FAIRR Initiative research finds food firms lagging investor expectations and customer demand; cites regulatory drivers for accelerated protein transition.
Leading manufacturers and retailers are offering more products containing alternative proteins, but the food industry as a whole is still slow to grasp opportunities to reduce Scope 3 greenhouse gas (GHG) emissions.
Although companies including Unilever, Nestle, Tesco and Sainsbury’s have made firm commitments, the vast majority (72%) of major players have not adopted protein diversification targets to decarbonise their business models, according to research from FAIRR Initiative, an investor network focused on ESG risks in animal farming systems.
The research is based on a five-year engagement programme with 25 global food retailers and manufacturers, led by FAIRR Initiative and supported by a collation of institutional investors – including Fidelity, Newton and OFI Asset Management – with collective assets under management of US$18 trillion.
The UN Intergovernmental Panel on Climate Change’s recent report warned methane (CH4) emissions have reached an 800,000-year high, calling for “strong, rapid and sustained reductions” as part of efforts to meet the goals of the Paris Agreement. The Energy Transitions Commission included methane reductions as one of six priorities for limiting climate change before 2030.
The UN has estimated that livestock emissions make up around 32% of human-caused methane emissions. Alternative proteins include both plant-based replacement for animal-based protein products as well as cultivated ‘meat’, defined by FAIRR as animal protein produced by “culturing animal cells in a lab and then using a bioreactor to replicate the cell tissue structure of meat”.
“Food retailers and manufacturers have a vital role to play in the transition to a low-carbon economy, but the majority of leading food companies still lack concrete targets to address climate risks in their protein supply chains or to meet booming consumer demand for alternative meat and dairy products,” said Jeremy Coller, Chair of the FAIRR Initiative and Chief Investment Officer, Coller Capital.
Few Firm Commitments by Major Players
FAIRR Initiative identified seven firms among its engagement group as adopting formal targets to grow their alternative protein offerings, including Unilever, which has committed to reaching US$1.2 billion in sales of meat and dairy alternatives between 2025-27. Tesco plans a 300% increase in sales of meat alternatives by 2025.
But 18 (72%) of the engaged firms have yet to make concrete commitments to grow the proportion of non-animal proteins in their portfolio. This is despite the fact that 48% of the sample track and disclose Scope 3 emissions from animal agriculture, 52% have published net zero ambitions and 68% have targets for reducing agricultural emissions.
A study published last month by the World Benchmarking Alliance found that 60% of the world’s 350 food and agriculture firms do not report Scope 3 emissions, while 35% have not set any GHG emissions target reductions.
“The shift towards sustainable proteins will prove an essential tool for addressing serious climate risk, whilst also meeting the demand for nutritious food in a resource-scarce world,” said Jenn-Hui Tan, Head of Stewardship and Sustainable Investing at Fidelity International. “Investors should be aware of the impacts and opportunities within this shift and food companies should be innovating at pace.”
According to The Good Food Institute Asia Pacific, investment in alternative protein companies worldwide tripled in 2020 to US$3.1 billion – four and a half times greater than 2018 – covering cultivated meat, plant- and fermentation-based proteins. Cultivated meat is not without controversies, but does not involve slaughter or use of antibiotics in livestock and uses less water and land.
2021 has already seen two public listings from cultivated meat companies MeaTech and BioMilk, while Nestlé announced a cultivated meat collaboration with Future Meat Technologies in July.
Alternative protein products could account for 11% of the global protein-based foods market by 2035, up from 2% in 2020, according to report published in March by Boston Consulting Group and Blue Horizon.
Although reductions in agriculture-based emissions are under-represented in the national determined contributions published by major countries ahead of COP26, the FAIRR report notes a number of policy initiatives aimed at reducing meat consumption and using protein diversification to mitigate climate risk and improve health.
The UK National Food Strategy recommends a 30% reduction in meat consumption by 2030, for example, while Denmark’s dietary guidelines recommend a 30% reduction in meat and France’s recommendations include meat reductions of approximately 28%.