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Big meat and dairy suppliers lag in effort to cut greenhouse gas emissions

The world's biggest producers of meat, dairy and fish are directly or indirectly associated with vast quantities of greenhouse gas emissions but have so far made limited progress in the quest to achieve meaningful reductions, a new report suggests.

According to the findings, 78% the world's 60 largest publicly traded companies that supply chicken nuggets, beef patties and fish meat, and have a collective market capitalization of $338 billion, have so far not declared or set meaningful emissions reduction goals.

Their lagging efforts could undermine the more aggressive climate commitments made by some of their biggest customers, including household brands such as Nestlé SA, McDonald's Corp. and Danone SA. The report was published Nov. 12 by Farm Animal Investment Risk and Return, or FAIRR, a network of investors with a total of $25 trillion under management.

"This sector emits so much ... not just in land use but also in the production of animals, that we are simply not going to meet targets" unless upstream meat and dairy suppliers are also pressed into more robust action, said Maria Lettini, executive director of FAIRR.

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Food production is responsible for about a quarter of global greenhouse gas emissions, or GHG, and animals raised for meat, dairy, eggs and seafood contribute 31% of the food production total, according to tracking service Our World In Data. Many scientists maintain that the global temperature rise must be kept below 1.5 degrees Celsius by the end of this century to avoid the worst impacts of a warming climate.

The big challenge, then, for supermarkets and major food brands isn't reducing the carbon footprint of their own direct operations, but persuading those in their supply chain — pig, cattle and chicken farmers, as well as growers of animal feed — to cut emissions. Many of these producers are in developing countries where regulation is less strict and corporate sustainability practices are less prevalent. Of the 60 companies in the report, nearly half are based in Asia.

McDonald's, for example, has committed to reducing the carbon footprint of its entire supply chain by 31% by 2030. Switzerland's Nestlé has set a goal of zero net emissions by 2050. In a 2019 disclosure, Yum! Brands Inc., owner of KFC, Pizza Hut and Taco Bell, said that of the indirect, supply-chain emissions associated with purchased goods of food, more than three-quarters relate to beef, dairy and chicken.

Yet the FAIRR report points out that Nestlé and McDonald's use suppliers such as China's Fujian Sunner, Russia's Cherkizovo Group, and U.S.-based Seaboard Corp., which do not disclose GHG emissions or have not published targets to reduce them.

"It's a real risk for investors," said Thais Aleluia, analyst at asset manager AllianceBernstein, in an interview. "We're not waiting for companies to be regulated and fined. We're looking for them to disclose their data and to be ready for climate change."

Meat producers face an array of new pressures, ranging from risks related to COVID-19, to waterway pollution, to climate change. In the Amazon, 80% of deforestation is linked to cattle ranching, much of it illegal, according to scientific data cited in the FAIRR report. Despite a sharp reduction of economic activity resulting from the COVID-19 pandemic, Amazon deforestation surged more than 50% in the first four months of 2020 compared to the year-ago period.

Such practices have prompted financial institutions such as BlackRock Inc. and BNP Paribas SA to push consumer companies to more comprehensively incorporate deforestation in their climate-risk models.

In FAIRR's assessment, 47 of the 60 companies were deemed "high risk" on greenhouse gas emissions, while nine were classed as "medium risk." Of the 47 high-risk companies, 25 are in Asia, while seven are in Latin America. The largest contributing protein for the high-risk companies is poultry and eggs, the data showed.

Some large meat producers are turning to technology to get a better fix on the far-flung carbon footprint of their suppliers. In announcing JBS SA's third-quarter results on Nov. 11, CEO Gilberto Tomazoni said climate change was a "priority" for the company. JBS' supply chain monitoring system in Brazil now covers an area of more than 45 million hectares. The company also recently announced the creation of the JBS Green Platform, "a system that leverages blockchain technology to extend our monitoring system to suppliers of our suppliers in the Amazon biome," Tomazoni said.

Large restaurant chains and other western food brands "can make statements and commitments about reducing emissions, but they won't be able to attain their targets if they don't engage their suppliers, especially emerging-market companies," said Aleluia.