KANSAS CITY, MO — Environmental, social and governance (ESG) is quickly becoming a critical issue for food manufacturers, mainly because of the impact it could have on how they operate. Pressure is growing for companies to be more transparent about their long-term continuous improvement plans for supporting positive environmental and social change. It’s leading many to develop a comprehensive ESG framework to help guide operations.
Along with increased consumer demand for a focus on ESG, a few other factors come into play. Ingredients marketplace company TraceGains published a report, “The State of ESG Compliance for the Food and Beverage Industry,” which included a survey of 343 large, global food and beverage companies. Results indicated that 32% of companies are focusing on ESG compliance because of the evolving regulatory environment, 27% because of consumer demand, and 18% to remain competitive.
It’s not enough for a brand to say it’s striving to be a force for good and tout its accomplishments. Savvy stakeholders want tangible evidence that companies are folding ESG practices into the fabric of their organizations vs. passing the responsibility along to the compliance and human resources departments.
“It has become increasingly apparent that companies must integrate and align their ESG efforts with corporate strategy,” said Eric Jacobson, VP of investor relations and ESG for Thomasville, GA-based Flowers Foods. “Doing something just to say you did it, without a focus on how it will benefit the company, brand and stakeholders, can backfire. Staying focused on delivering value in a responsible way is more critical than ever.”
ESG is multi-faceted and complex, and there’s no standard formula for building — and governing — the framework created. While companies choose their focus areas or pillars based on the needs of their stakeholders, the overarching goal is the same across all industries: Make a positive impact on the planet (environment); employees, customers and communities (social); and the organization’s conduct (governance).
“A significant challenge was understanding where to focus and how,” Jacobson said about how Flowers Foods chose its pillars. “To manage and oversee our efforts, we established a clear governance structure that includes a cross-functional ESG steering committee, an ESG executive committee and our board of directors. Additionally, our materiality assessment helps give direction and prioritize areas of focus.”
Last year, Ardent Mills transitioned its corporate social responsibility program to an ESG framework called Nourish: Intention & Impact, guided by stakeholder feedback and the United Nations’ Sustainable Development Goals.
“We’ve been on a sustainability journey for quite some time,” said Jeff Zyskowski, VP of supply chain for Ardent Mills. “In the past 12 to 24 months, the ESG space has just exploded. It’s become much more holistic. We had an opportunity to step back and consider how we can be more intentional and better integrate ESG into our daily operations. We prioritized around what’s emerging and what we thought our plants and people should be focused on. It helps us bring our mission, vision and values to life.”
Similarly, Mexico City-based Grupo Bimbo unveiled its ESG program, Nourishing a Better World, in early 2022.
While companies choose their focus areas or pillars based on the needs of their stakeholders, the overarching goal is the same across all industries: Make a positive impact on the planet (environment); employees, customers and communities (social); and the organization’s conduct (governance).
“The program is cross-functional across the value chain, so there’s overlap between the three pillars,” explained Chris Wolfe, senior director of corporate environmental and sustainability for Bimbo Bakeries USA, one of Grupo Bimbo’s business units. “Each pillar (Baked For You, Baked For Life and Baked For Nature) has a champion, but all of our general managers for our various operations have a role.”
Operating within an ESG framework creates several business-related benefits in addition to being a force for good.
“Understanding the company’s purpose combined with a defined ESG strategy will generate greater competitive advantage, financial performance, employee engagement/retention and corporate reputation,” said Kirsten Green, director of ESG for Global Prairie, a purpose-driven global marketing firm that is a 100% employee-owned Public Benefit Corporation and a top 1% Certified B Corporation. “ESG is a business strategy that drives long-term success, sustainability and impact.”
Through his leadership with Ardent Mills’ ESG program, Zyskowski noted another benefit: the opportunity to connect with customers and growers in a new way.
“We’re all learning and growing and evolving in this space, and it’s changing so rapidly,” he said. “With our customers wanting to do the exact same thing, we’re putting our heads together to think about how we can partner in the ESG space. It’s generated greater connectivity with our customers as well as with the growers who make our raw materials.”
TraceGains’ research indicated companies are thinking about ESG on many different levels. According to its report, 64% of companies surveyed acknowledge the significance of ESG; 46% said they already prioritize ESG performance in sourcing partners and ingredients; and 50% said they would be willing to stop production on new products if they couldn’t ensure compliance with relevant ESG guidelines.
“We commend brands that ethically and sustainably commit to meeting important ESG goals in the products they bring to market,” said Gary Nowacki, CEO and founder of TraceGains.
While the ultimate goal of ESG initiatives is to create a healthier world for everyone, companies are in business to make money.
This story has been adapted from the February | Q1 2024 issue of Commercial Baking. Read the full story in the digital edition here.
