Advancing food systems transformation through sustainability and ESG reporting: A state of play

By Margarita Lysenkova, Senior Manager — International Policy, GRI

Material sustainability issues associated with our food systems are multiple. How companies respond to these issues directly influences the long-term resilience of agriculture and food supply chains. In order to measure progress and identify gaps, more relevant and high-quality sustainability data is needed. Yet mainstreaming corporate disclosure in the agriculture and food sector does not come without challenges.

The food that we eat is produced every day, everywhere, and comes from multiple destinations. The food sector comprises both consumer-facing parts, such as retail, catering, and restaurants, and the upstream production sector, which includes companies operating farms, plantations, and fisheries. There are a lot of blind spots in this value chain: unlike retail food brands who are often well-known, most agricultural producers tend to remain in the shadows — consumers would not necessarily know who they are and where they are located. In addition, agricultural production is characterized by the presence of many small companies. In some countries, up to 80% of food is produced by smallholders.[1] To deliver the produce to the markets, food supply chains rely on aggregators and traders, often active across multiple sectors.

Agricultural produce from many different points of origin gets blended together, posing challenges to traceability. All these factors make the food sector highly fragmented and transparency about its impacts insufficient.

Furthermore, benchmarks of companies’ performance in the agriculture and food sector show that standardized data on emissions, human rights issues, living wages, food loss, pesticides use, and water is lacking.[2]

Sustainability reporting in the sector

Public sustainability reporting is a known catalyst for ESG data disclosure, making markets more transparent and allowing to understand companies’ sustainability and long-term viability. Large producers like Olam and Cargill publish sustainability reports, covering a wide range of topics and data points. Smaller companies often fall outside the scope of regulations mandating sustainability disclosure and they are not subject to ESG ranking organizations. But they also generate ESG data. If a small producer wants to be part of the global supply chains, they are encouraged by large retailers — and increasingly required — to adopt certification schemes, sign up to responsible sourcing criteria, and participate in sustainability audits. These schemes result in labels signalling fulfillment of certain and specific sustainability requirements for commodities or sites, but they also have their drawbacks. For example, the underlying data may not be publicly available, assessment criteria of such schemes may be narrowly focused on avoiding major risks and prioritizing quantifiable environmental impacts rather than social ones, thus limiting transparency.

Policy developments

Another limiting factor for transparency in the agriculture sector is lack of progress on policies mandating disclosure of agriculture-specific indicators. Many regulatory bodies have identified areas requiring action and measurement, including immediate priorities to secure harvests and ecosystems. These shared objectives encompass halting deforestation, reducing the use of highly hazardous pesticides, enhancing soil health, preserving biodiversity, and so on.

This collective recognition of priorities has extended its influence into the corporate landscape. At the international level, the Food and Agriculture Organization (FAO) has produced voluntary guidelines and codes of conduct for companies on specific issues. The OECD-FAO joint Guidance for Responsible Agricultural Supply Chains has set out broad expectations from business, including on human, labor and land rights, animal welfare, and several other topics. Regionally, the European Union has developed a Farm to Fork policy framework with detailed sustainability outcomes for the agriculture sector, comprising targets that will cascade down to business level. The authoritative EAT-Lancet commission has identified six main areas of concern for the sustainability of the agriculture sector and proposed indicators to measure these — GHG emissions, crop land use, freshwater use, nitrogen and phosphorus application, and extinction rate.

To track progress in all of these areas, there needs to be aligned measurement and a high uptake of a standardized reporting methodology.

Despite significant policy developments, there are still key issues in the food sector where regulatory pressure is lacking. For example, despite recognizing animal welfare’s relevance for both environment and nutrition, economic incentives to maintain low meat prices are being preserved. Available research concludes that a higher proportion of plant-based foods is beneficial for both the environment and human health.[3]

Nutrition

When it comes to nutrition, the prevailing consumption patterns often favor fast and inexpensive options over healthier alternatives. While shifting to healthier diets is a choice that individuals can make, this shift requires from them a comprehension of nutrients, the capacity to make informed choices, access to healthier food options and affordability of those.

When considering the agriculture and food sector’s effects on nutrition, both downstream and upstream segments of the value chain have a role. The downstream part, encompassing food processing, retail, and catering sectors, is crucial as it directly influences the food choices available to consumers. It is worth noting that there are growing regulatory attempts aimed at expanding the range of healthier food options, including more plant-based options, in retail and catering across various jurisdictions.

ESG data can serve as a tool in driving nutritional shifts in this regard. For instance, this can be facilitated through ESG targets related to the offering of healthy or healthier food options and the sales of such.

At the same time, the upstream sectors — agriculture, aquaculture and fishing — also have an influence on nutrition. These sectors shape the supply side of the equation, which in turn impacts demand: decisions regarding what to grow on the land — such as food crops or non-food crops, opting for commercially more advantageous crops over essential food crops, and allocating land for either crop cultivation or animal rearing — as well as the sustainability practices adopted in farming and fishing, all affect the availability and affordability of food.

Global momentum for transparency

The push for transparency is transversal. Investor interest in the risks facing the food system has also been growing over the last years. This is reflected in shareholder resolutions being filed at multinational food companies and the growth of investor-led engagement initiatives.[4]

Overall, integrating sustainability reporting standards in the agriculture and food sector has high potential for transformative effect. But we need to take proactive steps to get reliable and comparable data, especially in critical areas. Beyond relying on product certifications, producers should embrace broader sustainability strategies that align with overall sustainability goals.

To make real progress in agriculture and food, we must focus on two key goals: more relevant, globally consistent and high-quality sustainability data and getting that data from more and more companies.

In 2022, GRI published the Sector Standard for Agriculture, Aquaculture and Fishing (GRI 13) that features 26 topics, including emissions, biodiversity, climate adaptation and resilience, natural ecosystem conversion, food security, animal welfare, and living wages for farmers, among others. GRI 13 was developed by a multi-stakeholder project working group, featuring representatives from business, civil society, labor unions, investors and mediating institutions, including the UN agencies, benchmarking organizations and consultancies. With the Standard coming into effect on 1 January 2024, all companies in the sectors reporting in accordance with GRI Standards will be required to use GRI 13.

References

[1] International Fund for Agricultural Development, United Nations Environment Programme, Smallholders, food security, and the environment, 2014.

[2] See the findings of the World Benchmarking Alliance Food and Agriculture Benchmark 2023.

[3] The EAT-Lancet Commission, Summary Report of the EAT-Lancet Commission: Healthy Diets from Sustainable Food Systems, 2019.

[4] See Financial Times at ft.com, Big food’s unhealthy products leave bitter taste for ESG investors, 2022.

[5] See the KPMG Survey of Sustainability Reporting 2022.

About the author

Margarita Lysenkova joined GRI in 2019 and was the project manager who led the development of GRI 13. In her current role, she manages strategic relations, including with intergovernmental organizations and governmental bodies, and drives policy dialogue and advocacy for the private sector engagement.

Margarita’s professional background is in the corporate, UN and non-for-profit sectors across four countries. She has previously worked for the International Labour Organization in Geneva, and in a financial reporting role with a Belgian multinational. Margarita holds degrees in economics (Saint Petersburg University of Economics & Finance) and business management (ESC Rennes School of Business).