Food and Beverage Industry Leads its Peers in Sustainability Performance, Ceres Finds

Growing consumer demand for transparent food supply chains and responsible sourcing has pushed the food and beverage industry to embrace sustainability to a larger extent than other sectors, according to new research from Ceres, an NGO focused on sustainability.

Ceres examined how more than 600 of the largest publicly traded U.S. companies are responding to environmental risks, human rights abuses and other threats falling under the umbrella of sustainability. The organization found that food and beverage companies are generally ahead of their peers.

An impressive 90% of the food and beverage companies in Ceres’ analysis hold senior-level executives accountable for sustainability performance, whereas the average for all sectors is 65%.

“Companies including ConAgra Foods, Constellation Brands and Kellogg have established systems to manage material sustainability issues at the senior executive level,” the Ceres report notes, “And one company — General Mills — explicitly states its CEO is ultimately responsible for its sustainability strategy and performance.”

Forty-three percent of food and beverage companies also link executive compensation to sustainability performance metrics, compared with just 8% of all companies.

Executives and unit managers at Molson Coors receive monetary rewards for sustainability performance. C-suite compensation is tied to the company’s 2020 Sustainability Targets, which also incorporate third-party standards like the CDP and Dow Jones Sustainability Index.

Nearly all (95%) of the food and beverage companies in Ceres’ analysis report on climate change-related risks to operations and supply chains in their annual financial disclosures, whereas only half of the companies from across all sectors do so.

Climate change brings along a number of business risks, from increased material costs to supply chain disruptions to lower agricultural productivity. Companies are also aware of the reputational risk associated with environmental and labor malpractices in their supply chains.

In 2015, General Mills announced that it planned to reduce absolute GHG emissions across its full value chain by 28% by 2025. Indeed, food and beverage companies are much more likely to have time-bound targets for reducing GHG emissions (86% versus 36% for all industries). General Mills, Kellogg and PepsiCo have all set science-based targets to support the goals of the Paris Climate Agreement.

Nine out of 10 food and beverage companies have also set time-bound targets to manage water impacts, compared to two out of 10 companies in general.

Recommendations

Overall, the food and beverage industry is leading the way in sustainability initiatives, but plenty of opportunities remain. The Ceres report concluded with six concrete recommendations for companies that want to boost their own sustainability performance. Here is a brief rundown of the recommendations:

1. Tie sustainability to compensation. Companies ought to incorporate sustainability criteria into the performance assessments of executives and employees in order to get serious on meeting goals and creating a culture of sustainability.
2. Be proactive in engaging investors on sustainability by highlighting ESG (environmental, social and governance) performance data and risk mitigation successes.
3. Set GHG emissions reduction goals and prioritize renewable energy. The RE100, for instance, is a global initiative to commit to 100% renewable power, and it boasts Hewlett Packard, Kellogg, and Starbucks as members.
4. Collaborate with other companies on clear water management strategies, prioritizing areas of highest risk.
5. Establish comprehensive sustainable sourcing strategies for the agricultural supply chain, the food and beverage industry’s biggest risk area.
6. Use scenario planning to align with the Paris Agreement’s goal of limiting global warming to below two degrees Celsius (3.6 degrees Fahrenheit).