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Special edition: Sustainability

Measuring the benefit of sustainable reporting

16-Sep-2008
Last updated on 17-Sep-2008 at 12:35 GMT

In the first of a series on sustainability, FoodNavigator looks at the value of sustainable practices and reporting and how it can improve a company’s standing among shareholders, customers and peers.

From reducing carbon footprints, to conserving energy and water, an increasing amount of companies are publishing some kind of sustainability report to measure the impact of their business on the world around them.

What was once a peripheral concern has now become a statement that reflects the long-term health of a company and can also inspire confidence among investors.

Best practices are still emerging to establish consistent measures and transparency, so reporting standards can vary and comparisons can be difficult.

However, the benefit clearly goes beyond a public relations boost as there can be immediate and actual cost savings related to employing “green practices” according to a PricewaterhouseCooper (PWC) report called The food, beverage and consumer products industry: Achieving superior financial performance in a challenging economy, which was compiled for the Grocery Manufacturers Association (GMA).

The PWC study said that companies which reported sustainability data consistently achieved higher return on assets than those that did not. They also outperformed other companies, based on gross margins and return on sales.

One explanation for this could be that they operate more leanly, saving on energy costs and overall input costs. Likewise consumers could be happier to pay more for goods perceived to be environmentally friendly.

The emergence of indexes which track sustainability performance, such as the Dow Jones Sustainability Index, also suggest it is becoming “an important key to investors’ decisions” and this is reflected in annual reports.

In its 2007 report Novozymes spoke of “the dawn of sustainable development” with an almost religious fervor.

The message from Steen Riisgaard, Novozymes president and CEO read: “These are exciting times. Times when one revolutionary scientific result replaces another; when the whole planet has become our market and workplace; and when the world has woken up to the realization that an extensive and global effort is needed to solve climate problems.

“This is a time when many hands and minds must work together to keep the world on track – and when it is clear that sustainability makes sound sense in business.”

It then boasts that the world saves an estimated 100 kg of CO2 emissions every time its customers use 1 kg of its enzymes, reducing CO2 emissions by about 20 million tons in 2007 alone. This is mainly because using enzymes saves energy compared with traditional processes.

Meanwhile, General Mills says that using less water, less fuel and less packaging provides a tangible measure of savings reflected in its margins.

In its 2008 annual report the company emphasizes its commitment to sustaining a healthy environment, adding that it has set “measurable goals to reduce energy usage, greenhouse gas emissions and solid waste generation rates by 2010”. It also highlights its goal to reduce water usage rate by five percent by 2011, and has implemented water conservation programs in many of its manufacturing facilities.

However, one problem highlighted by PWC is that many reports “fail to discuss the bottom-line effects of sustainability on a company” and only a small percentage are audited by independent third parties to ensure accuracy, consistency and reliability.

Attempts to address this are being made by a number of different schemes.The Global Reporting Initiative (GRI) was established to develop harmonized reporting rules for the food industry on issues relating to economic, social and environmental performance. It counts Nestlé, Bunge, Danisco and Tyson Foods among its members.

Similarly the The GMA’s Environmental Sustainability Initiative is looking at consistent metrics to measure environmental improvement in the areas of packaging reduction and recycling, water conservation and energy efficiency, and reductions in climate-forcing emissions.

A new sustainability alliance The Food Trade Sustainability Leadership Association (FTSLA) was also launched in the last few month to provide members with a network to share best practices and establish a sustainable business model.

Members will work towards sustainable improvements in 11 key areas including organics, climate change, energy utilization, distribution and waste management, and report progress, using common benchmarks.

And with studies showing that increased transparency in reporting sustainability data boosts stakeholder and investor confidence, as well as corporate reputation, the PWC concludes that there is no doubt “more and more companies will quantify the social and environmental impacts of doing business”.