Green Strings Attached
Consumer demand for dirt-to-dish environmental data may soon dictate what retailers will ask of their meat suppliers.
While the majority of livestock producers may not be legally required to report greenhouse gas emissions today, Timothy Smith, associate professor of environmental sciences, policy and management, bioproducts and biosystems engineering at the University of Minnesota, says greenhouse gas regulation is not going away, though it may change forms.
Experts speaking at the Food, Agriculture & Biofuels National Conference in Minneapolis, MN, predict that consumers may one day request greenhouse gas data be included on product labels in the retail meat counter.
The Walmart Effect
Controlling a sizeable share of the retail food market means retailers such as Walmart wield impressive power over their food processing and meat packing company suppliers. According to Brian Buhr, University of Minnesota agricultural economist, Walmart controls 29% of the retail food market in the United States. Food sales alone bring in $233 billion for Walmart. By comparison, Kroger, the nation’s second-largest food retailer, represents 8% of the retail food market with $66.1 billion in sales.
Eric Jackson is the chief sustainability officer at Conservis, a company that helps provide and analyze environmental compliance programs. He specializes in corporate sustainability and concentrates on figuring out what strategies businesses need to take in order to be competitive.
“For all of the major food companies, their largest customer is Walmart,” Jackson explains. “So every time Walmart says something, even the companies we may consider to be the behemoths have to figure out what their response is going to be.”
What Walmart Wants
Jackson says Mike Duke, Walmart president and CEO, has focused on the “greening” of Walmart since he took on the company’s leadership role in February 2009. During a shareholders’ meeting in June 2010, Duke indicated that Walmart is committed to eliminating 20 million metric tons (22 million tons) of greenhouse gas emissions from the company’s global supply chain by the end of 2015.
“They said that reduction in greenhouse gas emissions would come from their supply chain, not only from their stores,” Jackson points out. “The number one hot spot for greenhouse gas emissions in the supply chain is apparel. The number two source is food production. They are very focused on (emissions) in cotton and wheat production right now and they are talking about the meat
side, too.”
Jackson says Walmart is currently conducting significant studies to find ways to track and trace inputs and activities, including greenhouse gas emissions, at all points in the production process — from the farm to the retail shelf.
He expects Walmart’s agricultural tracking activities to eventually encompass more of the company’s food suppliers. “They are starting the tracking process with their private (Walmart) brands because the major branded food companies have told them it is not possible. Walmart is trying to prove to the (branded) food companies that is not the case,” he notes. “Walmart is taking a very proactive approach. They see the train rolling down the track and they would rather be in the driver’s seat than back in the caboose.”
A July 16, 2009 Walmart press release quotes Duke as saying, “Customers want products that are more efficient, that last longer and perform better. Increasingly, they want information about the entire life cycle of a product so they can feel good about buying it.”
The “feel good” focus on environmental emissions is not unique to Walmart. “In our research, we have not found a single U.S. food company that is not studying, at least quietly, the greenhouse gas emissions from their food supply chain,” Jackson relates. “And they are doing it largely in response to Walmart.”
As a large distributor of meat on a global scale, Jackson says McDonald’s is focused on the environmental impact that suppliers may have on the protein side. While they face pressure from around the globe, McDonald’s has been engaged in the European effort to reduce greenhouse gas emissions in the food supply chain for the last 10 years. Similar initiatives have been launched in the United States recently.
The McDonald’s Web site proclaims: “Our opportunity is to increase our influence along the supply chain back to the primary producer, thereby driving progress in sustainable agriculture.”
Proctor & Gamble (P&G) recently introduced a Supplier Environmental Sustainability Scorecard, which asks suppliers about greenhouse gas emissions in a request-for-information format. “After talking with people in the (P&G) procurement area, the scorecard is gradually going to move from a ‘request’ format to a ‘filtering’ format,” Jackson explains. “They are going to practice in the request stage for a while, but those who cannot or will not participate will find themselves in a different position in regards to being a supplier to Proctor & Gamble.”
Walmart is expected to follow a similar path, first asking suppliers for their greenhouse gas information, and then gradually requiring more disclosure.
“Eventually, participation in the market is going to be limited by whether or not you are willing to provide information to your downstream markets,” Jackson says. “That is why it is important to realize the difference between measurement and reduction. Right now, it is all about measurement. Will you be transparent?”
Jackson predicts producers are going to play a big role in answering the investor demands for corporate transparency. “Investors are requiring scoring systems and labeling systems already, and that pressure is going to keep getting dialed up every year,” he states.
Database Building
Stockholders for major corporations are driving greenhouse gas emissions reporting by using entities such as the Carbon Disclosure Project (CDP), an independent, not-for-profit organization that holds the largest database of primary corporate climate change information in the world. According to the CDP, 2,500 organizations in 60 countries now measure and disclose their greenhouse gas emissions and climate change strategies through the organization. CDP encourages companies to put this information at the heart of financial and policy decision making.
Jackson says more than $65 trillion is being managed by companies that back the global carbon disclosure initiative, and 65% of Fortune 500 companies are reporting their carbon emissions.
“Last year, there were 100 shareholder lawsuits brought specifically around greenhouse gas disclosure transparency,” he explains. “At the corporate level, they (investors) are standing on the doorsteps of the boards of directors and saying, ‘you will report.’ Today it is about the corporate level; tomorrow it is about the supply chain level. It is working its way back toward production agriculture.”
Voluntary? Really?
“My question becomes, is this really ‘voluntary’ if the major investors are requiring this type of disclosure? It is going to have to be a corporate decision, so in that sense it is not mandated by law. But your shareholder price may react and you may have shareholder activity against the board if you don’t comply with the request,” Jackson says.
As investors demand information, the dirt-to-dish data gathering will likely become more commonplace. The data at the retail end is currently much easier to gather and analyze than at the farm level, but Jackson does not believe producers will be let off the hook.
Eventually, greenhouse gas emissions information could very possibly become a food label data field, much like nutritional information is presented now. “It has already happened in Europe and it will happen here,” he notes. “The consumer will eventually start making data-driven choices; that’s probably only 5-10 years away. If there are any gaps the industry is not covering, the regulators will fill in the gaps.”
Time to Get Started
As a first step, Jackson urges producers and industry experts to develop an understanding of the types of requests consumers are making. Watch for the metrics being set for measuring and categorizing greenhouse gas emissions and have the tools necessary to respond to those metrics.
“Position yourself to respond to whatever requests or regulations are developed, whether through legislation or via regulatory bodies. There will be virtually no one in the food supply chain, from the farmer all the way up to the retailer, who is not going to be affected at some point,” he assures.
Lora Berg is a freelance writer from Lakeville, MN.