How can large cap food companies ensure animal welfare in their supply chains? Triodos Bank believes that companies should do much more in this respect. Since its earliest days, Triodos Bank has financed the entire organic food chain, from producers and processors to retailers and restaurants. Triodos believes that organic agriculture, including the meat and dairy industry, is the only systematic approach to agriculture that is sustainable in all respects. Factory farming, the raising of livestock in confinement and at high density, is a system whereby a farm operates as a factory and is at the opposite end of the farming spectrum. Factory farming’s main products are meat, dairy products and eggs.
Sustainability concerns in the food chain
14-12-2010 | Triodos Sustainability Research faces the considerable challenge of finding large cap, multinational food companies that meet our investment criteria.
Triodos Sustainability Research is currently looking at large, multinational companies in the food products industry. Like all companies we research, these companies are judged on their efforts to improve environmental performance, uphold social standards and follow ethical considerations. Although research is still ongoing, we face a big dilemma because none of the companies seem to meet all of our investment criteria. Food is an important basic need, but the food and agriculture industry is also closely linked to a wide range of sustainability issues. In order to become eligible for investment by Triodos Bank, food companies are required to meet a number of social, environmental and ethical requirements. To name a few, food producers must meet specific policy and programme requirements for biodiversity and deforestation, animal testing, factory farming and the use of Genetically Modified Organisms (GMOs).
What are the main barriers?
The first and largest issue is the use of GMOs in food products. Triodos Bank rejects the use of GMOs because of their negative impacts on biodiversity and because there is insufficient knowledge regarding the consequences of GMOs for human health and the environment. Therefore Triodos requires multinationals to limit GMO use as much as possible (not using them at all is very difficult or impossible for large companies operating on a global scale) and to label products containing GMOs, at least when required by law. However, the use of GMOs is generally accepted in the United States and other countries, and is gaining ground around the world. Most companies simply follow regulations; they do not limit GMO use and only address the minimum food safety aspects of GMOs. Few large food producers meet our standards and it is expected that even fewer will meet them in the future.
Another important stumbling block is animal testing. One does not think immediately of animal testing in the food industry, but unfortunately more and more food producers are making use of animal trials. This is linked to the growth of health enhancing food, such as yoghurts containing probiotics or margarines that lower cholesterol levels. Animal tests are often used in the research and development stage for products or ingredients that claim to have a health impact. These tests are not always legally required and we do not consider them to be for medical purposes, which means they do not meet Triodos Bank requirements.
A third important issue is factory farming. Triodos expects companies in the food industry to meet high animal welfare standards for all animal products. Unfortunately, producers in the food industry lag behind, with only a few frontrunners on this issue. Companies should have a good policy on animal welfare, as well as their own minimum standards on animal welfare in farming. They should monitor suppliers and offer alternative products with ingredients produced under better animal welfare standards, for example organic products. See the article on factory farming in this issue.
What to do?
Food is a basic need and we believe that food should be represented in the Triodos Investment Universe. However, Triodos carefully develops its minimum standards and believes in the principles behind them. Our requirements evolve to reflect industry best practice, but at this point we believe that food producers should show more sustainability leadership and we will engage with the companies researched to encourage them to implement better practices. On the brighter side, we have some good examples of smaller food companies (see the article on food pioneers in this issue) and we have high hopes that we will be able to select one or two large cap food producers in the final stage of our research.
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Triodos SRI Strategy
Selection process
Note: The issues explored in this article are specifically relevant for sustainable investments on the stock market. Triodos Bank believes that our socially responsible investments are a powerful means of promoting our values and working for greater sustainability, while enabling us to offer a complete range of attractive investment options to customers who choose to invest on the stock market.