Kerry Group plc

Kerry completed its first TCFD-aligned scenario analysis, it covered its own operations and supply chains. The company identified four critical climate risks - extreme weather, heat waves, carbon pricing and market dynamics - and detailed potential mitigation measures. However, the company did not explicitly mention impacts or mitigation/adaptation actions specific to animal agricultural supply chains. Kerry is conducting a quantitative scenario analysis and will report results in its next annual report. Moreover, Kerry shared with investors that it has conducted a double materiality assessment using a third-party organisation. The findings from the materiality assessment are integrated into the company’s strategy, and sustainable proteins are one of the nine themes identified. Kerry continues to discuss its role in the dietary transition in its public communications, stating it is an enabler in supporting its customers to meet the growing demand for lower-carbon products, such as plant-based proteins. The company has developed four strategic priorities for its broader long-term business strategy. Plant-based is one of the four areas. Kerry targets revenue volume growth of 4-6% per annum from these areas, above average for other categories. The company confirmed to investors that it is continuing to conduct LCA’s to understand better its products' carbon footprint, water, and waste impacts. However, it will not be publishing the results of this work due to its commercially sensitive nature.

Kerry Group continues to focus on providing sustainable nutrition solutions to its customers, it has not set an ingredient diversification target and we do not expect this to change within the next 12-18 months. Kerry’s sustainable sourcing commitments primarily focus on dairy after the company sold most of its Consumer Foods business, reducing its exposure to meat significantly. To decarbonise dairy, the company is working with the Agriculture and Food Development Authority in Ireland to reduce Scope 3 emissions by minimising fertiliser use and using low emission slurry spreading techniques. To incentivise emissions reductions at the farm level, Kerry has launched its EVOLVE programme and made €6 million funding available at farm level. By 2030, Kerry expects participating suppliers to achieve up to a 30% reduction in the carbon intensity per kg of fat and protein corrected milk (FPCM). The company did not share the expected proportion of suppliers participating in the programme or the anticipated percentage of procured volume covered by this programme, however, it committed to providing updates in future reporting. Kerry reported a 10% increase in the number of people reached with sustainable nutrition, up to 1.1 billion in 2021. The company designed the methodology to calculate this reach in partnership with independent third-party organisations. It combines the outputs from its nutritional assessment with external market data and Kerry’s business insights. While it is positive that the company has set this target it is unclear what the expected benefit is for people’s health. Kerry has not set a time-bound public commitment to increase the share of plant-based ingredients or food in its portfolio and did not indicate doing so in the near term during the meeting with investors. Kerry is working on setting an SBTi-approved net-zero target; as it hopes to achieve overall net-zero emissions by 2050. Kerry confirmed it is working on improving its SBTi-approved Scope 3 intensity target to align it to a 1.5C warming trajectory. More information will be made available towards the end of this year.

Kerry has identified plant-based as a key growth platform; it is dedicating R&D resources towards growing its plant-based product offering. The company shared with investors that approximately 2% of revenues are associated with products that it sells into plant-based applications, and its investment of total R&D spend dedicated to plant-based would be greater than this percentage. Going forward, it plans to grow its product portfolio organically, given its strong in-house capability it does not plan to acquire other alternative protein businesses. It has, however, recently acquired c-LEcta for €137m - a leading biotechnology company specialising in precision fermentation for the creation of ingredients. Kerry’s ingredient business enables B2B customers to develop and produce nutritious and sustainable plant-based proteins. Using its ingredient solutions, the company has helped customers bring plant-based products to market and increase their shelf-life. Health is a clear driver for plant-based solutions development; for example, Kerry Group has helped customers reduce the sugar content of plant-based beverages by 22%, without noticeably changing taste. Kerry is developing its product offering in underserved categories. In 2022 it is launching its plant-based fat range, and it recently launched a plant-based cheese slice in collaboration with McDonald’s. Kerry disposed of most of its Consumer Foods brands last year; it sold its meats and meals business. However, it is unclear what percentage of the remainder of Kerry’s Consumer Foods business is made up of alternative proteins and if the company is actively looking to diversify this portfolio.

Sustainable nutrition continues to underpin Kerry’s B2B consumer engagement strategy, along with the KHNI and we do not expect this to change within the next 12-18 months. The KHNI continues to provide scientific papers, blogs, and data insights to guide its B2B customers, highlighting the health and sustainability benefits of plant-based foods. Since Phase 5, the company has published around 8 resources dedicated to alternative proteins. Kerry identified plant-based as the key Health and Nutrition Trend for 2022 and highlighted the importance of nutrition when developing these products. Additionally, Kerry released new research into consumer expectations on sustainability. It surveyed over 14,000 consumers across 18 countries, one of the most extensive surveys ever undertaken. The study shows that 49% of consumers are now considering sustainability when buying food and drink. Their understanding of the issue evolves from environmental and social responsibility to sustainable wellbeing and nutrition. The insights produced by KHNI provide customers with a convincing argument as to why they should diversify their portfolios towards healthy alternative proteins. Since the spin-off of most of its Consumer foods division, Kerry has less exposure to the B2C segment and therefore it’s promotion of plant-based products to consumers has reduced. This may reflect that it now has fewer plant-based products available for customers as it only kept a few brands including Cheesestrings, Pure and Dairygold. Kerry continues to be part of the Sodexo Future of Food Collective and shapes demand for plant-based products.

Kerry will not be providing a breakdown of the product portfolio to show what percentage is plant-based. Kerry shared with investors that as it’s a technology and ingredient company, where hundreds of raw materials make up the composition of one flavour system, the company does not track a metric on plant-based percentage for the large portfolio of raw materials that end up in its more than 20,000 finished products. Instead, it will disclose the percentage of revenue from plant-based products relative to the total revenue; this is currently around 2%. There are goals to grow this by more than 10% annually, which is above the expectations for the rest of the business, and Kerry will comment on whether it has achieved this growth rate or not. In 2021, the company reviewed its Scope 3 emissions to improve the accuracy of its footprint and enable the company to identify emissions hotspots. Kerry reported that in 2021 it had reduced its absolute Scope 3 emissions by around 1% and its intensity by around 5.6% compared to its 2017 baseline. However, both absolute and intensity Scope 3 emissions have increased since FY20. Kerry does not publicly provide a breakdown of the company’s Scope 3 emissions (i.e., purchased goods and services) but shared with investors that it will do from 2022 onwards.

The company attended the technical roundtable on protein diversification metrics, participated in informal discussions with FAIRR and met with FAIRR and the investors for the formal engagement dialogue. The company was willing to learn about best practices. Kerry responded to FAIRR’s follow-up questions via email, formally acknowledged the final FAIRR assessment and provided additional feedback.