Over the past 2 weeks European beverage company, Diageo (DEO) leads the food and beverage category in ESG score and ranked 4th overall on the Amenity Safeguard Platform. The beverage giant, who owns brands such as Guinness, Smirnoff, and Captain Morgan rolled out a new 5 point sustainability plan for the next decade. Elsewhere in the food and beverage space Coca-Cola (KO) and Pepsi (PEP) garnered some attention for commitments on plastic use and scandal rocked Tyson Foods (TSN)
The food and beverage industries are truly global enterprises with supply chains and distribution networks weaving their way around the world. European giant Diageo (DEO), founded in 1886 has operations in over 180 countries. They produce and distribute well known brands such as Guinness, Smirnoff, and Captain Morgan. In November Diageo unrolled a sustainability plan for 2030 that touches on key issues facing the industry, including water use, diversity and inclusion, and packaging. We use our Safeguard ESG Impact platform to dive into the activities that led to Diageo’s ranking as well as the actions among its sector peers.
The water footprint, including the supply chain for beverages is quite large. According to Water Footprint Network a pint of beer costs 37 gallons of water to make due to the water intensive nature of agriculture and water inputs for making the beer itself. With a new commitment to reducing water use by 30%, Diageo would save roughly 11 gallons of water for every pint of beer produced. Multiplied over the scale and range of their operations, the water savings alone proposed by Diageo would be significant.
On the human resources side Diageo seeks to create a team that is as inclusive and diverse as possible making this a priority in their action plan. The targets in diversity include 50% women in leadership roles and 45% from ethnically diverse backgrounds. Increasing the number of women and minority owned businesses in the supply chain is also on the agenda. In terms of energy use packaging the company aims to have 100% recycled material and have completely renewable energy for company operations by 2030.
Recently, the company has started a marketing campaign called “The Balance Challenge”. The initiative includes an augmented reality filter for Instagram that promotes responsible drinking for the holidays and charitable contributions for WaterAid. The campaign is targeted towards a younger generation that is more likely to buy from sustainable brands and promotes the 2030 sustainability goals as well.
Elsewhere in the food and beverage industry Coca-Cola (KO) is developing a paper bottle with Danish company Paboco. Coca-Cola also held a virtual dinner series with celebrity appearances ahead of giving Tuesday to promote diversity and inclusion issues. Pepsi (PEP) has committed to using plastic bottles made from 100% recycled material by 2022. On a less positive note, Tyson Foods (TSN) has been indicted in a lawsuit for treatment of employees at the Iowa Waterloo plant during the outbreak of the pandemic. This is an outcome of the supply chain risk that we identified in our blog highlight back in May, that big meat producers were under increasing pressure to fulfill demand expectations. Allegations against Tyson include reports of plant managers betting on how many employees would get COVID-19 and keeping employees working in unsafe conditions. Those managers have since been suspended without pay, but not terminated outright.
While many people may not have experience in the food and beverage industry, it is an area that affects all of our lives. Beer for instance has been around as long as agriculture and has been a part of human civilization for thousands of years. The basic beverages like coffee, beer, and tea that billions of people drink every day are sourced from all over the globe and use many times their volume in water to produce. The people that grow and produce these products live in some of the most marginalized communities in the world, small-holder farmers in developing nations and immigrant factory workers in developed countries. Increasing activism by consumers and investors show us that supply chain responsibility is material to the bottom line. Companies that are taking the time and effort now to address labor and resource use concerns will reduce risk while increasing operational capabilities.
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This communication does not represent investment advice. Transcript text provided by FACTSET and S&P Global Market Intelligence.
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