On 17 December 1997 Grand Met and Guinness merged to form Diageo plc, one of the world’s leading consumer goods companies. But what effect do such mergers have on the companies’ community affairs programmes? Caroline Hartnell talked to Geoffrey Bush, Chairman of the newly formed Diageo Foundation and Group Director of Corporate Citizenship.

What do you personally most hope to achieve in your new role as head of the Diageo Foundation?

What we’re currently developing is strategy and vision for our whole interaction with the community, and the role of  the Diageo Foundation will be important in terms of supporting our community involvement. It’s important to me that it integrates with our business as far as it possibly can.

Are the Foundation’s giving policies decided yet?

We’ve yet to formally announce policies. What we have already decided in looking at the best of Grand Met and Guinness programmes is that we’ll be supporting the community in five distinct categories (see side panel), within a consistent and integrated approach under the overall theme of ‘Freedom to Succeed’. We’ll be trying to give priority within those to excluded and disadvantaged people who can help themselves and be transformed. We’ll be looking principally towards community groups and partnerships, not individuals, areas where we operate or connect or touch communities, and where our involvement can make a difference.

In what ways, if any, do the new Diageo priorities depart from those of Grand Met and Guinness?

We hope that they bring out the best of both. We have built our future strategy around the core values of Diageo and tried to see how we can do something that is innovative and exciting as well as building on the heritage of the two companies’ work.

You talk about the values of Diageo. Can you expand on that?

Corporate citizenship runs through all Diageo’s values. We have committed 1 per cent of worldwide trading profit (less interest costs) to community involvement. The core values are Freedom to Succeed, Being the Best, Proud of What We Do and Passionate about Consumers.

You talk about bringing the best out of both the previous programmes, but what about the ‘less than best’? Will there be some former beneficiaries that will lose out under the new arrangements?

We have a finite amount of resources, so we can’t possibly help everybody. Where we aren’t able to carry on supporting certain community groups, we will discuss this with them and give them good advance notice.

And are there particular groups that this applies to, particular types of people?

Not particularly – it’s just that we’ll be trying to focus more on the five categories I’ve outlined and we will try to geographically target our resources more to where our businesses are.

Do you feel that one or other side of the merger emerged as dominant? Or does Diageo have a new identity that’s completely distinct from that of Grand Met and Guinness?

We hope so. Certainly, neither side is dominant. We have looked with fresh eyes at Diageo’s values and we hope our programmes will have a fresh and new feel to them that is quite distinct from either the Grand Met or the Guinness programmes. But within those will be recognizable elements of successful programmes such as the Guinness ‘Water for Life’ programme, which we think will fit very well within our overall theme of Freedom to Succeed.

How much does the overall amount to be given away in the Diageo Foundation ‘pot’ compare with the amount formerly given away by Guinness and Grand Met?

We’ve announced that on a global basis the company will give 1 per cent of its profit (worldwide trading profit – less interest), which is approximately £20 million, and that’s very comparable to the total sum that Guinness and Grand Met gave before. That will go partly through the Diageo Foundation  but we also have other group foundations funded from our businesses such as the Pillsbury Foundation in the US, the Burger King/McLamore Foundation which is being launched next month in the US, the Smirnoff Foundation in Russia, and the Cinzano Foundation. So there are a number of routes it will go through – the Diageo Foundation will be trying to give international leadership.

Are all four levels of the London Benchmarking Group pyramid included in your 1 per cent?

It includes the social investment levels, in other words all the charitable giving, employee matching, fundraising, payroll giving, all responses to requests for donations that come into the company, and but also longer-term social investments through working with community partners to tackle underlying social issues such as homelessness, unemployment and other long-term issues we feel we can contribute to.

So it doesn’t include the bottom two levels of the pyramid?

No, in addition, to the planned level of social investment and donations, we have other funds that go to the community – for example, through cause-related marketing, which may be brand-led but there’s a considerable spin-off to the community. That would be over and above the 1 per cent.

Do you know how the proportion given away abroad compares with the proportion of group profits generated overseas?

We have reported that in the past and we will regularly report it for Diageo. As far as we can, we try to aim for our community giving to reflect the level of the business and employees in different countries around the world. Inevitably, it will vary in some countries because of history or because of particular issues where we can do more to help.

Are there particular regions you need to give more attention to proportionately?

Yes, we do feel that our community involvement is underrepresented in some regions. For example, we are very strong community players in the UK and the US but not as strong in some of the emerging markets where we operate, so we’ll be looking to try to pump more resources into some of those countries.

Is it your aim to have parity between the proportion of profits generated in a country and the proportion of your giving that goes into that country?

Not necessarily profits, because clearly our business is at different stages of development in different countries, but I think the giving should be roughly in proportion to the scale of our business operations and our employees.

Do you think carrying out a community programme though a trust or foundation means that you’re less tied to the bottom line of corporate objectives than you would be if the programme were all carried on from within the company itself?

I think having a foundation gives an element of objectivity. Different foundations vary between being closely aligned to the company objectives or very independent. Our foundation’s purpose is to work with our businesses to help where we can, so we will be reasonably closely aligned to the business. But having a separate foundation means that the trustees can look objectively at applications and possible different options for funding. And our contribution goes beyond giving money. The foundation is a mechanism for facilitating partnerships.

When we looked at whether we should establish a foundation or not, we looked at the two companies – one which had a foundation, one which didn’t – and we felt that the foundation was a better route for our particular company. One of the things we hope it brings, besides a certain amount of impartiality and objectivity, is a greater residual knowledge of the voluntary sector and community partners. This distinct knowledge base can be very valuable in working alongside our businesses.

So you are almost saying that having a foundation actually aligns you with the voluntary or non-profit sector rather than just with your business?

Yes, having a foundation is one way of clearly delineating a set of people with expertise about the community and good voluntary sector partners. These people are then in a position to advise our businesses and equally to talk to people in charities about how they might interact with our business people.

Some of your community policies are going to be carried out through the Diageo Foundation and some in your role as Director of Corporate Citizenship. How is it determined which policies will go through which route?

They are really very distinct roles. All our charitable giving goes through one of the foundations, but being Director of Corporate Citizenship is more broadly about how our company interacts with society. While our charitable giving is a large amount of money, £20 million, it’s dwarfed by our business turnover, which is about £14 billion. Clearly the way we conduct our business can have a huge impact on society and the environment, so working with our business managers to set up things like social auditing, and understanding the impact we have, is very important both to the company and to the community.

 
The Diageo Foundation has identified five key areas for community support within an overall theme of ‘Freedom to Succeed’

• Environment, principally through its international ‘Water for Life’ programme.
• Learning, with an emphasis on disadvantaged young people.
• Art and culture, with an emphasis on greater access to community arts.
• Employability and local regeneration.
• Employee involvement and matched giving.

London Benchmarking Group model of the company in society

Definitions

Gifts of cash and other forms of support in response to appeals to the company by community organizations or by its shareholders and employees, who, with company support, help good causes of their own choosing.

A policy of sustained involvement in resolving a few social issues carefully chosen by the company in order to protect its long-term corporate interests and enhance its reputation.

Activities in support of the commercial success of the business, directly promoting its brands in partnership with charities and other organizations.

The core activities of the company in providing the goods and services society needs and wants, in an ethical, cost-efficient manner with due regard to the interests of all shareholders.