Environment

Social Capital

Leadership & Governance

  • Business Ethics
  • Competitive Behavior
  • Management of the Legal & Regulatory Environment
  • Critical Incident Risk Management
  • Systemic Risk Management
General Issue Category
(industry agnostic)

Disclosure Topics (industry specific) for:
Food Retailers & Distributors

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GHG Emissions

Fleet Fuel Management

Companies in the Food Retailers & Distributors industry own and operate vehicle fleets to deliver products between its distribution and retail locations. The fuel consumption of vehicle fleets is a significant industry expense, both in terms of operating costs and associated capital expenditures. Fossil fuel consumption can contribute to environmental impacts, including climate change and pollution. These environmental impacts have the potential to affect food retailers and distributors through regulatory exposure. Efficiencies gained in fuel use can reduce costs, mitigate exposure to fossil fuel price volatility, and limit the carbon footprint associated with storage and transportation. Short-term capital expenditures in fuel-efficient fleets and more energy efficient technologies may be outweighed by long-term operational savings and decreased exposure to regulatory risks.

Air Emissions from Refrigeration

Emissions of refrigeration chemicals from equipment used to store and display perishable foods pose unique regulatory risks for the Food Retailers & Distributors industry. International regulations on hydrochlorofluorocarbons (HCFCs) aim to mitigate damage by HCFCs to the Earth’s ozone layer. Additionally, many common HCFCs and hydrofluorocarbons (HFCs) are highly potent greenhouse gases (GHGs), which increases the industry’s exposure to climate change-related regulations. Regulators can assess penalties to companies that violate emissions standards, while companies may be required to upgrade or replace equipment, requiring capital expenditures, to reduce their emissions or replace existing refrigerants with potentially costlier, but less environmentally-damaging alternatives.

Energy Management

Energy Management

Food retail and distribution facilities are typically more energy-intensive than other types of commercial spaces. Energy is used predominately for refrigeration, heating, ventilation, and air conditioning (HVAC), as well as lighting. Companies in the industry generally purchase the majority of consumed electricity, while some are beginning to generate energy on-site or add renewable energy into their energy mix. Energy production and consumption contribute to environmental impacts, including climate change and pollution, which have the potential to indirectly, yet materially, impact the operations of food retailers and distributors. Companies that manage their overall energy use through increased efficiency and use of alternative energy sources can increase profitability by lowering expenses and reducing risk.

Waste & Hazardous Materials Management

Food Waste Management

The Food Retailers & Distributors industry generates food waste at various stages of operation. Food waste includes edible or otherwise useful food that does not reach consumers, as well as foods that spoil or are damaged during transportation or stocking or while on store shelves. Food loss and waste represent loss of saleable merchandise for companies in the industry and more broadly, a loss of resources used in food production, which include land, water, labor, energy, and agricultural chemicals, as well as contribute to food insecurity. Additionally, food waste can generate greenhouse gas (GHG) emissions during landfill decomposition. Effective food waste management can present financial opportunities to reduce costs associated with inventory loss, as well as help improve food security by more efficiently diverting food resources to beneficial purposes.

Data Security

Data Security

Through electronic payment transactions and the sharing of personal financial data, food retailers establish a relationship of trust with consumers. Data breaches can occur through breaches of the physical payment technology, called point-of-sales breaches, as well as through attacks on cybersecurity. Data breaches that result in the theft or loss of customers’ private data can undermine their trust in a company’s ability to securely manage their private information. This loss of confidence could result in reduced number of customer visits, lower revenues, and a diminished brand value. Retailers with strong technological and managerial systems to avoid and respond to data breaches can position themselves favorably with customers and reduce potential litigation and costs associated with data breaches.

Product Quality & Safety

Food Safety

Maintaining product quality and safety is crucial for the Food Retailers & Distributors industry, as contamination by pathogens, hazardous substances, or spoilage can present human health risks. Contamination can occur at any stage in the food value chain, including food production, processing, transportation, distribution, and retailing. While food retail companies may not be directly responsible for all food safety and recall incidents, they are involved in the process and may still experience financial ramifications, damage to brand value, lower revenues, and increased costs associated with recalls, lost inventory, or litigation. Measures to prevent spoilage and contamination include temperature control, frequent food inspection, and supplier selection.

Customer Welfare

Product Health & Nutrition

Increasing consumer awareness of food content and nutritional value, and the impact these can have on health, is shaping the Food Retailers & Distributors industry’s competitive landscape. Demand for food products that are made with natural ingredients or that are certified to be organic, low-fat, low-sugar, or made without genetically modified organisms (GMOs) has driven industry growth in recent years. Although the links between consumer health and certain foods are not well established, consumers have nonetheless shown preferences for food categories that are perceived to be more healthful. Food retailers that recognize the risks and opportunities presented by consumers’ shifting preferences and adapt to consumer demands are better positioned to capture opportunities for additional revenue and market share.

Selling Practices & Product Labeling

Product Labeling & Marketing

Communication with consumers through product labeling and marketing is an important facet of food retail. The accuracy and depth of information presented in food labeling is of growing importance to shoppers and regulators alike. It is especially relevant for the sale of private-label products manufactured for food retailers, given direct brand reputation impacts. To inform purchasing decisions, consumers today seek additional information about product ingredients, such as genetically modified organism (GMO) content, and other health and nutritional impacts. These issues can affect the competitive landscape of the industry, as companies may be subject to litigation or criticism resulting from making misleading statements or failing to adapt to consumer demand for increased labeling transparency. These factors can have an impact on retailers’ brand value and revenue growth. Additionally, regulations addressing the accurate labeling of products and their ingredients present the risk of penalties or litigation for food retail companies.

Labor Practices

Labor Practices

The Food Retailers & Distributors industry employs many hourly workers. Low average wages in the industry, which help companies maintain low prices for products, may result in labor-related risks. Worker dissatisfaction with wages and benefits, combined with high unionization rates, have led to employee strikes at major food retail companies, resulting in business disruption and reputational damage. Additionally, companies in the industry have been involved in gender and racial discrimination cases, sometimes resulting in costly financial settlements. Companies may benefit from taking a long-term perspective on managing workers, including their pay and benefits, in a way that protects the rights of workers and enhances their productivity while strengthening the company’s reputation and brand value.

Supply Chain Management

Management of Environmental & Social Impacts in the Supply Chain

Food retailers and distributors source merchandise from a wide range of manufacturers. These suppliers face a myriad of sustainability-related challenges that include resource conservation, water scarcity, animal welfare, fair labor practices, and climate change. When poorly managed, these issues can affect the price and availability of food. Additionally, consumers are increasingly concerned with the production methods, origins, and externalities associated with the foods they purchase, which may affect a company’s reputation. Food retailers and distributors can also work with suppliers on packaging design to generate cost savings in transport, improve brand reputation, and reduce the environmental impact. Companies that can address product supply risks by assessing and engaging with suppliers, implementing sustainable sourcing guidelines, and enhancing supply chain transparency will likely be better positioned to improve supply chain resiliency, mitigate reputational risks, and potentially increase consumer demand or capture new market opportunities.

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