Global investor engagement on meat sourcing

Progress briefing

Introduction

Meat Sourcing

Growing global demand for meat and dairy products continues to place unsustainable burdens on our planet’s limited resources. Animal agriculture is linked to nearly 15% of global greenhouse gas (GHG) emissions and is a significant driver of both water scarcity and land-use change. As one of the largest buyers and sellers of meat and dairy products, the $570 billion global fast-food sector is increasingly vulnerable to the impacts of a warming planet on these animal protein supply chains. Multiple analyses from Ceres, FAIRR, and others have found that many prominent protein suppliers are not adequately managing these risks. In response, global investors representing more than $6.5 trillion in assets called on six of the largest fast-food companies in 2019 to act urgently to mitigate the climate and water risks in their meat and dairy supply chains.

To ensure resilient commodity supply chains, investors have requested that companies develop strong supplier policies on climate and water risks, set science-based targets to curb GHG emissions and improve water use, and perform climate-related scenario analyses to understand the risks and opportunities for their businesses. One year after launching this investor engagement, Ceres and FAIRR are excited to announce the second phase, which will continue dialogues with all six companies, with the added support of an expanded coalition of over 90 investors, amounting to a total of $11.4 trillion in combined assets under management.

Engaging companies

The case for engagement

The fast-food sector plays a dominant role in feeding billions worldwide. In the U.S. alone, on any given day around 84.8 million adults (nearly one-third of the population) consume fast food. A significant portion of this consumption is linked to food items that wholly or partially involve meat and/or dairy products. The sector continues to expand rapidly in developing and emerging markets, especially in China where the sector is expected to experience double-digit growth up to 2025.

Across three key areas – GHG emissions, water, and land use – animal proteins have a significant environmental footprint. This footprint creates increasingly material reputational, operational and market risks for companies buying animal protein-based products.

The livestock sector is also particularly vulnerable to impacts linked to climate change. Two recent IPCC reports, “Special Report on Global Warming of 1.5°C” and “Climate Change and Land” detail the multiple ways in which climate change will directly affect animal agriculture. The impacts will include disruption through changes in feed/forage quantity and quality, poor animal health outcomes (e.g., persistent heat stress and higher incidence of disease), lower productivity (e.g., reduced milk yields and reproductive inefficiency), higher mortality and reduced water availability. The latter study is stark in its pronouncement: an average global temperature increase of 2°C would result in a decline in livestock of 7–10%, with associated economic losses of between $9.7 and $12.6 billion.

Meat processors remain behind the curve on understanding and managing these risks. The 2019 Coller FAIRR Protein Producer Index assesses 60 of the world’s largest meat, dairy and farmed fish suppliers on climate, water and deforestation risk management, finding that most fast-food suppliers have taken limited action to mitigate these risks (e.g. by setting targets or decreasing emissions). The vast majority of suppliers provide no disclosure on how they manage water use and only a few companies have sustainable agriculture policies that address water scarcity in feed farming. A large proportion provide little detail on how livestock manure is managed. This not only increases global methane emissions, but it also leads to significant impairment of local water resources.

Furthermore, analysis of companies that produce agricultural products, beverages, meat and packaged food found that the meat industry, in particular, lags considerably behind the other three in its efforts to manage risks associated with water scarcity and pollution. Meat companies are doing far less than other benchmarked companies to establish board- and executive oversight of these risks, assess risks within their operations and supply chains, and ensure supply chain resilience to droughts, floods and rising temperatures.

 

Investor requests

Areas for improvement

Supplier Policy

Develop a supplier policy addressing the environmental impacts of animal protein sourcing.

Targets

Set quantitative, time-bound targets to reduce the impacts of a company’s animal protein supply chain.

Scenario Analysis

Undertake scenario analysis/risk assessment in line with TCFD recommendations.

Disclosure

Commit to disclosing progress towards these targets on an annual basis.

Next steps

Next steps for the investor coalition

Investors have been encouraged by companies’ responsiveness, their increasing recognition of climate and water risks in meat and dairy supply chains, and by meaningful efforts to mitigate such risks (disclosed throughout the dialogues). However, notable gaps in the sector’s risk management strategies remain, particularly around assessing supply chain resilience to various warming scenarios and setting time-bound, quantitative targets addressing supply chain emissions, water use, and water pollution.

In 2020, Ceres and FAIRR will work with investors to continue dialogues with all six companies with the support of over 90 investors with more than $11.4 trillion in combined assets under management.

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