Investors Push for Sustainable, Transparent Supply Chains
By Dinah Wisenberg Brin
Environmental and workers’ rights groups aren’t the only parties interested in “sustainable” supply chains. Many investors, too, see value in companies whose goods are sourced with an eye toward fair treatment of workers and gentle handling of the environment, as evidenced by the work of numerous funds focused on socially conscious investing.
In a semi-annual report to stockholders earlier this year, for example, the Portfolio 21 Global Equity Fund, which uses environmental, social and governance (ESG) screens in investing, explained that it had divested two holdings over such concerns.
In one case, a cleaning-products supplier had made acquisitions that increased its exposure to fossil fuels and, the fund believed, its regulatory and legal risks. In another, the fund cited a major U.S. natural-foods distributor’s “poor treatment of its workers and lack of transparency in its communications” in the decision to sell the stock.
In contrast, Portfolio 21 praised long-time holding Natura Cosméticos, a Brazilian cosmetics company whose operations are “based on the ‘sustainable use of natural resources and respect for regional and local cultural traditions.’ Natura Cosméticos works closely with its suppliers in the promotion of organic and biodynamic agricultural models,” the fund said.
“Recently, the company launched its Sustainable Supply Chain strategy for suppliers. This strategy’s social and environmental indicators measure a supplier’s performance on carbon emissions, water consumption, solid waste generation, investment in education, training, inclusion of disabled employees, and occupational safety. Natura Cosméticos has also completely eliminated the use of parabens from its production formulations. Parabens are allowed in cosmetic formulations in most countries; however, Natura Cosméticos banned these chemicals based on the lack of consensus regarding their safety,” the report said.
“Portfolio 21 believes that the company’s leadership and transparency surrounding its supply chain and raw material inputs will place the company at a competitive advantage by minimizing its exposure to future chemical regulations and operating risks,” the fund said.
Among Natura Cosméticos’ initiatives are its six-year-old “carbon neutral program,” which includes an inventory of all emissions through the supply chain, various efforts to reduce emissions, and compensation for unavoidable emissions, according to Natura’s website. Portfolio 21’s website also noted that the cosmetics maker prohibits the use of genetically modified organisms and that some of its raw materials are certified by the Forest Stewardship Council.
Another Portfolio 21 investment in Brazil, Banco Bradesco, “has initiated several supplier initiatives,” including a social-environmental questionnaire and membership in the Supply Chain Leadership Collaboration, which encourages suppliers to manage and disclose their greenhouse gas emissions, the fund noted on its website.
Investor interest in sustainable supply chains, of course, extends well beyond one fund.
Oxfam International announced this month that 33 investment funds representing nearly $1.4 trillion in assets under management had expressed support for the anti-hunger organization’s “Behind the Brands” scorecard initiative by urging the world’s 10 largest food and beverage companies, including Nestle, Coca-Cola and Unilever, to cut social and environmental risks and improve transparency in their supply chains.
“Investors are increasingly rewarding companies that address sustainability challenges across their global supply chains,” Bennett Freeman, senior vice president, sustainability research and policy at Calvert Investments, said in an Oxfam press release.
Among the signatory funds were BNP Paribas, Calvert Investments, Christian Brothers Investment Services, Sustainalytics, Goodfunds Wealth Management, Domini Social Investments, the Sustainability Group of Loring Wolcott & Coolidge, and Boston Trust & Investment Management Company’s Walden Asset Management.
“There is a clear and growing consumer interest in understanding the impacts made by the supply chains of the brands they purchase. Consumers and investors recognise the problems identified as real and urgent. We will continue to engage with this project to support improved policies and practices that guarantee future commodity supplies and to reduce social and environmental risks – all as part of the process of establishing sustainable business models in the food and beverage sector for the 21st century,” their investor statement concluded.
Meanwhile, Oxfam said it plans to release information soon revealing “land grabs” in major food and beverage companies’ sugar supply chains.
