Cop26

‘Cows the New Coal’ as Firms Fail to Track Methane

FAIRR Protein Index reveals huge gaps in efforts by world’s major food producers to combat emissions and waste products.

A study by the FAIRR Initiative showed livestock suppliers to companies like Nestlé and Tesco are undermining recent COP26 pledges on methane reduction by failing to track their emissions.

The fourth-annual FAIRR Protein Index assessed 60 publicly-listed animal protein producers against ten ESG-related factors including greenhouse gas (GHG) emissions, deforestation, antibiotic usage, and investment in alternative proteins.

The companies included 49 primarily meat and dairy producers and 11 aquaculture operations from around the world.

“Despite pockets of innovation the animal agriculture sector is unprepared for the transition on climate change and risks looking outdated and unattractive,” says FAIRR’s report. The Index assessed firms that supply multinationals including the likes of McDonald’s, KFC and Carrefour.

The report revealed that only 18% – or nine out of 49 – of livestock producers measure any methane emissions, which FAIRR said undermined the sector’s ability to play its part in a global deal for 30% methane reductions struck at COP26 last month.

“Annual methane emissions from global cattle and livestock, make up 44% of global anthropogenic methane emissions and would require a forest covering around three quarters of South America to sequester,” it added.

The study also showed that meat giants with a zero-deforestation pledge, such as McDonalds suppliers JBS and Marfrig, do not monitor the third party suppliers that are responsible for up to 90% of deforestation from rearing cattle.

“As the largest driver of both methane from human activity, the ambitions set at COP26 handed a big slice of responsibility to the food sector,” said Jeremy Coller, Chair of FAIRR investor network, members of which manage US$45 trillion AUM. “Yet failures from methane to manure management underline the growing sense in the market that cows are the new coal.”

Innovations and alternatives

Three Norwegian aquaculture firms were represented in the Top 5 Index companies: Mowi (1st), Grieg Seafood (2nd) and Lerøy Seafood Group (4th). The highest-ranking meat and dairy firms are Maple Leaf (Canada), Marfrig (Brazil) and Fonterra (New Zealand).

The report highlighted the lack of action taken around waste produced by the world’s 70 billion farm animals by many of the companies. This causes the release of methane and threatens biodiversity and human health. Despite this, 88% – 43 of 49 – have no or limited disclosure and commitments on waste pollution.

Feed innovation was seen as a major benchmark in the report addressing ESG risks. “With feed prices reaching an eight-year high, driven partly by extreme weather, nine meat, fish and dairy firms are investing in sustainable feed ingredients or production to de-risk their supply chains,” it said.

The report added that firms such as the UK’s Cranswick, which is trialling feed based on insect protein, peas and beans, and JBS in Brazil, which has partnered with Netherlands-based DSM to implement a feed additive to reduce methane emissions from digestion in cows, showed progress was possible.

Nearly half, 28 of the 60 Index companies, now have exposure to alternative proteins, compared to just 15 in 2019, it added.

Seven meat companies report investments in cultured meat,” the report observed, “Thai Union has formed partnerships with cultured meat start-up Aleph Farms and cultured seafood start-up BlueNalu Inc, and [in November] JBS entered the space with a £100m investment in the acquisition of a Spanish cultivated meat firm and a cultivated meat R&D centre.”

Several jurisdictions are moving forward with new regulations to combat methane. New Zealand, Ireland and the US state of California have all set methane reduction targets covering livestock of at least 10% by 2030, and more jurisdictions may follow after the COP26 deal. New Zealand dairy producer Fonterra stated that, given its environmental restrictions, the country has now reached peak milk, while Ireland is expected to have to cut its national cattle herd by 20% to meet its target.

Incremental progress

The report flagged mixed progress across the sector in terms of managing well-established environmental and social risks.

This included limited improvements in water use with 94% of companies categorised as high risk, down from 96% in 2020. Of the companies that have water consumption or withdrawal targets, only seven, or 14%, disclose having set targets at the facility level, which includes JBS, Marfrig, Maple Leaf and Tyson.

Some progress was also made in the animal welfare and use of antibiotics categories. Companies rated as high risk fell to 63%, down from 68% in 2020 for animal welfare. Companies improved antibiotics use too, with 62% of companies ranked high risk, down significantly from 75% in 2020.

However, 100% of companies still ranked as high risk on water pollution – the same as 2020. In the US, slaughterhouses discharge the highest phosphorus levels and second highest nitrogen levels of all industrial categories, often into water. “Yet none of the major meat producers that operate in the US market has set quality or volume targets on wastewater from their processing facilities,” the report said.

Away from environmental concerns, only 37% ranked as high risk in working conditions versus 57% in 2020, suggesting this has been an area of positive focus in the wake of the pandemic. While 52% of companies are categorised as high risk for issues around governance, compared to 63% in 2020.

“The science is clear that high-emitting sectors such as agriculture must transform themselves in the next decade,” said Eugenie Mathieu, Senior Analyst, Aviva investors. “The world’s biggest meat and dairy suppliers are still failing to set reductions targets for emissions, which is unhelpful given that extreme weather events are hurting the bottom lines of these companies. Investors can play their part by demanding that the animal protein producers they invest in make change happen quickly.”

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