Supply chain emissions impede North American food sector’s climate change progress

19 Sep 2024 --- Nearly 60% of major companies in the North American food sector are making headway on reducing direct emissions, but slower progress in addressing supply chain emanations is preventing them from slashing total emissions, finds a Ceres study.

As the F&B industry gears up to meet the Paris Agreement’s 2030 deadline, Ceres’ analysis examined data from 50 companies covered by Food Emissions 50, an investor-led initiative that works toward a net-zero future in the food sector.

The study is based on public company disclosures like sustainable reports and reveals that those with “science-based emissions targets” covering their total emissions are more likely to lower emissions.

“Ceres’ new report serves as a lens into the current state of climate action in the food sector, and while some companies are making positive progress, too few are making significant reductions in their total emissions,” says Meryl Richards, program director, food and forests at Ceres.

“Since emissions reduction efforts may take time to bear fruit in this sector, it’s even more important for companies to publish climate transition action plans so that investors know they are poised to mitigate risks and seize opportunities in the transition to a lower-emissions economy.”

Using renewable energy to run company plants and production processes can help them reduce scope 1 and 2 emissions.The data cut-off date for the assessment was August 1, 2024.

Gauging target fulfillment

Ceres’ study finds that many companies are making progress in reducing scope 1 and 2 GHG emissions, which are direct emissions from company-owned vehicles, buildings and other operations and indirect emissions associated with the company’s energy use. 

For instance, Ingredion reduced these emissions by 22% compared to the company’s base year, cites the report. Transitioning away from coal power in company plants and attributing 25% of the company’s energy purchases to renewable power contributed to this reduction.

However, managing scope 3 (indirect) GHG emissions poses challenges, as companies “must rely on their direct and indirect suppliers as well as customers to implement reduction steps,” flags the report.

This issue was also observed in a FAIRR Protein Producer Index report published last year, which stated that greenhouse gas (GHG) emissions from the meat and dairy sector are still increasing by 3.28% from the top 20 producers, out of which, 40% still do not include Scope 3 emissions.

Ceres’ analysis found that out of the 31 companies that reported decreasing their scope 1 and 2 emissions, 14 recorded either an increase in overall GHG emissions or no significant change due to increases or “insignificant reductions” in scope 3 emissions.

The study also finds that setting science-based targets increases companies’ likelihood of lowering their emissions, demonstrating the importance of target-setting to prioritize climate action internally.

“No company without any targets reduced their total GHG emissions and these companies were also more likely to have increased scope 1 and 2 emissions.”

McDonald’s and Hershey have set targets to reduce their emissions from forests, land and agriculture.Disclosure to action

According to Ceres’ analysis, momentum is building for climate action in the food sector. It highlighted some companies’ actions over the past year to reduce their emissions.

“ADM’s 2022 Corporate Sustainability Report confirmed that emissions from purchased goods and services make up the largest portion(88%) of its total GHG emissions,” states the report. To address these emissions, the nutrition company is expanding its regenerative agriculture programs, which it says reduced its scope 3 footprint by 310,000 metric tons of CO2e last year.

McDonald’s and The Hershey Company have set targets to reduce their emissions from Forests, Land and Agriculture, validated by the Science-Based Targets Initiative.

Meanwhile, General Mills, Kraft Heinz and Starbucks have joined the Dairy Methane Action Alliance to disclose their methane emissions and Ahold Delhaize has partnered with Kellanova on a regenerative agriculture program to lower scope 3 GHG emissions in the wheat supply chain for Cheez-It and Club Crackers.

Additionally, Dairy Farmers of America and McDonald’s are “publicly supporting” the Enteric Methane Innovation Tools for Lower Emissions and Sustainable Stock Act to advance the adoption of lower-emissions practices in the food sector.

“Room for progress”

Companies are beginning to clarify their emissions disclosures, but there is still room for improvement to enhance comparability and the ability to assess progress over time, underscores the report.

For 18 of the 50 companies assessed, it was not possible to analyze whether their total emissions declined between their most recent year of reporting and their base year GHG emissions, due to companies not reporting emissions since 2020.

Companies must be transparenct about a lack of traceability in the supply chain to ease progress assessment.Ceres recommends companies to ease the assessment of corporate GHG emissions disclosures by separating scope 1, 2, and 3 emissions, indicating whether location-based or market-based scope 2 numbers are disclosed and mentioning any changes to the company’s emissions calculation methodology.

It also demands transparency about any “underlying uncertainties in the data,” such as those arising due to a company’s supply chain’s lack of traceability and the company’s plans to reduce them.

Need for urgent measures

Ceres’ report mentions that 38 Food Emissions 50 companies now report their scope 3 emissions, up from 20 companies when the initiative was launched in 2021.

“With so much work needed for the food sector to reach a 1.5°C future, it’s encouraging to see a growing number of companies report emissions targets and publish more robust climate transition action plans,” says Nako Kobayashi, Food Emissions 50 manager at Ceres. 

“As our report underscores, comprehensive emissions disclosures are the best way for external stakeholders to keep track of the sector’s progress, but food companies need to go farther and urgently take concrete steps toward reaching their public targets.”

By Insha Naureen