According to the Institutional Investors Group on Climate Change, Nestlé, Campbell Soup, Nissin Foods, Ajinomoto, and Kerry Group are among 50 big firms that are “highly exposed” to climate risks in comparison to other businesses in the sectors and areas (IIGCC).
The IIGCC, which represents over 50 global investors with a combined asset value of $10 trillion, released a list of expectations for these at-risk firms to adopt in order to protect their operations from the climate risks. This involves establishing a climate risk assessment to determine the importance of potential climate-related consequences on their goods, devising strategies to manage material and financial risks, and identifying adoption solutions.
As extreme weather events such as droughts and wildfires have become more common in recent years, this research reveals that investors believe many food firms are woefully unprepared to deal with the component shortages, price increases, and supply difficulties induced by climate change.
For food corporations, the question of whether climate change poses a financial — and perhaps existential — danger to their operations is no longer debatable.
A drought in Canada and Europe this year resulted in a bad harvest season for durum wheat, which has the potential to lead to a pasta scarcity. Prices for commodities affected by dry weather conditions, such as wheat, corn, and soybeans, have risen this year, forcing manufacturers to pass the cost on to consumers. And customers are taking notice: According to a recent Inmar Intelligence study, more than 84 percent of customers have seen a rise in the pricing of food and home products that they routinely purchase.
These difficulties are occurring at the same time as labor and freight concerns, which are putting a strain on food supply systems.
According to the investor group’s research, even if global temperatures do not rise over 1.5 degrees Celsius over the next 20 years, there would be concrete consequences for businesses. Droughts, for example, will last an extra two months on average.
The IIGCC anticipates that investors will interact with firms that disregard climate risks.
“It is more critical than ever that investors understand the risks and related financial repercussions that firms face when it comes to the physical effects of global warming,” IIGCC CEO Stephanie Pfeifer said in a statement. “This means they can effectively identify sectors and individual firms that are resilient or well-positioned to adapt, and interact with those who do not have an adequate risk management plan in place.”
Nestlé, the world’s largest food business and one of the IIGCC “highly exposed” to climate change, has taken steps to protect its operations from the consequences of climate change. According to Reuters, the food behemoth would “assess physical implications on our value chain over a longer time horizon.” Nestlé stated in its 2020 Task Force on Climate-Related Financial Disclosures report that it has modelled several climate scenarios with physical consequences, such as raw material shortages and facility interruptions, to track the possible financial impact on the firm.
Nestlé has also made investments in its own operations to address the causes of climate change. It stated earlier this month that it will invest $1.29 billion in regenerative agriculture to reduce its carbon footprint while also conserving the soil in which it grows food. It has also spent extensively in research and development to create higher-yielding cocoa and coffee types that can produce more with the same or less water.
Campbell Soup has announced a list of climate measures that it has put in place to reduce its carbon impact, such as lowering emissions and combating deforestation. As of press time, the firm has not responded to requests for comment on the IIGCC ranking.
Other big food and beverage firms have taken steps to mitigate the consequences of climate change on their supply networks. Nestlé, Danone, Kellogg, Mars Wrigley, and other companies have focused on boosting variety and resilience in their products so that they are not dependent on the same crops. Wheat, soybeans, sugar cane, maize, rice, potatoes, palm oil fruit, sugar beet, and cassava account for two-thirds of global agricultural output.
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