ESG: Does Food Waste = Profit Waste?
Shockingly, over one-third of all food never makes it from farm to fork. Somewhere along the supply chain, something goes wrong, and an unthinkable portion of otherwise perfectly good food winds up in a landfill.
With over two billion people living in dire poverty, it’s astounding that more hasn’t been invested in reducing this food waste. Is waste a necessary evil in bringing food to the masses? Have current practices topped the cost-benefit curve?
Per a recent study, the contrary is true. Conducted by Champions 12.3, The Business Case for Reducing Food Loss and Waste found that for every $1 invested in food waste and loss reduction, companies saved $14 in operating costs. Talk about strong ROI.
With this new information at hand, shareholders should be hounding the board of directors and management teams of the companies they own. Opportunities providing a 1,400% return on investment don’t come around every day.
Focusing on just one link in the food chain, SASB has deemed food waste and loss a material issue for the restaurant industry. The metrics tracked under sustainability accounting standard SV0203-03 – Food & Packaging Waste Management include amount of weight, percentage food waste, and percentage diverted. SASB describes how this issue can affect a company’s bottom line:
“Food waste results in loss of resources, such as water, energy, land, labor, and capital, and produces greenhouse gas (GHG) emissions as a result of decomposition… Companies that are able to reduce waste through various methods, including food recovery, diverting waste from landfills, and packaging reclamation programs, can reduce waste handling costs and improve operational efficiency.”
Together, this and the above-mentioned study demonstrate the financial benefits that can flow to a company’s bottom line when they focus on becoming more sustainable. Sustainability will help companies become better capitalist institutions, and not just from a “conscious” standpoint. ESG measures corporate sustainability — better serving society’s needs — on the same scale by which it measures increased profitability. ESG also provides data which can help concerned investors hold companies accountable and encourage them to become better corporate citizens.
So how can ESG work for you? Understandably, most investors do not have the time or staff to spend long hours searching through corporate sustainability disclosures. How do you find out how your holdings and potential holdings are performing on such an important metric?
If you’re looking to integrate ESG analysis systematically into your investment process, you could hire consultants and analysts or subscribe to numerous databases for corporate sustainability metrics. This can be quite costly — however, it could be even more costly to simply ignore it.
But if you’re new to the ESG game, or even if you have some experience with ESG but not enough to understand its applications, these measures could be a waste. Make sure you do your homework. Before you invest money in raw data, you must understand the potentials and limitations of ESG and how to most effectively integrate it into your investment process.
There is an easier way to jumpstart your ESG integration process: contact us today and find out how we can help you apply the benefits of ESG to your investments.
Don’t Be Tempted to Persuade Your Clients
Recently, I've been seeing a lot of articles about Advisors persuading clients to move from active management to passive management. Persuading clients to follow the way you manage investments is a big mistake. Do this instead.
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