Why ESG initiatives matter for the food industry

Why ESG initiatives matter for the food industry

Tue 09 Feb 2021

Historically, Environmental, Social and Governance (ESG) factors have taken a back seat to financial performance in the corporate world. And in the interest of performance measurement, companies have often made short-term profit decisions at the expense of negative environmental and social impacts.

Against this backdrop, good corporate citizenship does exist and always has. Many companies are either purpose driven or have excellent leadership with an interest in more than just their own short-term wealth. Matters have become more interesting in recent years with financial performance data being tracked for those companies with high levels of ESG awareness.

In fact, the business case is emerging that active ESG management is directly linked to superior financial performance. We now have the ingredients for an incentivisation strategy that demonstrates that purpose and profit aren’t mutually exclusive.

A company that is more committed to the sustainability journey and that has embedded ESG into its wider business strategy will be more efficient and more resilient to change. The 2021 message is clear: corporate directors and investors need to pay attention to ESG to properly fulfil their fiduciary duties.

The evidence is overwhelming. The groundswell of demand for change in society is deafening. Not only has the availability of ESG based capital become more attractive, it’s most probably the single most transformative power of our time.

ESG and the food industry

A recent Wall Street Journal survey evaluated 5,500 publicly-traded companies on ESG metrics, with Nestle the only food company scoring in the Top 100. Not a good data point for an industry which accounts for 70% of global fresh-water withdrawal and almost a quarter of global greenhouse gas emissions.

The industry, like most others, must also address environmental problems like soil degradation and deforestation, as well as other ESG issues like racial and gender equality, and fairness in trade and labor practices.

Confronting these issues will require changes in traditional leadership. It means leadership teams must step up, own the problems caused by their businesses, and develop strategies to fix them.

The food industry’s poor standing on the newly released ESG list is disheartening. It should embarrass any food company that is behind the curve on these issues. However, for an industry that thrives on market research, it should serve as an immensely valuable consumer insight: being more socially responsible will not only be good for the world, it will also help win over a new generation of consumers who want the food they buy produced by companies that care.

This is an excerpt. Continue reading on mazars.us.