Investors Score a Meaty Win for Clean Water
Original blog post published by Ceres
Last week, Tyson Foods announced it was partnering with the World Resources Institute (WRI) to set targets to reduce water and greenhouse gas impacts in its operations and supply chain.
This is big news, coming as it is from the largest poultry player in the U.S., which has had a decidedly weak track record on water and climate change. In fact, Tyson was one of the worst performers in Ceres’ Feeding Ourselves Thirsty report that benchmarked how the world’s top 37 food sector giants are managing water risk.
Tyson’s move underscores, among other factors, the power of investors, who know that good environmental management is good business.
During the past three years, Tyson and other big players in the meat industry faced growing calls from their shareholders to improve their water use practices. Ceres and the Interfaith Center on Corporate Responsibility worked closely with investor partners to engage Tyson and other large meat producers to set water risk management policies. Just last November, 45 institutional investors with more than $1 trillion in assets sent a letter urging four of the largest meat producers to tackle the major water pollution risks associated with feeding, slaughtering and processing livestock.
Through letters like these, shareholder proposals and dialogues with company management, investors are essentially asking the meat industry to consider the long-term financial viability of a high-risk animal production and processing model that is among the food industry’s most water-intensive and polluting.
“This is where we see Tyson’s greatest risk as an investor,” Mary Beth Gallagher, from TriState Coalition for Responsible Investment recently told me. Gallagher has been engaging with the company through shareholder proposals and dialogues for the past few years, and notes that its longstanding history of water contamination issues also negatively affects the communities in which it operates and the farmers that are part of its supply chain.
“As investors, we are pleased to see the company take ownership and commit to setting robust water and greenhouse gas goals across its entire value chain,” she says of the commitment. “We will be watching to see how it collaborates with its ingredient suppliers, contract growers and stakeholders to incentivize good behavior and practices.”
Tyson of course is not the only food company with major water issues.
Overall, growing and processing the food we eat is the most water intensive business on earth—more than 70 percent of the world’s freshwater is used to irrigate crops and raise livestock. Yet, food companies can no longer take water for granted. In fact, in 2015, Tyson laid off workers, shut down a beef processing plant in Iowa, and posted disappointing quarterly earnings after cattle herds were hit hard by prolonged dry conditions in the Southwest.
Tyson’s new commitments could signal a tipping point in the industry. In just the past year, both Hormel and Smithfield Foods made significant commitments to improve water stewardship and climate protection in their supply chains, where the majority of their environmental impact lies. Smithfield, the world’s largest pork processor and hog producer, set a goal to slash greenhouse gas emissions by 25 percent by 2025 across the company’s entire supply chain, from the intense fertilizer use associated with growing feed grains, to fuel consumption in its transportation network.
Tyson, given its industry dominance, is a critical link in the chain. Tyson’s actions also put into relief the other major protein companies that still lag in setting ambitious supply chain targets on water and climate, including Cargill, JBS, Sanderson Farms, and Perdue.
As evidence of the financial risks of climate change and degraded water resources mount, investor interest in these issues will remain keen. The good news is that major meat producers have the buying power and the control over their supply chains to meaningfully strengthen farm practices and protect water supplies. Increasingly, they’re using it, because they realize that water risk management and conservation are now part of business as usual.
Author: Brooke Barton, Senior Director, Water and Food, Ceres