2024 Protein Producer Index
Key nature and biodiversity risk findings
Despite recent developments in initiatives and frameworks such as the Science Based Targets initiative (SBTi) and the Taskforce for Nature-related Financial Disclosures (TNFD), many companies still lack targets or strategies informed by comprehensive assessments to reduce their exposure to nature and biodiversity risks.
With 77% of globally produced soy used for livestock feed,1 and around 30% of all freshwater used for animal agriculture,2 these are two areas of acute concern where risk mitigation is non-negotiable.
A lack of action, as well as potential regulatory changes, could expose companies to material impacts throughout the value chain, ranging from feed supply to animal processing.
However, as the findings below highlight, while some progress has been made, many companies are lagging on basic disclosure and risk management.
63%
of companies rated as high risk on deforestation, remaining unchanged from last year.54%
of companies using soy do not have any form of deforestation target for the commodity.62%
of companies rated high risk on water issues vs 72% last year.8/60
companies disclose feed water intensity, and only two require feed suppliers to set water use reduction targets.75%
of companies are still rated as high risk for pollution, down from 78% last year.1
company discloses facility wastewater quality targets that meet World Bank standards.Deforestation commitments and targets for soy lacking
Protein producers have made slow progress on their soy-linked deforestation targets and commitments, with less than 50% of the 59 Index companies that use soy disclosing a zero-deforestation target of any kind.
Soy is a key component in animal feed and a leading driver of deforestation globally, while having a zero-deforestation or conversion commitment is a core part of the SBTi’s target setting requirements for the forestry, land use, and agriculture sector. Read the 2024 protein index: Key climate findings for more analysis on how companies are meeting these requirements.
Only 8% of these companies, the majority of which focus on aquaculture, source all soy from deforestation-free areas or suppliers.
The remaining 36% have made public commitments for soy, ranging from zero deforestation/conversion (27%) and source-certified soy (7%) to broader sustainable soy sourcing (4%) and zero illegal deforestation (2%).
Where companies have made commitments, 37% plan to achieve them by 2030 - much later than the 2025 recommendation from SBTi, while 10% have not set a target date at all. This should be of acute concern to investors due the range of direct and indirect material risks which are linked to or stem from deforestation.
Innovative practices provide multiple sustainability benefits while addressing nature risks
In 2024, 59% of companies using soy disclosed innovative practices to move towards more sustainable feed sources, reducing the risk of deforestation alongside other biodiversity impacts.
Some companies are looking to replace imported soy with locally sourced proteins, which can reduce associated emissions, while others are trialling growing hydroponic feed crops in ‘soilless’ systems, which can reduce agricultural pollution in feed supply chains.
Such initiatives show how singular actions can provide multiple sustainability benefits and address several nature risks.
Further, with regulations such as the EU Deforestation Regulation (EUDR) coming into force,3 companies that undertake practices to reduce deforestation risk exposure position themselves to navigate current and potential future regulatory developments relating to deforestation.
Actions to address water scarcity and quality are nascent
While pressure has been mounting to tackle deforestation, the dependence of the sector on water and its impact on water quality has only recently gained traction.
Almost two-thirds of companies have said they are undertaking, or have completed, a formal water-scarcity risk assessment. The 22 companies that have not done so are almost all based in countries with some areas of high or extremely high water-scarcity risk, highlighting the need for urgent attention.
The situation is worse for water quality assessments, where 61% of companies have not undertaken formal risk assessments for processing facilities, and over 90% of land-based companies have not assessed the water quality risk exposure of farms. Without comprehensive risk assessments, companies cannot prioritise which parts of the value chain to address, potentially reducing the efficacy of investments aimed at mitigation.
Only 11% of companies with processing facilities disclose wastewater targets at a facility level, with only one of these meeting World Bank Standards, reflecting a broader trend of local and national wastewater regulations that do not meet World Bank-recommended thresholds for pollutants.
Companies focusing on feed to tackle nature-related risks
Less than a quarter of companies disclose the proportion of feed sourced from water-stressed areas in some capacity, while less than 10% disclose this information for all feed commodities.
While this is a marked increase from last year’s 12%, most companies either still lack visibility over embedded supply chain risks or fail to disclose them transparently, with only 13% disclosing the water intensity of their feed production.
Most companies either still lack visibility over embedded supply chain risks or fail to disclose them transparently, with only 14% disclosing the water intensity of their feed production.
To prepare and respond to scarcity risk, companies could consider engaging with feed suppliers to set water use reduction targets - a best practice that two European aquaculture companies demonstrated this year – and to invest in more sustainable feed farming practices that have positive water-related impacts, as some Asian dairy producers are doing.
Overall, these results indicate that companies are not yet aligned with the TNFD’s LEAP approach4 in addressing water scarcity in feed, with 73% still classed as high risk on the Index (down from 83% last year).
Asian companies progressing on soy deforestation targets; water and pollution remain high risk across regions
Looking at deforestation risks, almost a fifth of Asian companies now have public zero deforestation/conversion targets for soy, alongside 83% of European, 38% of Latin American and 29% of North American companies (both based in Canada).
Notably, two Chinese dairy companies published their commitment this year, bringing the total to three Chinese companies with a market cap of US $48.4 billion. As China imported almost 60% of the world’s soy in 2023,5 this could leverage positive developments in Brazil, their primary sourcing region, in future. Read more in FAIRR’s Insight piece, Could China’s Soy Policy Changes Drive a Sustainable Agricultural Transformation?
For water-related risks, Asia-based companies have improved their facility water risk scores, with the proportion rated as high risk, dropping from 63% to 56%. However, more than three-quarters of Asian constituents have high exposure to feed and animal farm water risks, as reflected in their ratings.
On overall pollution, all North American companies have a high-risk rating. Facility management seems to be a priority, with only 57% of companies rated high risk, while nutrient management in feed and animal farming remains an area that requires work, with 71% rated high risk.
