Climate Action 100+ has started benchmark to evaluate corporate ambitions on net-zero
The commitments being made by members of Big Food on net-zero has led to some optimism action will be taken to tackle one of the planet’s largest sources of greenhouse-gas emissions. However, while the companies themselves are under no illusion about the challenges that lie ahead, there is also likely to be close scrutiny of their efforts and progress. David Burrows reports.
“Those who choose hesitation over action will be endangering our planet and their business,” wrote Nestlé CEO Mark Schneider in a piece for Fortune in December. The world’s largest food company had just published its plan to hit net-zero by 2050 and halve its greenhouse gas emissions by 2030. It isn’t alone in setting such targets.
A month later, PepsiCo committed to net-zero greenhouse gas emissions by 2040 and an absolute emissions reduction target of 40% by 2030.
Unilever, meanwhile, published its climate transition action plan last summer, covering how it’ll get to net-zero emissions by 2039. Next month the plan will be put to a shareholder vote.
“I’m really optimistic,” says Maria Lettini, executive director at the Fairr Initiative, a UK-based network of global investors aiming to create awareness over environmental, social and corporate governance issues. “These companies are putting themselves out there [and] it’s fair game to hold them accountable.”
Are the commitments all they are cracked up to be? And what challenges do major food companies like Nestlé, PepsiCo and Unilever face in achieving them?
In its 2020 progress report, the Science-Based Targets Initiative (SBTi) showed 30 of the 84 ‘high impact’ global food, drink and agriculture companies had already set net-zero targets, with a further seven committed to do so. This is good news given the food industry’s hefty environmental footprint (a study published in Nature Food in March showed the world’s food systems were responsible for 34% of global anthropogenic greenhouse gas emissions in 2015).
“We know what’s happening in the food system,” says Emma Keller, head of sustainability at Nestlé’s business unit covering the UK and Ireland. “We know the physical risks that exist and we know some transitional ones [like carbon taxes] may come, so this is about us being ready for that.”
Purse strings are loosening. Nestlé has committed CHF3.2bn (US$3.52bn) in the first five years of its net-zero plan as it seeks to be 100% deforestation-free and plant 100 million trees, use 100% recyclable or reusable packaging and use only renewable electricity across all sites. “The key thing focusing the mind is our halving [of emissions] by 2030,” explains Keller. “Over the next nine years, we’ve got more clarity on what can be done, what needs to be done.”
“We cannot continue to farm in the same way as in the past”
Some of the targets will be easier met than others. While factories can be rapidly upgraded to work on renewable energy and packaging can be redesigned relatively easily, curbing emissions on farms presents unique challenges. “We’re facing up to a reality,” explains David Wilkinson, senior director agricultural procurement for PepsiCo’s European business, which is that “we cannot continue to farm in the same way as in the past”.
Nestlé is going to plough at least CHF1.2bn into regenerative agriculture. It is a theme that runs through many of the plans published by the food industry’s big guns. Danone is a fan and so too PepsiCo, which this week said it wants to “spread regenerative farming practices across seven million acres, approximately equal to its entire agricultural footprint”, saving three million tonnes of greenhouse gas emissions by 2030.
PepsiCo has already calculated growing potatoes with fertiliser made from potato peelings discarded in its Walkers’ factories can cut the emissions of its crisps brand by 70%. Plans are in place to trial this approach in the UK this year, and then across its Lay’s potato crops in Europe in 2022.
Agricultural emissions comprise a third of PepsiCo’s footprint (packaging is a close second). For others, they represent a far greater chunk, which makes these co-called ‘Scope 3’ emissions key to any food company’s net-zero plan. Emissions from Scopes 1 and 2 cover the direct emissions companies control as well as ‘indirect’ ones related to energy use. Scope 3 covers all the other indirect emissions – the ones they don’t own or control.
Changing the behaviour of tens of thousands of suppliers “won’t be easy”, as Roberta Barbieri, PepsiCo VP of global water and environmental stewardship, noted in a podcast for Future Food in February. “Our focus is not just on our farmers but trying to help broader system change.”
There were similar messages within an announcement this week from Arla Foods, as the dairy giant published carbon footprint data collected from 7,986 farms in seven countries. Arla’s data showed its farmers emitted 1.15 kg of CO2e for every?kilo?of milk they produced. The global average, according to the UN’s Food and Agricultural Organization (FAO), is 2.5kg CO2e, but Arla wants to shave a further 30% from its footprint by 2030 as it aims to become net-zero by 2050.
“We will use this [data] to decarbonise our farms at a faster pace and share our findings with stakeholders to help drive an effective transition for the whole industry,” explains chairman Jan Toft Nørgaard. “There’s a huge amount of value in this for all of us.”
Collaboration is a word that crops up often in conversations about these new climate commitments. “When you were reducing your carbon footprint by 3% a year or reducing plastic use by 2% a year, you could do it on your own. But now, with net-zero goals, we need to fundamentally rebuild value chains,” said Mike Barry, long-time director of sustainable business at Marks & Spencer and now a consultant, in an interview with Raconteur recently.
Mars and PepsiCo have come together on an initiative to help engage suppliers in climate action, for example, while Kellogg and Unilever are working in partnership with Future Food-Tech as part of an innovation challenge.
Lara Ramdin is chief innovation officer at Dole Packaged Foods, part of fruit-and-veg group Dole Food Co., which is aiming to be ‘carbon neutral’ within its own operations by 2030 and will be working on cutting emissions across its value chain. She’s refreshingly open about the pressure food companies are under when it comes to climate commitments. She, like others, is keen to stress not all of the answers (or even all the data) are available yet. “I do [think] food companies believe we have to collaborate more,” she says.
Candour is something to look out for in the commitments: clarity on the near-term actions being taken to reduce emissions and honesty about some of the answers they don’t have. “There’s no point in us saying that, in 2040, we’ll being doing this or that because we just don’t know yet,” says Keller at Nestlé. “We haven’t got that crystal ball.”
Other brands are similarly but understandably (who knows what advances technology will bring on everything from packaging to meat production and crop protection?) vague. Baby-food manufacturer Ella’s Kitchen has gone for 2030 as its net-zero target, which is going to be “incredibly difficult”, admitted CEO Mark Cuddigan recently. He wants to see more urgency, more 2030 targets rather than 2050.
These are net-zero commitments 1.0, so they will evolve over time. Dates could be brought forward, but they can’t go back. Keller warns against slipping to 1.6 degree or 1.7 degree commitments, while PepsiCo’s Barbieri admitted the thought of “not everybody doing what we are doing” keeps her awake at night.
The pressure is on to move fast, with firms both collaborating and competing. This is welcome. But some brands have tripped up to get ahead in the race to net-zero.
Net-zero responses involve both cutting emissions and removing (or offsetting) carbon. Some firms keen to solve their own net-zero riddles as soon as possible have leaned heavily on carbon offsetting (a hot potato since the 1990s when carbon management plans came to the fore). NGOs dismiss the concept as greenwash. Food companies see a role for offsets but want the market tightened up.
The Taskforce on Scaling Voluntary Carbon Markets (TSVCM) reckons demand for carbon credits could increase by a factor of 15 or more by 2030 and by a factor of up to 100 by 2050. Overall, the market for carbon credits could be worth upward of $50bn in 2030, noted McKinsey recently. That’s a lot of money to spend on a duff system.
“The concerns in the past are that offsets are a get-out-of-jail-free card for companies – I’ll go plant some trees somewhere in the world and I’ll continue to emit greenhouse gas emissions guilt-free,” explained Barbieri. What’s needed, she says, is a more structured marketplace that has clear roles, a governing body and rules that bring “rigour and credibility”.
This is what the TSVCM is attempting to do. Some firms are, however, already bringing the idea in-house through a process referred to as carbon insetting, which keeps the offset projects within their own value chain.
It’s important companies don’t “jump” to offsetting without making great strides in reducing their emissions first, notes Jamie Pitcairn, technical director for sustainability and circular economy at consultancy Ricardo Energy & Environment, which has been working with industry body FoodDrinkEurope on net-zero.
Research Ricardo has done with Kellogg showed how pragmatic management practices could cut emissions by 60% on arable farms. Pitcairn was “surprised” by the results, but they weren’t zero of course. “If we continue to drink milk, eat meat and use cereals then there are likely always going to be some residual emissions,” he adds. “If we are going to get to net-zero across the food and drink sector then we will need to find ways to capture [or sequester [emissions].”
“It is hard to see what the end-game will be if your business model relies on burning oil, or belching cows”
Or reduce consumption, of course. Whether growth in meat and dairy is viable in a net-zero future is moot. Some companies are adjusting their portfolios, expanding their reach into the alternative meat and dairy categories that are proving so popular. For the Fairr Initiative’s Lettini, this is exciting: meat- and dairy-free is potentially being used as a “mitigation strategy and opportunity” in terms of greenhouse gas emissions. She cites Unilever’s pledge to increase sales of alternatives to EUR1bn (US$1.18bn) within the next five to seven years.
Whether more plant-based sales mean less meat or dairy is less clear, though. Dairy represents about 35% of Nestlé’s total emissions. CEO Schneider said recently that “we need to shift consumer preferences towards plant-based food and beverages”. But he also said: “We don’t want to avoid dairy, meat products and meat by-products. We want to make them in a more carbon-efficient way. If we … walk away from [those divisions] and the emissions continue unabated, the world is not better off.”
Are companies trying to have their cake and eat it? Campaigners argue commitments lacking recognition of the need to reduce consumption of meat and dairy products are not worth the paper they are written on. Duncan Oswald, principal consultant at environmental consultancy Eunomia, says: “It is hard to see what the end-game will be if your business model relies on burning oil, or belching cows.”
Given livestock’s considerable environmental footprint, the commitments made by meat and dairy companies will be more closely scrutinised than most. The Nature Food study showed retail, transport, consumption, fuel production, waste management, industrial processes and packaging represented 29% of the global food system’s emissions. The rest (71%) came from agriculture and land-use/land use change activities.
Ricardo’s Pitcairn says it is “fundamentally not acceptable” for a food company to sidestep Scope 3 emissions. At Nestlé, Keller agrees. Given 71.4% of the group’s emissions are from agriculture “if we ignored scope 3 we’d be tweaking around the edges”, she says.
There is quite a range in quality of commitments out there, notes Oswald at Eunomia. NGOs and academics have already started to cry foul, initially honing in on the proposals from oil companies. But they will be casting their net wider.
Climate Action 100+, the world’s largest investor engagement initiative on climate change, has already started a benchmark to evaluate the corporate ambitions on net-zero. It doesn’t specifically score or rank companies (individual company reports are available for Coca-Cola, Danone, Nestlé, PepsiCo and Unilever), but NGOs certainly will in time. The first benchmark, published in March, found just one in ten companies were aligning their plans with the so-called 1.5-degree pathway. The inclusion of Scope 3 emissions was a “blind spot”.
Some commitments amount to little more than a date on a press release, argues Steve Smith from the University of Oxford, while others are backed by robust third-party analysis and set out short-, medium- and long-term targets and actions. “At the moment there is no single place for collecting and assessing these targets,” he says, adding: “What the world needs now is pace runners to show how net-zero should be done, and referees to call out the cheaters and laggards.”
Fairr’s Lettini says investors “don’t want to crucify companies for making targets but they want a meaningful discussion when announcements are made”. The race for net-zero is on. For the planet’s sake, it needs to be a fast and fair one. “This whole agenda is going to be a pre-requisite of doing business,” says Keller.