The transition to a more sustainable agri-food sector is gaining momentum.
Climate finance for agrifood systems has risen by over 300% since 2019, reaching US$95 billion, according to the Climate Policy Initiative, and financing the food system transition is high on the investment agenda, with asset managers and owners moving beyond broad pledges to channel capital into the real economy.
Yet for investors trying to assess the materiality of company sustainability efforts, a persistent challenge remains: the gap between what companies disclose publicly and what happens in their operations and supply chains.
Over the past year, FAIRR has engaged in conversations with several listed animal protein companies as a part of its corporate outreach activities. These conversations aimed to move beyond public disclosures to better understand how these companies are navigating sustainability challenges in practice.
While progress is being made, our discussions highlighted recurring structural and operational barriers that affect how companies implement sustainability strategies, manage supply chain risks, and communicate their activities to investors.
This Insight piece details those barriers and identifies some of the steps companies and investors can take to overcome them.
The gap between disclosures and actual business practices
Public disclosures do not always fully reflect the sustainability work companies undertake. Companies often do not publicly report on the pilot projects, supplier engagement efforts, or operational improvements they are making.
This reluctance is driven by concerns about the legal and reputational risk of publishing information in an environment characterised by heightened regulatory scrutiny. Companies are cautious about communicating projects where outcomes remain uncertain or where scaling pathways are still being tested. In some cases, greenwashing concerns are legitimate, in others, under-communicating progress has resulted in greenhushing.
The disconnect between disclosure and practice creates several challenges. Without visibility into ongoing initiatives, it is difficult for investors to assess whether companies are managing sustainability risks and developing solutions to transition their businesses, and how this might impact profitability and returns.
This lack of transparency can also stall progress. For instance, innovative solutions remain under-reported, preventing investors from encouraging their broader adoption through stewardship and engagement dialogues. It may also limit the mobilisation of capital, as early-stage programmes that could benefit from investment support remain largely opaque to markets.
Companies can address this by reporting on their initiatives in a credible, robust way, even when progress is incremental or nascent. As FAIRR’s regenerative agriculture report highlights, disclosing the objectives, methodologies, and early learnings from pilot projects, and clearly linking them to supply chain risks and operational strategies, can provide investors with valuable insights into risk management, investable solutions, and transition pathways.
Investors, in turn, should look beyond disclosures of high-level targets and outcomes to better understand how companies are implementing strategies to achieve both. Encouraging disclosures that prioritise decision-useful information, methodologies and assumptions can improve the quality of reporting and support more effective investment and stewardship decisions.
Supply chain complexity and traceability constraints
Supply chain complexity and limited traceability are consistently cited as barriers to data collection, supplier engagement and risk management.
Many companies operate global, multi-tiered supply chains that span diverse geographies, as FAIRR’s supply chain tool illustrates. As a result, they lack direct visibility and control over upstream suppliers. Most companies only have access to Tier 1 suppliers, i.e. those that directly supply them. Regional, operational and cost constraints also make traceability challenging.
This lack of traceability is a challenge because many of the most financially material sustainability risks, such as deforestation, water use, pollution and methane emissions, originate in the wider supply chains.
This is reflected in FAIRR’s research (see Figure 1), which shows that companies manage risks such as pollution more effectively within their own operations, but as they move upstream into animal sourcing, limited traceability constrains their ability to address risks. This is even more pronounced for animal feed, where impacts are further removed.
This not only weakens risk management but also limits the credibility of sustainability commitments made to investors and other stakeholders. Without robust traceability, companies are unable to accurately assess risk exposure, prioritise high-risk sourcing regions, or implement targeted mitigation strategies.
Figure 1: Pollution risk management is weaker in feed and livestock supply chains
Source: Coller FAIRR Protein Producer Index (2024)
Note: This chart represents the average scores livestock producers in the 2024 Coller FAIRR Protein Producers received relating to the disclosure of their pollution risk management practices in their direct operations and in the operations of feed and animal suppliers.
FAIRR’s corporate engagement dialogues highlight that companies want to understand how peers approach specific high-risk issues, such as soy-related deforestation, and how they structure supplier engagement in practice.
The Coller FAIRR Protein Producer Index provides examples of good practice in supply chain traceability that could support industry-wide improvement, while FAIRR’s briefing, Deforestation Risks in Agricultural Commodity Supply Chains: What Investors Need to Know, provides engagement best practices to improve traceability when sourcing at-risk commodities.
For both companies and investors, improving traceability is essential to enabling more effective capital allocation and risk management.
Disjointed governance structures and incentives
Corporate sustainability teams are frequently small and overstretched, and sustainability governance is not sufficiently embedded within businesses, particularly commercial or operational functions.
Emerging regulatory developments and evolving reporting standards are placing increasing administrative burdens on already small sustainability teams.
As a result, a significant portion of time is spent on preparing disclosures and responding to reporting requirements rather than developing and implementing operational strategies that could meaningfully improve sustainability performance.
When such small sustainability teams carry broad responsibilities without sufficient organisational support, the focus can shift towards compliance and reporting rather than driving transformational business change.
Governance challenges also impact the ability of companies to execute their sustainability strategies. For example, despite the high prevalence of risks in complex, global supply chains, many company procurement teams still operate without sustainability-related KPIs as part of their decision making.
Without integrating sustainability considerations into procurement, sustainability teams are left with limited influence over key functions that ultimately determine the sustainability performance of a company.
Executive remuneration provides another example. FAIRR’s research shows a correlation between management compensation linked to sustainability performance and improved risk management outcomes – see Figure 2.
However, almost half of the protein producers in the Coller FAIRR Protein Producer Index do not link executive remuneration to sustainability metrics. Without incentives tied to sustainability performance, boards and senior management may lack the motivation to prioritise these issues within strategic decision making.
Figure 2: Distribution of risk management rating for companies with and without sustainability-linked executive remuneration
Source: Coller FAIRR Protein Producer Index (2024)
Note: The 2024 Coller FAIRR Protein Producer Index assessed 60 listed protein producers based on their disclosures related to 10 sustainability factors, with each company given a low, medium or high risk rating to reflect their final score. More information can be found in the Methodology Summary.
Nonetheless, companies are increasingly aware of how governance can support their implementation of sustainability strategies and are looking to peers for examples of what good practice across all functions.
Investors can play an important role in strengthening governance structures by encouraging companies to integrate sustainability into core business functions. This includes:
advocating for sustainability-linked KPIs across procurement and operational teams;
supporting the alignment of executive remuneration with sustainability outcomes; and
emphasising governance frameworks that embed sustainability holistically rather than limiting them within small specialist teams.
From fragmented efforts to systemic change
Whilst companies are making progress on sustainability, they face clear barriers to improving resilience and to communicating the positive work they undertake - overcoming these is essential to enact real transformational change.
Stakeholders – from suppliers and clients to investors and NGOs – can work to help address these, by setting clear expectations on required disclosures, sharing risk management best practices, and supporting companies to develop strategies that enhance supply chain resilience.
Such efforts can help drive operational improvements and shareholder value while also enabling a sustainability transition among protein producers.
FAIRR insights are written by FAIRR team members and occasionally co-authored with guest contributors. The authors write in their individual capacity and do not necessarily represent the FAIRR view.
Written by
Senior Analyst
Senior Analyst
Senior Technical Specialist, Climate and Nature
