McCormick surfaced on our ESG Safeguard platform as a Top Sentiment Mover last week with their refreshed environmental goals, prompting a closer look at the Food Products sector. The Maryland-based spice company has long been a proponent of sustainable initiatives around sourcing and energy. Their new goals include metrics around packaging, similar to what we have seen from a number of other companies in recent weeks.
McCormick (MKC) surfaced on our ESG Safeguard platform as a Top Sentiment Mover last week with their refreshed environmental goals, prompting a closer look at the Food Products sector. McCormick has made significant progress this past year on their ESG goals, which they detailed heavily in a new report published last week. Highlights from the report indicate that they are well on their way to meet their ESG goals and provide an example for the rest of the industry to strengthen their performance when it comes to environmental issues. As a producer of finished food products sourced from around the globe, McCormick understands what is at stake, as rising sea levels and hotter temperatures in many of the regions they source products from become threatened by climate change.
In 2017, McCormick set a goal to reduce emissions 20% by 2025. The company thus far has reached a 22% reduction and is now shooting for a new goal of 42% reduction in emissions by 2030, from their 2017 baseline. This may seem like an audacious goal, but the company knows they will have to continue to improve in order to get to net zero emissions by 2050. Companies seem to be throwing that 2050 net zero goal into play recently, but it takes a lot more planning and segmentation of goals to achieve it, as McCormick has shown us.
Looking at packaging, which has been a hot topic lately and ties into our major theme of materials use, McCormick is attempting to minimize the impact from plastic use as much as possible. Currently, 84% of their packaging is reusable or recyclable and McCormick is working towards making that 100%.
McCormick may be setting a good example for the Food Products industry, but as we can see from the mixed sentiment in recent weeks across the industry, that is not the case for everyone. The next two companies mentioned are not new to the spotlight and have had a slew of bad results in recent months.
Kellogg (K) experienced a fire at a major factory in July that was recently discussed in an Earnings Call. This has exacerbated supply chain shortages that were already hindered by strikes, which we covered previously. The company has still not reached previous production and inventory levels, despite a resolution of the strike, and anticipates this to be a problem going forward.
Meatpacker JBS (JBSS3:BR) settled a suit last week that sent shockwaves through the industry, where they were found to have been price-fixing by artificially constraining the cattle supply. JBS has been linked to deforestation and was identified as a major player at COP26 in significant need of improvement in this area. The company also has had issues with cyber security this summer and the price-fixing fallout is just the latest in a line of faux pas by the Brazilian meatpacker.
Food is one of the sectors most inextricably linked with climate change. The very planet that we rely on for sustenance for millions of years is under threat and the first companies to be affected will be the ones that depend on our planet for profit. Companies like McCormick take that threat seriously, putting itfront and center in their company operating procedures. Other companies that we mentioned have been distracted by other short-term issues and don’t seem to be as focused on the big picture. Time will tell who will succeed, but given this week's review, some are clearly better positioned than others.
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