Food Sector Off-track on Emissions Reduction
Environmental costs and deforestation have been flagged as central risks if the industry continues to operate as it currently does.
The food sector is misaligned on emissions reduction targets and sector producers are not on the pathway to limiting global warming to 1.5°C above pre-industrial levels, recent research has shown.
Analysis conducted by the Transition Pathway Initiative Global Climate Transition Centre (TPI Centre) assessed the world’s 26 largest publicly listed food producers against its new carbon performance methodology.
“The food sector is responsible for an estimated one-third of global greenhouse gas (GHG) emissions, yet there has not been much focus on the degree of food producing companies’ alignment with the Paris goals, because gauging food producers’ efforts is complex,” the TPI Centre told ESG Investor in a statement.
“Despite the sectors’ high contribution to global GHG emissions, the assessed food producers’ alignment with any of the TPI Centre’s benchmarks is relatively low – especially compared to other sectors in industry, transport and energy where the measurement of climate progress is more advanced.”
The report called on food producers to set more ambitious emissions reduction targets, and recommended that producers improve the disclosure of Scope 3 emissions and purchased agricultural inputs.
“This would allow more food producers to be assessed against the TPI carbon performance methodology and inform investors’ engagement and decision-making,” it mentioned.
Although 24 of the assessed food producers have already set emissions reduction targets, only one – Nestlé – aligned with the 1.5°C pathway in the medium term (2035), while another – Ajinomoto – aligned in the long term (2050). The companies represent approximately US$930 billion in market capitalisation.
The TPI Centre chose to focus its research on food producers, as opposed to agricultural producers. “This is due to the high level of [output] and market capitalisation concentrated at the stage of food production, while in contrast agricultural production is highly dispersed,” it explained.
Launched in 2022, the TPI Centre is an asset owner-led initiative supported by more than 150 asset owners, asset managers, and service providers representing approximately US$60 trillion in combined assets under management. Its new carbon performance methodology quantifies food producers’ historical and future GHG emissions, comparing them with low-carbon benchmarks for the sector.
Of the 26 food producers included in the research, only seven reported sufficient data to enable the assessment of their historical emissions intensities and emissions reduction targets on a comparable basis. The 73% of companies classified as “no or unsuitable disclosure” represented the highest such proportion across all sectors assessed by the TPI Centre during its 2023 cycle.
Driving deforestation
In parallel, UBS recently released a report flagging the agri-food industry’s high impact on nature and climate. According to the wealth manager, the sector accounts for up to 30% of global GHG emissions – second only to fossil fuels as the largest human-caused driver of climate change. The industry is also responsible for 70% of freshwater consumption, and at least 90% of the world’s deforestation.
“The [agri-food] industry generates US$15 trillion in negative externalities a year globally, and is structurally unprepared to smoothly deliver sustainability goals,” UBS said. “…it is risk-averse, cautious, and fragmented.”
A January report from the Food Systems Economics Commission (FSEC) estimated that food systems incurred US$3 trillion in environmental costs per year. One of the central drivers for this was deforestation, with the sector linked to a net loss of over 6 million hectares of natural forest each year.
“Deforestation will erode a further 71 million hectares of natural forests between 2020 and 2050 – an area equivalent to 1.3 times the size of France,” the FSEC noted. “This has far-reaching implications for carbon emissions and biodiversity loss”.
Last December’s COP28 saw the preliminary release of the UN Food and Agriculture Organization’s roadmap for enabling the global agri-food system to achieve the UN Sustainable Development Goal 2: Zero Hunger while bringing GHG emissions down to levels compatible with a 1.5°C temperature.
“The global food system is on an unsustainable trajectory [which] current policy commitments are not strong enough to divert,” the FSEC warned. “Even if countries follow through on all the policy commitments made in their nationally determined contributions, they will not succeed in shifting the global food system from its unsustainable trajectory.”
Earlier this month, the UK’s Transition Plan Taskforce (TPT) published its last set of tools and documents to help companies and financial institutions mobilise transition finance globally. This included sector-specific transition plan guidance for food and beverage firms – one of seven sets of guidance issued for consultation last November.
Given the agri-food sector’s impact on GHG emissions, cutting its emissions will play a central role in the UK’s previous pledge at UN climate negotiations to cut emissions by at least 68% by 2030.
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