ESG in the food industry
ESG (environment, social and governance) in the food industry is now a crucial hill to climb because, quite simply, the food industry has a significant impact on the planet, its people, and standards of governance.
- ESG pressure is mounting on the food industry.
- Energy sources and recycling are of paramount importance.
- But, companies should not restrict themselves to environmental factors alone. Social and governance matter also.
Why does ESG matter for the food industry?
Pressure on the food industry to embrace ESG is growing, and that growth will continue. After all, the sector accounts for a quarter of global greenhouse gas emissions; it’s no surprise that it soon feels the need, both from consumers and investors, to shoulder more responsibility.
The food industry is a high consumer of natural resources, generates a significant amount of waste, and contributes to emissions through production and processing.
Adopting ESG practices can address these issues. Renewable energy resources can
sustainable farming can reduce their carbon footprint. Green packaging can solve a persistent problem. Reducing energy consumption and waste can lower operating costs for those in the food sector, and improving supply chain efficiency can ease transportation pressure.
Is that it?
No. Even with progress on environmental goals, critics still single the food industry out for being behind the curve – particularly on social and governance pillars.
The food industry has social impacts on multiple stakeholders, like farmers, consumers, and local communities. Critics blast low wages and poor working conditions because they’re still commonplace and drastically lifestyles.
Providing farmers and workers with fair wages, safe working conditions and (where necessary) training opportunities can help address these issues. It’s also worth companies considering working with charities; this can build strong community relationships.
Furthermore, another major impact can be made around promoting healthy diets. They can ensure they choose a diverse range of suppliers and source ingredients responsibly.
Governance challenges within the food industry include corruption and conflicts of interest. Again, these are problems that an ESG strategy can help solve.
Here, we’re discussing important defences like an independent board and clear accountability protocols. Implemented correctly, these produce transparent systems and ethical sourcing policies. They go a long way to improving any firm’s external and internal integrity.
Companies should also publish sustainability reports and communicate how ESG goals are progressing. Remember, principles aren’t enough anymore; you need tangible results to back them up.
What is the best way to integrate ESG-related policies?
Here are some concrete steps:
- Conduct a sustainability assessment. This will identify areas within ESG where you can make an impact.
- Develop ESG strategies. Remember, this should always align with the strategies of the overall business. A standalone ESG strategy is meaningless.
- Engaging stakeholders. Talk to farmers, workers, consumers, suppliers, and local communities, and try to understand their ESG-related concerns.
What benefits will I see if I do them?
- Enhanced sustainability: Companies can reduce their environmental impact, fuelling the long-term viability of food production.
- An improved brand. The above will demonstrate a commitment to sustainability, attracting customers interested in more ethical food choices.
- Cost savings. Since energy consumption and supply chain inefficiencies are potential costs to the business, improving these areas can also help reduce costs and improve financial performance.
- More resilient supply chains. Responsible sourcing and sustainable farming can help mitigate the risk of disruptions.
- Increased innovation. This fosters competitive advantages.
What metrics do we use to measure this?
There are many ways, from carbon emissions and water usage to employee satisfaction and governance transparency. Food-industry-specific metrics include labour practices, community engagement, sourcing practices and supplier diversity. For more info on this, click here.
What areas should food companies focus on?
Here are some things to think about:
- Are the sources of energy chosen for food production clean or carbon-based? (E)
- Are recycled materials used in the manufacturing process? (E)
- Can your company engage with greener technology? (E)
- Do you provide wellness initiatives, paid time off, or other employee subsidies? (S)
- Do you provide opportunities for employee career development? (S)
- Do you have a robust code of ethics? One that people follow? (G)
- Do you have defences against corruption? (G)
Whether they will admit it or not, food companies significantly impact ESG-related factors. However, improvements are possible and should result in a greater reputation among consumers and investors for companies.
This spells sustainable business.