Could Climate Change Make Cows The Next Stranded Asset?
Mike Scott, Contributor, Forbes
Sep 4, 2019
As fires rage in the Amazon rainforest and consumers and companies step up moves to boycott products grown on deforested land, a new report suggests that suppliers to some of the biggest brands in the world are undermining the sustainability commitments of their customers.
Cows could follow coal and become the next stranded asset, the report suggests.
New research for the Coller FAIRR Protein Producer Index, backed by $16 trillion of investment, finds that the world’s largest meat, fish and dairy producers are failing to match the sustainability commitments of the high-street brand names they supply, including McDonalds, Tesco, Nestlé and Walmart.
The research analysed 60 of the largest global meat, fish and dairy producers, with a combined market capitalisation of $324bn. These firms provide much of the meat, fish and dairy used in the burgers, nuggets and ready meals sold around the world. The assessment finds that:
· Suppliers to McDonalds, Tesco, Nestlé and Walmart ranked as worst offenders in areas such as greenhouse gas (GHG) emissions, antibiotic use and deforestation.
· 77% of major meat, fish and dairy producers do not measure all GHG emissions or have meaningful targets to reduce them, undermining climate commitments of high-street brands.
· Norwegian fish farmers Mowi and New Zealand-based dairy co-operative Fonterra are the best performers in the index; with four poultry firms in bottom five, including Indian chicken producer Venky’s and Cal-Maine Foods, the largest producer of fresh eggs in the US and a significant supplier to Walmart.
Walmart aspires to zero net deforestation in its supply chain by 2020, but suppliers such as Sanderson Farms (US) and Cranswick (UK) fail to report any commitments on deforestation, according to the Index.
Meanwhile, McDonalds and Yum! Brands are among the companies that have pledged to reduce antibiotics use in their beef supply chains. But the vast majority of beef suppliers do not have a policy to avoid routine use of antibiotics – only one (Brazil’s Marfrig) does.
"From cage-free eggs to plant-based burgers, high-street food brands have made bold commitments on sustainability in recent years,” said Jeremy Coller, founder of FAIRR and chief investment officer at Coller Capital.
"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,” he added.
Climate change is putting dire pressure on the ability of the meat, fish and dairy industries to meet global demand for protein, with the recent IPCC report warning that industrial livestock systems “will suffer most” from indirect climate change impacts. Examples of this are already evident – Australian Agricultural Company, Australia’s biggest beef company, suffered losses of over $100 million in 2018/19, partially due to extreme weather events, while Cal-Maine saw its revenues fall 30% in Q4 2018 partly as a result of historic levels of rainfall. Singapore’s QAF, which has a number of pig farms in Australia, saw its feed prices rise 55% in 2018 due to increased droughts.
“The message from an increasing number of investors is that the food industry must find better answers to the business risks it is facing from more extreme weather patterns and increasing water scarcity,” said Juan Salazar, director of responsible investment at BMO Global Asset Management. “As a first step meat, fish and dairy suppliers must start to echo and act on the commitments some of their big customers are making, for example reducing emissions in line with the volumes demanded by climate science.”
The meat, fish and dairy sector as a whole performs poorly in the index, with 39 out of the 60 companies (65%) ranked in the bottom ‘high risk’ category for overall performance across all sustainability criteria.
At the same time, some companies are attempting to diversify into new products – 25% of animal protein producers now have some investments in alternative proteins such as ‘plant-based meats’, including traditional meat companies such as JBS, Tyson and Marfrig.
The index also highlights that none of the 50 meat and dairy companies (excluding fish farmers) have a comprehensive policy to address or mitigate deforestation in all regions in which they source soy and/or cattle, while 94% of meat and dairy companies are ranked in the bottom ‘high risk’ category for water pollution.
In addition, 77% of companies (46) are ranked in the bottom ‘high risk’ category for management of antibiotics. 22 firms have no policy on antibiotics use and over 75% of meat and dairy companies and 60% of fish farming companies (9) are ranked in the ‘high risk’ category for animal welfare...