Generating prosperity through doing good business in Africa

3 Our business approach

4 Contributing to social and economic development 6 Overview of our business in Africa 8 Integrity and good governance 9 Investing for the future

3 Core business operations and value chains 10 Supporting economic growth 12 Building inclusive businesses across Africa 14 Our leadership in promoting responsible attitudes to alcohol 16 A strategic approach to the environment and resources 18 Investing in our people and in leaders across Africa 19 Creating the environment to succeed

4 Contribution through social investment 20 Contributing to development through direct community investment 22 Diageo Water of Life

5 Advocacy 26 Advocacy – helping provide insights into Africa’s opportunities

6 Partnerships and collective action

Diageo is the world’s leading premium drinks business with an outstanding collection of beverage alcohol brands across spirits, beer and wine. These brands include Johnnie Walker, Crown Royal, J& B, Windsor, Buchanan’s and Bushmills whiskies, Smirnoff, Cîroc and Ketel One vodkas, Baileys, Captain Morgan, José Cuervo, Tanqueray and Guinness. Diageo also produces local African brands such as Tusker, Bell, and Premium Serengeti Lager. Diageo is a global company, with its products sold in more than 180 countries around the world. The company is listed on both the New York Stock Exchange (DEO) and the London Stock Exchange (DGE). Diageo’s businesses in Africa are also listed on the Kenya, Tanzania, Uganda, Ghana and Nigeria stock exchanges. For more information about Diageo and its people, brands, and performance, visit us at Diageo.com. For our global resource that promotes responsible drinking through the sharing of best practice tools, information and initiatives, visit DRINKiQ.com. Celebrating life, every day, everywhere.

28 Making a difference through collective action

30 More information

© 2011 Diageo plc. All rights reserved. All brands mentioned in this document are trademarks and are registered and/or otherwise protected in accordance with applicable law.

2

FOREWORD FROM NICK BLAZQUEZ Africa is a continent with significant growth opportunities for business. The economic fundamentals are favourable; populations are growing, GDP growth rates are relatively high, much needed infrastructure is being developed, and the political landscape is becoming more stable in many countries. However, poverty still remains a substantial issue and, as a significant company operating at scale in Africa, Diageo believes its focus on contributing to the economic and social development of the continent is integral to growing its business. The primary way we contribute to development in the communities in which we operate is through our core business activities; by employing people, building skills and capabilities, paying taxes and distributing dividends to local shareholders. We do this in a sustainable manner through, among other things, seeking to minimise our environmental impact, actively promoting a responsible approach to alcohol and operating to the highest standards of corporate governance. We create ‘value chains’ through the network of local suppliers, distributors and retailers that we have invested in and built over a long period. From farmers cultivating grain that we use to make our products, to third party hauliers, or a barperson serving one

Doing good is good for business

of our great brands, we generate opportunity and wealth for a broad spectrum of enterprise within the local economy. In addition, and in a direct response to the UN Millennium Development Goal 7, our Water of Life programme, now in its sixth year, aims to deliver access to clean drinkable water to one million people that don’t have access to it every year. And, through the Diageo Africa Business Reporting Awards, we actively encourage balanced reporting by the media of the opportunities in Africa for business, and by so doing intend to encourage others to invest and participate in the continent’s growth. We do all of this because it makes sound business sense –’doing good is good for business’. Our ability to attract and retain talent is enhanced, employee engagement scores are increased and our reputation with key stakeholders is improved. In a world where employees seek out companies which have an enduring and motivating purpose and where there is increased scrutiny on businesses at large, operating in a sustainable and transparent way provides a solid foundation on which to grow our business. It is encouraging to see that the partnership between the private sector, public sector and civil society is increasingly being recognised as critical to accelerating development, alleviating poverty and creating broader-based wealth. There are many opportunities for further collaboration which will lead to even greater impact. Governments and donors might encourage increased trade through building local capacity, improving infrastructure, removing tariff and non tariff barriers, or creating balanced local tax environments to encourage further investment. NGOs, donors and development agencies might seek to leverage the opportunities that business provides such as technological development in the agricultural sector or in fighting the ongoing battle with HIV/AIDs. Moreover, businesses might continue to increase investment to drive growth and create wealth, sourcing more locally, building skilled labour forces, and encouraging others to invest. This report summarises our activities in Africa and demonstrates the increased importance we place on unlocking shared value and creating broad-based prosperity. We aim to integrate this approach even more into the way we run our business, and by so doing, to bring to life Diageo’s purpose of ‘celebrating life, every day, everywhere’.

Nick Blazquez President, Diageo Africa

3

OUR BUSINESS APPROACH

contributING to social and economic development in Africa We have enjoyed good growth from our businesses in Africa as a consequence of the opportunities that Africa provides and through continued investment into our brands, our people and our supply base. We take a holistic approach to measuring our performance with particular focus on our financial results, the equity of our brands, our skills and capability and how we contribute more broadly to the communities in which we operate. The primary way in which we contribute to our communities is through doing business – providing employment, building local capability, developing local supply chains and paying local dividends and taxes. Developing local supply chains and ‘inclusive businesses’ makes good business sense. It helps build stronger economies, networks of enterprises throughout our value chain and more prosperous communities. The private sector has a vital role to play, through working in innovative partnerships with government and civil society to drive shared value for all.

As a leading pan-African business, Diageo makes a real and sustainable contribution to economic and social development, as reflected in the United Nation’s paper: ‘A Global Compact for Development’.

GENERATING AND DISTRIBUTING WEALTH, AND BUILDING HUMAN CAPACITY THROUGH OUR CORE BUSINESS OPERATIONS Through doing good business we make a direct contribution to the economies in which we operate, through the jobs we create, the significant tax contributions we make to governments and the dividends we pay to over 100,000 local shareholders. Diageo recruits talented and diverse people and runs extensive programmes to develop human capacity at all levels (building key skills, sharing best practice and leadership development).

INCLUSIVE VALUE CHAINS AND BUSINESS MODELS From the 100,000 local farmers across Africa that supply us with sorghum or barley, all the way through to small local distributors and retailers, many benefit from opportunities created as a result of their connection to Diageo’s operations in Africa. We believe that our approach to inclusive value chains stimulates entrepreneurship and investment, and generates significant employment. It opens access to the commercial economy and to capacity-building for agricultural and other communities.

SUPPORTING COMMUNITIES THROUGH DIRECT SOCIAL INVESTMENT We continue to invest in providing significant financial support and human resource to initiatives and partnerships which make a positive difference to vulnerable groups. For example Diageo’s Water of Life programme aims to enable access to potable water to an additional 1 million people in water stressed areas across Africa every year.

ADVOCATING FOR A FAIR, TRANSPARENT AND VIBRANT BUSINESS ENVIRONMENT We share our experience of doing business in Africa at local, regional and international level to encourage long-term investment, higher standards of governance, greater resource management and high quality business reporting on Africa. For example, the Diageo Africa Business Reporting Awards were inaugurated to recognise and celebrate balanced business reporting on Africa in the media.

4

in numbers

40 Africa countries where Diageo brands are sold

170 Diageo water projects in Africa

5,300

number of people directly employed by Diageo in Africa

BROAD-BASED PROSPERITY THROUGH PARTNERSHIPS A critical enabling factor in Africa’s development is leveraging the collective interests and resources of stakeholders – governments, private sector, civil society, NGOs and donors. By combining our perspectives, skills and experience, we can accelerate development through an increased level of co-ordinated interventions. These partnerships are effective through traditional collaborations

where each party contributes to achieving a unified goal – whether it be funding, operational expertise or access. Partnerships are becoming increasingly more innovative, replicable and scalable, and, importantly, are focused on delivery and outcomes. The private sector has a critical role in catalysing impactful partnerships of all varieties to drive greater, sustainable prosperity for all.

100,000 number of farmers from which we source cereal inputs

4.8 million number of people who have access to clean water through Diageo Water of Life (approx)

1.3 billion 2011 net sales (GBP)

Being a good corporate citizen in the developing world is about businesses partnering with society to create sustainable solutions to the challenges which face us. Through doing good business, Diageo generates broad-based wealth for communities across Africa. Paul Walsh, CEO Diageo and Chair of the Corporate Citizenship Committee

5

OUR BUSINESS APPROACH

OVERVIEW OF OUR BUSINESS IN AFRICA

Our scale, outstanding brands and great relationships have helped Diageo Africa consistently produce strong results. Over the six years to June 2011, Diageo’s business in Africa has doubled with net sales reaching over £1.3 billion. Africa represents Diageo’s largest group of emerging markets in terms of net sales. The consistency of Africa’s growth has made the region increasingly important to Diageo’s overall performance. With strong underlying demographics and favourable economic indicators, we know that more African consumers will aspire to quality premium branded products. We are committed to continuing to invest in both the demand and supply sides of our business. We will continue to unlock efficiencies and innovate throughout the value chain to ensure both Diageo, and the communities in which we operate, benefit from sustained profitable growth. Diageo employs over 5,300 people in Africa (one in four of Diageo’s total workforce worldwide) and many more indirectly through the production, distribution and promotion of our brands. In 1963, the first major overseas brewery for Guinness was built to brew Foreign Extra Stout in Lagos, Nigeria.

Net sales*, £m 1500 1250 1000 750 500

F07

F08

F09

F10

F11

* Year ended 30 June 2011. Net sales are total sales excluding excise duty.

6

Diageo Africa net sales by category*

local management The way we operate reflects the diversity and opportunities of the continent. We have a fit-for-purpose approach dependent on the makeup of the market.

24%

* Year ended 30 June 2011 excluding CSDs

In high priority markets, we have built our own businesses with distribution access to trade channels, enabling us to invest directly in the growth of our brands. These are truly local businesses, managed by local leadership teams, creating long-standing relationships with public institutions, authorities, communities and our customers and consumers. Some of these businesses such as Guinness Nigeria plc, Guinness Ghana Breweries Ltd and East Africa Breweries Ltd are listed on local stock exchanges, stimulating capital flows and creating value for local shareholders. We continue to look to establish our own in-market presence in countries that offer opportunities for growth.

Today, while Guinness remains at the heart of our business, our range of brands and geographic reach has expanded and our supply presence has grown to support it.

In other markets, we partner with a strong local business through licensing our brands or through third party distributor agreements. This is the way we will benefit from local insights, knowledge and distribution.

43%

6%

27%

Lager

Spirits

Guinness

Ready to drink

Diageo in Africa is comprised of 13 breweries, one of which is with our joint venture in South Africa. In addition we brew beer with third party operators in 16 other African countries. We own 15 bottling plants, a glass manufacturing facility, and one maltings facility. We sell over six billion drinks per year (with one drink equivalent to one 33cl bottle of beer or a 25ml measure of spirits).

Our long history in Africa, our local partners, and the experiences we bring from other developing areas in the world enables us to adapt to volatility and changing market conditions.

OUR BUSINESS APPROACH

Every day Diageo’s brands are enjoyed in many countries across Africa. We are proud of our history on the continent, with the first recorded exports of Guinness to Sierra Leone in 1827. Over 180 years later,

Guinness is now a truly pan-regional premium beer brand, brewed in over 20 countries and exported to many others. Through our local businesses, we also produce and sell a range of local African beer brands including Tusker, Senator, Serengeti Premium Lager and Bell. Beyond beer,

Diageo is the number one premium spirits company in Africa with leading brands in their categories, including Johnnie Walker Scotch whisky, Smirnoff vodka, Baileys and Gordon’s gin. We also produce a small number of non-alcoholic carbonated malt-based drinks including Malta Guinness and Alvaro.

1in 4

of Diageo’s total workforce worldwide is employed in Africa

Listed on local stock exchange

Listed on Nairobi, Uganda and Tanzania stock exchanges

Listed on local stock exchange

Subsidiary Associate License Brewing

Fully owned subsidiary

Joint Venture with international brewers

Third Party Distributors

7

OUR BUSINESS APPROACH

Integrit y and good governance

At the core of our business and our values is the commitment to being one of the world’s most respected companies with an earned reputation of integrity, fairness and trustworthiness. This is critical to our employees, our commercial success, long term sustainability and the fulfillment of our purpose to celebrate life every day, everywhere. To this end we apply rigorous international standards to governance, defining industry-leading codes for marketing and we actively promote and protect human rights and freedoms in everything we do. Diversity is valued and celebrated throughout Diageo’s businesses across Africa creating an open, empowering and safe working environment for all. In order to provide a practical guide to compliance and ethics, the Diageo Code of Business Conduct is designed to help translate Diageo’s values and principles into actions and responsibilities for the daily activities of our employees. The Code is supported by comprehensive mandatory training programmes. Building on this training, every one of our employees in Africa is given the opportunity to attend a ‘Pathway of Pride’ workshop. These events aim to provide a forum for sharing experiences and ideas, to help answer questions around the interpretation of the Code and Diageo policies, and foster an environment of personal accountability and integrity.

8

In addition, in the past year we have: • Created a network of compliance and ethics ambassadors • Reviewed our approach to corporate governance in light of changes in the UK regulatory environment • Reported more fully on governance and ethics, including reporting breaches of our Code of Conduct.

Our employees are also supported through ‘Speak Up’, an independently run, confidential contact where employees are able to report any concerns, potential issues or breaches of the Code or policies that they do not wish to raise directly with their line managers.

Anti-corruption initiative in Cameroon

In February 2011, Guinness Cameroun was one of the leaders behind the launch of an idea to establish the ‘Business Coalition against Corruption in Cameroon’. This is an unprecedented anti-corruption initiative, with over 120 participants representing 60 private companies, public sector services and civil society organisations. Together in partnership with Transparency International, and the Government of Cameroon, we joined forces to make a symbolic stand against corruption. Participants spent a day together to learn about the Cameroon anti-corruption system, and the important role that the private sector has to play in the fight against corruption. Workshops were held to increase understanding of the steps needed to prevent malpractices and to create a

pathway of integrity within organisations using the ‘six steps approach’ of Transparency International. The Coalition continues today, facilitating training programmes to help organisations and companies embed core values such as respect for the rule of the law, probity, accountability, integrity and transparency. Together we are committed to supporting organisations to practically and consistently embed ethics and compliance principles in their day to day business, by creating a platform for public bodies and private companies to combat corruption together. Full texts of our Code of Business Conduct and other Diageo policies are available on www.diageo.com

OUR BUSINESS APPROACH

Investing for the future

As we expand our total business in Africa, the opportunity to shape our industry’s evolution grows.

sales capability enabling us to react quickly and provide resource and supply when and where necessary. Our sales processes are now the most automated in Diageo.

Diageo’s supply business is truly global and designed to be able to get product to market quickly, effectively and efficiently. In Africa, growing consumer demand for our products requires investment in facilities so that we can meet our customer and consumer needs. Many of our new construction projects involve state-of-the-art technology and we aim to be as impact neutral as possible on the local environment. The construction and operation of our sites are also a major source of employment. Diageo has recently dedicated significant investment in building capacity in Nigeria to support the growth of Guinness, Harp and Smirnoff Ice, in bottling facilities at our brewing site in Kenya, in developing further brewing facilities in Tanzania, as well as in building our supply platform in South Africa.

We are committed to investing behind our brands and building our businesses in Africa. We will continue to exercise global best practices in sales, supply, marketing and management, optimising new technologies and transferring knowledge and skills to our talent base in Africa.

The focus of our sales function is to build great working relationships with customers and distributors in order to deliver greater value for all, and we invest in rolling out common selling practices and building capability throughout the sales network. This includes automating a great proportion of our field

The Platform for Growth process has made my business more profitable. I now have a road map to even more profitability in my business Chief Dr. Nnamdi Okafor, CEO, EDDINHO Nigeria Ltd, (Guinness Distributor)

Platform for Growth – Investing in our customers As Africa progresses, so the customer environment is changing rapidly, as the formal off-trade (for take home consumption) develops and global retailers start to participate. Critical to our growth therefore is customer development. Approximately 90 per cent of Diageo Africa’s net sales are delivered by our 550 distributors and wholesalers. Many of our distributor partners are small, family businesses that are working to extend their

networks. Our world class ‘Platform for Growth’ programme supports our distributors by rapidly and sustainably increasing their capabilities in key business areas, including (but not limited to) P&L management, sales techniques, supply and demand planning and health and safety. Over 100 distributors in more than 10 countries joined ‘Platform for Growth’ in fiscal 2011, it is a rollout that is happening at scale and at pace, increasing revenues for both our distributors and Diageo.

Diageo has recently dedicated significant investment in building capacity in Nigeria to support the growth of Guinness and Harp

9

CORE BUSINESS OPERATIONS AND VALUE CHAINS

Supporting economic grow tH • D  oing good business is good for the economy – our biggest contribution as a private sector leader is through wealth creation and distribution, as an employer, as an investor, as a revenue generator and taxpayer • O  ur positive economic impact is broad and sustainable as we continue to develop inclusive value chains across Africa • Local investors are able to participate in our growth through local listings Diageo significantly contributes to wider economic growth through providing direct employment but also by building skills; by manufacturing goods from local raw materials; by collecting and paying taxes, raising foreign exchange and distributing

Local businesses become more empowered and sustainable wealth is created 10

dividends; and by stimulating local capital market development and investment. Demand for our brands creates economic opportunity for many other businesses in our value chain – in agriculture, manufacturing, services, distribution and retailing. Our employer impact extends further than our directly operated businesses – we estimate a 1:20 direct to indirect employment ratio in Africa.

The popularity of our African brands around the world mean there is an increasing opportunity to export products, generating further brand awareness and, more importantly, stimulating greater consumer demand and production levels. For many markets which are skewed heavily towards import models, this provides a means of raising important foreign exchange. The payment of excise remittances and corporate tax represents a large segment of value added in Africa, and in many markets we are the biggest private sector contributors to government income. In fiscal 2011, Diageo paid £500 million to African governments in taxes. In Kenya alone, EABL’s contribution constituted over four per cent of total government revenue. In addition to our direct contribution, our businesses pay other taxes such as local and business taxes; our consumers pay sales taxes such as VAT; our employees and investors pay income

CORE BUSINESS OPERATIONS AND VALUE CHAINS

HELPING FACILITATE GREATER INTRA-REGIONAL TRADE As a company operating at scale, Diageo has a large production footprint across its African markets. Beverage products manufactured in one state have for many years been exported to other countries for consumption, and raw materials are imported from one state to another. The company therefore promotes intra-regional trade by creating demand for cereals and other industrial inputs, as well as its products. We have for many years been at the forefront of promoting intra-regional trade, and have done this directly through cross border trade and by giving institutional support to government agencies. While the streamlining of tariff barriers at borders will go a long way to foster sustainable enterprise development, we also believe that a thriving regional

taxes; and our suppliers and customers pay corporate taxes which arise as a result of the business we generate in these companies. Fair systems and levels of tax are an important topic for our conversations with governments as are other issues that impact our business such as barriers to free market access, the regulation of the market for alcohol beverages, community programmes, national alcohol policies and responsible drinking campaigns. Diageo has majority shareholdings in four publicly listed businesses with over 100,000 local shareholders. The shares of these companies are publicly traded and, in the majority of cases, dividends are paid every year creating a source of income for local investors.

Approximate number of local shareholders as 31 Dec 2010 Guinness Nigeria plc

74,000

East Africa Breweries Ltd

27,000

Guinness Ghana Breweries Ltd

5,000

Seychelles Breweries Ltd

1,300

business environment can be enhanced through the harmonisation of certain domestic taxes, including excise tax. In East Africa, for example, EABL regularly engages stakeholders in both the private and public sector to harmonise domestic tax regimes in the region as prescribed in the Treaty on the Establishment of the East African Community. Often the biggest barrier to intra-regional trade is the administrative measures taken by governments and imposed on trade. As a big importer and exporter, Diageo has on numerous occasions been confronted by these barriers. The company frequently promotes trade through identification and reporting of non-tariff barriers, working in close collaboration with national trade bodies to establish workable solutions.

local enterprise development Enterprise development within our value chain plays an important role in stimulating local private sector growth. In Uganda and Kenya, EABL has developed a Distributor Financing Scheme which provides our distributors with financial support from EABL’s partner banks as well as financial management solutions that enhance their cash flow cycle efficiencies. The benefits on offer include access to working capital, increased liquidity, improved cash flow and an increase in their sales helped by access to the distributor network. Micro-financing for SMEs (small and medium enterprises) not only incentivises and rewards great business acumen and entrepreneurialism, it acts as a critical link between our business and the community. We also provide training for business partners

in our value chain. For example, EABL has partnered with Jomo Kenyatta University of Agriculture and Technology to establish the Tusker Academy. The Academy provides entrepreneurial training to small and medium-sized enterprises in the distribution, retail and customer service sectors. We want to be a business partner that provides valueadded services beyond our core business and believe this a critical factor in generating long-term prosperity. As we rely upon more services from other businesses directly associated with our core operations, so the value chain extends, local businesses become more empowered and sustainable wealth is created. This process is self-perpetuating and our collective ways of working become more integrated.

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CORE BUSINESS OPERATIONS AND VALUE CHAINS

Building inclusive businesses across Africa • T  he private sector can make a meaningful and positive impact to socio-economic growth in Africa  e see a common advantage in collective development, sharing • W learnings and experiences and investing in capabilities We have a strategic and commercial interest in establishing meaningful, long lasting collaborations with broader society, while investing to establish profitable and equitable environments. Business can effectively engage lower income segments of the population across the value chain. Diageo engages through

employment and through collaboration with suppliers and service providers by working with them to increase their business efficiencies. Diageo’s value chain stretches from ‘grain to glass’ and clearly beyond in many cases, and we look to partner with those economically affiliated with our business. Whether it is working with farmers to source cereal inputs, or building business skills in our wholesaler and distributor network, or investing in training for bartenders on service and responsible drinking, our economic impact becomes greater and more sustained.

We strive to engage and communicate with stakeholders, using constructive dialogue focused on achieving combined success. This also relies upon us developing and maintaining a mutual framework of transparency and governance focused on adhering to high ethical standards. Inclusive business is increasingly a sustainable way of addressing some of the challenges linked to poverty. By catalysing enterprise development through our value chain, Diageo can have a far-reaching and longlasting impact on social security, civil stability and economic growth.

LOCAL RAW MATERIAL FOOTPRINT For the year to June 2011 Number of individual farmers engaged by Diageo

Acreage (Ha)



Tonnage of cereals (MT)

KENYA 10,000 35,000 68,000 (farming) + 3,500 (locally sourced) UGANDA 4,600 2,700 2,200 (farming) + 5,200 (locally sourced) TANZANIA 15 2,400 2,600

12 12

GHANA

NIGERIA

CAMEROON

7,000

80,000

1,750

TOTAL

3,000

70,000

1,900

103,365

5,500 (farming) + 2,000 (locally sourced)

51,400 (farming) + 20,000 (locally sourced)

2,000

115,000 162,400

LOCaL SOURCING Local sourcing is a well established inclusive model that benefits the end-to-end supply chain. As well as providing education, investment and a sustainable source of income for small scale farmers and rural communities, local procurement acts as a catalyst for local supply chains, stimulating small businesses and broader opportunities for operators. We source locally where possible to support farmers and stimulate local economies. We aim to source 65 per cent of our raw materials in Africa locally by 2012 (a 30 per cent increase from a 2007 baseline).

from unexpected increases in commodity prices and reduce the overall price of raw materials. Diageo had already had success with grain import substitution programmes in Uganda, Ghana, Kenya, Sierra Leone and, most notably, Nigeria. Drawing upon these experiences, Guinness Cameroun developed a programme to support the development of the local agricultural infrastructure. The project was co-founded by Diageo and the Africa Enterprise Challenge Fund – a vehicle designed to catalyse private sector-led development and supported by governments of the UK, Australia and the Netherlands.

Case study In Cameroon, Diageo saw the advantage of investing in the local sorghum supply chain as a way to insulate its local brewer

Launched in 2008, the programme provides smallholder sorghum farmers in the main sorghum-growing regions in northern Cameroon with access to

improved seed varietals and agricultural inputs, hands-on agronomic training and advice, and support in the development of storage and transport infrastructure. Farmers participate in training sessions to learn about inexpensive but sustainable techniques of improving soil fertility, water absorption, preventing soil erosion, and controlling pests and disease. In addition, Guinness Cameroun is working to develop long-term storage and transport systems to facilitate the movement of sorghum from the north of the country down to Douala.

We estimate a 1:20 direct to indirect employment ratio in Africa. 13

CORE BUSINESS OPERATIONS AND VALUE CHAINS

Our leadership in promoting responsible at titudes to alcohol • W  e take a leadership position in promoting responsible consumption and marketing our products responsibly, engaging with governments and our trade channels to further endorse our messages • W  e are committed to setting industry-standards and working with governments to develop and implement balanced and effective policies to encourage consumers to make responsible choices around their consumption of alcohol

Drinking alcohol has been part of the social and cultural life of communities throughout Africa for centuries. As the world’s leading premium drinks company, Diageo is proud of our heritage, our brands, and the positive role which alcohol plays in the social lives and celebrations of many African cultures. But we know that some people – albeit a minority – drink too much, and can cause harm to themselves, to others, and to their communities. The social consequences of alcohol misuse are a matter of significant concern to a responsible company like ours. It is not in Diageo’s interests that our reputation, and the reputation of our brands be tarnished by irresponsible drinking. It is bad for business. For these reasons we want to play an active part in tackling alcohol misuse in partnership with others. Changing attitudes and behaviour on the scale required will take time and commitment from multiple stakeholders including governments and law enforcers, and NGOs, as well as individual consumers and their friends and families. Of course everyone who makes, markets and sells alcohol also has an important role to play.

Fit for purpose programmes There is not a one-size-fits-all solution to address alcohol misuse across such a diverse geography as Africa’s. We therefore tailor our programmes according to local issues and the needs of our consumers, customers and stakeholders, typically addressing issues related to drink driving, underage drinking, and over-consumption of alcohol. Whatever our approach, we believe in working with others. The WE ID age verification scheme launched in Kenya in 2007 and in Uganda in 2010, has successfully trained over 700 outlets and their bartenders with the skills to determine underage consumers and apply the ‘proof of age’ check before serving their customers. We have developed campaigns in South Africa, Nigeria, Kenya and Ghana to address the issue of drink driving.

Alcohol policy development in Africa We are committed to working with governments to develop balanced and effective policies to address alcohol misuse. As an industry leader across the continent, we believe that judicious and effective steps must be taken to reduce the harmful use of alcohol. To date Diageo has implemented numerous programmes across Africa to help curb excessive consumption and to raise awareness

14

and educate consumers about responsible drinking. We believe that transparent dialogue between government and the industry, third parties and organisations like the International Centre for Alcohol Policies (ICAP) can provide useful insights and a strong base for developing effective policies to tackle alcohol misuse. The World Health Assembly recently adopted a global strategy aimed at reducing the harmful use of alcohol. The World Health Organisation (WHO) Africa region is developing an equivalent strategy for Africa, acting as a catalyst to influence the development of national alcohol policies. Illicit alcohol consumption and brewing is a growing concern across many parts of the continent. Rather than simply increasing tax levels or clamping down on opening hours for legitimate outlets, the WHO strategy for Africa represents an opportunity to encourage governments to develop more innovative approaches to formalise the sector, improve

Nigerian musician Tuface Idibia signs pledge not to drink and drive

CORE BUSINESS OPERATIONS AND VALUE CHAINS

safety and regulation while also improving education about the harmful effects of illicit brews (see page 29: Senator Keg). Across Africa, work continues to support the implementation of rational alcohol policies. In some cases, the work has been led by the relevant Ministry of Health, in consultation with the WHO and other stakeholders, including trade associations. The countries in which this work is taking place include Ghana, Kenya, Namibia and Uganda. We welcome these developments and remain committed to working with governments, civil society, and others in these countries to reduce the misuse of alcohol.

Self-regulation We produce, market and sell our brands responsibly and are committed to promoting responsible decisions about drinking, or not drinking. • The Diageo Marketing Code (DMC) is our mandatory global minimum standard for all marketing practices. In addition Diageo has developed a Digital Marketing Code to cover all issues related to marketing in the digital world.

• The Diageo Digital Code of Practice on-line facility is a new resource for use by Diageo and our third-party suppliers in the digital marketing area. We are committed to ensuring that our employees understand the nature and effects of alcohol. We believe that our employees are our ambassadors and can contribute to our reputation by showing a responsible attitude to drinking. To this end we provide communication and awareness programmes for all employees.

.com DRINKiQ.com is Diageo’s responsible drinking website and houses information on Diageo initiatives to promote responsible drinking and combat alcohol misuse, nutritional information about Diageo brands, a resource library showcasing responsible drinking resources from other interested parties around the world, and a responsibility channel. In addition to the global site, there are 18 specific country sites in eight local languages.

Brandhouse ‘Drive Dry’ campaign In 2009 we conducted extensive consumer research throughout South Africa, gauging consumers’ attitudes towards drinking and driving. The insight gained was that most people believed ‘It won’t happen to me’. This gave rise to the creation of the brandhouse Drive Dry campaign. Adopting the ‘It won’t happen to me’ tag line, the Drive Dry campaign aims to provoke thought around the issue in a hard hitting way. By showing

that it can in fact happen to them, it aims to discourage consumers from drinking and driving. The campaign message is conveyed through television, cinema, outdoor and radio. To date, Drive Dry has been well received by public and a recent survey indicates that consumers are very aware of it and the message it carries. Visit the Drive Dry website at www.drivedry.co.za

15

CORE BUSINESS OPERATIONS AND VALUE CHAINS

A strategic approach to the environment and resources • C  limate change, food security and poor infrastructure are big issues in Africa – we have a responsibility as a leading business to strategically minimise our resources, risks and impacts • W  e are answering the call to action to address water scarcity by driving measurable change through sustainable water management, direct community involvement and through collective action Environmental sustainability is central to the future of our business and crucial for Africa’s sustainable development. To help us achieve our vision, in 2008 we set ourselves challenging targets for 2015. These global targets allow us to measure the progress we have made towards our vision. To achieve these targets and our vision, we embed environmental priorities in our decision making and management structures.

Water resource management Stress on water resources is a serious and growing issue for Diageo’s business globally. Water is an essential ingredient in our brands and a critical resource for our operations. However, water is also vital to our markets, consumers and local communities. These issues are most acute in Africa, where it is estimated that by 2025 50 per cent of the population will face water stress (UNEP). Water scarcity has a consequential impact on health, education and economic activity. Building on our learnings, we have developed a ‘Blueprint Water Framework’ – an integrated approach based on three platforms designed to affect substantial, sustainable and measurable change:

16

We are also aware that our impact on the environment does not begin or end at our production sites. In addition to working through our value chain to reduce our environmental impact, we seek to work cooperatively with other companies and organisations to share best practice. For example we work with BIER (Beverage Industry Environmental Roundtable) to improve standards of environmental

• Operations We endeavour to work to reduce water impacts in our production facilities and supply chains. Activity includes efforts towards improving water efficiency and decreasing water pollution across all our facilities and engaging directly with suppliers in water stressed countries where we operate to encourage more sustainable agriculture strategies. • Community involvement We will work to reduce water poverty where we operate by becoming a positive contributor to the stewardship of water resources through watershed protection and sustainable water management.

Africa’s performance against Diageo’s global environmental priorities for 2015 (against a 2007 baseline) Metric

2015 target

% change 2007–2011

Water efficiency

+ 30%

+ 20%

Water wasted at water stressed sites (m3)

– 50%

– 8%

Greenhouse gases (tonnes)

– 50%

+ 6%

Polluting power of wastewater (tonnes)

– 60%

– 2%

zero

– 35%

Waste to landfill (tonnes)

performance within the sector and we are listed on the FTSE4Good and Dow Jones Sustainability Index to benchmark our CSR performance.

Our flagship community investment programme, Water of Life, supports community based projects aimed at enabling access to clean drinking water to one million additional people every year until 2015 (see page 22). • Collective action We aim to work with others to accelerate progress on the water/sanitation Millennium Development Goals while educating consumers and stakeholders on the value of water. Positive action can be generated through the concerted efforts of our employees, consumers, customers, suppliers, NGOs, governments and other businesses through targeted campaigns of action.

CORE BUSINESS OPERATIONS AND VALUE CHAINS

For us, sustainability is about being ready for the future – planning for how the world will be in 100 years. Climate change, water scarcity, limited resources and energy prices are all going to have an impact on our business. This is why we are taking decisive action now. Paul Walsh, CEO Diageo

Tree planting in Kenya Since 2003 Diageo has spent a total of £24.5m on Effluent Treatment Plants (ETPs) in African countries including Ghana, Nigeria, Tanzania Uganda, Kenya and Cameroun. Waste water generated from our sites goes through the various stages of an ETP to be treated and made safe before discharged back to the environment. In 2011 Guinness Cameroun SA constructed the first ETP of its kind in Cameroon. The plant now treats all liquid effluent from the brewery, removing all contaminants, and enabling the brewery to dispose of liquid waste safely and without damaging the surrounding environment or water supplies. Earlier this year, during an environmental forum that brought together renowned multinational enterprises and NGOs, Guinness Cameroun’s plans for the effluent treatment plant were recognised as a practical example of worldclass standards in environmental protection. These types of investment demonstrate our commitment as a business to operate responsibly and sustainably. Download Diageo’s Environmental brochure from www.diageo.com

We encourage our employees to be actively involved in environmental conservation in Africa. In Kenya our ‘E-Green Team’ is focused on tree planting as a way of restoring and protecting the environment. Employees are regularly involved in planting indigenous trees in areas where deforestation is evident, as well as helping to educate the community on the importance of trees and their preservation. Since 2006 over 760,000 tree seedlings have been planted by the team.

Reducing waste to landfill in South Africa Isipingo, a Diageo spirits facility in South Africa, is well on its way to achieving zero waste to landfill. The site was the first African winner of our GREENiQ medal, our global internal environmental engagement programme. Between 2008 and 2010 the amount of waste sent to landfill went from around seven tonnes

a month to an average of 2.5 tonnes. Packaging also represents a key area of focus for reducing our environmental impact. Our goal is for all Diageo packaging to be sustainable. During 2010, we took significant strides towards achieving this vision.

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CORE BUSINESS OPERATIONS AND VALUE CHAINS

Investing in our people and in leaders across Africa • W  e invest significantly in the development of our people and create a supportive environment to bring out the best in everyone • L eadership and the development of great leaders at every level in our businesses across Africa is a fundamental focus for Diageo  e are committed to fostering African talent, providing opportunities • W to build capabilities and grow careers for our African employees across Africa and beyond Critical to our success in Africa is our ability to attract, retain and develop the best talent. We invest in developing leadership skills and capabilities in our people at all levels to make Diageo an inspiring place to be. We continue to seek and encourage African talent, developing our African leaders through our leadership programmes, promoting Diageo as a place for new talent, and targeting the African diaspora.

Designed to create a step-change in our individual and collective leadership thinking, behaviour and performance, these programmes also aim to raise the visibility and accelerate the development of our internal African talent for leadership roles in the future. The Diageo Leadership Performance Programme is a leading edge development scheme focused on bringing

out great management skills and attitudes and connecting them with the Diageo purpose. We are also committed to the long-term sustainability of the talent pipeline and identify rising stars early. We select a proportion of our best people at more junior levels to join a 12 month programme which focuses on building self insight and skills to help manage their career, and which gives each person the opportunity to build a broader network across the business. The Diageo ‘Growing Together’ Graduate Programme combines practical and theoretical learning across a variety of disciplines. The programme, which has recruited 140 graduates since its launch in 2008, is based on a ‘real job, real accountability’ philosophy that provides graduates with authentic, stretching job experiences within our company.

Growing our leaders We know that through inspiring leadership we can cause amazing outcomes for our people, our business and our communities and have therefore continued to focus on developing leaders through a variety of internal training and career development programmes. Approximate number of employees by area 2011 Hub

100

West Africa

2,350 Southern Africa

1,200

East Africa

1,700 18

There’s a culture of building strong relationships. It makes you feel part of the Diageo family, helps you appreciate the various functions and gives you the confidence to succeed. Richard Ahiagble, graduate, Ghana

CORE BUSINESS OPERATIONS AND VALUE CHAINS

Creating the environment to succeed • O  ur values are central to the way we conduct ourselves and our business. At their core is Diageo’s common purpose to ‘Celebrate life, every day, everywhere‘  e invest to understand employee motivations and create development • W solutions for individual careers  e aim to provide a safe place to work and to promote healthy, • W responsible living Our goal is to develop amazing relationships to bring out the best among our employees, to nurture a spirit of entrepreneurship across our markets, and invest in building capabilities and skills at all levels. We encourage all of our employees to try new things, to challenge the status quo and to make things happen quickly and efficiently. Our commitment to our people is that Diageo is a place where they can realise their potential and achieve their aspirations, we create the conditions for their success, and understand the direct link between high levels of employee engagement and great business performance.

OUR VALUES

Freedom to succeed Proud of what we do Be the best Valuing each other Passionate about customers and consumers

among the very best on engagement (our overall engagement score is 85%) and we are consistently high scorers in other areas including ‘valuing each other’. Across Africa, we are committed to a Zero Harm safety culture in all of our operations to ensure that everyone goes home safe and enjoys healthy working conditions. We expect our suppliers to do likewise, conducting routine risk assessments to continuously improve health and safety standards to prevent accidents and injuries. In fiscal 2011, we had a loss time accident rate of 1.6 (number of LTAs per 1,000 employees) across Africa and two fatalities (including contractors).

Total Lost Time Accidents 140 120 100

across the business. As important as our commitment to safety is the advocacy of wellbeing and personal health. We have worked to reduce the impact of HIV/AIDS on our employees, their families and our business partners through a workplace programme, community involvement and partnerships. We support employees and their dependents affected by HIV/AIDS through counselling and testing, palliative treatment and the provision of access to anti-retroviral medicine. We also go to great lengths to encourage preventative measures to infections and illness, and have an active programme within our business to promote self awareness and personal accountability towards health and welfare issues. Important to our long term success and true to our overall purpose, we take time to celebrate our successes as a business, as teams and as individuals. Furthermore we have a good reputation across the continent for being a great place to work, and have received many awards in recognition of this fact.

Guinness Nigeria’s HIV/AIDS workplace programme for supply chain companies was commended at the Global Business Coalition (GBC) awards in June 2010 in New York. The programme, a collaborative effort by Diageo, Heineken and Unilever, received commendation in the Partnership category of the awards for reaching more than 12,000 people with critical disease-prevention training, and for the innovative partnership between the participating companies.

80 60 40 20

In 2011 Diageo carried out its ninth global Values Survey (and the second working with Kenexa, the largest employee survey company in the world) to measure how well we are living the Diageo values across the company. Overall our Values Survey results in Africa are excellent compared to those of other leading organisations. We score

0

2006 2007 2008 2009 2010 2011

Risk assessments are the cornerstone of all of our safety activities. We have safety managers and occupational health specialists in all of our markets, and are proud of the passion for safety which is demonstrated

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CONTRIBUTION THROUGH SOCIAL INVESTMENT

Contributing to development through direc t communit y investment • D  iageo has a long history of direct community investment which remains core in how we do business wherever we operate • O  ur community investment strategy complements and supports our business activities and our holistic approach to socio-economic development  ur employees are critical to our community programmes and support • O many causes directly through volunteering and fundraising  ater of Life – as our single largest community investment programme, • W it enshrines Africa’s community spirit and is embedded in our businesses. It provides education, builds skills, encourages entrepreneurship and demonstrates the power of partnerships Arthur Guinness and his family set a legacy of goodness in the 18th century that continues today in our company. As an enlightened entrepreneur Arthur Guinness had the vision to improve the communities and lives of the citizens where his products were sold around the world. We are proud of this heritage and our approach to positive social progress is evident in our continued investment in communities across Africa. Diageo believes that doing good is good for business, and our contribution to social investment is one way in which we are able to demonstrate our commitment to community development. It also plays a vital role in creating an enabling environment in which we can continue to grow our business. Our community investment strategy supports our wider, holistic approach to local economic development, and includes educational projects, increased health care provision

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and access to clean water, among other initiatives. Each year the Diageo Foundation and our markets establish and fund major programmes that focus investment around needs most relevant to each market.

The Diageo Foundation aims to address local needs through investment, partnership and employee involvement, and seeks to leverage our contributions through collaborations with other organisations. The Foundation is entirely funded by Diageo and, in accordance with UK charity law, does not directly promote the group’s commercial interests. Employee engagement plays a vital role in our community strategy. In particular through Giving for Good, a web-based campaign that enables employees to support sustainable community projects in Diageo’s developing markets. The website also provides advice and support for employee’s fundraising activities.

CONTRIBUTION THROUGH SOCIAL INVESTMENT

eabl Foundation Optical Centre in Moshi In March 2011 the EABL Foundation funded the construction of a new optical centre in Moshi, Tanzania, which is expected to benefit more than 300,000 residents. The optical centre includes an optical workshop that will serve as an optometry centre as well as an eye unit offering eye examination services and treatment. Speaking at the event, Tanzanian Prime Minister, Hon. Mizengo Pinda said: ‘On behalf of the community members, I wish to thank the sponsors for bringing services closer to the community through such investments. The optical centre will greatly reduce risks associated with eye problems’.

Friends of the Community (FOC) Friends of the Community is an employee driven charitable initiative in Guinness Nigeria aimed at giving back to the community. Since 2005 FOC has brought together employees from across the business in a united pursuit of positively impacting the lives of those less privileged. The initiative has grown from strength to strength with a focus on sustainable projects with long-term impact. Staff have engaged in activities such as ‘Project Brushstrokes’ – repainting a block of run-down classrooms in a school in Lagos and Benin City, and ‘Project Shop for Free’, which raised funds for children from five orphanages across Lagos and Benin to give them a unique shopping experience where FOC ‘money tokens’ gave them an opportunity to purchase clothing, books and toys donated by employees.

Water filters in Ghana (giving for good) The Diageo Giving for Good programme provides a unique opportunity for Diageo employees around the world to directly contribute to enriching the lives of people in our communities. We research community projects and select one for the Giving for Good programme each year. We then work with a partner organisation who can help us deliver real community benefits. Through a dedicated website, employees can get support to raise funds which will go directly towards supporting the programme. In 2010 the

programme chosen was implemented by Relief International to distribute CrystalPur water filters to beneficiaries in the Northern, Eastern, Greater Accra and Ashanti Regions of Ghana. CrystalPur water filters use low cost, efficient point of use water treatment technology that provides people with an alternative way to improve their water quality for far less than it costs to buy bottled water. It eliminates 99.99 per cent of all bacteria and is very easy to use. Last year employee fundraising benefitted more than 87,000 people in some of the most vulnerable communities in Ghana.

Optical centre in Moshi, Tanzania

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Over 170 Diageo Water of Life projects in 16 countries in Africa

Diageo Water of Life

Ensuring water security and improving access to clean water and sanitation will be one of the greatest leadership imperatives of the future for both governments and business. It is already a major challenge in parts of Africa where water stress is high and institutional capacity for water management is weak. Diageo offers a good example of the different ways in which a company can play a leadership role.

First through managing and improving the water footprint of its own core business operations. Second through proactively supporting locally-led solutions and community partnerships to improve water access and security through its ‘Water of Life’ initiative. And third through cooperating with other companies, government entities and non-governmental organisations to improve watershed management and water policy more systemically. Jane Nelson, Director, CSR Initiative, Harvard Kennedy School

22

water of life Our Water of Life programme was launched in 2006 as Diageo’s commitment to make a tangible contribution to the UN Millennium Development Goal (MDG) 7, target 10, to reduce by half the proportion of people in Africa without access to water and adequate sanitation. Since 2006 Diageo has enabled access to clean drinking water for approximately 4.8 million people. Our aim is to deliver water

CONTRIBUTION THROUGH SOCIAL INVESTMENT

across Africa for an additional one million people in Africa ever year to 2015. It is a firm expression of our belief in the importance of water. Diageo places budget commitments of one per cent of profit after tax towards CSR activities. In Africa, approximately 50 per cent is allocated to water projects. Through the programme we support community-based projects that improve access to drinking water in Africa, as well as aid environmental conservation and deliver capacity-building training. In our commitment to supply clean drinking water to local communities, Diageo sets targets

based on the number of individuals reached, and we measure the corresponding positive impact on lives. We intend to build on this progress and reach one million people year on year until 2015, making a substantial contribution to the MDG 7. A commitment to sustainability is inherent in these projects – from building entrepreneurial and technical skills, enabling local ownership, water usage education and environmental protection. To meet these ambitious targets, we work in partnership with governments, NGOs and community organisations to magnify our impact.

We believe we bring the following key assets to any partnership involving water: • Strong local networks with influential decision makers at the national and local level enabling us to identify and implement suitable projects in Africa; • A good reputation derived from long-term experience and successful investments in capital projects in Africa; • Access to governments and donors to secure extra funding and galvanise key stakeholders into action; • Engaged and supportive employees; and • Earmarked corporate citizenship funds which ensure projects are well implemented.

Progressive partnerships We also aim to work with others to accelerate progress on the water and sanitation Millennium Development Goals while educating consumers and stakeholders on the value of water. Positive action can be generated through the concerted efforts of our employees, consumers, customers, suppliers, NGOs, governments and other businesses through targeted campaigns of action.

Our Water of Life programme has enabled access to clean drinking water for nearly five million people since 2006

In March 2010, Diageo partnered with the International Business Leaders Forum (IBLF) to launch a series of business roundtables in Cameroon, Ghana, Kenya, Nigeria and South Africa. The programme provides an African perspective on corporate engagement with public policy, and forms part of the business sector’s contribution to the UN MDG 7 – improving access to water and sanitation. A series of papers, covering each country, captured the shared commitments from roundtable members on improving access to water and sanitation, and all were presented as a collected paper at the United Nations Global Compact Leaders Summit in New York held in June 2010.

In bringing the private sector together on water issues, the roundtable programme has enabled us to benchmark our own performance on water against those of our peers, share best practice on improving water efficiency subsequently reducing our impact on resources, and identify opportunities for collective action. These roundtables also demonstrate our growing leadership on community water issues and speak to the ideals of the United Nations’ Global Compact CEO Water Mandate, to which we are a signatory. While Diageo acts as the business partner, it relies upon the implementation and technical expertise of development and non-governmental organisations as partners to deliver the initiatives. NGOs and businesses such as AMREF, WaterHealth International, WaterAid, EnterpriseWorks, help build, operate and maintain projects while ensuring the funding is put to optimal use.

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The water scheme has really helped our local community by providing safe and reliable drinking water and helping to eradicate disease and improve health. It also creates productive economic activities in the communities, and skills training and gainful employment for women, as well as providing water for irrigation. Alhaji Ayuba Dogo, Representative to the key community leader, Esu of Karu Water of life Project, Nassarawa State, Nigeria

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CONTRIBUTION THROUGH SOCIAL INVESTMENT

CEO Water Mandate

With Diageo’s ongoing support and commitment, we have been able to work with poor and marginalised communities, improving access to water and sanitation facilities for thousands of people in Ethiopia and Tanzania. Africa Medical and Research Foundation

• In the Mbashe area of the Eastern Cape, South Africa, about 67 per cent of the people take their drinking water from contaminated sources, resulting in high incidences of typhoid and cholera. brandhouse partnered with South Africa’s leading water and sanitation NGO, Mvulu Trust, to provide communal standpipes which deliver clean drinking water to 5,500 people in the area.

• Since 2007 Diageo has been funding projects in Ethiopia through its NGO partners. Working with AMREF to bring water and sanitation facilities to the 56,000 residents of Kechene. In Burka Gudo, a marginal farming area in south eastern Ethiopia, Diageo is part funding a water and sanitation project to provide access to potable water and sanitation for over 20,000 people. The project is jointly funded by USAID and implemented by CARE international. Diageo’s contribution to this project was critical to the sourcing of local materials for the project. This is an integrated water and sanitation project with 10 water access points managed by a Watsan committee within the community.

• Guinness Ghana has adopted a unique approach to providing access to clean drinking water for the most vulnerable communities across all 10 regions of Ghana. In 2007/2008 GGBL partnered with Enterprise Work VITA (now Relief International) to promote locally made water filters for communities in the three Northern regions (Northern, Upper East and Upper West) in support of efforts to reduce guinea worm prevalence in these communities, and to support an entrepreneurial structure creating a business for locally manufactured water filters. Working with local partners and NGOs and communities to implement projects that meet the water needs of these communities.

• EABL partnered with a local NGO, Maji na Ufanisi, to support a youth services for a slum area in Nairobi. Along with other partners a well, a water kiosk, four showers, and 10 toilets stalls were created for the community and members were trained in entrepreneurship, financial management, and life skills.

2011 Water of Life half marathon, London

Paul Walsh is a signatory of the CEO Water Mandate, a unique public-private initiative designed to assist companies in the development, implementation and disclosure of water sustainability policies and practices. Launched in July 2007, the CEO Water Mandate recognises that the business sector, through the production of goods and services, impacts water resources – both directly and through supply chains.

• Working in partnership with WaterAid, Diageo is implementing a water and sanitation project in Luanda, the capital of Angola, that will provide access to clean water and sanitation facilities to over 51,000 beneficiaries over a three year period. Angola is described as a country that has the lowest improved water coverage in the world with one of the highest incidences of diarrhoeal diseases. Through this partnership, Diageo Africa aims to support Government’s effort to solving some of the water related challenges of the country. The project is funded by fundraising effort from the Water of Life half marathon, an annual Diageo event to mark World Water Day.

• To bring water to a large number of people in Nigeria, Guinness Nigeria has since 2007, partnered with the Government of Nigeria and a local engineering firm to build boreholes, water tanks and pipes to underserviced communities. In the Suleja and Abukwarka communities, Guinness Nigeria has reached 50,000 people with drinking water through this partnership model, and more than one million in total across the country.

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ADVOCACY

Advocacy – helping provide insights into Africa’s opportunities • W  e believe the private sector will be key in shaping the pace of development and economic growth on the continent and use our experience and knowledge of doing business there to engage with others • I n addition to contributing through our business activities and investing directly, we pro-actively seek to engage on global, regional and local platforms to inform, educate and inspire others • W  e engage with governments, NGOs and other members of the private sector to unlock value and promote interest and investment in Africa 

As a business with a long and successful history in Africa, we can draw on a wealth of experiences and insights. We have the benefit of networks that enable us to catalyse engagement around development. The scale and nature of our business means we enter into frequent dialogue with governments and institutions on public policy and social and environmental development, enabling us to offer opinion, guidance, support and resource around particular challenges. Diageo is proud to sponsor value enhancing public policy outcomes and continues to build authentic relationships with governments in our markets. As significant contributors and employers we have a role to play when discussing issues of economic importance. We seek

end results that benefit the governments and societies we operate in as well as our wider industry • We are leading initiatives to launch industry associations, most recently in Namibia, Kenya and Ghana. These offer a voice and face for governments to interact with the sector.

• We promote regional integration, encourage free trade and demand transparency. We believe the implementation of trade mechanisms and greater cooperation among customs will help harmonise and accelerate rates of development.

In 2001, Diageo became a founding member of the Private Investors for Africa (PIA), a group of private sector companies united and motivated by a common vision to help accelerate economic growth and social development across the African continent. In bringing together the expertise of institutions such as the Bretton Woods organisations and the European Institutions, with the local knowledge, insight and management drive of the PIA members, the group leverages what businesses are already doing across Africa to greater effect. The PIA has also furthered institutional understanding of the challenges the private sector faces when operating in Africa. Over the past ten years, the PIA has enjoyed a good working relationship with the World Bank, collaborating on projects focused on power securitisation, regional integration and agricultural development.

Our participation in a number of groups, associations and platforms enables us to

For more information go to www.privateinvestorsforafrica.com

• We engage in bilateral and multilateral annual budget submissions and aim to better educate stakeholders on policy outcomes that could unlock value and grow revenues. • We deliver authentic and respected opinions; our goal is to provide a valued, evidence-based perspective. • We provide data analysis and can model change, making assumptions about future growth that can aid governments revenue forecasting.

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identify common areas of interest and expertise among different organisations both public and private, creating a forum in which we can debate issues and interests as well as advocating collaboration. Diageo has memberships and representation at the World Economic Forum, Business Action for Africa, Business Call to Action, Chatham House and the Global Clinton Initiative.

ADVOCACY

Advocating high quality, balanced reporting on Africa The Africa Business Reporting Awards was launched by Diageo in 2004 as a practical response to a report entitled ‘Africa: the Marginalised Continent’ which revealed how Africa’s share of voice in the international media was dominated by stories about famine, drought, conflict and politics. Diageo wanted to encourage more prolific and balanced reporting of business and economic opportunity in Africa. The awards continue to grow year on year, and the categories have grown to reflect the importance of various industries

to development. The awards recognise journalists, photographers, broadcasters and editors from around the world who have excelled in reporting accurate and unbiased information about the region and have helped shape opinions and create an enabling environment for business in Africa to succeed. The awards are free to enter and open to all business journalists regardless of their geographical location.

of the awards, Diageo commissioned a study on the Africa media landscape and its link with investment flows on the continent to understand how the media in Africa had changed, and its role in informing investor perceptions. Investors made it clear their decision to invest in Africa was directly linked to improved media coverage about Africa: a staggering 83 per cent cited an improvement in the quantity of both the international and local media, while 61 per cent noted an improvement in its quality.

In addition to the awards, Diageo supports a range of measures to promote Africa’s investment profile and to build capacity of the media. Four years after the launch

For more information on the awards and for a copy of the ‘African media and investment research report’ visit www. diageoafricabusinessreportingawards.com

It is obvious that the media in Africa – as much as international press – needs to be part of changing perceptions about the continent. The days of Africa being seen as a place where potential is yet to be realised, or just simply as a destination for aid, must be put behind us. The reality today is that Africa is a viable business destination with a large and mainly untapped market, offering excellent investment returns and diverse opportunities for business. Ms. Obiageli Ezekwesili, Vice President, Africa Region at the World Bank Group (2010 awards)

1500

Entries received by year

1200 900

These awards and this event have grown in stature over the eight years of their existence. It is a gathering of people and organisations that have the potential to set agendas and be true thought leaders.

600 300

2011

2010

2009

2008

2007

2006

2005

2004

0

Graça Machel (2011 awards)

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PARTNERSHIPS AND COLLECTIVE ACTION

Making a difference through collec tive ac tion • T  hrough constructive dialogue and shared knowledge and experience, partnerships between key institutions in society can unlock new solutions to existing issues • B  y collectively looking at ways to improve infrastructure, develop human capacity, encourage free trade and support inclusive value chains, public and private sectors can make a considerable and sustainable difference to social and economic development in Africa. While the growth indicators in Africa are strong, and the private sector has made great headway in driving shared value, there remain some significant hurdles to overcome in order to create a more attractive business and investment environment. Infrastructure is still underdeveloped with the opportunity to further improve communications, transport networks, and access to affordable energy. The regulatory environment remains bureaucratic and unpredictable in many places, leading to volatile legislative and tax regimes. These structural and operational constraints are currently compounded by a shortage of skilled local talent which leading companies across the continent like us are seeking to hire and further develop. Strong partnerships between the private sector, government, donors and civil society can address some of these key challenges and accelerate progress towards achieving development goals. There are a number of initiatives we can embark upon together that will give an immediate and substantial impetus to driving shared value. These include prioritising essential infrastructure projects; developing small and medium enterprises through thriving local supply chains; scaling up existing inclusive business models through the provision of financing and other tools; providing catalytic start-up investment and advice; developing much-needed transport corridors; and developing codes for growth in pilot projects and sharing of best practice.

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A cooperative dialogue between business and government on the ground, and between business and donors on the direction of aid, adds genuine value. Business can make a real difference in terms of making things work and making them sustainable. Through combining our respective experience and expertise and through partnerships, public and private sectors can make a considerable and sustainable difference to social and economic development in Africa.

partnering in Tanzania to deliver faster growth The Southern Agricultural Growth Corridor of Tanzania (SAGCOT) initiative launched by the President of the World Bank at the World Economic Forum in 2010 is an inspiring partnership between the Tanzanian government, leading development organisations and a small number of leading private sector flagship companies, including Unilever, Yara, Syngenta and Diageo. By catalysing private investment, the initiative aims to deliver rapid and sustainable agricultural growth along an infrastructural ‘backbone’ between Malawi, Zambia and the DRC to the port of Dar Es Salaam. Through commercialising smallholder production, driving scale efficiencies through ‘clustering’ supply chains and setting up financing facilities,

the aim is to triple the area’s agricultural output and create a virtuous cycle of lower production costs, increased productivity, higher profitability, more investment and rapid growth. Demonstrating early results will establish a replicable model for agricultural development in the rest of Tanzania and the wider region.

For more information go to www.africacorridors.com/sagcot

PARTNERSHIPS AND COLLECTIVE ACTION

Safe water for Africa innovative partnership In May 2011, Diageo made a joint announcement with the World Bank-IFC, Coca-Cola and WaterHealth International (WHI) to launch a new initiative to catalyse the expansion of a sustainable community safe water delivery model across the continent – Safe Water for Africa (SWA). The partnership is a private sector-led initiative based on the use of an innovative, and more importantly, self-sustaining model of water provision. It brings the expertise and commitment of two leading private sector players together with the IFC to further progress towards a critical

Millennium Development Goal (MDG). WHI, which already constructs decentralised water treatment facilities throughout the developing world, provides long-term operations, maintenance and quality services to vulnerable communities for a low, initial one-time investment. The project will initially focus its investments on West Africa with a goal to provide safe water for circa two million people by 2012 and five million in total by 2015. SWA’s target is to attract $20 million of investment. This includes core ‘seed’ donor funding by Diageo, the Diageo Foundation and Coca-Cola, with further debt funding from the IFC and equity funding from WHI and Dow Ventures.

This SWA initiative will complement our other Water of Life projects and materially increase the impact we are having. It also demonstrates the potency and speed of impact collaborations can have with a common goal.

There are a number of initiatives we can embark upon together that will give an immediate and substantial impetus to driving shared value.

Senator Keg Senator Keg is a clear example of where active and collaborative partnership between industry and government has been truly transformational in addressing social policy while generating incredible monetary and social value across the stakeholder spectrum. It is estimated that illicit brews constitute over half the alcohol volumes in Kenya and significantly contribute to the mortality rate across the country. Through collaboration with the government, Diageo’s innovation team created an accessible and safer branded option for low income consumers using 100 per cent locally grown grains. This was made economically viable through the exemption on tax awarded to Senator Keg by the Kenyan government. The development of Senator Keg generates a virtuous cycle of value creation: • value for low-income farmers and farming communities; • value for small business vendors and distribution partners;

• value for low-income consumers with no alternative product offerings to harmful brews; • value for government by helping to reduce the health impacts of illicit alcohol consumption and access new sources of revenues, and; • value for our business by opening up new routes to market. At a low price point we can give even the poorest consumers a credible alternative to illicit brews by providing them with access to clean and safer beer, while also making a modest profit. Since its launch five years ago

the brand Senator Keg has become a huge success and continues to grow annually as it takes share from the large illicit market. In addition we are creating a new customer base by supporting the government’s agenda to formalise outlets and provide them with business skills and bar training. The social benefits of the scheme are obvious. It creates economic activity at the very bottom of the pyramid. It gives lower income people access to a product that is affordable and safer, and offers dignity and a sense of empowerment to a large number of consumers.

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More INFORMATION

Diageo plc Lakeside Drive Park Royal London NW10 7HQ

East African Breweries Limited P.O. Box 30161 00100 Nairobi Kenya

UK Main switchboard: T: +44 20 8978 6000

T: +254 20 864 4000 F: +254 20 856 1090 E: [email protected]

www.diageo.com

www.eabl.com

Guinness Ghana Breweries Limited P.O. Box 114 Achimota Accra Ghana

Guinness Nigeria plc 24 Oba Akran Avenue Ikeja Lagos Nigeria

T: +233 21 400 649 F: +233 21 400 673

T: +234 1 270 9100 F: +234 1 270 9338

Guinness Cameroun SA BP1213 Douala Cameroon

brandhouse Black River Park North Fir Road Observatory 7925 Cape Town South Africa

T: +237 340 7956 F: +237 340 7182

T: +27 21 442 7100 F: +27 21 442 7300 www.brandhouse.co.za

Photographer acknowledgements: We wish to thank the photographers whose work features in this report. Tim Bishop Nick Riley

For additional copies of this report, please contact [email protected] or download it at: www.diageo.com

Designed by Altadicta

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Celebrating life, every day, everywhere 32