Ethical Performance
inside intelligence for responsible business


Food firms still don't have a grip on sourcing

January 2011

The weak point of the food industry remains working conditions and problems in sourcing raw materials, according to a new sustainability study by Bank Sarasin.

The bank, which is a large investor in the area, has labelled the industry's current trajectory as 'completely unsustainable' in research that rates the world's 15 largest food companies.

The two biggest challenges facing the sector are the environmental footprint resulting from recent increases in agricultural productivity and many firms' record on labour rights on supplier farms, as well as in their own manufacturing plants.

Sarasin says there is 'significant room for progress' on the sourcing of raw materials, although firms are starting to realize the need for investment in the area. Heinz and Unilever are among the few that score well in this field.  

As the world's largest food multinationals purchase 10 per cent of the world's supply of a number of foodstuffs including tomatoes, peas and tea, and 20 per cent of the world's coffee, the study says the risk to firms has gone far beyond the reputational, with long-term supply now at stake.

Sarasin also notes that organic food should be looked to as an example for the sustainable procurement of raw materials. With its closed-loop systems and the avoidance of problematic agrochemicals, the report says, organic farming has overcome some of the environmental problems associated with conventional farming - in particular in relation to water and soil fertility.

On working conditions, the historically poor performance of companies is getting worse rather than better in most areas, according to Sarasin.

The bank notes an increase in 'precarious' work without employment contracts, sickness benefits or trade union rights, and a failure on the part of firms to use their market power with suppliers.

Unilever and Nestle were among the worst performers in this area, although other firms, particularly those associated with child labour, also fared badly.

Sarasin points to the growth of international trade unions as a potential solution to some problems, saying they can play a valuable role as mediators between local unions and management.

Overall, the best performers were the Canadian health foods firm SunOpta, Danone, and the Swiss dairy company Emmi. Among the worst, and those excluded from Sarasin's sustainable investment universe, were Kraft, PepsiCo, SABMiller, Campbell and Coca-Cola.

Bank Sarasin's sustainability ratings
Food firms rated by Bank Sarasin as eligible for investment under sustainability criteria:

H. J. Heinz
Lindt & Sprungli

Source: Bank Sarasin

Sarasin Partners | Global | Supply Chain Management

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