Supply-chain failings undermine progress on CO2 emissions and water, despite science-based targets.
Three years of investor engagement with fast-food companies has led to progress on climate-related target-setting, but more needs to be done when it comes to CO2 emissions and water usage across the supply chain, according to a report published Tuesday.
Suppliers account for well over 90% of overall emissions for fast-food chains, with meat and dairy products suppliers a key concern, said investor network FAIRR, which published the report together with US-based sustainability non-profit Ceres.
Investors warn this lack of transparency in the animal-agriculture supply chain could undermine the efforts of food brands to tackle climate risk.
The companies involved — Chipotle Mexican Grill, Domino’s Pizza, McDonalds, Restaurant Brands International, which owns Burger King, Wendy’s Co. and Yum! Brands, which owns KFC, Pizza Hut and Taco Bell — have a combined market capitalisation of more than US$281 billion.
All six firms engaged by the US$11 trillion global investor coalition have now set, or committed to set, global greenhouse gas reduction targets approved by the Science-Based Targets initiative (SBTi), the report said.
Widespread pressure on fast-food firms
But none of the companies have set targets to reduce water pollution or consumption across their supply chain and all are failing to mitigate risks posed by water stress.
And there remains a lack of transparency and action in the supply chain, with only two firms, RBI and Yum!, reporting the proportion of emissions arising from suppliers of agriculture products. In both cases, they represented more than 50% of the firms’ entire emissions.
Pressure on fast-food companies to commit to targets that aim to mitigate climate change is coming from investors, consumers and some regulators.
“We are seeing investors start to shift away from divestments as a knee-jerk way of encouraging change at these companies. There is the understanding that that may make the investor’s portfolio look cleaner and greener, but it’s not having a real-world impact,” said Teni Ekundare, Head of Investor Outreach at FAIRR.
Consumers are also having a direct impact on fast-food chains, through plant-based food choices, which filter back to companies and their supply chains. Variable government regulation, meanwhile, can hamper progress towards greener corporate policies.
“We do find that there’s an issue with companies being able to almost hide behind regulation” where these aren’t robust enough, said Ekundare. A more global approach recommended by FAIRR would see companies adhering to the highest standards of regulation even across regions where localised policies may not be so strong.
Impact on biodiversity under scrutiny
In the wider food sector, the industry’s impact on climate change — and biodiversity — is increasingly a key issue for investors.
Managers of assets worth £6 trillion this week urged the UK prime minister to commit to mandatory health and sustainability standards for food companies, as the government published a food strategy that its own lead adviser on food issues described as “not a strategy.”
Voluntary schemes potentially lead to weaker reporting standards and inconsistent metrics, making it difficult to compare and track progress, said The Investor Coalition on UK Food Policy, which is led by Rathbone Greenbank.
Some companies are starting to take the lead in supporting their suppliers to introduce greener standards.
Australia’s Woolworths has launched a dairy fund to help farmers introduce on-farm sustainability measures, for instance, while Unilever published its Regenerative Agriculture Principles last year, outlining plans to increase biodiversity, and improve water quality and climate resilience.