Grupo Nutresa S.A.

There is no evidence that the company progressed in its acknowledgement of high animal protein exposure as a material risk; in 2021, 46% of total revenues were exposed to animal agriculture ingredients, this number remained YoY. Grupo Nutresa recognises its palm oil, meat and dairy supply chains have impacts on biodiversity and the environment. Hence, it continued its work with the WWF on supply chain analysis consisting of mapping risks and building a mitigation plan. As a result of the risk mapping on meat and dairy, in 2021, the company developed animal agriculture guidance, with recommendations for its suppliers to reduce their environmental impacts, including biodiversity conservation. Moreover, in 2021, the company assessed production sites located near high-value conservation areas for some commodities and confirmed it will expand this work into beef and pork agriculture. The company has not shared or discussed publicly the results of its scenario analysis conducted in 2020. There is no further evidence of how the company used scenario analysis to inform its mitigation and adaptation actions, and if the findings concluded that its material exposure represents a risk. The company stated it will include climate variable descriptions when it updates the assessment of physical climate and transition-related risks for Grupo Nutresa, its industrial businesses in the Colombian region and sourcing chains. This includes the financial quantification of climate-related impacts. Grupo Nutresa lacks evidence of incorporating alternative proteins as a climate mitigation tool. The driver behind protein diversification continues to be consumer demand. In its annual report, the company stated that to mitigate the risk of regulation on nutritional labelling it will use reformulation and incorporation of plant-based ingredients. This means the company is starting to use portfolio diversification to mitigate the transitional risk of regulatory changes and at the same time take advantage of the commercial opportunity. Moreover, there is mention of alternative and sustainable proteins in the company’s climate-related strategy and road map for 2030. However, there is no mention of the carbon abatement potential of portfolio diversification and how it would result in a quantifiable Scope 3 reduction.

The company is lagging behind peers in this engagement by not setting a Scope 3 target. In previous dialogues with investors, it confirmed that it is working on setting a target, yet there has been no progress reported, even though more than 90% of its GHGs stem from Scope 3. In 2020, the company announced its target to decrease Scope 1 and 2 emissions by 40% by 2030; in 2021 it achieved a 7.5% decrease. The company stated that its sustainable sourcing efforts include tackling Scope 3 emissions. But it provided no specific target to reduce these or Scope 3 mitigation actions. So far, Grupo Nutresa has achieved 49% of its target for sustainably sourcing its raw materials, suggesting it is on track to achieve this goal. Additionally, it discloses that 17.2% of its sales are from innovative products, indicating it is close to achieving its 20% goal by 2030. By adhering to the NDC of Colombia, the company has committed to becoming net zero by 2050. The company is offsetting the emissions of four bands -Tosh, Evok, Livean and Zuko. The company features its specialised brands with plant-based exposure as focused on health and nutrition. It reported that it has achieved 37% of its target of generating 50% of sales from products that are innovative in health and nutrition. The company reported that 23% of total products sold were reformulated to limit sodium, sugar, and saturated fat. The company shared the plant-based product portfolio is designed to score A, B or C with Nutri-score Nutritional Profiling System. However, it does not report the proportion of scores in the plant-based portfolio. The company is addressing the environmental impacts of its animal agriculture supply chains by focusing on decarbonisation, adaptation to climate change, water and waste management, biodiversity loss and improved agriculture practices. Within its Biodiversity policy, the company has a principle to “explore, promote and apply the principles of regenerative agriculture and livestock”. Nevertheless, it is unclear if all animal species across all geographies are covered. In 2021 the company developed and published a Biodiversity policy. The biodiversity work focuses on regeneration and conservation of ecosystems, avoiding or minimizing biodiversity loss, and supplier compliance with the corporate biodiversity policy. Animal agriculture is included in this initiative, as it covers beef, pork, chicken, milk, eggs, fishing resources and aquaculture. The company is tackling water usage in its animal agriculture supply chain, for example, reusing wastewater in its meat processing business in Colombia. The company has set a target to reduce water consumption by 30% by 2030 in production plants, yet it is unclear how many of its animal agriculture operations have such projects. Also, in its cheese processing business, the company reduced its COD (Chemical Oxygen Demand) by 74%, yet it is unclear if this is already within the limits set by regulation. It is also seeking circularity in its operations; the company is using outputs from some business units as inputs for others or using the by-product for human consumption and adding value to it, instead of wasting it. It clarified that eatable by-products that traditionally were not used as ingredients, such as coffee residue, animal bones, or wheat bran, are being repurposed for human consumption, renewable energy, and animal feed. The company reported the business units producing more waste were biscuits, meat and processed meat, ice cream, and pasta, 88% of residues are used as animal feed. Grupo Nutresa reported improvements in its agriculture practices. The company has regenerative agriculture projects within its own operations and supports suppliers. Grupo Nutresa increased the number of beef suppliers’ practices being assessed, from 29 to 75 this year. This represents 95% of primary suppliers to its meat business. The company developed a sustainable sourcing manual for its meat suppliers with the WWF, which has recommendations on water management, silvopasture, and soil management. This was implemented last year and seeks to decrease GHG emissions. After conducting surveys with milk suppliers, the company published guidance for sustainable sourcing of dairy last year, that aim to address ecosystem degradation, soil and water management, biodiversity, and best practice of chemical used to reduce the impact on pollinators and nutrient cycles.

The company through its R&D team and ventures arm, Nutresa Ventures, is looking into the use of novel raw materials that mitigate environmental impacts. This has led the company into developing plant-based milk, meat analogues, and spreadable vegetables. This suggests that the company acknowledges the carbon abatement potential of plant-based products. The company wants to bring back ancient grains to diversify consumers’ diets, thus it assessed 540 potential ingredients, of which 50 were marked as relevant and 25 have been prioritised to be incorporated into the product portfolio, these include plant-based ingredients and proteins. Nevertheless, Grupo Nutresa’s disclosures reveal its intentions to grow alternative proteins along its meat business, taking the opportunity of consumer changing demand without slowing the expansion of the animal-derived portfolio. This is especially after its acquisition of a pet food brand in Costa Rica, Belina, which has products for pets, farm animals and aquaculture. It is unclear how the company will address the sustainable sourcing of this new brand and if it will venture into alternative feed. It also expanded its range and presence of plant-based foods, such as the Kibo brand which now offers a veggie burger and veggie bites, which the company states help consumers’ nutrition. The company also launched an alternative milk range -oat, almond, hazelnut, and macadamia- in Colombia, Panama, and Costa Rica. The products are fortified to increase nutritional content and the company reported in its first year these generated $574,305 in sales; the company shared it is developing goals that are not public yet. It also launched new plant-based products on Pietran meals (lasagne and nuggets), burgers under Corral Vek, lentil crackers and protein powders under the Kibo brand. The company is also focusing on more natural ingredients and cleaner labels for its plant-based products. However, there continues to be no evidence that the company is limiting the content of animal-derived ingredients in its reformulation, which is currently focused on the measures of its Nutrition Policy which are salt, sugar and fat content as well as revenues generated by innovative health and nutrition products.

The company continues its consumer engagement efforts to promote the consumption of plant-based whole foods and meat analogues. It also markets the sustainability and nutritional benefits of these, nevertheless, we found no evidence of the company measuring the success of its promotional campaigns or plant-based products, nor running evidence-based consumer engagement campaigns. Grupo Nutresa promotes the nutrition aspect of wholefood proteins; it also has attractive designs and presentations to promote the consumption of plant-based proteins. As part of its circular economy initiatives, the company promotes wholefood proteins and plant-based foods. For example, the company is using the wheat bran that is traditionally used as animal feed for a new product for human consumption, branding it as an ideal supplement containing fibre, iron, and zinc. Grupo Nutresa aims to help consumers diversify their sources of calories and proteins by focusing on bringing back ancient grains through its Kibo brand, promoting whole food proteins such as chickpeas, lentils, and peas, which it stated can replace corn, rice and wheat in pasta and snacks. As part of this work, it assessed 540 potential ingredients, of which 50 were marked as relevant and 25 have been prioritised to be incorporated into the product portfolio. Tosh brand educates consumers on the environmental impacts of protein choices and is a certified carbon-neutral brand through buying offsets for reforestation and conservation of forests in Colombia and Costa Rica. The company educates consumers on the sustainability attributes of its products through its labels, it also makes available detailed information on its website.

The company made no considerable progress on publicly disaggregating Scope 3 emissions from animal agriculture. Also, there are still no metrics showcasing portfolio diversification such as the volume of purchased ingredients that are plant-based vs animal-derived. In 2021 the company reported that 18.5% of its total revenues were generated by meat, which is lower than last year’s 19.3%. Moreover, its ice-cream business generated 4.5% of total sales, chocolate 15.4% and ready meals 7.6%, which means 46% of the company’s revenues are exposed to animal-derived ingredients. Nevertheless, the company reported an increase in sales of alternative proteins of 18.9%, which is above the total revenue’s growth YoY of 9.8%. Grupo Nutresa also reported sales growth for the meat category at 8.6%, marinated meat at 61.2%, and ready meals at 10.6% growth YoY. The company continued to disclose its procurement costs by top commodity, including animal-derived inputs. In 2021, 15.3% of the total cost of production was related to animal agriculture, comprised of 7.7% pork, 3.1% beef, 2.8% milk, and 1.7% poultry. The total figure is up by 1.9% from 13.4% in 2020. Given the figures account for costs rather than the volume purchased it is not possible to conclude how the company’s exposure to animal-derived ingredients has evolved. We encourage the company to provide a clear view of the volume of procurement and revenues generated by plant-based products vs animal-derived ones. In 2021, the company reported that 90% of total GHG emissions were related to Scope 3, which was 142,508 tonnes of CO2. Of these, 76.5% were related to raw materials, which include animal agriculture. Last year the company stated that it would assess its main raw material supply chains, prioritising those with the highest environmental impacts. In its annual report, it disclosed the 16 raw materials that will be prioritised to decarbonise. This disclosure is still insufficient to track how the sustainable sourcing initiatives addressing animal agriculture are resulting in Scope 3 emissions reductions.

The company attended the technical roundtable on measuring portfolio diversification, however, after multiple requests, it did not agree to meet with the investors for an engagement dialogue during the formal dialogue period (May - July). The company provided feedback on the final assessment.