Environmental, social and governance (ESG) has quickly become a hot button for food manufacturers, retailers, wholesalers and distributors. For leading companies like Nestle, General Mills, Kelloggs, Kraft, and Wrigley, not only is ESG a moral imperative but it’s a good business practice.

With global supply chains under more scrutiny, food companies are working to improve resilience, boost efficiency and continue delivering value to customers. Supply chains have always been critical to the success of all enterprises, but in years past they often operated quietly behind the scenes of corporate operations.

The disruption of the COVID-19 pandemic changed that, revealing the importance of food chains to a wider audience including customers, partners, employees and investors.

ESG Defined

At its highest level, ESG covers Environmental, Social, and Governance. At their most basic level, these issues impact a company’s internal dynamics and external footprint. They also encompass how food companies do business and how they impact the world.

Supply chain ESG is an approach that accounts for the entire footprint of the company’s supply chain operations. It means seeing deep into the supply chain to understand where materials come from, whose hands touch those materials, and how they reach processing at the company’s sites.

Environmental issues encompass everything that has to do with a company’s impact on the environment and the sustainability of its operations – and supply chain activities such as logistics, transportation, warehousing and distribution can have a significant impact on these areas. Emissions, climate change, and a company’s overall carbon footprint can be addressed through ESG. It also can cover use of materials in production and packaging, land and water, as well as pollution and waste responsibilities. Consideration must be given to indirect effects that occur upstream or downstream, such as greenhouse gas emissions from product use or a company’s supply chain activities, sometimes referred to as Scope 3 emissions.

Social issues cover how a food company’s activities – from hiring workers, to sourcing goods – impact both internal workers and the global supply chain and community. At the highest level, social issues can involve workplace diversity, safe working conditions, fair compensation, employee and consumer data privacy, whistleblower protections, forced or child labor, and conflict minerals.

Governance issues largely relates to a food company’s internal governance structure, including how rights and responsibilities are distributed within an organization. How a company governs itself, meets stakeholder needs, discloses information, enforces policies and standards, and complies with the law are just a few ways this ties into ESG overall.

Further Exploring Supply Chain ESG

Supply chain ESG is an approach that accounts for the entire footprint of the company’s supply chain operations. It means seeing deep into the supply chain to understand where materials come from, whose hands touch those materials, and how they reach processing at the company’s sites.

Digging deeper, ESG and supply chain ESG are inextricably linked. That is because food companies cannot truly understand their own ESG position without including the impact of their suppliers or looking at their overall supply chain. Since a large portion of a food company’s ESG footprint can be found in their supply chain, it must be tied to any resultant program.

In addition, improving a company’s ESG position must include a manufacturer’s vast network of partners who provide parts, materials, chemicals, service, and other important components.

As more manufacturers and individuals focus on ESG’s importance, it will be vital to ensure that strategies are in place to address these issues. With a comprehensive view into your supply chain, and an understanding of the various challenges that could affect everything from market access to reputation, you can mitigate risks and create substantive ESG programs that are proactive and transparent.

Additionally, focusing on supply chain ESG gives a food manufacturer greater insight as to where and how materials are sourced. For example, a supply chain ESG framework allows a food manufacturer to make sure its materials aren’t produced with child labor, don’t utilize conflict minerals, and don’t negatively impact environmental sustainability. Effective supply chain ESG solutions allow a manufacturer to both positively impact the world around them and mitigate risk by anticipating where future shortages or redesigns can occur.

ESG Scorecard Highlights for Top Food Companies

FSA has done comprehensive research on some of the largest food brands to determine their reported progress and areas of focus in ESG. While this is not a comprehensive list, this gives you a glimpse at some of the progress being made.

AB InBev. Climate, water stewardship, sustainable agriculture, circular packaging, entrepreneurship, diversity, equity and inclusion (DEI)

Archer Daniels Midland. Main categories are Feed the World, Protect Nature, and Enrich Lives.

Cargill. Expanding transparency on impacts of its operations, products, services, and supply chains worldwide.

Coca-Cola. High focus on water security strategy and a circular economy for packaging because to reduce waste and carbon emissions.

ConAgra Brands. Make food that’s safe while addressing environmental and social impacts linked to its products (i.e., responsible sourcing, reducing impact on climate change, preserving water resources).

Danone. Key focus areas: Zero hunger, good health and well-being, clean water and sanitation, decent work and economic growth, responsible consumption and production, and climate action.

General Mills. Focused on Food (i.e., safety, nutrition); Planet (climate change, eliminating deforestation, regenerative agriculture, water stewardship, packaging, sustainable operations), and People (Human Rights, Workplace Safety, DEI).

Heineken. Its Brew a Better World 2030 strategy guides the company on a path to zero impact on the environment; an inclusive, fair and equitable world; and moderation and no harmful use.

Hershey. Cocoa sustainability, responsible sourcing and human rights, environment, and people.

Hormel. Focus on ethical business conduct, environmental impact reductions, animal welfare, product safety and quality, and employee safety, diversity and professional development.

Kellogg’s. Focus on nourishing people with its foods, feeding people in need, nurture people and the planet by supporting farmers, and conserving natural resources across the company’s value chain.

The Kraft Heinz Company. Three broad pillars are Healthy Living & Community Support, Environmental Stewardship, and Responsible Sourcing.

Kroger. Advancing positive impacts for people, planet and systems with a framework designed to unlock greater value for the company’s associates, customers, and communities.

Mondelez International. Priorities drive innovative, more sustainable growth the right way for people and the planet through nutrition and well-being, DEI, and sustainability.

Nestle. Focus on people, families and pets (through improved, tailored and affordable nutrition), people & planet (packaging and circularity, climate, water and nature & biodiversity), and people in communities (DEI, human rights, and sustainable sourcing).

U.S. Foods. Products that meet our specified local, sustainable or well-being criteria; people fostered by diversity and inclusion, and plant through greenhouse gas reduction goals as an example.

Walmart. Sustainability and regeneration of retail and product supply chains, reduce or avoid greenhouse gases from the global supply chain, create more resilient communities, and operate with the highest standards of integrity.

This article was originally featured in Edition 1 of 2024 of Food Chain Digest magazine. Download the digital version for FREE today!

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