Why has Diageo Slashed so Many Key Sustainability Targets?
Diageo has sought to explain its rationale after announcing significant cuts to some key sustainability targets.
As part of its 2025 Annual Report, the beverages company – known for drinks including Guinness, Don Julio tequila and Smirnoff vodka – has published revised targets for areas including Scope 3 emissions and recycled content in its packaging.
Ewan Andrew, President, Global Supply and Procurement & Chief Sustainability Officer, Diageo, wrote on LinkedIn: “In 2020, when we set ambitious environmental sustainability goals as part of our Spirit of Progress action plan, we didn’t have all the answers.
“But we knew progress would require innovation, long-term commitment and supportive policy environments.”
He added: “Five years on, we have better data, deeper insights and a clearer view of the practical realities to deliver net zero.
“Today, alongside our Annual Report, we’re updating our sustainability goals, with some important adjustments to our carbon and packaging goals to give us a stronger, more credible path forward.”
What are the ‘important adjustments’?
All targets relating to water use and replenishment – described by Ewan as the “biggest threat” – remain the same.
But targets around direct and indirect emissions, plus recycled packaging content, have been revised significantly.
They are:
Water efficiency in water-stressed areas
2024 – 40% improvement by 2030
2025 – unchanged
Water efficiency across the company
2024 – 30% improvement by 2030
2025 – unchanged
Water replenishment
2024 – 100% target in water-stressed areas by 2026
2025 – unchanged
Emissions from direct operations (scope 1 and 2)
2024 – net zero carbon by 2030
2025 – reduce emissions by 50% by 2030 (net zero by 2040)
Value chain (Scope 3) emissions
2024 – Reduce by 50% by 2030
2025 – Reduce by 26% by 2030 (net zero by 2050)
Increasing recycled content
2024 – by 2030, increase recycled content in products to 60%
2025 – by 2030, increase recycled content in products by 50%.
A reflection of complex global challenges
While the revised emissions and recycling targets will not be well received in some quarters, Diageo’s report gives a detailed explanation for the changes, which it says reflect the “complexity of the challenges faced by society and the environment”.
It says: “Our sustainability strategy acknowledges the breadth of the environmental and social consequences of a changing climate and our dependencies on nature and people.
“It recognises the interlinkages between climate, nature, agriculture and people, and the connections to our value chain.”
The report says the targets are reviewed regularly as “regulations evolve or we gain more information on the timeframe required to address systemic issues, like greenhouse gas emissions”.
These reviews enable the company to review its commitments, enhance its business resilience while safeguarding its licence to operate and grow.
Working alongside the Science Based Targets initiative
While the fundamentals of Diageo’s strategy to preserve water and “take a focused approach to greenhouse gas emission reductions” have not changed, the report says it reviewed the targets used to measure progress.
It says: “This review, conducted as part of our regular update of Science Based Targets initiative (SBTi) targets, resulted in changes to greenhouse gas emission reduction percentages and timeframes to achieve those reductions.
“We also reframed our packaging targets due to both external factors and our growth ambitions, shifting our focus to recycled content of our packaging, with lightweight packaging reporting focused on examples, rather than a formal target.”
Mitigating the cost of tariffs
As with all businesses with a global supply chain, Diageo has been forced to bear the cost of the tariffs imposed by US President Donald Trump.
The Annual Report estimates tariffs will annually cost the business US$200m.
It says: “We have continued to undertake considerable contingency planning in recent months and are focused on what we can control in relation to tariffs.
“Assuming the current 10% tariff remains on UK and 15% European imports into the US, that Mexican and Canadian spirits imports into the US remain exempt under the United States - Mexico - Canada Agreement (USMCA), and that there are no other changes to tariffs, the unmitigated impact of these tariffs is estimated to be c.$200 million on an annualised basis.”
The company has undertaken a number of actions to help mitigate the potential impact, including inventory management, supply chain optimisation and re-allocation of investments.
It adds: “Given the actions to date and before any pricing, we expect to be able to mitigate around half of this impact on operating profit on an ongoing basis.
“Looking ahead, we will continue to work on measures to mitigate this impact further. Our long track record of managing international tariffs gives us confidence in our ability to navigate this successfully.”
Interim Diageo CEO Nik Jhangiani writes in the report’s introduction: “We continue to believe in the attractive long-term fundamentals of our industry and in our ability to continue to outperform the market as the Total Beverage Alcohol landscape evolves.
“Diageo’s ambition remains clear: to be one of the best performing, most trusted and respected consumer products companies in the world.”
He adds: “With world-class brands and talent, highly effective global consumer insights and an ongoing focus on efficiency and effectiveness, we are confident in our ability to outperform the market, restore Diageo to a top quartile TSR consumer company and provide stronger returns to shareholders.”
