continue to trade its products in Norway through third parties. [32]

Unions and labour - the shift to casualisation

Between 2003 and 2004, Diageo cut nearly 1000 jobs worldwide,[33] and between 1998 and 2000 axed the same number of people in the UK alone,[34] part of an on-going trend towards contraction of employment that mirrors the concentration of ownership into the hands of fewer and fewer companies. It is hardly surprising then that there is considerable pressure on Diageo’s relationships with suppliers and workforce, but it is interesting to note how, especially with regards to relationships with trade unions, the company’s strategies seem very much in line with the way they assume ‘responsibility’ for alcohol problems. Rather than an outright oppositional strategy to other interest groups, they seek 'working partnerships', which give the impression that they are engaged with other interest groups, but can have the effect of reducing the power an independent negotiating body might have over them. In labour law, just as in health regulation, we can see Diageo pursuing voluntary codes which seem evasive to more binding legislation. It is quite telling that a National University of Ireland report refers to the trade union role in Guinness as constructively ‘managing change’[35] - the emphasis on communication with unions masks the extent to which ‘involvement’ is a substitution for influence.

Diageo Europe Forum (DEF)

One recent innovation has been the new Diageo Europe Forum (DEF) agreement which was unveiled in 2002. The DEF is an annual meeting involving at least two core senior managers, and just 35 employees, only some of whom are union representatives, drawn from the whole of Europe. It is supposed to be a means by which management and staff work in partnership, and was hailed as innovative because it included an unusually extensive definition of ‘consultation’ with employees over the issues that affect their interests. This was called 'extensive' because it stipulated that this must involve communication before, rather than after, decisions are made,[36]but the key point is that there is no obligation on managers to respond to objections. The function of the DEF is said to be an ‘information and consultation’ forum, but whatever that may mean, it is stated not to involve ‘collective bargaining’.[37]

In addition, we must look at what precipitated Diageo towards such an 'extensive' definition of its worker's rights. Firstly, the forum has to be seen as a response to the1994 European Directive on European Works Councils (EWCs). This aimed to improve workers rights to information and consultation, and stipulated that all companies of a certain size must establish EWCs,[38] such as Diageo's annual forum. Under this Directive, companies which had established a voluntary agreement on the consultation of the workforce before a certain deadline were exempt from many of its provisions, and because of the time delay in implementation of the Directive, the agreement can be counted as just such a voluntary code.[39]

What's more, the agreement over the definition of ‘consultation’ also came after unions threatened to take Diageo to the European Court of Justice over the issue. The company had announced it was planning to cut 300 out of 360 jobs at Dundalk in Ireland, and insisted that ‘consultation’ had taken place, because they had mentioned ‘overcapacity’ at the plant at the DEF meeting a month before.[40]

Corporate Social Partnerships

Another strategy recently favoured by businesses is the development of corporate social partnerships with employees. These set up structures between staff and top level management, which allow for communication and ‘joint problem-solving’, and often involve some degree of employment security. While these do not replace unions, they can in effect means that they are co-opted, and ‘involvement’ in decisions replaces independent bargaining power.[41]. It is telling that both the UK Department of Trade and Industry (DTI) and the Involvement and Partnership Association (IPA) refer to these partnerships as a means of increasing ‘competitiveness’,[42] and the ability to ‘manage change effectively’, change being a sure euphemism for insecurity and instability.[43]

The DTI features Diageo Global Supply in Scotland as a shining example in their brochure on best practice in employee partnerships, though it also states that this partnership was revised after 7 months attempting to negotiate pay in 2000.[44] It is also the case that only 55% of the Diageo work force in Scotland is unionised, and 17% are employed on temporary contracts.[45]. In July 2004, when Diageo announced it was cutting 60 jobs in Glasgow and Edinburgh, a spokesperson for the company said that they hadn’t consulted over the move because they ‘operated in a non-unionised environment’.[46]

United Distillers, now owned by Diageo, provides a prime example of how these partnerships can serve corporate rather than employee interests. After considerable job losses had already taken place, the unions (GMB, AEEU, TGWU and MSF) signed up in 1994 to a 'Positive partnership', a three-year deal which promised no more compulsory redundancies, provided that staff agreed to retraining and ‘redeployment’, and didn’t attempt to oppose voluntary redundancy. The move was rejected in a ballot, but, to quote the IPAs own website, for 'mysterious reasons ... the agreement still went through ...'.[47]

Casualisation of labour and redundancies in Nigeria

However partial Diageo's extension of labour rights to European employees, there is no suggestion that they are to be extended beyond the zone of EU legislation. In 2004 Diageo Africa was awarded first prize as the 'Employer of the Year', for its 'clearly articulated policies' to 'ensure that employees have a positive experience.'[48]. This recognition came from Africa Investor Magazine, the quarterly publication of 'Business for Africa',[49] and Diageo's website described the award as recognition of its 'investment' within the continent,[50] rather than its labour standards. It seems unlikely that unions would be offering the same accolade. Guinness Nigeria sacked 500 workers in February 2005, and unions claimed that the company's objective was to replace permanent contracts with casual ones, and claimed that major redundancies in 1992, 1995 and 1997 had all been followed by employment of casual workers with no conditions of service, and created space for more expatriates in higher level management.[51]. Guinness had already been picketed in 2002 as part of the Nigerian Labour Congress (NLC) anti-casualisation campaign,[52] which revealed that a majority of workers in Nigerian industry were employed on a casual basis,[53] and claimed that the biggest companies had the worst labour practices.[54]

Relations with Suppliers

The phrase ‘eliminate waste’ occurs twice in three short paragraphs in Diageo Scotland’s Corporate Citizen Report.[55] In 2000 they switched to an e-procurement system with the company Ariba, which among other things allowed them to negotiate in consortiums.[56] E-procurement is said to place suppliers in an increasingly cut-throat environment, where any possible considerations for quality, labour rights or the environment are squeezed out in favour of competition based simply upon who can offer the lowest price.[57] It also places another intermediary in the sale process, which puts further costs on the suppliers, who have to pay a transaction fee for every sale made.[58]

NFU protest

In October 2002 the National Farmer’s Union of Scotland chose to target Diageo in a protest against the price paid for malted barley, claiming that the price paid to farmers accounted for only 7.5p in a bottle of whisky, and that an increase of one penny per bottle would produce a further £20 per tonne,58 while in 2003 the money farmers were receiving was still lower than the cost of production.59 Peter Smith of Diageo described himself as 'mystified' by the accusations, while Scotch Whisky Producers Association spokesperson Campbell Evans protested that the NFU was responding to a 'wider problem within agriculture,' and protested that the whisky industry could not 'control the weather and world prices;'60 in other words, while marketing ‘Scotch’ whisky, the only factor in selecting suppliers could be cost.

International Supply Chain labour standards

Diageo has produced a 'Statement of Intent' on its ethical standards in international deals with suppliers, which promises to take its responsibilities 'very seriously',61 but a recent independent report into supply chain labour standards produced a different picture.62 Although Diageo came out as a leader against other companies in the beverage industry, this sector had one of the lowest scores overall,63 and a vast majority of the companies surveyed were found to be inadequate, even though the only data used was their own publicly-available reported information.64 Although Diageo has a code in place with regards to labour standards, this was described as weak, not referencing all the core conventions of the International Labour Organisation (ILO).65 It scored 0 in the 'Management' and 'Stakeholder Engagement' sections of the survey. In other words, it doesn't privilege ethical standards at a high enough level of the organisation, or offer training on this issue to buyers and sellers, and nor does it give unions adequate scope for involvement in decisions over issues such as working conditions.66 Perhaps more worrying, Diageo's score is very low in the auditing and reporting section, so that there is no guarantee that the code responds to anything in reality.


Diageo in Africa

Diageo enjoys huge economic clout in many areas of Africa. Not only does the continent provide 10% of their annual profit, and an area of 'phenomenal growth',67 but the concentration of wealth is such that their subsidiaries are frequently among the very top companies listed on local stock markets. In Kenya for instance, over 50% of the national market is controlled by just five companies, all of which are owned by multinationals, including Diageo.68 Since national industries were privatised and opened up to foreign capital, the market in branded alcohol has been more or less carved up between Guinness, Heineken and South African Breweries. In Nigeria around three quarters of the regional and state owned breweries foundered in the 1980s, leaving Guinness, and the Heineken-controlled Nigeria Breweries competing for top position.69 As well as their ability to buy out competition in the form of smaller national companies, this stranglehold may also in part have been achieved by a marketing strategy which seems to pervade all areas of public life and to seek to demonise non-branded alcohol as illicit and dangerous. With such financial power, Diageo seems in a position to exercise huge influence on public policy, with regards to alcohol, environmental and labour regulation, and more over-riding economic issues.

In addition to the disproportionate influence Diageo wields by virtue of its sheer size, it has a more direct impact on public policy. In 2003 it was one of the prime sponsors of, and provided speakers for a meeting of the Commonwealth Business Council (CBC) in Abuja.70 This forum was held directly before the meeting of the commonwealth heads of government, and the CBC made its intentions quite explicit, referring to it as a 'unique opportunity' for delegates to 'network', contribute to policy recommendations, and influence 'the debate on important trade and investment issues.'71 The agenda of the CBC is equally clear and predictable: it's pre-Abuja recommendations for instance, called consistently for public services to be 'liberalised' while 'burdensome environmental, health and safety regulations' were to be avoided.72

Diageo was also a member of the Business Contact Group set up to give business input into Tony Blair's Commission for Africa in 2004-2005. The outcome of the Commission for Africa were predictable, calling for Africa to embrace liberalisation and for the continent to make itself more attractive to foreign investment through developing its infrastructure.(See Corporate Watch report, 'Bringing the G8 Home: Corporate Involvement in and around the G8 in Scotland 2005).

Diageo in South Korea

The financial times reported in 2007 that Diageo had lost it's import licence to South Korea. The firm was found guilty of selling alcohol to unlicensed suppliers and fined Won290m ($313,000). Diageo and Pernod Ricard are being further investigated in the country for allegedly holding slush funds to be used for bribery while police are said to be investigating the sale of promotional items at four and five times their value. The charges are being taken seriously by the authorities. Diageo said that they had a problem with a few members of South Korean staff and steps had been taken to ensure this would not happen again. They also described the fine and investigation as "Diageo said it would be able to reapply for an import licence in six months and that the fine and extra costs of paying a third-party distributor would not be material to its earnings" [59].

Philanthropic projects

As well as bragging about its business successes, Diageo's literature tends to use Africa as proof of its philanthropic credentials. Diageo's Corporate Citizen Report 2004 'Focus on Africa' talks very little about breweries, and a lot about hospitals, literacy programmes, water projects, and of course HIV.73 It seems almost churlish to be critical of anyone addressing such basic needs, and yet with a healthy dose of scepticism we see a different picture. For a start, according to an admittedly very rough estimate, Diageo donates only 0.078% of annual turnover to worthy causes,74 and for a second, it can seem that the initiatives are chosen to maximise publicity and minimise investment. In Kenya and Nigeria for instance Diageo subsidiaries provide scholarships for small numbers of individuals to attend university, especially to study business, and in South Africa Guinness UDV presents a yearly award to the best literacy centres.75 Such schemes are an excellent way of increasing the prominence of Diageo's brand, inducing brand loyalty, and providing future recruits, but sponsorship for individuals doesn't increase the total number of places available, and pouring more funds on successful institutions doesn't help those which are under-resourced and struggling. Diageo is often cited as a leading socially responsible corporate citizen because it provides free drugs to HIV-positive members of staff. However this seems rather an inadequate counterbalance to the well-documented role alcohol has to play in the spread of HIV.76 In addition, the epidemic has reached such devastating proportions that is in business' direct economic interests to address it.77

Far more damningly however, an article in The Guardian in November 2003 suggested that, at that stage at least, Guinness Nigeria had not actually implemented the drinking water projects which were boasted of on the website, and by Gabriel Nkanang, then the external relations manager. The company's water engineers when questioned said that they had not heard of any boreholes being drilled, and when questioned, Nkanang replied evasively that 7 of the 10 projects were in fact 'at the planning stage'. Similarly, after weeks of media coverage senior spokespeople for Guinness Nigeria seemed to know nothing of the provision of anti-retrovirals for HIV positive staff, and claimed that none of the then 3000-strong workforce were infected, and that therefore the issue was irrelevant.78 It is interesting that nearly two yeas later the web-based project description for the Water of Life programme in Nigeria doesn't seem to have been updated, the wording is exactly as it was when Rory Carroll quoted it, referring to the project as having been 'launched', and talking of how Guinness 'will' work with local organisations.[60] Searching the local press on the internet has revealed a number of contradictory stories as to the locations of future boreholes, but nothing to suggest that any had been completed since the one in Benin, which had already been operating by 2003.80 While there is no evidence that Diageo does not intend to ever put its promises into practices, such delay seems rather contradictory to the 'integrity' which the company lays claim to.81

Marketing

The marketing of alcohol is of course the familiar area in which Diageo poses as the solution to a problem of which it is such an obvious part. There is nothing unique to Africa about Diageo's paternalism here: as in the UK, they have been training bartenders in 'responsible serving', publicly sponsoring campaigns against drink driving, and supporting 'programmes to educate consumers'.82 What is extraordinary however is the 'creativeness' with which the company has sought new territory for advertising. In part this is about targeted sponsorship. Guinness Nigeria backs events aimed at the young and wealthy, such as beauty contests on university campuses, essay writing competitions for schools, and radio shows devoted to questions and answers on particular brands. This reaches its climax in the superhero Michael Power, whose image has spilled over from billboards to mini adventure series on radio and television, which do not need to market products as such, but simply focuses on his personal qualities of strength, virility and moral responsibility.83 The 2003 film 'Critical Assignment' was celebrated in reviews as 'Africa's very own James Bond'84 and a testimony to the 'maturity of African films'85, but it is in fact tantamount to a feature long advert for Guinness, produced by the company and starring Power as its hero.

The competition which Diageo is fighting against is often not rival corporations: a majority of alcohol consumed comes from the so-called 'illicit' sector. Across Africa, beer is traditionally brewed from millet, maize or cassava as a small scale commercial enterprise, often by women. The company's agenda comes through very clearly from the 2004 Corporate Citizenship Report for East Africa which has a virulent attack on unbranded alcohol, which, they claim, can pose severe 'health and social risks.'.86 Interestingly enough, even a report commissioned by ICAP, an organisation itself sponsored by Diageo, reported that so-called 'illicit' brew is generally safe and of good quality,87 as well as providing an important boost to the household and local economy.

For further information about Diageo's practices in Africa see the separate 'Environmental damage' and 'Unions and labour' sections.

Environmental damage

In 2004, Diageo missed its targets for reduction of energy use, greenhouse gas emissions, and liquid effluent. It set 2007 targets for energy use at the same level as the missed 2004 target ,and set a more conservative target for 2007 than the missed 2004 target for greenhouse gas emissions. Diageo achieved its 2004 targets for water used and solid waste landfilled, though these still constituted an increase both in total supply and in relative level (refer to Diageo's Corporate Citizenship Report for details of these figures).88 According to Ethical Consumer magazine, in 2000 Diageo failed to meet its targets for reduction of raw materials and emissions, and set conservative targets for the future, which it succeeded in meeting most likely due to output reduction, with emissions relative to output making little progress.[61]

Why water?

It is interesting that water is Diageo's prime chosen area for charity given that, yet again, the company is a far bigger part of the problem than it is of the solution: breweries are frequently listed among the worst pollutants and biggest consumers of water, especially in Africa. Until new treatment plants were installed, Uganda Breweries was taking water from the national supply, and then discharging effluent and broken glass into Lake Victoria at levels which exceeded the recommended limits often by ten times or more.90 This is no isolated incident. In 2003 the executive director of the United Nations Human Settlement programme complained that Kenya Breweries was consuming nearly 6% of the total water supply for Nairobi City.91 A report into water pollution in East Africa held Tanzania Breweries, (partly owned by Diageo,) largely responsible for the fact that the Msimbazi River was so polluted as to be 'practically devoid of life.'92 The irony is complete when we learn that in Malaysia, Diageo have been sponsoring educational handbooks on integrated river mouth management,93 a gesture which, interestingly enough, came after the company had been fined for discharging effluent into inland water in the area.[62]

Genetically Modified products

The chocolate in Haagendazs Ice Cream (Haagendazs UK is one of Diageo’s subsidiaries) contains GM soya lecithin; in addition, some varieties contain corn syrup which may contain GM.[63] In 1999 Diageo was one of a number of companies targeted in a shareholder anti-GM campaign.[64]

MAI - Promoting Unjust Trade Rules

In 1998 Diageo was involved in the negotiation of the Multilateral Agreement on Investment (MAI). The MAI was an agreement multi-national companies tried to get passed through the Organisation for Economic Co-operation and Development. The agreement was defeated by a world-wide coalition of groups opposed to the serious social and environmental consequences it was expected to have. It would have increased investment rights and the opening up of free trade in an unprecedented manner, resulting in a real transfer of power to unaccountable private corporations.

Colombia

On 8 November 2004 Diageo together with Pernod Ricard were forced to defend themselves against a suit made by the Columbian government that the companies had bypassed the heavily-taxed official state alcohol distribution networks, instead importing alcohol through drug traffickers, and companies laundering drug money and supporting terrorist groups. According to the allegations, Diageo and the other companies had competed illegally with government-owned businesses and received bribes from companies dealing with laundered funds. Diageo determined to defend itself vigorously against these allegations.[65]

Human rights

As Diageo has operations in 180 countries, it has difficulty in putting its commitment to condemning human rights violations into practice, as many of these countries are ones in which serious human rights abuses take place. In 1999 Amnesty International pointed out that Diageo had operations, and investments into establishing markets, in countries with oppressive regimes including Tanzania, Turkey, Russia, the Philippines, Mexico, Indonesia, Colombia, and Nigeria (the world's 3rd market for Guinness).[66] In 2003 the IBLF drew attention to this, suggesting that the discrepancy between the company's policy on human rights and its operations in these countries might damage the company's reputation. To guard against this, Diageo drew up a policy on human rights in collaboration with Amnesty International. Geoffrey Bush, director of corporate citizenship, suggested that there was little Diageo could do about human rights abuses in countries it operates in, beyond assisting the local economy: 'from our point of view the best thing we can do is build a brewery.'[67]

Squeezing out small businesses

In 2002, Diageo sponsored a bill in the California Assembly which would have had the effect of limiting imports of wine to a small monopoly of registered companies. This provoked a major campaign and the bill was finally blocked, but according to Michael Opdahl, managing partner of Joshua Tree Imports in Pasadena, it represented 'perhaps the greatest threat' smaller importers had ever faced, and could have been the end for local business.[68]

The Thalidomide Scandal and its aftermath

Thalidomide was a drug produced in 1954, and prescribed to pregnant women for morning sickness in the late 1950s. It was found to produce severe deformities in babies including internal deformities and missing limbs. Distillers, which was bought by Guinness in 1985, was the company which manufactured and marketed the drug in 1958. In 1973 Distillers failed to accept liability when offering compensation to victims of thalidomide, and the original settlement made by Distillers is described by the group Thalidomide UK as 'the lowest medical claim ever awarded in the UK.'[69] in 2000 this group called for a boycott of all brands owned by Diageo with the aim of obtaining full compensation for the surviving 456 British victims of the drug, who saw the no-blame compensation fund of 1973 as inadequate. In June 2000 Diageo extended the company's payments to the Thalidomide Trust.[70]

The Guinness Affair

In 1990 the ‘Guinness Four’ were convicted of trying to manipulate the price of shares in Guinness, by artificially organising widespread buying of shares to boost the share price in order to succeed in its takeover bid of Distillers in 1986. This was judged illegal by the DTI in their investigation of December 1986. Ernest Saunders, former Guinness Chief Executive, was imprisoned for 5 years, which was halved on appeal, for false accounting, conspiracy and theft. Also imprisoned were trader Anthony Parnes and businessman Gerald Ronson, and consultant Jack Lyons was fined.[71] In 1991 Saunders was released from his term on the grounds that he was suffering from Alzheimer’s disease, though he subsequently recovered from his symptoms (Alzheimer’s is incurable).[72]

Other Resources

References

  1. The World Health Organisation, World Health Report 2002, Addictive substances: Smoking and oral tobacco use, Chapter 4, WHO (Accessed: 22 September 2007)
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  5. World Health Organisation, Global Status Report on Alcohol Policy, ibid.
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[1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [33]

[34]
  1. 58 Jim Walker, president of the National Farmer's Union of Scotland, quoted http://www.lifestyle.scotsman.com/yourhealth/health_headlines_specific.cfm?articleid=6834, 29.10.02
  2. 59 http://www.bottlesuppliers.net/news/02january.php, 0.11.03, original article in the Scotsman -
  3. 60 BBC News, 'Whiskey Prices Anger Scots Farmers,' 28.10.02, http://news.bbc.co.uk/1/hi/scotland/2369567.stm viewed 15.02.05
  4. 61 Diageo website, 'Partnering with suppliers', http://www.diageo.com/download%5C3000---R139.pdf, last viewed 31.03.05
  5. 62 Insight Investment, Halifax Bank of Scotland, 'Gradient - Promoting best practice management of supply chain labour standards', http://www.gradient-index.net/GradientReport.pdf, last viewed 31.03.05.
  6. 63 ibid. p.4
  7. 64 ibid. p.5
  8. 65 ibid. p.27
  9. 66 ibid.
  10. 67 Diageo Africa, company profile, http://www.careersinafrica.com/CareersinAfrica2005Diageo.asp, last viewed 22.02.05
  11. 68 'Corporate Governance in Africa, A Study of Publicly Listed Companies' London Business School, UK, http://www.africaplc.com/typetool/uploads/main_news/docs/CGiA%20Final%20Report.pdf, last viewed 22.02.05
  12. 69 Selling booze: alcohol marketing in Nigeria. A Paper for World Health Organisation Valencia conference, 2002. Obot, Isidore S, Ibanga, Akan J. http://www.ias.org.uk/publications/theglobe/02issue2/globe02issue2.pdf. Last viewed 01.03.05
  13. 70 The Corporate Socal Responsibility Newswire Service, 'Momentum Builds for the Commonwealth Business Forum', 11.25.03, http://www.csrwire.com/article.cgi/2288.html, last viewed 25.03.05
  14. 71 Quoted by Sean Healy, 'Next on the M1 Hitlist: The Comonwealth Business Forum', The Green Left Weekly, http://www.greenleft.org.au/back/2001/450/450p9.htm, last viewed 25.03.05
  15. 72 'The Commonwealth, the WTO and the Doha Round: a compass for trade policy reform, growth and development.Recommendations of the Commonwealth Business Council (CBC)', July 2003, http://64.233.183.104/search?q=cache:RMHx4N9EHtUJ:www.lse.ac.uk/ collections/internationalTradePolicyUnit/Razeen_articles/THE%2520 COMMONWEALTH%2520AND%2520THE%2520WTO.doc+abuja+chogm+cbc+forum+influence&hl=en, last viewed 25.03.05
  16. 73 Diageo Corporate Citizenship Report, 2004 'Focus on Africa' http://www.diageo.com/citizenshipreport2004/africa.asp, last viewed 25.02.05
  17. 74 Educare, NGO as quoted by Rory Carroll in the Soociety Guardian, 'Brewing up Standards', 17.11.03 http://society.guardian.co.uk/givinglist/story/0,10994,1087123,00.html, last viewed 25.02.05
  18. 75
  19. 76 eg. International Federationof the Blue Cross: HIV AIDs and alcohol http://www.eurocare.org/bluecross/english/topic03eng.html, last viewed 25.022.05
  20. 77 Global Business Coalition on HIV/AIDS, Report of the Expert Meeting, 'The Role of the Business Sector in Scaling-up access to Antiretroviral Therapy', May 2003, p.14, http://www.kintera.org/atf/cf/%7BEE846F03-1625- 4723-9A53-B0CDD2195782%7D/Expert_Meeting_Report%202003.pdf, last viewed 21.03.05
  21. 79 Diageo website, 'Project Description: Guinness Nigeria - Water of Life in the Community, http://www.diageo.com/pageengine.asp?menu_id=0&site_id=4&section_id=21&page_id=977, last viewed 20.03.05
  22. 80 'Guinness pland borehole for Badia Residents', Nigeria News Now, http://nigerianewsnow.com/News/June04/220604_boreholes.htm, last viewed 20.03.05; Kingsley Emereuwa, 'Guinness exctends "Water of Life" to Abia Communities', This Day Online, 16.11.04, http://www.thisdayonline.com/archive/2003/06/12/20030612dia01.html, last viewed 20.03.05;
  23. 81 Diageo, 2004 Corporate Citizenship Report, http://www.diageo.com/download%5C3000---R532.pdf, last viewed 20.03.05
  24. 82 'Social Impacts', Corporate Citizenship Report 2004, East Africa Breweries Ltd. http://www.eabrew.com/content/ccrep_eng.pdf, last viewed 01.03.05
  25. 83 'Selling booze: alcohol marketing in Nigeria. A Paper for World Health Organisation Valencia conference, 2002. Obot, Isidore S, Ibanga, Akan J. http://www.ias.org.uk/publications/theglobe/02issue2/globe02issue2.pdf. Last viewed 01.03.05
  26. 84 'Africa's very own James Bond', Jo Foster, Cameroon, BBC News, 17.04.03 http://news.bbc.co.uk/1/hi/world/africa/2956043.stm, last viewed 01.03.05
  27. 85 'Critical Assignment' African Theater USA http://www.africantheaterusa.com/reviews.htm#critical%20assignment, last viewed 01.03.05
  28. 86 East Africa Breweries Ltd Corporate Citizenship Report 2004, p5, http://www.diageo.com/download%5C-9999---R487.txt.pdf, last viewed 25.03.05
  29. 87 Adam Jones, 'A New Respect for Moonshine', Financial Times 20.12.03
  30. 88 Diageo Corporate Citizenship Report,www.diageo.com/download%5C3000---R532.pdf,p.25 -viewed 25.01.05
  31. 90 'Environemtal Impacts of Trade Liberalisation and Policies for Sustainable Management of Natural Resources: A Case Study on Uganda's Fisheries Sector', Economic Policy Research Centre, Kampala, Uganda. http://www.unep.ch/etu/etp/acts/capbld/rdone/uganda.pdf, last viewed 25.02.05
  32. 91 Speech Delivered by Mrs. Anna Kajumulo Tibaijuka Under-Secretary-General, United Nations Executive Director, UN-HABITAT, United Nations Foundation Washington D.C., 11 February 2003 http://www.unhabitat.org/director/unf.asp, last viewed 25.02.05
  33. 92 'Regional overview of land-based sources of pollutionand activities affecting the marine, coastal and associated fresh water environment in the East Africa Region' Institute of Marine Sciences, University of Dar Es Salam, http://www.unep.org/water/regseas/eaf/eaf5/overview.doc+msimbazi+pollution+breweries&hl=en" class="url" target="_blank">http://66.102.9.104/search?q=cache:6Kh9UgCUQEgJ:www.unep.org/water/regseas/eaf/eaf5/overview.doc+msimbazi+pollution+breweries&hl=en, last viewed 25.02.05
  34. 93 'Project description' Guinness Anchor Berhad Brewery - Educational Handbooks for Integrated River Mouth Managment in Malaysia. http://www.diageo.com/pageengine.asp?site_id=3&section_id=10&menu_id=18&page_id=743, last viewed 01.03.05