Relevant Issues (8 of 26)
- GHG Emissions
- Air Quality
- Energy Management The category addresses environmental impacts associated with energy consumption. It addresses the company’s management of energy in manufacturing and/or for provision of products and services derived from utility providers (grid energy) not owned or controlled by the company. More specifically, it includes management of energy efficiency and intensity, energy mix, as well as grid reliance. Upstream (e.g., suppliers) and downstream (e.g., product use) energy use is not included in the scope.
- Water & Wastewater Management The category addresses a company’s water use, water consumption, wastewater generation, and other impacts of operations on water resources, which may be influenced by regional differences in the availability and quality of and competition for water resources. More specifically, it addresses management strategies including, but not limited to, water efficiency, intensity, and recycling. Lastly, the category also addresses management of wastewater treatment and discharge, including groundwater and aquifer pollution.
- Waste & Hazardous Materials Management
- Ecological Impacts
- Human Rights & Community Relations
- Customer Privacy
- Data Security
- Access & Affordability
- Product Quality & Safety The category addresses issues involving unintended characteristics of products sold or services provided that may create health or safety risks to end-users. It addresses a company’s ability to offer manufactured products and/or services that meet customer expectations with respect to their health and safety characteristics. It includes, but is not limited to, issues involving liability, management of recalls and market withdrawals, product testing, and chemicals/content/ingredient management in products.
- Customer Welfare The category addresses customer welfare concerns over issues including, but not limited to, health and nutrition of foods and beverages, antibiotic use in animal production, and management of controlled substances. The category addresses the company’s ability to provide consumers with manufactured products and services that are aligned with societal expectations. It does not include issues directly related to quality and safety malfunctions of manufactured products and services, but instead addresses qualities inherent to the design and delivery of products and services where customer welfare may be in question. The scope of the category also captures companies’ ability to prevent counterfeit products.
- Selling Practices & Product Labeling The category addresses social issues that may arise from a failure to manage the transparency, accuracy, and comprehensibility of marketing statements, advertising, and labeling of products and services. It includes, but is not limited to, advertising standards and regulations, ethical and responsible marketing practices, misleading or deceptive labeling, as well as discriminatory or predatory selling and lending practices. This may include deceptive or aggressive selling practices in which incentive structures for employees could encourage the sale of products or services that are not in the best interest of customers or clients.
- Labor Practices
- Employee Health & Safety
- Employee Engagement, Diversity & Inclusion
Business Model & Innovation
- Product Design & Lifecycle Management The category addresses incorporation of environmental, social, and governance (ESG) considerations in characteristics of products and services provided or sold by the company. It includes, but is not limited to, managing the lifecycle impacts of products and services, such as those related to packaging, distribution, use-phase resource intensity, and other environmental and social externalities that may occur during their use-phase or at the end of life. The category captures a company’s ability to address customer and societal demand for more sustainable products and services as well as to meet evolving environmental and social regulation. It does not address direct environmental or social impacts of the company’s operations nor does it address health and safety risks to consumers from product use, which are covered in other categories.
- Business Model Resilience
- Supply Chain Management The category addresses management of environmental, social, and governance (ESG) risks within a company’s supply chain. It addresses issues associated with environmental and social externalities created by suppliers through their operational activities. Such issues include, but are not limited to, environmental responsibility, human rights, labor practices, and ethics and corruption. Management may involve screening, selection, monitoring, and engagement with suppliers on their environmental and social impacts. The category does not address the impacts of external factors – such as climate change and other environmental and social factors – on suppliers’ operations and/or on the availability and pricing of key resources, which is covered in a separate category.
- Materials Sourcing & Efficiency The category addresses issues related to the resilience of materials supply chains to impacts of climate change and other external environmental and social factors. It captures the impacts of such external factors on operational activity of suppliers, which can further affect availability and pricing of key resources. It addresses a company’s ability to manage these risks through product design, manufacturing, and end-of-life management, such as by using of recycled and renewable materials, reducing the use of key materials (dematerialization), maximizing resource efficiency in manufacturing, and making R&D investments in substitute materials. Additionally, companies can manage these issues by screening, selection, monitoring, and engagement with suppliers to ensure their resilience to external risks. It does not address issues associated with environmental and social externalities created by operational activity of individual suppliers, which is covered in a separate category.
- Physical Impacts of Climate Change
Leadership & Governance
- Business Ethics
- Competitive Behavior
- Management of the Legal & Regulatory Environment
- Critical Incident Risk Management
- Systemic Risk Management
Disclosure Topics (Industry specific) for:
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The Processed Foods industry is highly reliant on energy and fuel as primary inputs for value creation in manufacturing food products. Energy is needed to operate large manufacturing facilities for cooking, refrigeration, and packaging. Energy production and consumption contributes to significant environmental impacts, including climate change and pollution, which have the potential to indirectly, yet materially, impact the results of operations of processed foods companies. Energy efficiency in production and distribution can mitigate exposure to volatile energy costs and limit a company’s contribution to direct and indirect greenhouse gas (GHG) emissions. Producers may be able to further reduce the risk posed by volatile fossil fuel energy costs—particularly natural gas, which is used heavily in the industry—by diversifying their energy portfolio across a range of sources. Decisions regarding the use of alternative fuels, renewable energy, and on-site generation of electricity versus purchasing from the grid, can play an important role in influencing both the costs and reliability of the energy supply.
Water & Wastewater Management
Processed Foods companies rely on a large water supply for cooking, processing, and cleaning finished goods. Additionally, companies in the industry generate and must manage its wastewater discharge from processing activities. As water scarcity becomes an issue of increasing importance, processed foods companies—especially those operating in water-stressed regions—may face increasing operational risks. Companies in the industry may face higher operational costs as well as water shortages due to physical availability and/or regulations. Companies can manage water-related risks and opportunities through capital investments and assessment of facility locations relative to water scarcity risks, improvements to operational efficiency, and partnerships with regulators and communities on issues related to water access and effluent.
Product Quality & Safety
Food safety, as it relates to production quality, spoilage, contamination, supply chain traceability, and allergy labeling, can materially affect processed foods companies. Food safety recalls can happen for numerous reasons, including packaging defects, food contamination, spoilage, and mislabeling. Food safety issues that arise within a company’s supply chain typically result in recalls of final products and can also influence the brand reputation, operations, and revenue of processed foods companies. Supply chain traceability is a great concern for companies in the industry, particularly amid new regulations. Poor management of food quality and safety may lead to damage to brand value, lower revenues, and increased costs associated with recalls, fines, lost inventory, and/or litigation. Obtaining food safety certifications or ensuring suppliers meet food safety guidelines may help companies in the industry safeguard product safety and communicate the quality of their products to retailers and consumers.
Health & Nutrition
Key nutritional and health concerns such as obesity, ingredient safety, and nutritional value are shaping the Processed Foods industry’s competitive landscape. The health and nutrition characteristics of the industry’s products and ingredients are of growing concern to both consumers and regulators, thus creating the potential for these issues to affect a processed food company’s reputation and its license to operate. New regulations, including imposed taxes on processed foods, may impact industry profitability and pose long-term risks in the form of reduced demand for the industry’s products. Companies that adapt to changing consumer preferences to promote more healthful and nutritious offerings may be better positioned to gain market share in a growing segment while avoiding the risks associated with potential regulation and shifts in demand.
Selling Practices & Product Labeling
Product Labeling & Marketing
Communication with consumers through product labeling and marketing is an important facet of processed foods companies. The accuracy and depth of information presented in food labeling is of importance to regulators and consumers. Labeling regulations require specific and detailed product information to ensure food safety and inform consumers of nutritional content. Additionally, to help inform purchasing decisions, consumers are increasingly interested in further information about the ingredients used in processed foods, such as genetically modified organism (GMO) content, and about the production methods used. Another area of public concern is the marketing practices of processed foods companies, especially those targeted to children or on nutritional claims, and whether they present potentially untruthful or misleading information. Product labeling and marketing issues can affect the competitive landscape of the industry, as companies may be subject to litigation or criticism resulting from misleading statements or failing to adapt to consumer demand for increased labeling transparency. Additionally, regulations on product labeling and marketing introduce near-term costs to adhere and present the risk of penalties or litigation. All of these factors can impact a company’s brand value, operating costs, and revenue growth.
Product Design & Lifecycle Management
Packaging Lifecycle Management
Packaging materials represent a major business cost and contribute to the environmental footprint of processed foods companies. Each stage of a package’s lifecycle, including design, transportation, and disposal, presents its own unique environmental challenges and opportunities. Companies may be impacted by regulations on allowable packaging materials or end-of-life management of packaging. Processed foods companies can work with packaging manufacturers on packaging design to generate cost savings, improve brand reputation, and reduce their environmental impact. Innovations such as light-weighting materials can also result in cost benefits in the transportation of goods. Other innovations can improve end-of-life management of products, such as through the use of recyclable or compostable materials, which may mitigate potential risks related to costs and compliance.
Supply Chain Management
Environmental & Social Impacts of Ingredient Supply Chain
Companies in the Processed Foods industry manage global supply chains to source a wide range of ingredient inputs. How companies screen, monitor, and engage with suppliers on environmental and social topics affects the ability of companies to maintain a steady supply and manage price fluctuations. Supply chain management issues related to labor and environmental practices, ethics, or corruption may also result in regulatory fines and/or increased long-term operational costs for companies. The consumer-facing nature of the industry increases the reputational risks associated with supplier performance. Companies can engage with key suppliers to manage environmental and social risks to improve supply chain resiliency, mitigate reputational risks, and potentially increase consumer demand or capture new market opportunities.
Materials Sourcing & Efficiency
Companies in the Processed Foods industry source a wide range of ingredients, largely agricultural inputs, from global suppliers. The industry’s ability to source ingredients and at certain price points fluctuates with supply availability, which may be affected by climate change, water scarcity, land management, and other resource scarcity considerations. This exposure can lead to price volatility which may affect company profitability. Climate change, water scarcity, and land-use restrictions present risks to a company’s long-term ability to source key materials and ingredients. Companies that source ingredients which are more productive and less resource-intensive, or work closely with suppliers to increase their adaptability to climate change and other resource scarcity risks will be better protected from price volatility and/or supply disruptions.
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