Investors involved in Climate Action 100+, the world’s largest investor engagement initiative on climate change responsible for over USD$55tn in assets, has released a new set of expectations that lay out the necessary actions for the food and beverage sector to make progress towards achieving a net zero future in line with the goals of the Paris Agreement.
Outlined in “Global Sector Strategies: Recommended Investor Expectations for Food and Beverage”, the investor expectations aim to inform and improve constructive engagements between investors and food and beverage companies, which are responsible for some of the highest levels of greenhouse gas emissions in the world.
The sector strategy report was developed by Ceres and PRI, two of the founding investor networks of the Climate Action 100+ initiative. It comes weeks after scientists warned that the planet is at risk of failing to achieve the goals of the Paris Agreement and the necessary reductions in greenhouse gas emissions without immediate policy changes in the release of the Intergovernmental Panel on Climate Change’s Sixth Assessment Report.
“As the IPCC makes clear, urgent action is needed now from food and beverage companies, both individually and across their supply chains, to make a net zero future possible,” said Mindy Lubber, president and chief executive officer of Ceres, and global Steering Committee member of Climate Action 100+. “By focusing on supply chains, these companies have a unique opportunity to collaborate on changing producing and sourcing practices to increase the ambition of emissions reduction for the whole sector. Investors will need to see interim targets from companies and then details on how they will deliver these in the short and mid-term, so they can accurately assess how prepared they are for the net zero transition.”
Food and beverage sector emissions account for about a third of global greenhouse gas emissions, with most of the emissions coming from the supply chains of food and beverage companies. Neither the individual companies nor the sector as a whole will be able to meet science-based emissions reduction targets without addressing supply chain upstream emissions from agriculture and land use change.
“The scale of the food and beverage supply chain means that the sector faces extensive challenges around addressing emissions and moving towards net-zero,” said Fiona Reynolds, PRI CEO and global Steering Committee member of Climate Action100+.
She continued: “We’re encouraging companies in the sector, and investors working with those companies, to be aware of and take action on addressing emissions throughout these supply chains. This includes committing to targets around reducing the impact of emissions related to agriculture and livestock, securing green transportation and distribution of products and sourcing sustainable packaging solutions, among others. We’re urging the sector to take note of the report released today and to work collaboratively to embed climate considerations into their operations.”
As the Climate Action 100+ report points out, in order to align with the IEA’s Net Zero by 2050 scenario, scope 3 land-based emissions must be reduced by 85% compared to a business-as-usual scenario. The sector is currently not on track to meet that target by some margin, with little evidence of specific strategies to measure and reduce scope 3 emissions. Scope 1 and 2 emissions, which make up about 17% of food and beverage sector emissions, must also be reduced as much as possible.
Mitigating emissions in this sector presents companies with a significant challenge, in addition to enormous business and environmental opportunities. According to the report, eliminating deforestation, restoring previously cleared land, and employing agricultural practices that mitigate and sequester carbon alone all have the potential to mitigate more emissions than implementing renewable energy technologies across all sectors.
To accelerate coordinated action across the value chain and address the sector’s unique challenges and opportunities, Ceres, PRI, and Climate Action 100+ investors, in consultation with external sector experts and food and beverage companies, have outlined priority actions for individual companies, the broader industry, and investors. These engagement recommendations span every part of the food and beverage supply chain – from improved sourcing practices to eco-friendly packaging.
Key expectations of companies include:
- Integrating supply chain climate action into corporate decision-making processes and procurement policies
- Incentivising and supporting agricultural producers to reduce the climate impact of crop and livestock production and enhance agricultural carbon sequestration
- Aligning capital expenditures, product development, and R&D with a 1.5-degree scenario
- Transitioning to more efficient and renewable energy use and transportation across operations, distribution, and supply chains
- Improving processing, manufacturing, and packaging practices to reduce emissions and food loss
- Partnering with peers, suppliers, and policymakers to drive transformations across the sector
Investors have an important role to play in accelerating the net zero transition within the food and beverage industry by engaging companies both within and outside the sector on key actions to support the net zero transition. This includes engagement with chemical companies that produce agricultural inputs such as seeds and synthetic fertilisers, machinery companies that produce agricultural and farm machinery, and banks that play a key role in financing agricultural commodity production in emerging markets.
“Climate change poses a series of material risks to the food and beverage sector – to avert its worst impacts and enable our society to achieve goals for a net zero future, swift action is needed across the sector, not simply on the margins,” said Jared Fernandez, ESG analyst and proxy voting manager at Boston Trust Walden. “This requires moving beyond risk mitigation to innovation —engaging farmers to reduce manufacturing and production impacts and reorienting capital allocation to businesses aligned with a 1.5-degree scenario. The Climate Action 100+ Food and Beverage Global Sector Strategy report provides investors credible, actionable information to engage and accelerate a transition within the sector, which in turn helps mitigate climate-related risks at the portfolio level.”
“Because the food and beverage sector is behind over a quarter of total greenhouse gas emissions, the companies have not only the responsibility but opportunity to reduce these emissions,” said Natalie Wasek, shareholder advocacy manager at Seventh Generation Interfaith Coalition for Responsible Investing. “Investors have urged companies to adopt reduction targets, but without full sector and supply chain collaboration, the decarbonisation transition has not been possible. Investors are looking for action plans to hold these companies accountable for reaching their targets. The Climate Action100+ initiative can help make this happen.”
The sector strategy report is part of a wider new workstream from Climate Action 100+, a globally coordinated effort led by its founding investor networks, in consultation with lead investors, signatories, external experts and focus companies. It marks the first time Climate Action 100+ investors have collectively engaged with specific sectors on climate action, and have facilitated a regular dialogue to discuss how cross-sector collaboration is required to accelerate interim decarbonisation targets.
Global Sector Strategies for the aviation and steel sectors were published earlier in 2021. In the coming months, the investor networks that coordinate Climate Action 100+ will release additional strategy reports for other key sectors. The global recommendations of each strategy will be tailored into region and sector-specific actions that investors can take to sectors and focus companies in their regions.