Investors are placing unsustainable supply chain practices under increasing scrutiny. Foodservice companies should take note, says ShareAction’s Mara Lilley.
Why should companies pay attention to sustainability? Some businesses might consider it a luxury to operate in a way that causes minimal damage to the planet and its communities – nice if you can afford it, but for most international corporations, it has to come down to what the business can afford, right?
Not quite. Corporate awareness of the financial risks of ignoring sustainability is becoming much better publicised. And now, growing numbers of investors are beginning to take stock of the many unsustainable practices associated with industrial-scale farming.
A recent initiative coordinated by ShareAction, a charity which promotes responsible investment, and global investor coalition FAIRR, saw 54 investors representing over $1 trillion in assets write to ten leading restaurant and fast-food chains urging them to end the prophylactic use of antibiotics in their global meat supply chains.
Antimicrobial resistance – the reduced effectiveness of antibiotics due to overuse – is just one of 28 financial risks associated with intensive livestock farming identified in a recent FAIRR report. These risks could lead to portfolio-wide damage for investors if left unaddressed.
Through focusing in on four key risks, which make little business sense in the long term, our goal is to drive up best practice across the supply chain. These risks concern the close confinement of livestock; rising antibiotic resistance; the impacts of climate change; and land rights issues in supply chains. For investors, these intertwined issues present a wide range of legislative, legal, operational and reputational concerns that have the potential to negatively impact the share price of companies they’re invested in.
Close confinement presents key animal welfare issues and, as new regulations loom and consumer demand for better welfare rises, business models that rely on close confinement look increasingly risky. Intensive livestock production also has significant environmental impacts, contributing more to greenhouse gas emissions than the entire transport sector combined. Not only this, but the sector is highly vulnerable to disruptive environmental factors such as drought or flooding. Intensive livestock production also presents various social risks, being linked to practices such as deforestation and land grabbing.
Our initial focus has been on the issue of growing antimicrobial resistance through the excessive use of antibiotics in livestock production. Over the next few months we’ll be working with investors to identify further risks, and work with companies to address them. Judging by the level of interest we’ve received from the investment community so far, it is clear that this is an issue firmly on the investor agenda, and a matter, which the foodservice sector needs to begin taking seriously.
There are potentially lucrative opportunities for forward-looking businesses willing to take the lead on these matters. Through continued dialogue, we can support companies looking to review their current sourcing polices and implement more sustainable practices. Those fully engaged with their supply chains will be best placed to win investor confidence and seize new business opportunities in fast-growing markets.
Mara Lilley is Campaigns Officer for ShareAction