UNILEVER TOPS THE TOMORROW’S VALUE RATING FOR SUSTAINABILITY IN THE FOOD AND BEVERAGE SECTOR

Consumers’ social and environmental concerns, as well as companies’ worries about the security of their food supplies, are the motivation for the food and beverage industry’s sustainability efforts, says new research from The Tomorrow’s Value Rating.

Social and environmental concerns, as well as growing worries about the impacts of climate change and water scarcity, encourage the industry’s increasing efforts in this area. Furthermore, growing numbers of potential customers in emerging markets motivate companies to develop new products and distribution models for challenging socio-economic circumstances.

The Tomorrow’s Value Rating has studied the ten largest companies in the food and beverage industry (based on the Fortune Global 500). Researched and produced by Two Tomorrows, the leading sustainability consultancy, the Tomorrow’s Value Rating uses publicly available information to assess companies on how well they manage their most pressing social and environmental issues.

The Rating identifies how leading companies such as Unilever, Nestlé and Danone have come a long way in addressing water as a key issue alongside climate change – well ahead of many other industry sectors.

While supply chain impacts receive considerable attention from companies, they nevertheless continue to present some of their biggest challenges. Most recently, the media has highlighted human rights issues within the UK meat supply chain, as well as endangered species of fish being served as sushi in California. Some commentators see this increasing media attention as forcing a step-change in the sector’s approach to supply-chain management, not unlike the response branded clothing manufacturers have taken over the last decade, which followed a series of revelations about child labour amongst their suppliers.

There are also notable gaps in most companies’ sustainability reporting, for example the subject of genetically modified organisms. Whilst this is a major issue and remains a potential touchstone for consumer activism, the sector stays largely silent on the subject.

Unilever tops the Tomorrow’s Value Rating of the food and beverage sector with a comprehensive sustainability strategy underpinned by solid management systems.

Nestlé and Danone follow in second and third places, the former having the sector’s best approach to supply-chain management, the latter standing out for its efforts to reach consumers at the bottom of the pyramid. The two soft-drink rivals Pepsi and Coca Cola are on fourth and fifth places respectively.

The top ten are:

Unilever 64%
Nestlé 59%
Danone 58%
PepsiCo 51%
Coca Cola 49%
AB-InBev 46%
Kraft 46%
Heineken 39%
Tyson 28%
Kirin Holdings 23%

Thomas Krick, global manager of the Tomorrow’s Value Rating, comments: “Unilever’s sustainability strategy is based on stakeholder feedback, governed by the company’s senior leaders, and its performance on important variables such as carbon emissions and water usage has shown marked improvements over recent years.

“The company has demonstrated leadership by co-founding initiatives such as the Marine Stewardship Council and the Roundtable on Sustainable Palm Oil; it was an early supporter of fairtrade, and started rolling out nutritional labelling practices before most of its competitors.”

Whilst there are some laggards in the sector, demonstrating only limited awareness of sustainability challenges, Alex Nichols from Two Tomorrows, who led the research, adds: “Most food and beverage companies are now very aware of the major social and environmental issues that impact global food-chains and consequently their businesses. Primary consumer concerns such as food safety, health and nutrition, together with responsible marketing practices, result in the most diligent management approach. Nutritional labelling is evolving quickly, and companies are actively reviewing the salt, fat, sugar and additive contents of entire product portfolios, often resulting in significant reductions.

“Management approaches for direct environmental impacts such as water and carbon emissions, and for packaging-related waste, are also maturing.

“The main challenge for the future, however, still lies in the companies’ global supply- chains.”

With some of these companies having thousands of suppliers, tackling supply-chain issues is indeed a major challenge. Many are working together to address these issues through approaches like the Sustainable Agriculture Initiative (SAI) and AIM-Progress. These consolidate efforts to train suppliers, enhance community welfare and help level the commercial playing field by offering a forum to agree on commonly endorsed standards for decent working conditions or environmental requirements from suppliers. All of the top five ranking companies, and Kraft, are members of SAI and AIM.

Other key findings that emerge from this Tomorrow’s Value Rating include:

  • Nestlé has the sector’s leading supply chain management approach. It purchases most of its dairy, coffee and cocoa direct from more than 660,000 suppliers. This results in financial benefits, better traceability and enhanced long-term security of supplies, and improves Nestlé’s ability to influence suppliers’ farming practices and working conditions. These, and other initiatives with partners, ensure quality supplies while benefiting sourcing communities, additionally putting the company into a strong position when the effects of climate change and overpopulation start impacting agricultural commodity prices.

  • Danone has achieved first successes with innovative new business models. In 2006, it teamed up with the world’s leading microfinance bank, Grameen to build a factory for nutrient-fortified yogurt in Bangladesh, and then awarded loans to locals for the purchase of dairy cows, or of yogurt, for door-to-door retailing. Borrowers sell their products at a profit, thereby earning a livelihood, and thousands of malnourished children get access to affordable nutritional products. Despite some challenges since launch, sales have now reached all time highs, and a second factory is set to be launched in 2010.

  • Carbon emissions resulting from the transport of supplies and the distribution of products have been receiving growing attention, largely because of the potential increased costs if they were included in cap & trade agreements or other carbon-pricing approaches. However, following the failed Copenhagen summit, this is likely to be seen as less of a priority for now.

  • While food labelling is now mandatory in most highly developed economies, the expansion into less regulated emerging markets means this remains a critical issue. Leading companies are responding with global labelling standards for their products, in line with considerable adjustments to the actual nutritional contents of their product lines.

  • Campaigning groups are increasingly vocal about food waste, estimated at around 8.3 million tons in the UK alone by the Love Food Hate Waste campaign. The sector will be expected to contribute to the awareness raising efforts to reduce this amount.

  • Chemical additives in food, for example those listed on ingredient tables in Europe as E-numbers, are another source of concern amongst campaigning groups. Differing regulatory environments and conflicting priorities like the longevity of products and concerns about health effects, can make this a complex issue for global companies to manage.

  • After some prominent conflicts with communities regarding local water supplies, operational water usage has become a priority issue for beverage companies such as InBev, Coca Cola and Pepsi. Coca Cola, for example, now commonly works on a wide range of locally relevant initiatives, such as watershed protection, expanding community drinking water and sanitation access, agricultural water use efficiency as well as education and awareness programmes.

www.tomorrowsvaluerating.com

The Tomorrow’s Value Rating is a new tool for assessing how well companies manage their most pressing social and environmental issues.

It examines companies’ performance in five key areas, or ‘domains’: Strategy, Governance, Engagement, Value Chain and Innovation. Assessments are based on companies’ public disclosures, including their annual report and accounts, sustainability, CSR and corporate citizenship reports, and information on their websites.

The selection of companies subjected to this Tomorrow’s Value Rating of the food and beverage sector was based on the Fortune Global 500 list, which ranks the world’s largest companies by revenue.

The Tomorrow’s Value Rating methodology draws on five years’ of experience with its predecessor rating, the Accountability Rating. In that time, many large companies made significant progress in the areas of performance assessed by the Accountability Rating. The new Tomorrow’s Value Rating is designed to assess and advance the areas of sustainability performance that still have much scope for improvement among the majority of companies. That is why it focuses in particular on innovation for sustainability, sector-specific issue management and the corporate value chain.

The Tomorrow’s Value Rating is produced by Two Tomorrows, the leading sustainability consultancy with a global network of consultants and associates based out of offices in Europe, Asia and North America. www.twotomorrows.com