Meat and dairy companies have yet to “meaningfully address” basic sustainability risks, report warns

05 Sep 2019 --- Meat and dairy food producers are facing criticism following a report which states key companies within the food industry are not doing enough to tackle the impacts of climate change, deforestation, greenhouse gas emissions and the use of antibiotics in the livestock sector. The vast majority of companies have yet to “meaningfully address even the most basic sustainability risks,” says the Coller FAIRR Index. Thirty-nine (of 60) companies, valued at US$175 billion and with combined revenues of over US$116 billion, are ranked as high risk (worst performers) by the Index.

The Coller FAIRR Protein Producer Index – an assessment of meat, dairy and farmed fish producers on material environmental, social and governance risks – examines the producers which supply meat and dairy to global brands and giants such as McDonald’s, Tesco, Nestlé and Walmart.

The findings outline that scarcity and pollution have the lowest average scores, while food safety has the highest.The report also notes that none of the companies analyzed have a comprehensive policy to stop deforestation, while only four companies in the index have committed to phasing out routine use of antibiotics – an issue that is widespread in the industry.

The index closely follows last month’s landmark report from the Intergovernmental Panel on Climate Change (IPCC) which demonstrates how the world’s meat, fish and dairy industries are under serious threat from climate change impacts.

Established by the Jeremy Coller Foundation, a philanthropic vehicle of private equity entrepreneur Jeremy Coller, the Coller FAIRR Index is designed to help investors build a deeper understanding of the risks and opportunities in global protein production systems. In the analysis, the foundation consulted over 40 stakeholders, including issue experts, investors and company representatives, to build the Index’s methodology.

As some of the largest protein suppliers globally and regionally, the spotlighted companies play a significant role in meeting – and building – global consumer demand for animal proteins, the foundation notes The 60 companies have material exposure to five main animal protein categories: beef, dairy, pork, poultry, eggs and farmed fish.

Around 86 percent of the 60 companies’ total revenues of US$319 billion are derived from producing and processing intensively farmed livestock and fish. The analysis highlights that companies with poultry supply chains have the largest representation of the total revenues (24 percent), indicating the growing popularity of poultry.

The report outlines that 39 of the 60 companies are ranked as “high risk” (worst performers) by the Index across its nine factors. The companies are valued at US$175 billion and with combined revenues of over US$116 billion. The findings also outline that scarcity and pollution have the lowest average scores (average of 13 percent for both), while food safety has the highest (46 percent).

European companies lead the Index, while those headquartered in Asia are flagged as lagging on managing material risks. Nearly half (47 percent) of companies in the Index are based in Asia, including 14 companies located in China. Among the lowest ranked companies were brands Thaifoods, San Miguel and Yili.

The methodology and all information used by The Coller FAIRR Protein Producer Index relies on public information disclosed by companies on their websites and other platforms. The foundation asserts that its methodology is “grounded in international and industry-specific standards” and within the expectations of investors who are members of the FAIRR Initiative.

Tackling deforestationIn 2019, deforestation in the Amazon was up by 278 percent compared to the previous year.
The Index assesses meat and dairy companies on their policies and supplier engagement to halt deforestation in two of the highest-risk supply chains: soy and cattle. 

In 2019, deforestation in the Amazon was up by 278 percent in just one year, notes the foundation. Inputs into feed and animal agriculture, including fertilizers, pesticides and veterinary drugs, also degrade local ecosystems and water sources.

According to the Index, there is a broad industry trend that, despite growing investment from companies, there is a lack of progress on halting deforestation due to rapidly growing demand for soy and beef. The analysis categorizes 88 percent of the spotlighted meat and dairy companies as “high risk” in the scope of deforestation, valued at US$229 billion and with revenues of US$1160 billion.

Industry has seen a dynamic investment climate this year in the space of non-animal proteins.Industry swings towards meat-free protein
Industry has seen a dynamic investment climate this year in the space of non-animal proteins. The Coller FAIRR Protein Producer Index rationalizes that due to a companies’ involvement in the production non-animal proteins, its exposure to risk factors is “automatically reduced.”

Sustainability is expected to be a key driver of business decision making in the years to come. An Innova Market Insights survey finds that 64 percent of US and UK consumers expect companies to invest in sustainability. Meat reduction trends were also highlighted by the market researcher in a consumer survey that revealed one in five US consumers “have eaten less meat across the past year.” 

Last month, ingredient solutions provider Ingredion announced it is increasing its investment in plant-based proteins to US$185 million by 2020. The move builds on a previously stated investment amount of US$140 million and will expand both manufacturing and production capabilities. In the same month, Cargill ramped up its interest in Puris, the largest North American producer of pea protein and a key supplier to Beyond Meat, with an additional US$75 million investment. 

In July, Royal DSM announced it is joining forces with French agro-industrial group Avril to develop a new protein based on non-GMO canola, coined CanolaPRO. The facility of Saipol, an Avril subsidiary, will likely be the state-of-the-art industrial production site in Dieppe, France.

By Benjamin Ferrer