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Business Model & Innovation

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  • Business Ethics
  • Competitive Behavior
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  • Systemic Risk Management
General Issue Category
(Industry agnostic)

Disclosure Topics (Industry specific) for:
Meat, Poultry & Dairy

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GHG Emissions

Greenhouse Gas Emissions

The Meat, Poultry & Dairy industry generates significant Scope 1 greenhouse gas (GHG) emissions from both livestock and energy-intensive industrial processes. GHG emissions contribute to climate change and create additional regulatory compliance costs and risks for meat, poultry, and dairy companies due to climate change mitigation policies. The majority of the industry’s emissions stem directly from the animals themselves through the release of methane during enteric fermentation, and from manure storage and processing. The direct emissions from raising and producing livestock represent a significant portion of total GHG emissions released among all sources, both in the U.S. and globally. These emissions sources are currently not widely regulated, which presents uncertainties as to the future of GHG regulations for the industry. Companies in this industry also use large quantities of fossil fuels to meet energy needs, generating additional direct GHG emissions and increasing exposure to regulatory risks. Future emission regulations could result in additional operating and/or compliance costs. By implementing new technologies to capture animal emissions and focusing on energy efficiency, companies can mitigate regulatory risk and volatile energy costs while also limiting their GHG emissions.

Energy Management

Energy Management

The Meat, Poultry & Dairy industry relies heavily on purchased electricity and fuel as critical inputs for value creation. Companies’ use of electricity and fossil fuels in their operations results in direct and indirect greenhouse gas (GHG) emissions, which contribute to environmental impacts, including climate change and pollution. Purchased electricity is a significant operating cost for meat, poultry, and dairy companies. Efficient energy usage is essential to maintain a competitive advantage in this industry, as purchased fuels and electricity account for a significant portion of total production costs. 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 the reliability of the energy supply.

Water & Wastewater Management

Water Management

The Meat, Poultry & Dairy industry is water-intensive both in raising livestock and industrial processing. Additionally, companies in the industry typically generate wastewater, or effluent, from both animal production and processing activities. As water scarcity becomes an issue of growing importance due to population growth, increasing consumption per capita, poor water management, and climate change, companies in the industry may face higher operational costs or lost revenues due to water shortages and/or regulations resulting in production reduction. 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.

Ecological Impacts

Land Use & Ecological Impacts

Meat, Poultry & Dairy industry operations have diverse ecological impacts, primarily because of significant land-use needs to raise livestock and the contamination of the air, land, and groundwater by animal waste. While the impacts are different, both traditional and Concentrated Animal Feeding Operations (CAFO) lead to significant ecological impacts. The primary concern from CAFOs and animal-product processing facilities is the generation of large and concentrated amounts of waste and pollutants into the environment. Treating effluent and waste from facilities involves significant costs. Non-CAFO animal farming, which requires large tracts of pastureland, can lead to physical degradation of land resources. Land use and ecological impacts pose legal and regulatory risks in the form of fines, litigation, and difficulties obtaining permits for facility expansions or waste discharges.

Product Quality & Safety

Food Safety

Meat, poultry, and dairy products are either sold directly to consumers (e.g., milk or eggs) or are further processed into a wide variety of foods. Maintaining product quality and safety is crucial, as contamination by pathogens, chemicals, or spoilage presents serious human and animal health risks. Food safety practices and procedures in the industry have recently been subject to more intense scrutiny and oversight, and future outbreaks of diseases among livestock could lead to further governmental regulation. Product recalls can harm brand reputation, result in costly fines, reduce revenues, and increase regulatory scrutiny including trade restrictions. 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 buyers.

Customer Welfare

Antibiotic Use in Animal Production

The use of antibiotics in livestock production is of increasing concern due to the potential impacts on public health. Prevalent use of antibiotics in livestock production that are also administered to humans may promote the development of antibiotic-resistant strains of bacteria. While the use of antibiotics in animal feed or water supplies can improve the output of animal production and enhance animal welfare in industrial farm settings, companies in the industry must balance these benefits with the potential for negative public health risks. The use of antibiotics in animal production presents reputational and regulatory risks, both of which can affect long-term profitability through impacts on demand and market share for meat, poultry, and dairy producers. Depending on the animal species, companies in the industry have differing levels of control over and management approaches to this issue, from having direct control over the feed and medicine administered by contract suppliers to more broadly setting requirements for suppliers.

Employee Health & Safety

Workforce Health & Safety

The Meat, Poultry & Dairy industry has relatively high injury rates compared with other industries given the prevalence of industrial machinery, chemicals, and a fast-paced, loud working environment. Common acute and chronic hazards include musculoskeletal disorders, exposure to chemicals and pathogens, and traumatic injuries from machines and tools. Worker injuries or fatalities can lead to reputational risks, high turnover, low worker morale and productivity, injury liability risks, and associated health care and workers’ compensation costs. Additionally, regulators may levy fines against companies for noncompliance with worker health and safety standards or require employee training to address preventable accidents. By developing a strong safety culture and reducing employees’ exposure to potentially harmful situations, a company can proactively guard against accidents and improve workforce health and safety.

Product Design & Lifecycle Management

Animal Care & Welfare

There is increasing public and regulatory scrutiny of meat, poultry, and dairy companies and their suppliers’ treatment of animals. While in the U.S., farm animals are largely excluded from federal and state animal welfare statutes, including the Animal Welfare Act, pressure from consumers and advocacy groups has caused the industry to improve the state of animal welfare for its livestock. Consumer demand has driven shifts in industry practices, such as eliminating the use of gestation crates in hog production and eliminating caged enclosures for poultry. Companies that are prepared to anticipate or adapt to these trends may be able to increase their market share by capturing this changing demand and being first to market with products that comply with new regulations.

Supply Chain Management

Environmental & Social Impacts of Animal Supply Chain

Companies in the Meat, Poultry & Dairy industry rely on a variety of contract farmers and suppliers. Environmental and social impacts within the industry’s supply chain include those related to deforestation, land use and waste management, water withdrawals, animal welfare, antibiotic usage, and food safety. Management of environmental and social risks within a company’s animal supply chain is critical to maintain the cost of capital, secure a steady source of animals at desired price points, and to prevent reputational damage, which may decrease revenue and market share.

Materials Sourcing & Efficiency

Animal & Feed Sourcing

Meat, poultry, and dairy companies source animal and animal feed from a range of suppliers depending on animal species. The industry’s ability to reliably source animals and animal feed at desired price points may be affected by climate change, water scarcity, land management, and other resource scarcity considerations. Companies that select and work with suppliers who are less resource-intensive and who actively manage adaptation to climate change and other resource scarcity risks, will be better protected from potential price volatility and supply disruptions. Additionally, such companies may improve their brand reputation and develop new market opportunities. Failure to effectively manage sourcing risks can lead to higher costs of capital, reduced margins, and constrained revenue growth.

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