Four proposals address deforestation and its connection to climate change. All are at food companies and seek information on commodities supply chains.
Green Century asked Aramark to report on “quantitative metrics on supply chain impacts on deforestation, including progress on any time-bound goals for reducing such impacts,” seeking metrics on sustainable sourcing of palm oil, soy, beef and pulp/paper—and an assessment of related risks. It withdrew after the company agreed to develop a new deforestation policy; to transition to 100 percent sustainably sourced palm and soy oils by June 2019; to require supplier reporting on sustainable sourcing for palm, soy, beef and timber; to report on time-bound goals and participate in the CDP Forestry survey; and to formalize its supplier engagement strategy with input from stakeholders. The company is to report by May 2019 and quarterly thereafter.
SHAREHOLDERS PLAY KEY ROLE IN REDUCING DEFORESTATION AND CLIMATE RISK
Leslie Samuelrich
President, Green Century Capital Management
As investors analyze the climate resiliency of their portfolios, they should consider risks associated with the agricultural sector and especially the conversion of forests and peatlands to crop and pasture land. The burning and razing of forests is one of the largest contributors to global greenhouse gas emissions. Deforestation contributes as much greenhouse gas emissions as the global transportation sector, with commodity-driven deforestation itself responsible for two-thirds of tropical forest loss.
The proposal is still pending at Kroger. It suggests the report could include commodity-specific goals for eliminating deforestation, the certification standards Kroger is using for major commodities, strengthened non-compliance protocols and reporting to the CDP Forests initiative. A similar proposal in 2017 earned 22.9 percent support. Earlier, proponents withdrew a 2013 resolution after Kroger agreed to source all its palm oil from sources certified by the Roundtable on Sustainable Palm Oil.
Also still pending are proposals to two more firms. SumOfUs wants Mondele–z International to report by May 2020 and annually thereafter “on how the company is curtailing the impact on the Earth’s climate caused by deforestation in Mondele–z’ cocoa supply chain.” The resolution notes that subsidiary Cadbury is the world’s second biggest confectionery company and says “Cocoa is a driver of climate change caused by deforestation in Africa, Asia and South America”—a matter that has prompted substantial public notice that can damage the company’s reputation given connections to human rights abuses and biodiversity concerns. The proposal contends Mondele–z’s Cocoa Life program for sustainable cocoa lacks transparency, with no specific goals or key performance indicators, in contrast to peer firms. The resolution suggests reporting on how much cocoa is traceable, verified by third parties, certified by global entities and shade-grown.
Seventh Generation Interfaith Coalition for Responsible Investment, an ICCR member, has a more general proposal at Yum Brands. It asks for annual reports “on how the company is curtailing the impact on the Earth’s climate caused by deforestation in YUM’s supply chain,” with “quantitative metrics on supply chain impacts on deforestation and progress on goals for reducing such impacts.” The proposal suggests the company could report on the track of and goals for sustainably sourcing palm oil, soy, beef and pulp/paper.
Sustainable energy access: In one more proposal about the impacts of climate change on the developing world, the Sisters of St. Dominic of Caldwell, N.J., are asking ExxonMobil to report “on how ExxonMobil’s business activities contribute to the provision of affordable, reliable, sustainable, and modern energy to alleviate energy poverty, in alignment with the Paris Climate Agreement goal to limit global average temperature increases to well below 2 Degrees C above pre-industrial levels.” The proposal is new in 2019 and notes the “dual challenge” of sustainable energy needs for the one billion people without access to energy. Supplying energy to developing markets to enable development is a theme ExxonMobil has stressed in its annual energy assessments for many years.
The company has challenged the resolution at the SEC, arguing it relates to ordinary business because it is micromanagement, is moot given current reporting and duplicates the resolution from NYSCRF asking for GHG goals reporting. ExxonMobil says it will include the NYSCRF proposal in its proxy statement.
