From obligations to added piece of mind

It’s been a long and winding road...

70 years ago, the economist and academic Howard Bowen came up with the idea of Corporate Social Responsibility (CSR). He defined it (in shockingly misogynistic terms) as “the obligations of businessmen to pursue those policies which are desirable in terms of the objectives and values of our society”.

After being largely ignored for about half a century, the idea started to catch as companies searched for a way to respond to increasing public trust issues and demands from consumers and investors.

CSR was – and remains today - primarily a marketing tool, a way for firms to tell good stories and make symbolic gestures (we all remember greenwashing) to show they care. But it’s easy to tell stories, it’s much more work to connect the intentions to business objectives and properly resource them. Cue the joke about the CSR professional having a small poky office at the end of a long dark corridor near the washrooms.

ESG is attempting to be different.

First, it stands for Environmental, Social & Governance, which means it has the word Governance in it. And that changes everything.

The lightbulb flickered on when extreme weather events started causing multiple supply chain failures. Pension funds were the first to really get it. If you invest on a 50-year horizon, climate change matters. And where pension funds go, other investors follow.

According to Investor Relations Magazine, “Knowing that management and the board of directors are proactively monitoring key risk factors and have mitigation strategies warrants a valuation premium for added peace of mind to investors. A recent McKinsey article illustrating the results of more than 2,000 studies on the impact of ESG on equity returns shows a 63 percent positive correlation”. 

With that level of proof in the data, it is no surprise that today 93% of the world’s largest companies report on ESG. And because ESG requires proper monitoring and tracking (because otherwise you can’t properly “govern” it), this reporting includes disclosing GHG emissions, plastic, water, energy usage and more.

The point of this article, however, is not to be a missive on the history and relative benefits of different acronyms.

No, I want to make two points about ESG and the food and beverage industry.

My first point is that I am very concerned at how long it is taking the food and beverage industry to catch up.

ESG reporting in food and beverage – which is dominated by small to medium sized businesses – is lagging way, way behind that 93% number. Outside of the largest firms, my best guess is that fewer than 10% of Canadian food and beverage companies are doing ESG reporting.

This means that we are collectively failing to do the work that every single business needs to be doing to mitigate the impacts of climate change.

And we are missing out on growth. Go back to the McKinsey study I quoted earlier: 63% of firms who have ESG reporting in place are growing their value faster than their competitors. Doing good helps you make more money!

So, we need a concerted and urgent effort to encourage more firms to embrace ESG reporting (before they start finding that investors are closing doors to them).

My second point is that the real value in ESG is not the reporting. It is the opportunity to use this framework as a way to think differently and push towards a circular food system that actually eliminates take-make-dispose.

Yes, it is important that firms are disclosing things like how much plastic they’ve recycled. And yes, it’s important to have targets and take responsibility. But to actually solve the problem we are going to have to go even further. We need to embrace circularity – and create an economy that is inspired by nature.

A circular food economy reimagines and regenerates the natural systems that feed us, eliminating waste, sharing economic prosperity, and nourishing our communities. It is about keeping resources (or nutrients) in the system for as long as possible. It is a mindset, a way of thinking that challenges the linear status quo (often referred to as “one and done”) where resources are taken from the Earth, products are made, used until they are no longer immediately required, and then disposed of.

And if that all sounds a bit conceptual, have a look at the pull-out to see an example of what it looks like in practice: 7 food and beverage companies have come together to create the first ever circular gourmet restaurant meal, developed from waste by-products.

ESG is based in data and governance, which means that it requires real monitoring, measuring, tracking and reporting. It is a risk management tool that every business needs to adopt. And it is precisely because ESG provides boards and leadership teams real insight into how they are using resources, that it provides the framework to actually get a handle on these issues.

And the way to do that is through circularity. Frankly, there is no other way.

It’s been 70 years from the first framing of the idea that businesses should serve societies’ objectives to where we are today. It’s now time to use the tools we have at our disposal – the framework of ESG and the principles of circularity – and accelerate our progress in this space. The time for long and winding roads is behind us.

Cher Mereweather, CEO of Provision Coalition Inc., is a Food Industry Sustainability Expert based in Canada

View the original Food in Canada Sustainable Change Column on Page 12 here