As demand and inflation put pressure on supply chains, companies that figure out how to reduce their resource use will be at a competitive advantage, especially during inflationary periods like the one we are currently experiencing. This week we are focusing on companies that are investing and innovating circular economies to reduce and reuse materials, as well as protecting ecosystems.
While carbon transition garners much of the attention in the ESG world via new innovations and emissions reductions, there are still other areas of environmental concern that companies handle on a daily basis. Waste reduction and protection of habitats plays a critical role in our planet's future and protecting natural resources that people and companies use. This week on our ESG Safeguard platform we are focusing on companies that are investing and innovating circular economies to reduce and reuse materials, as well as protecting our ecosystems.
These issues are very timely as demand and inflation are putting pressure on supply chains. Increased demand from economies opening up and other unpredictable events in recent months like shipping mishaps and ransomware hacks, have caused shortages in everything from microchips to meat. Companies that figure out how to reduce their resource use will be at a competitive advantage, especially during inflationary periods like the one we are currently experiencing.
Starbucks (SBUX) will be starting its Cup-Share initiative in an effort to encourage consumers to reduce waste from single-use cups. The program will be launched in 43 countries by 2025. The coffee company aims to reduce its waste by 50% by 2030. A hallmark of this initiative is charging more for single-use cups and offering a discount to consumers using reusable cups. The pilot program will launch in Europe, the Middle East, and Africa. In the U.S., Starbucks is letting consumers bring their own mugs starting June 22nd. The company previously had this program in place but suspended it indefinitely due to health risks from the coronavirus. Single-use cup waste is a huge part of Starbucks ecological footprint and addressing this one issue goes a long way towards reducing their overall impact on the ecosystem.
Shareholder activism has become an increasing theme that we have seen play out in carbon transition. We are now seeing resource use surfacing as an issue among investors. Shareholder advocacy organization As You Sow put forth a proposal for Amazon (AMZN) shareholders that 35% of shareholders supported. The proposal asked the company to be more transparent about its resource use and offer options to consumers for plastic-free shipping. Similar to Starbucks, Amazon has a huge single use footprint attributed to shipping.
Partnerships play an important role in creating a cleaner environment and a more responsible economy. Two companies in the food and beverage space made recent commitments to take more responsibility for their resource use in the form of partnerships. Last month General Mills (GIS) partnered with the National Fish and Wildlife Foundation to support regenerative agriculture. Focused on the Great Lakes and Great Plains regions, the partnership has the goals of advancing soil health and water quality. As a large producer of finished grain products, focusing on the breadbasket of America has a direct impact on mitigating risk to General Mills’ supply chain.
Coca-Cola (KO) made a similar effort last week to clean up their act, specifically with regards to plastic waste. The beverage producer partnered with The Ocean Cleanup to remove plastic waste from 15 rivers around the world. The partnership’s objective is to catch plastic waste in rivers before it flows into the ocean. The Ocean Cleanup uses an autonomous solar-powered interceptor that removes plastic from rivers. Coca-Cola will provide access to its international network, help oversee community engagement, and help deploy new interceptors to clean 15 rivers by 2022.
From cleaning up the environment and insulating supply chains to reducing waste at the consumer level and financing cleaner initiatives, companies are taking a variety of steps to reduce environmental impact that is not related to carbon transition. Lowering emissions is but one step companies can take to protect our planet. Resource use and consumption also play a significant role in habitat loss and pollution. As more companies feel the effects of the current inflationary cycle from strained supply chains and increased operating costs, companies that set themselves up to function with decreased resource use will be at a competitive advantage.
Watch a recording of our special guests Jean Rogers, Founder of the Sustainability Accounting Standards Board (SASB) and one of the world’s leading ESG experts, alongside Bruno Bertocci, Managing Director of the Sustainable Equity Investors Team at UBS Asset Management. They discussed why it’s crucial for the analyst community to include next generation ESG data and second-order information as part of an effective investment strategy.
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