ESG in the Food IndustryAboitizEyes
Sustainability and Environmental, Social, and Governance (ESG) reporting is quickly becoming the norm for Philippine businesses. There is an increasing demand for improved ESG performance in every sector, including the food industry.
Here, we take a closer look at ESG in the food industry and the mounting pressures this sector faces.
ESG and the Food Industry
Food systems significantly impact the environment. Agriculture utilizes half of the earth’s habitable land and 70% of the global freshwater supply, while a quarter of all greenhouse gas (GhG) emissions can be attributed to livestock and food production.
These environmental impacts put the food industry under the same level of scrutiny as the oil and power industries, pressuring businesses in this sector to integrate sustainability into their business operations.
However, the food industry’s current performance in ESG reporting is underwhelming. In a Wall Street Journal survey, which evaluated 5,500 publicly-traded companies, a vast majority of food industry leaders did not enter the Top 100. Clearly, this is not a good indication for an industry that has such an impact on our natural resources.
This result, while disheartening, serves as a driver and a reminder for the industry to be more environmentally and socially responsible. Not only will it be good for the environment; it will also help win over a new generation of consumers who only buy from companies that care.
Why is ESG Important to the Food Industry?
These days, brand-conscious stakeholders can easily access an organization’s sustainability efforts online. They expect brands to show commitment to sustainability ー a key to earning their loyalty.
Moreover, consumer trends are becoming more influenced by ESG issues. In a recent study by Nielsen, over half of the consumers said that sustainability concerns influence their eating habits. The study shows that 48% of consumers expressed their desire to change their consumption habits to reduce their harmful impact on the environment.
These changes include:
- Reducing or stopping their consumption of red meat due to environmental concerns
- “Sustainable” labels are becoming one of the deciding factors when purchasing food products. Sustainable is now synonymous with environmentally friendly, without GMOs and pesticides, and locally sourced.
- In an attempt to reduce their environmental footprint, consumers are increasingly adopting plant-based foods in their diet. This includes non-GMO products and traditional vegetarian foods as replacements for meat-based proteins.
Another study by the World Resources Institute predicts that in 2022, the sustainable food sector will become a $2-trillion market. This further supports the claim that ESG issues are becoming an influential factor in how consumers choose the food they buy.
Thus, players in the food industry have a great deal to gain by proactively addressing ESG issues in their businesses. Those that do are likely to be rewarded with increased revenue driven by socially and environmentally-conscious buyers. In doing so, they also become more attractive to environmentally-minded investors.
The Challenges of ESG in the Food Industry
Becoming an ESG-driven business is easier said than done. The three main sectors of the food industry — agriculture, food processing, and food retail — are encountering different hurdles in running more sustainable businesses. This, accompanied by stringent reporting and grading standards, creates a considerable challenge for the food industry.
Here are some examples of the challenges this industry faces:
- Food Production
- Comprehensive water risk assessments, and wastewater management systems
- Water targets and climate risk assessments
- Innovations to raise productivity and efficiency, while reducing resource use
- Food Consumption
- Investment and risk evaluation for meat substitutes, alternative proteins, and other emerging trends in consumer preferences
- Food loss and waste reduction measurements — including targets
- Moving towards deforestation-free supply chains
- Developing and sourcing more sustainable packaging options
- Innovations in biodegradable packaging
- Moving towards plastic-free operations
- Responsible management of plastic waste
- How sustainably and ethically food products and packaging are produced
- Assessments of deforestation, waste management, and resource risks of own operations
- Commitment to full traceability with clear timelines
- Sustainable supply chain management systems
These are just a few salient problems this industry deals with for their ESG reporting.
To meet ESG goals, companies have to reformulate current operations and put in place new strategies. However, these can have drastic effects on their products. For example, switching to alternative proteins can have a significant impact on a product’s taste, nutritional value, and shelf life.
There is no easy way for food companies to create an impactful ESG strategy. But, doing so is important to build trust and improve the business potential for stakeholders today.
How Do We Score on ESG initiatives?
ESG concerns are not going away — food companies need to keep that in mind when making strategic decisions.
The Aboitiz Group’s growth aspirations, operations, and strategies have always been grounded on sustainability. Our KPIs are strongly aligned with the United Nations’ Sustainable Development Goals (SDGs). This shows our commitment to creating solutions to address poverty, climate change, responsible consumption, and other pressing social issues.
Today, we dedicate ourselves to actively seeking opportunities to contribute to globally-set sustainability goals. We believe this is key to not only meeting stakeholder expectations but also to becoming a truly future-ready organization.
This is palpable in our ESG programs and our recent projects. Take, for example, our Project Silk, an inclusive yellow corn sourcing program implemented by our food and agribusiness subsidiary, Pilmico Foods Corporation.
The project empowers Bukidnon’s corn farmers by sourcing yellow corn from local cooperatives at equitable values. Doing so helps raise crop production and improve their livelihood. Our results led to the project becoming a recipient of the Europa Award, an indicator of our exceptional performance and contributions to promoting sustainability.
A more recent endeavor is our Elite XP project, which is our answer to the continued threats to swine health. It is a revamped hog feed brand, with added immuno-growth factor and Piglet+ Technology. Elite XP is specially designed to enhance the health of our livestock, and optimize their full genetic potential.
This project, which seeks to help our partners in the swine industry maximize their resources, is just one of the many initiatives we have planned to help the Philippines become sustainable and to help ensure food security.
Another notable project, Bangon Capiznon initiative, provides fish farm training for locals in Capiz. In early 2020, we provided technical assistance and donated 1.3 million bangus fry to fishermen in the province.
Our assistance was instrumental in helping them rebuild their depleted fish stocks following the devastation caused by Typhoon Ursula on their livelihood. We provide ongoing support such as teaching them fish-feed ratios and the proper use of feed variants to promote sustainable fish-growing environments. This exponentially improved their earnings and industrial growth.
In 2016, Pilmico started using rice husks, a by-product of rice mills from rice production, as an alternative to bunker fuel in its feed manufacturing process. Bunker fuel is the most common fuel resource; unfortunately, it is also non-renewable. Through this initiative, Pilmico lowered its production costs while doing the environment a huge favor by reducing its fuel consumption by 60%.
These are just a few examples of how we continuously look for innovations in the food sector to influence change, optimize supply chains, and mitigate our ESG impact.
ESG in the food industry is similar to other industries — it is a means to reduce environment-related risk, address social issues, and demonstrate sustainability. However, with its unique challenges and an increasing concern for food sustainability, ESG’s role as a value driver for food companies is growing.
At Aboitiz, we take this to heart. For years, we have strived toward greater ESG performance and transparency for our food subsidiaries. This dedication is reflected at all points in our supply chain — read more about our impact here.