ESG Viewpoint: The meaty realities of food production

Our team discuss how our consumption practices are depleting natural resources at unsustainable levels and contributing significantly to climate change.
April 2020
Nina Roth

Nina Roth

Director, Responsible Investment


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Screening out sectors or companies may result in less diversification and hence more volatility in investment values.

The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any stocks or products that may be mentioned.

  • The growing global population is driving demand for protein, increasing the impact of the global food industry on workers and the environment
  • Alternative protein sources are gaining more and more traction, but some major food producers are lagging in keeping up with this trend
  • Many food companies already have sustainability strategies and targets in place, but investor engagement can help to identify gaps and challenges and take these best practices to companies that have less well-developed approaches

Initiatives such as Veganuary and meat-free Mondays are a sign of how patterns of food consumption are changing. People are increasingly aware that their eating habits can come with dramatic environmental and social costs. As investors, we are particularly interested in how companies are managing ESG risks in both their operations and supply chains, as well as whether they are seeking opportunities in high-growth areas such as vegan protein.

The food industry is a significant contributor to greenhouse gases, deforestation and water scarcity. The industry accounts for 70% of water withdrawal and agriculture, whilst forestry and other land use accounts for almost a quarter of global greenhouse gas emissions. As the global population grows from 7 billion in 2010 to a projected 9.8 billion in 2050, and incomes grow across the developing world, overall food demand is on course to increase by more than 50 percent, and demand for animal-based foods by nearly 70 percent. Prevailing food production and consumption practices are leading to the depletion of natural resources at unsustainable levels and contribute significantly to climate change.

We have been engaging on sustainable food systems for a while, focusing on nutrition, water risk and labour aspects before. For the next three years, we will seek to drive change in some of the world’s largest food producers, traders and retailers, promoting best practices which will help them to meet growing food demand whilst halting runaway environmental degradation. This will help stabilise the climate, improve overall risk and opportunity management, and drive enhanced returns to investors and a wide range of stakeholders.

Globally, we are addressing retailers, traders, producers, banks, as well as consumer goods companies.

We will also align our efforts with various collaborative engagement initiatives. This includes the Principles for Responsible Investment’s working group on sustainable forests, with a focus on cattle and soy production; the investor initiative FAIRR (Farm Animal Investment Risk and Return) on alternative proteins; and Asia Research and Engagement (ARE) on animal protein.

We will particularly ask for:

Food Production:

  • Comprehensive water risk assessments, including in the feed supply chains
  • Wastewater management systems, including manure management plans
  • Water targets; climate risk assessments, including in the feed supply chain
  • Technological innovation to raise productivity and improve efficiency of resource use
  • Environmental KPIs, including long-term targets aligned with the Paris climate agreement

Food consumption:

  • Evaluation of investment in development of meat substitutes risk assessments regarding emerging trends in consumer preferences, e.g. alternative proteins
  • Food loss and waste reduction measurements and reduction targets
  • Technological solutions to reduce food waste

Deforestation-free supply chains:

  • Assessment of and transparency around deforestation risk of own operations and supply chains
  • Commitment to no deforestation in own operations and supply chain
  • Commitment to full traceability with clear timelines
  • Thorough sustainable supply chain management system
We initiated the engagement project with a day trip to three producers and retailers in the UK.
Sainsburys logo


We met with the UK retailer’s strategy director, its head of property and procurement, and global communications director. They introduced us to their new net zero emissions by 2040 strategy, which includes pillars of water and carbon management; minimising plastics in packaging and production; healthy, sustainable diets; and food waste avoidance. Each theme has a working group that reports into the Corporate Responsibility and Sustainability Board, which is chaired by the CEO. While the strategy is broad and a good – though overdue – step into the right direction, we highlighted the need to assess and disclose more details on the environmental footprints of the company’s products (scope 3 emissions), including water footprints. The company states that they acknowledge that but have challenges getting the right data. They are cooperating with an external consultant to address this.

In addition, we highlighted our collaborative engagement efforts with the FAIRR Initiative on sustainable protein supply chains and encouraged Sainsbury’s to consider this as part of their sustainability strategy.
Cranswick logo


We met with this UK food producer’s CFO, Head of Marketing and the site director of a pork and chicken processing plant in Milton Keynes (UK) to discuss their sustainability strategy. The visit also included a factory tour. The company outlined its sustainability commitments, including a net zero emissions by 2040 objective. We discussed some of the changes we are seeing in food consumption patterns in the UK, including a decline in red meat consumption and increasing interest in plant-based proteins. At this point, Cranswick does not intend to enter the meat substitute business, and instead plan to continuously focus on their core products. We pressed them to be open to considering diversification of the business given that current trends are likely to intensify. We also discussed the soy supply chain, which is the major feed of the 20,000 pigs they produce each week. They have a bold commitment to have all their soy supply certified by 2025. Part of that objective will also be to investigate alternative feed sources and alternative production regions, avoiding high-risk areas such as the Cerrado or Amazon in Brazil.
Cranswick grows and hatches 900 thousand birds per week.
Britvic logo


The beverage company’s CFO introduced the current strategy, and achievements, followed by input from the Chief Sustainability Officer on their sustainability goals. Calorie reductions have been well integrated. The company regularly discloses to the Carbon Disclosure Project (CDP) and committed to do so following Task Force on Climate-related Financial Disclosures (TCFD) requirements; we particularly highlighted the need for enhanced water source risk assessments and disclosure on respective results. We also highlighted the need for broader sustainability commitments related to their sugar supply chain.

Social aspects of food supply chains

While environmental issues are our clear focus, we will also discuss labour and human rights standards in manufacturing sites and supply chains. We will discuss staff retention rates and proposals to consider wage levels, and the payment of a living wage, as an additional option for higher retention.
In all our engagements we will also highlight our support for the Workforce Disclosure Initiative (WDI) and encourage companies to respond or extend their response to the WDI’s annual survey. We will also be speaking to companies about how they are looking after their staff in response to the COVID-19 crisis, encouraging best practices such as paid sick leave and flexible working for those with caring responsibilities.₁

Final thoughts

These three meetings gave a good snapshot of current practices in three different parts of the food chain. We were encouraged that all already had broad sustainability programmes in place, and our discussions gave us a better understanding of best practices, as well as some of the significant implementation challenges such as data availability. Going forward, one focus area will be to share some of this experience with emerging market companies, where sustainability strategies are often less well developed than their developed market counterparts.
1 See also Viewpoint “ESG implications of COVID-19”:

Risk Disclaimer 

The value of investments and any income derived from them can go down as well as up and investors may not get back the original amount invested.

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.

The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.

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