Meat Industry Grilled by Investors to Address Water and Climate Risks

by Brooke Barton, Senior Director, Water and Food, Ceres

Hurricane Florence is only the latest environmental, financial and reputational calamity to hit the nation’s vast livestock industry this year.

Even before last month’s torrential rains caused widespread losses and flooding in hog waste lagoons across North Carolina, meat producers had come under growing pressure due to extensive pollution from their sprawling factory farms, which confine thousands of hogs and chickens in tightly packed facilities.

Noxious odors from football field-sized waste pits have prompted dozens of nuisance lawsuits by local neighbors in Iowa and North Carolina, two of which have resulted in favorable jury verdicts and financial damages. Harmful runoff into local waterways have triggered civil and criminal cases across the Midwest. Investor inquiries to companies about their ability to limit these pollution impacts have also been mounting, as is public pressure on state legislatures to crack down on the industry.

Many of these pressures are expected to grow as climate change and more extreme weather events trigger more disasters for the industry, which is especially concentrated in poor, rural areas in the Midwest and Southeast.

Floodwaters from Hurricane Florence caused dozens of hog waste lagoons to overflow, leaving trails of floating excrement that compromised local waterways and drinking water supplies. More than 3.4 million chickens, turkeys and hogs were killed, and the hurricane also forced plant closures, including the world’s largest hog plant operated by Smithfield Foods (WHGRF). Sanderson Farms (SAFM), the country’s third largest poultry producer, lost more than 1.7 million chickens to flooding. The losses come fresh on the heels of Hurricane Matthew in 2016, which caused similar damages, much of it from overflowing livestock farms.

The United States’ livestock industry produces 335 million tons of untreated animal manure annually. (In comparison, the U.S. human population produces 7 million tons of waste annually, the majority of which is treated by public wastewater utilities). This vast stockpile of poorly stored animal manure is a burgeoning liability to a growing U.S. meat and livestock industry, and especially risky in the context of the ever-wilder weather we see tied to climate change. The irony is that livestock production is also a major and growing contributor to global warming -- producing approximately 15% of annual global greenhouse gas emissions—so these risks are at least partially self-inflicted wounds.

A small number of industry players have taken steps address the twin impacts of water and climate pollution, but to date overall industry response has been tepid. When 40 of the world’s largest food producers were ranked by Ceres last year on their management of water risks, meat sector companies had the lowest overall scores, averaging only 15 points on a scale of 1 to 100. Similarly, very few meat companies have set climate targets that address the large-scale impacts of animal and feed-related emissions.

As the water pollution-climate change connections accelerate, some in the investment community have begun asking “Big Meat” to identify how these impacts translate into bottom line regulatory, reputational and market risks. In 2016, 45 institutional investors and debt holders sent letters to major livestock companies – including Smithfield Foods, Cargill and JBS/Pilgrim’s Pride (PPC) – requesting that they address significant water-related risks associated with feeding, slaughtering and processing livestock.

Investors followed up by filing shareholder resolutions this year with Tyson Foods (TSN) and Pilgrim’s Pride. The Tyson resolution was supported by 63 percent of the company’s independent shareholders. The company subsequently committed to improve water, soil and fertilizer practices on two million acres of its supplier land and to take additional measures to reduce water runoff and soil losses.

To date, meat companies have also been slow to set greenhouse gas emissions targets and disclose their climate risks in alignment with the recommendations of the Task Force on Climate-related Financial Disclosures. Nevertheless, major meat buyers are increasingly issuing their own directions for their suppliers. McDonald’s recently committed to lower the greenhouse gas intensity across its entire food supply chain by 31 percent by 2030. Wal-Mart, through its Project Gigaton, is asking its supplier base, including meat suppliers, to eliminate a total of one gigaton of emissions by 2030 – the equivalent to taking more than 211 million passenger vehicles off of U.S. roads and highways for a year.

While these actions are encouraging, growing pollution pressures and extreme weather events mean that the meat and livestock industries’ outsized impacts and risks will require bigger responses. Maintaining public trust and their license to operate will require much more, including rethinking the siting practices of new animal feeding operations, the adoption of far safer manure management models, and providing much needed incentives for contract animal and feed suppliers to adopt more sustainable practices.