Written by Eliza Roberts Among global food companies, there is a so-called drought of water-aware boards of directors. And for an industry that uses 70 percent of the world’s fresh water, on a warming planet with scarcer resources, that lack of awareness is a concern. Investors are zeroing in on how companies are tackling water and sustainability risks, and increasingly they’re focusing on the board room. In a recent Ernst & Young survey of some 320 investors, more than 75 percent said that mandatory board oversight of sustainability disclosures is “essential” or “very useful” when making decisions about whether or not to invest in a company. Little wonder. Companies that have strong board oversight on sustainability issues, including water, send a signal to investors that they’re serious about these issues. And experts have long asserted that businesses perform better on actual indicators of sustainability when their boards are engaged. Now Ceres has research to back up the strength of this connection. In the recent update of our Feeding Ourselves Thirsty analysis, we found that among the 42 major food & beverage companies that we benchmarked on water risk management, there was a strong link between stronger governance and companies that performed well across the other categories, including operations and supply chain. Campbell Soup Company, for example, is among a small but growing group of companies that increasingly recognize the importance of strong governance when it comes to sustainability. It’s one of four companies, along with Coca-Cola, Diageo and Nestlé, that briefs its board on water-related issues. All four scored among the top 10 in our benchmarking analysis. “Campbell’s CEO and board appreciate the opportunity to understand and assess sustainability performance within the context of core business strategy,” Dave Stangis, Chief Sustainability Officer at Campbell Soup Company told me. “Building that into the governance process drives accountability within the enterprise.” Or consider Molson, the 3rd highest ranking beverage company in our analysis. As a part of the board’s mandate to oversee executive compensation metrics, Molson’s board has identified sustainability as a key indicator to measure executive performance. At Molson, the corporate executive team is rewarded based on a set of metrics measured against the company’s 2020 sustainability targets, including water use. Unfortunately, these companies are the exception rather than the rule. Not enough corporate boards are stepping up. Overall, the food companies we analyzed managed on average to get just 4.5 points out of the 17 we awarded on governance. And a string of major players scored a perfect zero—including Cargill, Archer Daniels Midland, Chiquita Brands and Tyson Foods. The takeaway is clear. On key indicators, ranging from board oversight of water-related issues and links between executive compensation and sustainability goals, the industry is lagging when it comes to governance. For instance, half of the boards we analyzed did not oversee material risks and opportunities related to sustainability and water. And even though we saw an increase in companies starting to link executive compensation to management of water-related issues, 71 percent of businesses didn’t take this critical step. Companies simply cannot afford to keep ignoring water and other sustainability issues like climate change that could materially affect corporate financial performance. For the $5 billion food sector, the combination of climate change and growing threats to water scarcity, including population growth and pollution, is turning water into one of the sector’s biggest financial risks. In 2016, multinational corporations disclosed that they faced $14 billion of water-related risks, a five-fold increase over the previous year. Boards have a fiduciary responsibility to act when risks are material. And that is why more companies need to develop sustainability competent boards. By understanding what climate change or water stress means, why it matters to their business and what their organizations can do, directors can successfully make climate and water risk part of their governance systems. That way, boards will be able to respond to the rising scrutiny among investors. They’ll be able to help prepare their companies for the risks and the opportunities created by water stress, climate change, or forced labor in their supply chains. Lead from the Top, outlines three basic steps companies can take to have a sustainably competent board: integrate knowledge of material sustainability issues into the board nominating process to recruit directors that ask the right questions; educate all directors on material sustainability issues to allow for thoughtful deliberation and strategic decision-making at the board level; and engage regularly with external stakeholders and experts on relevant sustainability issues. Again and again, we’ve seen how strong governance—or lack of it—determines whether companies thrive or stumble when they have to deal with major market challenges. The corruption, deforestation and tainted meat scandals engulfing JBS, the world’s largest meat producer, drive home the importance of good leadership in tackling key challenges and maintaining profitability in the long-term. Food companies need to better prepare for the huge threat that water risks will have on their business. Turning that around will depend in large part on whether boards start waking up to the financial risks that water poses to their business. Read the original blog on Triple Pundit
Written by Brooke Barton, Senior Director Water and Food, Ceres Feeding the world is a mounting challenge for our food system, as climate change impacts collide with burgeoning population growth. And more mouths to feed means demand is rising globally for resource-intensive meat, just as water scarcity and challenges such as deforestation accelerate. But today on World Food Day, I see exciting trends that give me hope. The food sector is beginning to step up. More and more food companies are doing their part to tackle urgent sustainability challenges, while also ensuring our long-term global food security. They – and their shareholders – see both the business imperative and competitive advantage for acting. 1. Cutting Greenhouse Gas Emissions in Agricultural Supply Chains Agriculture produces about a quarter of the world’s greenhouse gas emissions. Fertilizer production, energy use on farms, land clearing for grazing or crops, and methane release from livestock and rice fields all contribute to that big footprint. Food companies have a key role to play at mitigating those impacts, where a sizable chunk of their GHG emissions are produced. Increasingly they are. Food giants like Mars, General Mills, Kellogg, Unilever and Smithfield are setting robust science-based targets to reduce their agricultural supply chain emissions through such strategies as eliminating deforestation practices by suppliers, fertilizer optimization, manure management, methane gas capture and deployment of renewable energies. At the retail end of the supply chain, big players like Walmart are also setting GHG goals, and that’s a key driver for the food companies that supply them to get their own houses in order. Mars pledged to spend $1 billion on an expansion of its sustainability goals, including cutting greenhouse gas emissions across its supply chain by 67 percent by 2050. General Mills pledged to cut absolute GHGs by 28% by 2025 “across the entire value chain.” By 2050 it will slash emissions up to 72%, “in line with scientific consensus.” Kellogg’s 2050 target is to cut its own and supplier emissions by 65% and 50% respectively. Smithfield’s plans to cut its value chain-wide greenhouse gas emissions 25 percentover the next eight years. Their actions are coming none too soon as rising global temperatures are beginning to impact our food supply, with one of the most significant impacts to our water system. 2. Sustainable Sourcing and Traceability Grow Hand in Hand Global food companies are setting time-bound, measurable goals to sustainably source their major commodities, such as wheat, corn, soy and palm oil. Ceres’ benchmarking analysis of 42 food and beverage companies, Feeding Ourselves Thirsty, found that more than half had set goals to source at least two of their major agricultural inputs more sustainably. Even better, six of these companies—Coca Cola, General Mills, Kellogg Company, Nestlé, PepsiCo and Unilever—have set sustainable sourcing goals for a majority of their major agricultural inputs. On a parallel track, commodity supply chains are becoming more traceable—which is an essential ingredient for sustainable sourcing. Supply chain complexity and a lack of data at the farm level can make it difficult for global food companies to ensure that their ingredients are being sourced without environmental or social harm. New tools are emerging, however, to help food companies and their investors gain greater transparency into supply chains. Trase, for example, is an open-access online platform that maps agricultural commodity flows at scale. Trase maps soy and cattle exports from South America and Indonesian palm oil down to the level of producer municipalities and departments. Similarly, University of Minnesota scientists have developed a tool that identifies which U.S. counties use the most water and fertilizer to grow corn, and tracks where that corn ends up, whether in a cow, a corn dog or ethanol in a car. 3. Food companies are helping their growers produce more sustainably Since Ceres first benchmarked food and beverage companies on water risk management in 2015, the number providing some form of direct agronomic support to growers on sustainable farm practices has doubled to more than 70 percent. Perhaps more significantly, twice as many are providing some form of financial incentives to growers to improve farm practices, such as by shifting to more efficient irrigation systems. These efforts are typically targeted and small, yet nonetheless they are a sign of progress. Unilever is a leading example. It partners with farmers on complex sustainable agriculture projects they might not be able to tackle alone. Its soup brand Knorr, for instance, will invest 50 percent of any agreed project budget to enable growers to try out new ideas and speed up the implementation of sustainable agricultural practices. Each year, the company co-invests one million Euros with its suppliers and farmers in training and equipment to accelerate the adoption of sustainable practices. 4. Meat companies are turning to non-meat alternatives Meat, and beef in particular, is heavily resource-intensive, requiring more land and water, and generating more emissions per unit of protein than any other food. In addition, as consumer demand for protein is shifting away from meat in some markets, investors are taking notice, and meat companies are starting to respond. Last year, Cargill sold off its feed lots in the U.S., stating that it wanted to reinvest the money in other sources of protein, like plant-based, fish, and insects as well as other opportunities linked to livestock and poultry. This year it’s making good on that promise with a recent announcement that it was investing in an alternative meat startup, Memphis Meats, which grows meat in tanks by feeding oxygen, sugar, and other nutrients to living animal cells. Cargill is not the first meat company to enter this brave new world. Tyson Foods has taken a five percent ownership stake in Beyond Meat, which produces meat and cheese substitutes from vegetable proteins. Even non-meat food companies are getting into the vegetable-based protein trend through their venture capital. General Mills investment arm partnered with private equity firm 2X Consumer Products Growth Partners to invest in vegan company, D’s Naturals. Our food system faces urgent and daunting challenges, but these trends show that food companies are beginning to take meaningful measures to reduce their impacts. Ceres will continue to drive change in the food industry through our Investor Initiative for Sustainable Forests, our research efforts, including the online resource Engage the Chain, our stakeholder engagements and the AgWater Challenge.
By Eliza Roberts Manager, Water at Ceres Preliminary estimates for the costs of Hurricanes Harvey, Irma and Maria are in the hundreds of billions of dollars range—from disruption of business, to infrastructure and property damage, to crop losses. Each of the deadly storms hit agriculture especially hard, from cattle and soy in Texas, to citrus and sugar in Florida, to bananas and coffee in Puerto Rico. Puerto Rico lost a staggering 80 percent of its crop value, according to its secretary of Agriculture, Carlos Flores Ortega. Cattle stand stranded in flood waters outside of Houston after Hurricane Harvey, Conroe Texas, August 29, 2017. (U.S. Army Reserve photo by Capt. Loyal Auterson) (Released) Climate change didn’t cause the monstrous hurricanes, but a warming earth fueled their sheer destructive force. The food sector, which consumes 70 percent of our planet’s freshwater, is especially vulnerable to such extreme weather patterns that are the most visible and devastating hallmarks of climate change. Already, erratic precipitation and hotter temperatures are impacting crop yields and productivity. With climate models predicting worse to come, food companies must better manage precious freshwater resources, and simultaneously shore up their resiliency against the impacts of an ever intensifying water cycle, from drought to altered rainfall patterns to flooding from turbo-charged storms. Already, water risks in food production are escalating around the world: One-third of the world’s largest aquifers—mostly nonrenewable groundwater supplies used to feed crops—are being rapidly depleted in Saudi Arabia, India, Pakistan, northern Africa and California’s Central Valley. In India—where 90 percent of freshwater goes to feed crops—farmers have taken to the streets in violent protest over the government’s failure to solve the agrarian crisis in the face of prolonged drought; thousands of others have taken their own lives. Wheat production in the U.S. is down 9 percent this year, and the 2017 drought in southern Europe is reducing cereal production in Italy and parts of Spain to its lowest level in at least 20 years. The meat industry, which consumes an enormous volume of water, is also responsible for huge wastewater and related pollution that result from animal slaughtering and processing. When manure is not disposed of properly, it can cause major toxic algae blooms. A Lake Erie bloom in 2014 left a half million people without drinking water. This year’s bloom is harming the regional economy. Population growth adds further pressure. Water demands are expected to increase by 55 percent and food demands by 60 percent by 2050 when population will exceed nine billion. People everywhere will be eating more meat, fruits, vegetables and processed foods—all of which will put added pressure on the earth’s strained resources. The implications for businesses that rely on agricultural crops are profound. A recent analysis by the investment research firm MSCI found that $459.2 billion in revenue is at risk for food companies from increasingly widespread water shortages for irrigation or animal consumption, and $198.2 billion is at risk from changing precipitation patterns. Fortunately, not all food sector companies are failing to address the link between water, climate and their bottom line. Feeding Ourselves Thirsty, a benchmarking analysis by Ceres that scores the world’s largest food companies on their response to water risk, found that some corporate leaders are making progress—especially Coca-Cola, General Mills, Nestle, PepsiCo and Unilever—but the majority must do more to water-proof their businesses and protect and sustain water supplies. Here are a few examples of what companies are doing right: PepsiCo committed to work with its agricultural suppliers to improve the water-use efficiency of its direct agricultural supply chain by 15 percent by 2025 in high water risk sourcing areas. General Mills has set time-bound sustainable sourcing goals for each of its 10 major commodities sourced and clearly defines and measures progress against each goal using a dashboard on its website to track progress overall. Campbell’s uses a Supplier Sustainability Scorecard to capture environmental performance metrics, including water management, from 60 suppliers representing 80 percent of procurement spend. The data is used to benchmark suppliers, identify opportunities for engagement and evaluate future supplier relationships. Unilever co-invests one million Euros annually in training and equipment for its suppliers to accelerate the adoption of sustainable farming practices. Even with these strong performers, however, the average score for the 42 companies evaluated in Feeding Ourselves Thirsty is only 31 out of 100 points. The meat and agricultural product industries in particular continue to lag woefully behind, demonstrating little investment in mitigating water-related risks, even though they have the highest exposure to them. Starting today, the food sector must put into place water-smart plans to prepare for the inevitable. Companies need to assess their supply chains and determine how they can prepare for water risks in the age of climate change, set time-bound measurable goals for improvement, equip farmers, and invest in water conservation technology. And they must simultaneously cut their greenhouse gas emissions across their supply chains and operations. Agriculture’s large carbon footprint is a key contributor to the very erratic weather that’s driving financial risk in the food sector and threatening global food security. Let this season’s monstrous hurricanes serve as a wake up call. Food companies must make water management a business imperative like never before. Read the original blog on National Geographic
Written by Mindy S. Lubber, President and CEO of Ceres Climate change didn't cause the recent monstrous hurricanes, but a warming earth certainly fueled their fury. The food sector, which consumes 70% of our planet's fresh water, is especially vulnerable to extreme weather patterns that are the most visible and devastating hallmarks of climate change. Already, erratic precipitation and hotter temperatures are affecting crop yields and productivity. Climate models predict worse to come. Diminishing snowpack in many regions will dry up seasonal water supplies that sustain major growing areas such as the western U.S., India and Peru. Crops will suffer more stress as evaporation reduces the amount of water they can soak up through the soil. And farmers will contend with increased weed growth, disease outbreaks and pest infestations — all of which reduce yield and drive up food prices. Population growth adds to the pressure. According to the United Nations, by 2050, to meet the needs of a projected population of 9.1 billion, water demands are expected to increase by 55% and food demands by 60%. Investors must act to cut their exposure to water risk, but it time is dwindling rapidly. Financial fallout The financial fallout of growing water risk is evident. In headlines and on earnings calls, major industry players — including Nestle SA, The Coca-Cola Co. and Diageo PLC — are disclosing material financial impacts linked to water challenges, including scarcity-driven tariff hikes, agricultural supply chain disruptions and lost growth opportunities in water-stressed markets. Pioneer Foods Group, for example, a South African packaged goods company, reported a 47% drop in 2017 midyear earnings resulting largely from a regional drought — especially shortfalls in raisin crops and high grain prices. More than 90 food-sector companies flagged water risk in their earnings calls so far this year, as well they should. Financial risks associated with water withdrawals and wastewater are highly material to the food sector, according to an analysis by the Sustainability Accounting Standards Board. The implications for businesses that rely on agricultural inputs are profound. A recent analysis by MSCI Inc. found $459.2 billion in revenue is at risk for food companies from increasingly widespread water shortages for irrigation or animal consumption, and $198.2 billion is at risk from changing precipitation patterns. But many food companies are unprepared for climate change's profound impact on the water resources that sustain their operations and agricultural supply chains. Feeding Ourselves Thirsty, a new benchmarking analysis by Ceres that scores the world's largest food companies on their response to water risk, found that while some corporate leaders are making progress — especially Coca-Cola, General Mills Inc., Nestle, PepsiCo Inc. and Unilever — the majority must do more to water-proof their businesses and protect and sustain water supplies. Even with these strong performers, the average score for the 42 companies evaluated is only 31 out of 100 points, based on their water management through governance and strategy, and in their direct operations, manufacturing and agricultural supply chains. The meat and agricultural product industries in particular continue to lag, demonstrating little investment in mitigating water-related risks, even though they have the highest exposure to them. What investors can do What can investors do to minimize their exposure to water risks in the food sector? First, money managers should review their institution's proxy-voting guidelines and policies to ensure support for relevant shareholder resolutions on water risk, while asset owners should ensure their fund managers act on those guidelines. Second, investors can support efforts to increase and standardize disclosure on food-sector water risk, whether by engaging directly with portfolio companies, joining investor collaborations such as Ceres Investor Water Hub or supporting market-level disclosure platforms such as SASB, the Global Reporting Initiative and the water questionnaire of CDP (formerly the Carbon Disclosure Project) among others. Third, investors can directly engage with poorly performing companies on performance improvement. Let this season's hurricanes serve as a wake-up call. The food sector must put into place water-smart plans to prepare for the inevitable. Starting today, companies need to assess their supply chains and determine how they can prepare for water risks in the age of climate change, set time-bound measurable goals for improvement, equip farmers and invest in water conservation technology. To protect their bottom lines and shareholder value, food companies must make water management a business imperative like never before. Mindy Lubber is CEO and president of Ceres, Boston, This article represents the views of the author. It was submitted and edited under Pensions & Investments guidelines, but is not a product of P&I's editorial team Read the original blog on Pensions and Investments Online
Written by Eliza Roberts - Manager, Water at Ceres Food can be a great unifier, presenting opportunities for people with differing views to reach across the table, both literally and figuratively. And when the diverse stakeholders of the food industry break bread together, they too can achieve greater understanding of the unique challenges they each face, and with that awareness move toward creating a more sustainable food supply. Take the issue of water. From irrigated fields to investment portfolios, each player in the food industry is impacted, and no wonder with food production consuming 70 percent of the world’s rapidly dwindling freshwater resources. To advance the dialogue on how best to conserve ever-scarcer water resources, even as global demand for food production soars, Ceres invited farmers, investors and food companies to the table to talk water challenges at 2017 annual conference. We weren’t surprised that the three groups didn’t always agree—but often enough their ideas overlapped. Here are some highlights from the lively discussion: What Drives Water-Smart Practices in the Food Industry? For Peter van der Werf, a senior engagement specialist at the international asset management firm Robeco, the economic business case at each stage of the supply chain drives sustainable agriculture. This sentiment was echoed by Dan Sonke, director of sustainable agriculture at Campbell Soup Company, who shared an anecdote in which he brought an agronomist on a field visit with a wheat grower to talk about sustainable fertilizer practices. “He spoke economic language to the grower without ever mentioning sustainability,” said Sonke. “He was telling the grower to do exactly what I, as a sustainability person, wanted them to do. What that farmer needed to hear that day, though, was the business case.” On the other hand, Craig MacNamara, a California farmer and owner of Sierra Orchards, and Wood Turner, vice president of Agricultural Capital, a sustainability-driven agriculture and food investment firm, said they viewed consumer demand as the overall driver for increased sustainable practices. How do you measure farm sustainability? Sustainability metrics are a hot topic for several reasons. First, in order to measure progress in a hotter, drier future, it’s critical for farms and companies to identify the right key performance indicators (KPIs) to benchmark their water stewardship efforts. Second, while more and more companies are setting sustainable sourcing goals for their major agricultural inputs, performance measurement details are often not clearly defined. That makes it hard to evaluate progress. When asked to identify the best indicator for measuring farm sustainability, some panelists identified irrigation and fertilizer efficiency. The majority, however, agreed that soil health was the most vital. As Craig MacNamara put it, “Farmers that practice good soil health tend to also practice other strong management systems because they’re thinking ahead.” While panelists expressed interest in accounting for these KPIs through surveys, survey fatigue was identified as a concern. Not only are farmers coming under greater pressure to decrease costs and increase yields in a complex global market, but they are also being asked to share data with their many buyers through individual buyer surveys. To address survey fatigue, panelists suggested simplifying the assessments to include only the most important metrics, harmonizing surveys across key industries, and ensuring that the data collected has value for growers by allowing them to benchmark their performance against their neighbors. Which performance indicators should be prioritized, and whether the right approach is to create a unified industry-wide survey, remain open questions among the panelists. Incentivizing Action at the Field Level What will incentivize farmers to actually integrate more sustainable agricultural practices? The panelists offered varied responses, ranging from financial incentives to business case imperatives. “I think to really scale it to where it needs to be for the future, the majority of these farmers are going to need financial incentives and support to make those changes,” said Josh Prigge, director of regenerative development at Fetzer Vineyards. Wood Turner offered another perspective, “I think an incentive to a grower might be witnessing the neighbor who was able to put practices into place and obtained real returns and benefits to their operations.” Turner added, “If there’s a clear indication that consumers are actively seeking out not just inexpensive food, but sustainably sourced food, then I think you’ll see a different mindset among growers who realize there are financial benefits to be gained.” Table Talk One undeniable step towards a sustainable global agricultural supply chain is bringing companies, investors and farmers together. In convening stakeholder discussions, we can learn more about commonalities and differences in perspective and work to ensure that the information investors seek aligns with the goals companies are setting and the data farmers are providing. Ceres’ Feeding Ourselves Thirsty report, which benchmarks the largest food and beverage companies on their water management practices, aims to help the food sector grapple with these issues. Our newest edition launches in early September with updated company scores and water risk management recommendations. Summing it up, Josh Prigge said, “We really need to have a more collaborative effort and have everyone at the table – the consumers, the investors, the companies, the growers – to start making some big changes.” View this blog on www.ceres.org
Written by Mary Ann DiMascio - Ceres, Senior Manager, Company Network Large food and beverage companies are operating in a time when consumer expectations, the economic landscape and the planet itself are all experiencing rapid and significant changes. The business models of these companies are profoundly entwined with some of the most pressing global challenges we face today — poverty, food insecurity, water scarcity and resource depletion — many of which are complicated by rapid population growth, climate change and shifting lifestyles. Perhaps nowhere are these factors playing out more strongly than in the agricultural supply chains where these companies source their ingredients. Globally, agriculture employs over 1 billion people, many of whom are food insecure; consumes 70 percent of our freshwater; and is estimated to contribute nearly a fifth of total global carbon emissions. More than ever, investors and consumers are looking for companies to demonstrate that they are sourcing their ingredients in a way that respects people and the planet. Long-term investors increasingly expect companies to manage and disclose environmental, social and governance (ESG) impacts as evidence of effective corporate governance, and investors are showing particular interest in how the food and beverage sector is responding to agricultural supply chain challenges. Investors seek to examine the agricultural supply chain risks and corporate responses more deeply. That’s because drought, extreme weather, poor working conditions and land disputes are already driving financially material business risks for food and beverage companies, such as price volatility, inconsistent quality and supply of ingredients, damage to brand equity from advocacy campaigns, legal sanctions and seizure of goods. These business risks that affect company bottom lines also can show up as decreased revenue or stranded assets in investor portfolios. As sustainable sourcing strategies and supply chain transparency become essential practices for the food and beverage industry, investors seek to examine the agricultural supply chain risks and corporate responses more deeply in order to make informed investment decisions. But beginning to understand and assess how companies are managing these factors can be a challenge when each commodity — and each company — is faced with a different constellation of risks and impacts. That’s why Ceres just released "Engage the Chain: An Investor Guide to Agricultural Supply Chain Risk" to help investors understand the challenges businesses face, how those translate into financial risks and how those risks can affect investor portfolios. The interactive guide provides investors with information about the social and environmental impacts driving material business risks for eight key commodities: beef; corn; dairy; fiber-based packaging; palm oil; soybeans; sugar cane; and wheat. These commodities are among the most prominent drivers of deforestation, greenhouse gas emissions, and water depletion and pollution. Some major U.S.-headquartered food and beverage companies already are taking action. Two examples: To address the long-term risks of climate change, General Mills has made a science-based commitment to reduce absolute greenhouse gas (GHG) emissions by 28 percent across its full value chain by 2025. Because nearly two-thirds of its total GHG emissions occur in agriculture, a key focus of the company’s climate strategy is advancing sustainable agriculture practices through collaboration. By working hand in hand with suppliers, farmers, NGOs and industry peers, the company hopes to catalyze action and scale climate solutions within its business and across the food industry as a whole. Unilever is likewise helping hundreds of thousands of smallholder farmers improve agricultural practices, enabling them to double or even triple their yields. This increased productivity improves both farmer livelihoods and the quality and security of key commodity supplies, which in turn reduces volatility and uncertainty for Unilever and supports the company’s long-term growth plans. Whether we are investors, companies or consumers, we all have a stake in the future of our food. It is becoming clear that the most effective way to address risks and innovate solutions at scale is to work together. By actively participating in multi-stakeholder collaborations, transparently sharing information and challenging each other to take bold action, we can meet the ever-growing demand for food and ensure a truly sustainable and resilient global agriculture system. Read the original blog on GreenBiz
Written by Brooke Barton - Senior Director, Water and Food at Ceres Last week, Tyson Foods announced it was partnering with the World Resources Institute (WRI) to set targets to reduce water and greenhouse gas impacts in its operations and supply chain. This is big news, coming as it is from the largest poultry player in the U.S., which has had a decidedly weak track record on water and climate change. In fact, Tyson was one of the worst performers in Ceres’ Feeding Ourselves Thirsty report that benchmarked how the world’s top 37 food sector giants are managing water risk. Tyson’s move underscores, among other factors, the power of investors, who know that good environmental management is good business. During the past three years, Tyson and other big players in the meat industry faced growing calls from their shareholders to improve their water use practices. Ceres and the Interfaith Center on Corporate Responsibility worked closely with investor partners to engage Tyson and other large meat producers to set water risk management policies. Just last November, 45 institutional investors with more than $1 trillion in assets sent a letter urging four of the largest meat producers to tackle the major water pollution risks associated with feeding, slaughtering and processing livestock. Through letters like these, shareholder proposals and dialogues with company management, investors are essentially asking the meat industry to consider the long-term financial viability of a high-risk animal production and processing model that is among the food industry’s most water-intensive and polluting. “This is where we see Tyson’s greatest risk as an investor,” Mary Beth Gallagher, from TriState Coalition for Responsible Investment recently told me. Gallagher has been engaging with the company through shareholder proposals and dialogues for the past few years, and notes that its longstanding history of water contamination issues also negatively affects the communities in which it operates and the farmers that are part of its supply chain. “As investors, we are pleased to see the company take ownership and commit to setting robust water and greenhouse gas goals across its entire value chain,” she says of the commitment. “We will be watching to see how it collaborates with its ingredient suppliers, contract growers and stakeholders to incentivize good behavior and practices.” Tyson of course is not the only food company with major water issues. Overall, growing and processing the food we eat is the most water intensive business on earth—more than 70 percent of the world’s freshwater is used to irrigate crops and raise livestock. Yet, food companies can no longer take water for granted. In fact, in 2015, Tyson laid off workers, shut down a beef processing plant in Iowa, and posted disappointing quarterly earnings after cattle herds were hit hard by prolonged dry conditions in the Southwest. Tyson’s new commitments could signal a tipping point in the industry. In just the past year, both Hormel and Smithfield Foods made significant commitments to improve water stewardship and climate protection in their supply chains, where the majority of their environmental impact lies. Smithfield, the world’s largest pork processor and hog producer, set a goal to slash greenhouse gas emissions by 25 percent by 2025 across the company’s entire supply chain, from the intense fertilizer use associated with growing feed grains, to fuel consumption in its transportation network. Tyson, given its industry dominance, is a critical link in the chain. Tyson’s actions also put into relief the other major protein companies that still lag in setting ambitious supply chain targets on water and climate, including Cargill, JBS, Sanderson Farms, and Perdue. As evidence of the financial risks of climate change and degraded water resources mount, investor interest in these issues will remain keen. The good news is that major meat producers have the buying power and the control over their supply chains to meaningfully strengthen farm practices and protect water supplies. Increasingly, they’re using it, because they realize that water risk management and conservation are now part of business as usual. View this blog on www.ceres.org
As Thanksgiving nears, 45 leading institutional investors collectively managing over $1 trillion in assets are pressing some of the nation’s largest producers of turkey and other meats to address the significant water pollution risks associated with feeding, slaughtering and processing livestock. The investors sent joint letters to four of the largest producers in the meat industry, Cargill, Inc., JBS, Perdue Farms, and Smithfield Foods. The letters come one month after Hurricane Matthew inundated poultry and hog farms in North Carolina, flooding manure lagoons and killing more than two million chickens, turkeys and hogs. “As investors analyzing water risks in our portfolios, we believe that robust management of water quality challenges is a critical aspect of risk management in the meat industry, and one of increasing importance in the context of climate change and growing weather extremes,” the investors wrote. Click here for one example of the letter and the list of investor signatories. Investors who signed onto the letters are members of the nonprofit sustainability organization Ceres and the Interfaith Center on Corporate Responsibility. “Broad mismanagement of local water resources can lead to devastating regulatory, reputational, and litigation risks, weakening a company’s ability to operate profitably,” said Kristel Verhoef, Active Ownership Specialist at ACTIAM, which has 56 Billion Euro in AUM. The effort comes on the heels of several shareholder proposals filed with other meat sector players, including Tyson Foods, Hormel Foods, Pilgrim’s Pride and Sanderson Farms, that call for improved water management. “Comprehensive water stewardship policies are critical to avoid the risks present at several points in the supply chain of meat producers like Hormel,” said Sister Patricia Daly of the Tri-State Coalition for Responsible Investment. “We are encouraged by the company’s commitment following the withdrawal of our shareholder proposal, to put a water stewardship policy in place that will apply to major suppliers, contract animal growers and feed suppliers.” Last year, Ceres released a report that ranks major food companies on water risk management. Several meat companies including Tyson and JBS were identified among the worst performers. A recent report from Environment America ranked Tyson as the biggest water polluter in the meat sector, releasing 104 million pounds of toxic pollutants into waterways from 2010 to 2014 from its slaughtering and processing plants, and buying livestock that generates approximately 55 million tons of manure per year. During the same time period, it is estimated that collectively Smithfield (27.3 million lbs.), Cargill (50.4 million lbs.), JBS (37.6 million lbs.) and Perdue (31 million lbs.) directly released 146.3 million pounds of toxic pollutants into U.S. waterways. Fines for violations of wastewater permits have proven costly to the industry. For example, in 2010 JBS paid $2 million over the failure of a facility to comply with the Clean Water Act and the Pennsylvania Clean Streams Law. JBS was also required to improve operations by reconstructing wastewater systems at an estimated cost of $6 million. Some companies in the industry have begun responding to these concerns. Last month, meat processor Hormel Foods, along with several other companies joined the Ceres-World Wildlife Fund AgWater Challenge, an initiative to advance water stewardship in the food sector. Hormel committed to developing a comprehensive water stewardship policy, setting water management expectations that go beyond regulatory compliance for its major suppliers, contract animal growers and feed suppliers – a meat industry first. “With climate change, business-as-usual management of the more than 300 million tons of manure produced annually by the U.S. livestock industry is no longer feasible. Hurricane Mathew’s effects underscore the vulnerability of meat companies – and their shareholders – to growing risks stemming from large-scale water pollution events, said Brooke Barton, Senior Program Director of Water and Food Program at Ceres. “These letters highlight the need for these companies to address the reputational, legal and regulatory risks of being a large polluter,” said Nadira Narine, ICCR Senior Program Director and co-coordinator with Ceres of the initiative. “All companies need to minimize effluent discharge beyond compliance levels, and set related goals and targets.” Investors signing the letter asked the meat companies to assess the pollution impacts of their direct operations as well as their supply chains, and develop a comprehensive water stewardship policy with related goals that address the following: Noncompliance and minimizing permitted releases to waterways Safe storage and management of animal waste Minimizing fertilizer runoff from animal feed production “The Human Right to Water and Sanitation, recognized in 2010 by the United Nations General Assembly, underscores the importance of a corporate role in ensuring that water impact risks are managed – including the improvement of waste storage and disposal controls to safeguard local waterways,” said Marcela Pinilla, Senior Analyst at CBIS. “In our upcoming engagements with JBS SA and Smithfield/WH Group, we will seek to encourage the inclusion of community impact risks as an element of a comprehensive water stewardship plan.” About the Interfaith Center on Corporate Responsibility (ICCR) Celebrating its 45th year, ICCR is the pioneer coalition of shareholder advocates who view the management of their investments as a catalyst for social change. Its 300 member organizations comprise faith communities, socially responsible asset managers, unions, pensions, NGOs and other socially responsible investors with combined assets of over $200 billion. ICCR members engage hundreds of corporations annually in an effort to foster greater corporate accountability on questions such as climate change, corporate water stewardship, sustainable food production, human trafficking and slavery in global supply chains and increased access to financial and health care services for communities in need. www.iccr.org