Scope 3 Reporting Improving in US Food Sector
In contrast, the Ceres Food Emissions 50 Companies Benchmark found slow progress on transition planning among food companies.
The number of North American food companies disclosing Scope 3 emissions has nearly doubled in two years, according to research by investor network Ceres.
Flora Gaber, ESG Analysis Manager at Swedish pension fund AP7, told ESG Investor that it was “encouraging” to see the improvement in disclosures.
Since 2021, Ceres has benchmarked the emissions reporting of the 50 largest food firms in the US through its Food Emissions 50 Companies Benchmark. This year, the benchmark found that 37 out of the 50 assessed companies had reported their supply chain greenhouse gas emissions (GHG), while 32 had set targets to reduce those emissions.
In 2021, when the benchmark was launched, only 19 companies disclosed Scope 3 emissions from their supply chain and corresponding 1.5°C-aligned science-based targets.
Scope 3 reporting reflects an organisation’s GHG emissions outside its operations, such as through its supply chain, customers, investments or lending. These are currently heavily underreported by companies, but almost always represent their largest source of emissions.
Meryl Richards, Director of Ceres’s Food and Forests programme, told ESG Investor that engagements and ongoing discussions with food companies had helped them improve disclosure of their supply chain emissions. “In this sector, [Scope 3] is a really relevant risk,” she said. “It is about 80 to 90% of these companies’ emissions, so it is critical for understanding their impact on the climate.”
Food retailers behind
Despite an overall improvement on Scope 3 reporting across the food sector, the Ceres benchmark found that food retailers continued to lag, with only four out of 12 retailers disclosing their supply chain emissions and setting targets to reduce them.
“In the food sector, supply chains are complex – and for food retailers, even more so,” said Richards. “Some of those companies struggle to get the data they need from suppliers. But that’s where consumers interact with the food sector, so it’s an important downstream actor. It’s an area where more transparency and action are needed.”
Scope 3 emissions are notoriously difficult to quantify, given the reliance on third-party data outside a company’s control and the current lack of expertise on how to calculate them robustly. However, this looks set look to change over the coming years, with upcoming reporting rules expected in major markets such as California and Europe. The International Sustainability Standards Board is also due to mandate Scope 3 reporting in its requirements.
In the food sector, some Scope 3 reporting will inevitably rely on generic, as opposed to primary data. “The key is that it’s important to get some estimate out there and improve the data as you go along,” said Richards.
AP7 is one of the many investment firms that participated in the Ceres Food 50 campaign, which kickstarted the Food Emissions Benchmark in 2021. Having been there from the start, Gaber said it was encouraging to see improvement in Scope 3 reporting, which she said represents the absolute majority of GHG emissions in the food sector.
“We have been actively engaging in dialogue with one company [on Scope 3] for the past two years,” she added. “As investors, we are collectively encouraging companies to improve disclosure and ultimately reduce Scope 3 emissions.”
This not only reduces the burden for companies and prevents them from having to engage with one investor at a time, but also signals long-term investors’ common concerns for the sector, Gaber explained.
Work in progress
The Food 50 Emissions Companies Benchmark also found slow progress in the sector on the publication of transition plans. Of the companies included in the study, only three – Yum! Brands, Nestle and Mars – had published a quantified plan that identified the percentage of emissions targets they expected to achieve through various actions across their operations and supply chain.
“[Transition planning] is the area where companies are most lacking,” said Richards. This includes considerations such as growth in innovation strategies, product development and their alignment with climate targets, as well as investment in innovations to reduce per-unit emissions.
“This is really important as we know that companies are going to grow, and investors want to know how they are going to do that while still maintaining a climate that allows them to continue sourcing the raw materials they need,” she added.
While Ceres’ Food Emissions 50 Company Benchmark revealed progress overall, the research also pointed to significant opportunities for improvement, suggested Greg Garrett, Executive Director at the Access to Nutrition Initiative.
“Just as we’re finding with our nutrition benchmarks, forward-thinking food companies can and should pursue business growth and innovation strategies focused on improved processes and products that are good for planet and people,” he said.
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