Food sector suppliers ‘defy sustainability commitments’, report warns

Companies supplying meat and dairy to some of the world's biggest food firms, including McDonalds, Nestlé, Tesco and Walmart are failing to match the sustainability promises of their clients, according to a report.

The Protein Producer Index, compiled by the $16 trillion-backed FAIRR investor network, assesses 60 of the world’s largest global meat, fish and dairy producers on environmental and social issues. These companies have a combined market cap of $324bn, according to FAIRR.

The companies are given a ranking of ‘low’, ‘medium’ and ‘high’ risk or ‘best practice’, based on their scores against nine sustainability factors. These are: greenhouse gas emissions; deforestation and biodiversity loss; water scarcity and use; waste and pollution; antibiotics; animal welfare; working conditions; food safety; and alternative proteins. 

FAIRR found that 77% of the companies do not measure all their GHG emissions and do not have meaningful targets to reduce them. These include Venky’s (India) and Hormel Foods (US) – both suppliers to McDonalds; LDC (France) – a supplier to Nestlé; and Cal-Maine Foods (US) – the largest producer of fresh eggs in the US and a significant supplier to Walmart. Nestlé, McDonald’s and Walmart have all publicly committed to reduce GHG emissions.

FAIRR’s founder Jeremy Coller said that the lack of environmental action from food suppliers was undermining the ‘bold commitments made on sustainability in recent years’ by high-street food brands.

"It is the companies hidden upstream in the meat and dairy supply chain who face the most significant climate and public health risks. Our research shows that the largest animal protein producers have failed to deliver any solutions. These companies urgently need to address issues such as climate risk, deforestation and antibiotic use to future proof their own business models and to prevent the commitments of their customers, the high-street brands, from becoming nothing but fake promises.”​

Europe is the best performing region​

Europe is the best performing region, however. While 65% (39 of 60) of all companies assessed by FAIRR are ranked in the bottom ‘high risk’ category for overall performance across all sustainability criteria, only three of the 10 companies on the index with headquarters in Europe were assessed as ‘high risk’.

Aarti Ramachandran, Head of Research & Engagements at the FAIRR Initiative, said that the meat, dairy and fish companies based in Europe are in general ‘managing and addressing some of these risks more than their counterparts on other regions’.

“That is positive news and it certainly reflects the environment of greater scrutiny both from regulators as well as from consumers. Companies are having to better disclose how they are managing these risks​,” she told FoodNavigator.

There are multiple drivers of why companies engage in sustainability, she said. "Sustainability is strongly tied to brand and reputation and consumer loyalty and there is increasing scrutiny from policy makers, investors and activist organisations​.” 

The farmed fish sector is performing particularly well, she said. “The farmed fish companies are represented well at the top of the index, which again is reflective of the fact that the sector today is more in tune with the risks that it faces and how to respond to those risks.”​

‘But the food sector still lags’​

But the food industry still lags compared to others, she claimed.

“In general, the meat, dairy and farmed fish sector, whether it’s in Europe, North America or Asia still in general lags when it comes to addressing sustainability issues compared to their consumer-facing counterparts and that should be concerning because they are in the front line in terms of facing and managing these risks.​

"What's alarming for us is that a significant majority of these companies - 65% - are not addressing their material sustainability issue. FAIRR's index look at how companies are looking at greenhouse gas emissions, deforestation risks, water use and manure management, antibiotics use, animal welfare, food safety, labour conditions - these are all risks that could have a material impact on the companies' performance and reputation and its surprising that a sector that is so critical to the global food system - 65% are not looking at or managing these risks adequately."​

'We need more sustainable diets' ​

The food industry also needs to shift to more sustainable ingredients and recipes, she argued.

"If the meat and dairy trend continues to grow at the trend it has over the last few decades we are going to see a profound breakdown on multiple planetary boundaries whether its climate change, deforestation or water use. ​

“The food system today is not sustainable and it has to shift towards foods that have lower resource intensity."​

She noted that consumer preferences are shifting in Europe and said companies should be leveraging this demand ‘to shift towards a product portfolio that is more sustainable and healthy for consumers.’

"Consumers want to understand what goes into their food and are increasingly concerned with the environmental and ethical implications of production systems. Health is a big driver of why consumers are beginning to move away from certain types of foods and eating more plant-based foods. These are all trends that are happening and that's why you're seeing such a phenomenal growth in alternative protein brands. In the last five months, we've seen a large number of meat and dairy companies make a play in this space. That's encouraging."​