Diageo Sips Savings in Whisky Carbon Emissions Footprint

What’s in a bottle of Scotch?

A large carbon footprint, as it turns out. While London-based Diageo Plc won’t say exactly how much, the world’s largest distiller last year produced 701,000 metric tons of carbon emissions, equal to about 0.6 pounds for each bottle sold, or what comes out of your car’s tailpipe over three-fourths of a mile.

The owner of the Johnnie Walker brand is working to voluntarily reduce emissions to help sustainability and boost the corporate bottom line. Those efforts include a product “life cycle assessment” of its famed blended Scotch whisky, a brand that dated back to 1860. The study required tracking down the true cost of making and selling the Scotch -- in energy and water use, wastewater, landfill waste and greenhouse-gas emissions.

What Diageo found was a “carbon hotspot” in Johnnie Walker’s distilling process, a discovery that led to the construction of a green-energy plant at its Roseisle facility in Speyside, Scotland. The distillery now uses half the fossil fuel of a conventional distillery and saves the company an estimated 900,000 pounds ($1.42 million) a year.

Completed in late 2010, the project is part of Diageo’s goal to cut its greenhouse gas emissions 50 percent below a 2007 baseline by 2015.

The company reduced carbon emissions 4.1 percent in 2012, and has cut 26.3 percent below 2007 levels, according to its most recent sustainability report, released on Aug. 12. Including cost savings, emission reductions and adding more clean energy to its mix, Diageo sees these efforts “in the long term as a competitive advantage,” Michael Alexander, global head of policy and communications, said in an interview.

Emissions Targets

The company isn’t alone. More than 80 percent of the largest 500 publicly traded companies filed carbon-emission reports in 2012 to Carbon Disclosure Project, a British nonprofit. Almost 70 percent of the S&P 500 did, according to CDP data.

Corporate climate programs are so widespread, rigorous and documented that calls of “greenwashing” have slowly disappeared, replaced by dismay in some quarters that governments and politicians lag the corporate world in taking direct action on emissions.

Consider the inability of nations to find a replacement for the United Nations-sponsored Kyoto Protocol. Limits in the 1997 greenhouse-gas reduction program lapsed at the end of last year, and the U.S. Congress has failed to pass climate legislation. Without Congressional action, President Barack Obama in June invoked executive powers to help reduce U.S. emissions by targeting power plants.

Companies Lead

In the vacuum of government inaction, corporations are stepping up to the leadership role in carbon-emission reductions. “As always, the law is the lagging indicator,” said Anne Kelly, director of Business for Innovative Climate & Energy Policy, a group that represents 23 consumer companies including Nike Inc. and EBay Inc.

Examples abound. Dow Chemical Co., the chemical giant, vowed by 2015 to hold its greenhouse gas pollution below 2006 levels. Nike saw its CO2 emissions from footwear manufacturing drop 6 percent from 2008 through 2011 even as production rose by 20 percent.

Like Diageo, Nestle SA, the world’s biggest food maker, has committed “to optimize the environmental performance of our products by systematically assessing product categories along the whole value chain,” according to a recent company report.

Pressure Groups

Another indication that this isn’t just greenwashing is the fact that environmental groups have been monitoring corporate carbon outputs -- and helping executives set and meet goals.

The World Wildlife Fund, which advises dozens of companies on climate issues, estimates the ones that signed onto its Climate Savers program have reduced emissions by 100 million tons through May 2012. That’s twice the yearly CO2 output of Switzerland.

Green groups helping global companies reduce emissions are as ubiquitous as green lobbying of politicians for climate-friendly policies.

“If you’re able to develop tools that are practical and fit with the way businesses think about problems, then they’re more likely to be taken up as solutions,” Lou Leonard, WWF’s vice president for climate change, said in an interview. “And that’s what we want.”

The most compelling argument for big business to reduce emissions is that it makes financial sense. A recent report by WWF and CDP using McKinsey & Co. analytics demonstrates that companies can meet U.S. pollution goals while realizing the equivalent of $190 billion in savings in 2020.

Wasteful Spending

The report, “The 3 Percent Solution: Driving Profits Through Carbon Reduction,” extrapolates from successes companies have found by curbing wasteful spending and operations.

Savings are “really what has driven home a lot of the change in corporate behavior,” said Don Reed, director of sustainable business solutions at PricewaterhouseCoopers in Boston.

Research done at the University of California, Davis, and cited by Diageo in its 2012 report to CDP suggests that markets notice when companies talk about carbon. The study concluded in 2012 that “managers’ voluntary green disclosure decisions produce positive returns to shareholders” and that smaller companies, which have more limited public information, benefit the most.

Lead researcher Paul Griffin and his colleagues see the outlines of investors rewarding companies for managing carbon pollution well. “We’re seeing a positive impact on stock prices,” he said.

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