Walmart was the highest performer on our ESG impact index this month as they committed to increased renewable development and supply chain sustainability. We explore the Consumer Goods sector for the good and bad activities among companies in Walmart’s ecosystem.
This month Walmart (WMT) topped our ESG impact index on Amenity Safeguard. In a follow up to our recent coverage of Walmart’s initiative in their beef supply chain last month, this month’s retrospective spotlights the collective set of actions that put them at the top of the pack in September.
Of particular note, Walmart have collaborated with a broad coalition of companies and non-profit organizations to set sustainability best practices. This initiative in collaboration with the World Wildlife Fund, Cargill, and McDonald’s, is called the Ranch Systems and Viability Planning Network. The companies involved have invested $6 million initially towards protecting the ecosystems in the Great Plains. While green-house gas emissions from agriculture are not the largest source of emissions (ranges from the EPA’s estimate of 8% of total emissions to 37% in other models), they are also the easiest to mitigate with existing technologies and ecosystem management practices like those that Walmart is investing in.
However, that’s not all Walmart has been up to this month, as last week they announced they would be completely renewable by 2040, without carbon offsets. Many companies that are currently zero-emissions or targeting 2030 for zero-emissions are doing so with the use of carbon offsets. It is a key distinction that Walmart is choosing to make this commitment without them. While carbon offsets are helpful, they need to be verified by a third party to make sure that they are effective and that the money spent on them is actually going towards real carbon reduction projects. Going 100% renewable ensures that you really are a net zero producer of carbon emissions. Moreover, it takes courage to make this kind of commitment without the safety net of carbon offsets. This move has been received as a real statement by Walmart and evidences their long term commitment to brand sustainability.
The rest of the consumer goods sector was also busy this month. Kellogg (K), for example, was one of the first companies back in 2015 to make climate commitments and announced this month that they are on track to meet their 2050 goal to be 100% renewable ahead of schedule. Currently 28% of their energy is renewable. Pepsi (PEP) also targeted going 100% renewable by 2030 and announced a five year initiative to empower women in agriculture.
Pilgrim’s Pride Chicken (PPC) strikes one of the few negative notes in the sector this month as a price fixing scandal led to the resignation of their CEO. Price-fixing is ethically suspect in the best of times, but when families are struggling due to the economic effects brought about by Covid-19 it is especially tone-deaf by Pilgrim’s Pride. Their stock dropped 8.26% this month. JBS (OTC:JBSAY) meat packer also had a Covid outbreak at their plant in Greeley Colorado earlier this year, for which they were fined this month by OSHA. JBS stock is down 11% over the last month. In both cases negative news surrounding ESG factors cost the company and shareholders.
Although we spent most of the time this month covering a busy financial sector, the largest impact on climate change will be made by the companies that make the everyday foods and products we consume. Changing the way we source, produce, ship, and consume can have drastic effects on the climate and our environment fairly soon. Walmart is quickly becoming a standard bearer for how and why this should be done. Most recently on Tuesday Walmart placed an order for 15 electric trucks from Tesla (TSLA) to begin the electrification of their fleet. It is impressive for a company that has faced a host of issues in the past to experience the success they are having. Since we touched on them last month they have already made great strides in their sustainable agriculture project while deepening commitments towards renewables. These changes have earned them the top ESG score for the month of September.
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This communication does not represent investment advice. Transcript text provided by FACTSET and S&P Global Market Intelligence.
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