The Food Industry Must Lead On Climate Before Activists Eat Their Lunch

Exxon and Shell debacles portend climate reckoning for food companies

Over the past few weeks the giants of the fossil fuels industry have been forced to reckon with their contribution to global warming. Royal Dutch Shell was ordered to reduce its carbon emissions by 45% by 2030, a ruling that encompassed even the fuel burned by consumers. And another energy titan, Exxon Mobil XOM , ceded three board seats to clean energy activists who will likely pressure the company to change its strategy behind fossil fuels.

The oil industry has long been under scrutiny for its role in climate change, and this has only intensified despite re-branding themselves as “energy companies” and touting their investments in wind and solar. Activists now are eyeing the food industry as the next entrant to the environmental rogue’s gallery. The industry should get ready for the hammer to come down, unless they own up to their own role in climate change and be far more aggressive about reducing it.

Martyn Day, a top environmental lawyer at Leigh Day in London, had this to say about the Shell verdict: “This judgment will not only send shivers down the spines of the oil industry, but of all the other industries that significantly contribute to the greenhouse gases.”

Count the food, beverage and restaurant industries in that group, and in the wake of these developments at Exxon and Shell they’d better be listening. The 2019 Lancet report targeting the meat industry was an eye-opener. So was a more recent United Nations report that noted that food systems account for over one-third of global greenhouse gas emissions, or 18 billion tons. These systems include all the activities involved in gathering raw materials, producing, processing, distributing, preparing and consuming food. Food manufacturing is among the five industry sectors contributing the most greenhouse gases, according to the UN.

Now that Big Food has been outed like this, we are sure to see increasing pressure on them from industry analysts, shareholders and consumers along with the usual environmentalists, politicians and regulators. More shareholders are already demanding that companies be transparent about climate change risks. Smart companies like Unilever are making sustainability part of their business model. And when board members of companies like Exxon Mobil start pushing for more clean energy, it’s clear that they see it as a key to the company’s future prosperity and good returns to shareholders.

Consumers, especially millennials and Gen Z, are also acutely aware of the need to address climate change and are turning against companies that pollute.  In a Pew Research study conducted in April, more than two-thirds said that large businesses and corporations are not doing enough to combat climate change. In a September 2020 Ipsos poll, two-thirds of respondents said that companies have a moral obligation to use sustainable packaging; and 65% said that companies should not be using single-use packages. And a significant number – 44% — said sustainability is driving their purchasing decisions.

The message here is clear: it is “open season” on any company or industry that shows a direct link to impacting climate with greenhouse gases. No company can afford to just hide behind making broad statements supporting the Paris Climate Accords without examining their own conscience and taking action. They can expect to be called out publicly on their practices, just as Greenpeace did in March when it alleged Chevron CVX , Inc. made misleading claims about its environmental impact.

What does this portend for the food industry? It must make changes that reassure all these constituencies that they are committed to drastically reducing greenhouse gases. If regulators don’t punish them, consumers and shareholders will.

Time for some leadership

Granted, packaged foods companies have been making strides. More than 200 big companies pledged last year to reduce greenhouse gases by 30% and cut food waste in half by 2030; companies like PepsiCo PEP and P&G are leading efforts to address plastic package waste; and confectionery companies and even the soda firms are reducing calories and package sizes.

A critical mass of activists, consumers, lawyers, regulators, and non-profits is now FORCING action…and the industry needs strong leadership to get ahead of this tsunami. Here are two critical steps they can take:

First, for once, get ALL food industry players in the room - manufacturers, ag companies, retailers and restaurants. Because each sector marches to the beat of its own drummer, we’re not seeing a concerted food industry-wide effort to tackle such raging issues as climate change, obesity and food waste. These problems supersede parochial interests and require comprehensive solutions. Pulling together everyone will not only address the climate change crisis, but also will protect these industries from anticipated attacks.

Second, this united group must finally put a stake in the ground and make an ambitious commitment that delivers a quantum leap in climate-friendly and healthier products available for consumers. While incremental progress has been made to date, it is no longer enough. Without this “Big Leap” the industry will remain vulnerable to ever-increasing assaults. Everything should be on the table including (1) tripling R&D spending from its paltry 1.4% of sales today so that true innovations (not line extensions) can be made; (2) committing to carbon footprint labeling across the board; and (3) adopting systems that easily identify healthier products for consumers like Ahold Delhaize’s Guiding Stars. These are the kinds of changes that will lead to real breakthroughs on climate and health.

In short, Big Food should take notice of what is happening in the fossil fuels industry as a wake-up call, and expect that their turn on the hot seat will come soon. Realizing that respecting the environment and reducing carbon footprints will be a selling point as more consumers care about how their choices affect climate change will serve to protect them as regulators - and even board members - start turning up the heat.