processed foods · 2020. 7. 30. · processed foods companies play an essential role in society by...

PROCESSED FOODSResearch Brief

Sustainable Industry Classification System™ (SICS™) #CN0103

Research Briefing Prepared by the

Sustainability Accounting Standards Board®

June 2015

www.sasb.org© 2015 SASB™

TM™

PROCESSED FOODS

Research Brief

SASB’s Industry Brief provides evidence for the disclosure topics in the Processed Foods industry. The

brief opens with a summary of the industry, including relevant legislative and regulatory trends and

sustainability risks and opportunities. Following this, evidence for each disclosure topic (in the

categories of Environment, Social Capital, Human Capital, Business Model and Innovation, and

Leadership and Governance) is presented. SASB’s Industry Brief can be used to understand the data

underlying SASB Sustainability Accounting Standards. For accounting metrics and disclosure guidance,

please see SASB’s Sustainability Accounting Standards. For information about the legal basis for SASB

and SASB’s standards development process, please see the Conceptual Framework.

SASB identifies the minimum set of disclosure topics likely to constitute material information for

companies within a given industry. However, the final determination of materiality is the onus of the

company.

Related Documents

• Processed Foods Sustainability Accounting Standards

• Industry Working Group Participants

• SASB Conceptual Framework

INDUSTRY LEAD

Evan Tylenda

CONTRIBUTORS

Andrew Collins

Henrik Cotran

Anton Gorodniuk

Sonya Hetrick

Eric Kane

Jerome Lavigne-Delville

Nashat Moin

Himani Phadke

Arturo Rodriguez

Jean Rogers

Levi Stewart

Quinn Underriner

SASB, Sustainability Accounting Standards Board, the SASB logo, SICS, Sustainable Industry

Classification System, Accounting for a Sustainable Future, and Materiality Map are trademarks and

service marks of the Sustainability Accounting Standards Board.

• industry jargon whenever possible] • [Delete any issue categories for which there are no issues]

I N D U S T R Y B R I E F | P R O C E S S E D F O O D S

http://www.sasb.org/standards/download/

http://www.sasb.org/sectors/consumption/

http://www.sasb.org/sectors/consumption/

http://www.sasb.org/approach/conceptual-framework/

Table of Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Industry Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Legislative and Regulatory Trends in the Processed Foods Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Sustainability-Related Risks and Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Energy & Fleet Fuel Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Water Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Social Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Food Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Health & Nutrition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Product Labeling & Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Business Model and Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Packaging Lifecycle Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Leadership and Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Environmental & Social Impacts of Ingredient Supply Chains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Appendix

Representative Companies : Appendix I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Evidence for Sustainability Disclosure Topics : Appendix IIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Evidence of Financial Impact for Sustainability Disclosure : Appendix IIB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Sustainability Accounting Metrics : Appendix III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Analysis of SEC Disclosures : Appendix IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

References

I N D U S T R Y B R I E F | P R O C E S S E D F O O D S

INTRODUCTION

Processed foods companies play an essential role

in society by supplying consumers with affordable

and convenient sources of food that meet various

dietary needs. As consumers are becoming

increasingly busy, innovations in processed foods

have provided for an efficient source of key

nutrients in their diet.

Regulatory and societal trends suggest a rising

concern over the health and safety of processed

food products as well as concerns over the

environmental and social externalities that result

from the manufacturing and sourcing of products

and ingredients, which can threaten a company’s

social license to operate.

During manufacturing, environmental impacts

arise from the use of energy and water, essential

inputs for food production. This reliance on

natural resources can contribute to operational

risks as the cost of such resources rises, which

places an emphasis on efficiency. Additionally,

the use of these resources generates greenhouse

gas (GHG) emissions and potential water

pollution. The industry is highly exposed to and

contributes to social and environmental issues

within its supply chain. Climate change and water

scarcity present challenges for sourcing key

ingredients. Additionally, the farming of key

ingredients contributes to many environmental

and social issues within companies’ supply chains.

The consumer-facing nature of the industry

makes the management of key sustainability

issues an important driver for long-term company

success. The management (or mismanagement)

of material sustainability issues, therefore, has

the potential to affect company valuation

through impacts on sales, profits, reputation,

assets, liabilities, and cost of capital.

Investors will obtain a more holistic and

comparable view of performance if processed

foods companies report metrics on the material

sustainability risks and opportunities that could

affect value in the near and long term in their

regulatory filings. This would include both

positive and negative externalities and the non-

financial forms of capital that the industry relies

on for value creation.

Specifically, performance on the following

sustainability issues will drive competitiveness

within the Processed Foods industry:

• Improving energy and fleet fuel

efficiency;

• Managing water use, particularly for

operations in water-stressed areas;

• Ensuring food quality and safety;

• Managing a product’s health and

nutrition characteristics to capture

shifting customer demand;

SUSTAINABILITY DISCLOSURE TOPICS

ENVIRONMENT

• Energy & Fleet Fuel Management

• Water Management

SOCIAL CAPITAL

• Food Safety

• Health & Nutrition

• Product Labeling & Marketing

BUSINESS MODEL AND INNOVATION

• Packaging Lifecycle Management

LEADERSHIP AND GOVERNANCE

• Environmental & Social Impacts of Ingredient Supply Chains

I N D U S T R Y B R I E F | P R O C E S S E D F O O D S | 1

• Building customer confidence and trust

by maintaining integrity in labeling and

marketing practices;

• Packaging lifecycle management and

innovation to reduce costs and improve

environmental impacts of packaging; and

• Addressing supply chain management

risks associated with climate change and

water scarcity.

INDUSTRY SUMMARY

The Processed Foods industry includes companies

that process and package foods such as bread,

frozen foods, snack foods, pet foods, and

condiments for retail consumer consumption.

Typically, these products are made ready to

consume, marketed for retail consumers, and can

be found on food retailers’ shelves.I

Globally listed processed foods companies

generated revenues of more than $515 billion in

2014. The two largest segments of the industry

are Snack Food & Confectionary items and

Frozen, Canned & Perishable food, which

generated 34 and 27 percent of total industry

revenue, respectively.1 The industry’s five largest

companies by revenue are PepsiCo Inc., Nestlé,

Mondelez International, ConAgra Foods, and

General Mills. These companies generated

processed food revenues between $16.5 and

$45.5 billion, together representing more than 27

percent of global industry revenue in 2014.2

Large companies in the industry generate sales

globally, and international opportunities are

driving growth. For example, Mondelez

International generated more than 80 percent of

its revenue outside the U.S. in 2014.3 General

Mills has expanded its operations in fast-growing

I Industry composition is based on the mapping of the Sustainable Industry Classification System (SICSTM) to the

external markets such as China, India, and

Indonesia. The company’s international sales have

been growing around 10 percent annually, while

domestic sales have only grown between one and

three percent, which highlights the opportunities

of operating internationally.4 Large companies

such as Campbell Soup Co. have global

manufacturing operations in countries such as

China, Australia, France, and Germany, which

demonstrates the global footprint that many

companies have in this industry.5

Companies in the industry transform raw

ingredients into packaged products. For snack

food companies like Mondelez and PepsiCo,

these raw ingredients include large quantities of

sugar, wheat, corn, vegetable oil, flour, oats,

potatoes, seasonings, cocoa, and other fruits and

vegetables.6 For frozen food producers like

ConAgra, raw ingredients include wheat, corn,

soybeans, pork, poultry, and beef.7 As a result of

the industry’s reliance on agricultural products,

company supply chains are susceptible to

changing weather patterns, water scarcity, and

climate change, which can lead to high degrees

of input price volatility.

The largest customers of the Processed Foods

industry include grocery stores and large retail

chains such as Walmart, which alone made up

more than 18 percent of PepsiCo’s total revenue

in 2014 and 17 percent of ConAgra’s.8 The

industry is driven largely by key external drivers

like raw material input prices, the healthy eating

index, and consumers’ disposable income and

leisure time.9 These external drivers are shaping

the industry landscape in a number of ways. For

example, consumers are becoming increasingly

health conscious, and as a result, they are

demanding products made with fewer calories

Bloomberg Industry Classification System (BICS). A list of representative companies appears in Appendix I.


and less sodium and trans fats, which are

typically found in snack foods. Healthy snacks

have made up the industry’s fastest-growing

segment over the past five years.10 Demand for

healthy products has led to the launch of new

companies such as Popchips and SkinnyPop,

which specifically target consumer demand for

less processed snack foods with fewer artificial

additives.11

The industry is highly capital intensive, as large

investments in equipment, machinery,

technology, and buildings are needed to produce

processed foods at scale. Additionally, large

operational costs include the purchase of raw

ingredients used to manufacture food products,

which represent roughly 50 percent of the

industry’s total costs.12 Other materials such as

packaging represent a large cost for the industry.

For example, PepsiCo spends $6.9 billion on

packaging, representing 10.5 percent of total

sales.13

The industry has been facing rising pressure from

higher input costs, particularly for raw

ingredients, packaging materials, and energy.14

This has contributed to gross margins remaining

relatively flat for larger industry players over the

past five years. For example, Mondelez

International generated a 36.8 percent gross

margin in 2014, a small increase from 2008’s low

of 33 percent and in line with pre-recession levels

of around 36.2 percent.15 Industry players

recognize the financial risk to operations of these

increasing costs, especially if they cannot

effectively increase efficiency or pass on rising

costs to consumers.16 Larger companies are better

able to pass costs to consumers, as reputation

and perceived value over small- to medium-sized

companies are greater. This phenomenon has led

to a decrease in the number of small- to medium-

sized companies in the industry and represents a

barrier to entry for smaller companies.17

Significant levels of capital are necessary in order

to operate heavy equipment and machinery in

production, leading to high barriers to entry for

new companies. New entrants also face hurdles

with establishing key grocery relationships and

building a sufficient brand reputation to attract

consumer demand.18

The Processed Foods industry has seen some

levels of consolidation as companies acquire

other companies in the industry in order to build

economies of scale and cut costs. For example,

ConAgra purchased private food label producer

Ralcorp in a deal worth $6.8 billion and created

one of the largest food companies in the U.S.19 In

2013, Heinz was acquired in a buyout by

Berkshire Hathaway and 3G Capital Management

in a deal worth $28 billion, the largest in food

industry history.20 In 2015, Heinz and Kraft

agreed to merge operations in a deal estimated

to be worth $49 billion. The deal is currently in

development and has not been finalized, but

would create the fifth-largest food company in

the world and would generate combined

revenues of more than $28 billion.21

Industry outlook remains mixed across the various

segments of the processed foods market. Some

segments are expected to improve and others to

decline in the near future as disposable income

and consumer trends shift. Revenue for the cereal

segment of the industry is expected to increase

marginally at 0.8 percent annually over the next

five years to $11.5 billion in the U.S.22 Healthy

alternatives and new establishments are expected

to drive future revenue growth in the snack food

segment of the industry 2.6 percent annually over

the five years leading to 2019, up to $39.4

billion.23 Consumers’ disposable income is

expected to increase, driving demand away from

frozen food segments as consumers become able


to afford to eat out at restaurants more often.

Revenue from the frozen food segment of the

industry is thus expected to decline marginally by

0.7 percent annually leading up to 2019, to

$27.9 billion.24 For chocolate producers like

Nestlé and Hershey, industry revenue is expected

to grow one percent annually over five years,

reaching $16.3 billion in 2019.25

Companies in the industry are typically valued

based on financial multiples, such as Price to

Earnings or EV to EBITDA.II The industry as a

whole has been trading at a premium to other

industries, as the Processed Foods industry is

experiencing a favorable outlook due to large

cost cutting initiatives and low commodity prices,

which are predicted to boost industry

profitability.26

In order to protect shareholder value over the

long term, companies will have to navigate key

competitive pricing trends, along with specific

regulations and significant environmental and

social issues affecting the industry or its

customers. Companies that manage these trends

successfully will be able to capture opportunities

for growth and attain a stronger competitive

position.

LEGISLATIVE AND REGULATORY TRENDS IN THE PROCESSED FOODS INDUSTRY

Regulations in the U.S. and abroad represent the

formal boundaries of companies’ operations, and

are often designed to address the social and

environmental externalities that businesses can

create. Beyond formal regulation, industry

II Enterprise value to earnings before interest, taxes, depreciation, and amortization III This section does not purport to contain a comprehensive review of all regulations related to this industry, but is intended

practices and self-regulatory efforts act as quasi-

regulation and also form part of the social

contract between business and society. In this

section, SASB provides a brief summary of key

regulations and legislative efforts related to this

industry, focusing on social and environmental

factors. SASB also describes self-regulatory efforts

on the part of the industry, which could serve to

pre-empt further regulation.III

Existing and emerging regulation in the U.S. and

abroad relating to health, obesity, food safety,

product labeling, and environmental concerns has

the potential to further emphasize the

importance of managing material sustainability

issues. The following section provides a summary

of recent developments that are likely to impact

the industry going forward.

U.S. food and beverages industries have all been

under pressure by consumers and regulators to

address obesity and the nutritional content of

food products. Recently, the U.S. Department of

Agriculture (USDA) banned multiple forms of

snack foods in schools, allowing only products

that meet certain limits for sugar and calorie

content. Allowable products include foods and

snacks in which whole grains, protein, or fruits

and vegetables are the primary ingredients, and

the amount of calories, sugars, sodium, and fat is

limited.27 Other countries have begun to

implement junk food taxes, or “fat taxes,” to

address obesity concerns. For example, Mexico

approved a five percent tax on unhealthy snack

food in 2013 to abate the country’s rising obesity

levels and the associated burden on health care

costs. Obesity-related health issues cost the

country more than $3.2 billion in health care

costs in 2008. This is expected to increase to $7.7

to highlight some ways in which regulatory trends are impacting the industry.


billion by 2017, according to estimates.28 Other

jurisdictions have implemented similar taxes on

high-fat products. Taxes and bans on snack foods

to address obesity concerns are affecting industry

profitability and forcing processed foods

companies to address health and nutrition

concerns about their products.

Food safety is also a major concern for the

industry, as millions of Americans are exposed to

foodborne illness and thousands are hospitalized

every year.29 On January 4, 2011, President

Obama signed into law the Food Safety

Modernization Act (FSMA), which allows for Food

and Drug Administration (FDA) oversight of food

safety issues in the areas of prevention,

inspection and compliance, recall response, and

traceability.30 Companies have begun to focus

heavily on food safety issues, as failing to do so

can result in costly recalls and fines.

The Processed Foods industry is also facing

increasing scrutiny from parents and the U.S.

government regarding advertising to children

under the age of 12. In 2006, a U.S. government

task force was established to address the impact

of media on childhood obesity. The task force

aimed to develop a voluntary industry standard to

reduce the amount of advertising for unhealthy

food and beverages targeted toward children.

The same year, the Better Business Bureau

launched the Children’s Food and Beverage

Advertising Initiative (CFBAI) to address growing

concerns about food and beverage advertising to

children, calling for industry self-regulation. The

initiative hopes to shift the focus of food and

beverage advertising aimed at children under age

12 to healthier options. It currently has 16

members including food companies ConAgra,

Kellogg, General Mills, Hershey, Campbell Soup,

and Nestlé. Members agree to follow five

components, including stipulations that

advertising directed solely at children must

promote “healthier dietary choices,” companies

must not advertise unhealthy snack food

products in elementary schools, and companies

must not actively seek placement of products in

entertainment directed at children.31

The U.S. government and consumers are

demanding more stringent rules relating to food

labeling, advertising, packaging, and other

claims. Failure to abide by these laws can

seriously impair a producer’s credibility and can

result in expensive product recalls that open up

producers to civil or criminal penalties.

Additionally, there is pending enforcement of

new FDA regulations around labeling that would

limit food producers’ opportunities to make

misleading health claims intended to harm

competitors. Producers that respond proactively

to regulations may boost their company image

and earn credibility and trust among consumers.

Concerns over deceptive and false advertising

have led to class action lawsuits for processed

food producers.32

The FDA has jurisdiction over food and food

labeling, ingredients, nutritional content, and

health claims. Health claims that promote the

benefits of a particular ingredient must be

substantiated by the FDA for approval in product

promotion.33 The FDA recently placed restrictions

on the use of partially hydrogenated oils, trans

fats, as they are no longer generally recognized

as safe.34

The Supreme Court unanimously decided that

competing producers may sue for unfair

competition if other food and beverage

producers make misleading claims, legislation

known as the Lanham Act.35 Additionally,

companies operating internationally are exposed

to new forms of regulation that influence a


company’s ability to operate. For example, the

European Commission launched Health Claim

Regulations that limit the health claims

companies can make on their products.36 These

new rulings may lead to further litigation for

processed foods companies that make false or

misleading health claims on their products,

adding to regulatory pressure.

Some 30 states around the U.S. have been

considering laws requiring companies to label

food products that contain genetically modified

organisms (GMOs). This presents a risk to food

companies, as consumers are increasingly

concerned over the use of GMO ingredients in

their food. Currently, only Maine, Connecticut,

and Vermont have passed legislation requiring

GMO labeling, however other states must pass

similar legislation before the laws take effect.

More than 60 countries worldwide have some

legislative restrictions on GMOs, although these

measures are often opposed by companies.37 The

safety concerns of GMO consumption are widely

debated, but these new legislative proposals and

bans are putting pressure on the Processed Foods

industry to acknowledge the use of GMOs in its

products and label them accordingly.

The industry is also subject to environmental

legislation as a result of running large-scale

operations and relying heavily on clean water.

The Clean Water Act’s (CWA) increasingly

rigorous standards for discharging wastewater

are the primary environmental regulatory

concerns for the Processed Foods industry. Unless

located in remote areas, most food processing

facilities pre-treat and discharge wastewater

directly to a publicly owned treatment plant.

When a facility discharges wastewater to the

environment, it is required to have a National

Pollutant Discharge Elimination System permit as

mandated by the CWA.38

Many companies in the industry have committed

to addressing key environmental, social, food

quality, safety, and nutritional concerns to

comply with regulations. Others have begun

implementing sustainability programs as a key

strategic initiative to drive overall business

success.39

SUSTAINABILITY-RELATED RISKS AND OPPORTUNITIES

Industry drivers and recent regulations suggest

that traditional value drivers will continue to

impact financial performance. However,

intangible assets such as social, human, and

environmental capital, company leadership and

governance, and the company’s ability to

innovate to address these issues are likely to

increasingly contribute to financial and business

value.

Broad industry trends and characteristics are

driving the importance of sustainability

performance in the Processed Foods industry:

• Health and nutrition: The industry’s

social license to operate is earned by

providing society with efficient, healthy,

and enjoyable foods for consumption.

This license is increasingly threatened by

obesity and health concerns related to

the consumption of unhealthy food.

Shifts in consumer preferences and tastes

are materially altering the Processed

Foods industry as producers begin to

address the health and nutritional value

of their current food portfolios.

• Consumer safety and awareness:

Evolving consumer concerns around

product ingredients and food safety are

driving regulation to create more

transparency in product formulation and


safety performance. These concerns are

driving the industry to adopt new

product formulations and procedures

around safety innovations.

• Exposure to climate change and

water scarcity: Climate change and

water scarcity are fundamentally

affecting the cost of raw materials for the

industry. This exposure presents the

industry with operational financial risks

that threaten long-term profitability.

As described above, the regulatory and legislative

environment surrounding the Processed Foods

industry emphasizes the importance of

sustainability management and performance.

Specifically, recent trends suggest a regulatory

emphasis on product labeling, consumer health,

and food safety, which will serve to align the

interests of society with those of investors.

The following section provides a brief description

of each sustainability issue that is likely to have

material implications for companies in the

Processed Foods industry. This includes an

explanation of how the issue could impact

valuation and evidence of actual financial impact.

Further information on the nature of the value

impact, based on SASB’s research and analysis, is

provided in Appendices IIA and IIB.

Appendix IIA also provides a summary of the

evidence of investor interest in the issues. This is

based on a systematic analysis of companies’ 10-

K and 20-F filings, shareholder resolutions, and

other public documents, which highlights the

frequency with which each topic is discussed in

these documents. The evidence of interest is also

based on the results of consultation with experts

participating in an industry working group (IWG)

convened by SASB. The IWG results represent the

perspective of a balanced group of stakeholders,

including corporate professionals, investors or

market participants, and public interest

intermediaries.

The industry-specific sustainability disclosure

topics and metrics identified in this brief are the

result of a year-long standards development

process, which takes into account the

aforementioned evidence of interest, evidence of

financial impact discussed in detail in this brief,

inputs from a 90-day public comment period, and

additional inputs from conversations with

industry or issue experts.

A summary of the recommended disclosure

framework and accounting metrics appears in

Appendix III. The complete SASB standards for

the industry, including technical protocols, can be

downloaded from www.sasb.org. Finally,

Appendix IV provides an analysis of the quality of

current disclosure on these issues in SEC filings by

the leading companies in the industry.

ENVIRONMENT

The environmental dimension of sustainability

includes corporate impacts on the environment.

This could be through the use of natural

resources as inputs to the factors of production

(e.g., water, minerals, ecosystems, and

biodiversity) or environmental externalities and

harmful releases in the environment, such as air

and water pollution, waste disposal, and GHG

emissions.

Companies utilize large amounts of natural

resources, including water and various forms of

energy, to transform ingredients into finished

products. The use of these natural resources may

create environmental externalities that lead to

tangible material risks and opportunities for

processed foods producers. For example, the


http://www.sasb.org/

heavy reliance on energy as a key input for value

creation for the industry has led to pressure on

margins from rising energy costs. With risk comes

the opportunity to address companies’ use of

natural resources, which can improve overall

operational efficiency.

Energy & Fleet Fuel Management

The Processed Foods industry is highly reliant on

energy and fuel as primary inputs for value

creation, both in manufacturing food products

distributing finished products to consumers.

Energy is needed to operate large manufacturing

facilities for use in steps such as cooking,

refrigeration, packaging, and transporting.

Energy production and consumption contributes

to significant environmental impacts, including

climate change and pollution, which have the

potential to indirectly yet materially impact the

results of operation of processed foods

companies. Material impacts can come in the

form of incentives for energy efficiency and

renewable energy, rising costs associated with

various forms of energy, and the risk of heavy

reliance on specific forms of energy that are

facing significant regulation. Therefore, energy

management, understood as the way in which a

company manages its overall energy efficiency, its

fuel consumption, its reliance on different types

of energy, and its ability to access alternative

sources of energy, is becoming increasingly

material for the industry.

Energy efficiency in production and distribution

can mitigate exposure to volatile energy costs

and limit a company’s contribution to direct and

indirect GHG emissions. Producers may be able to

further reduce the risk posed by volatile fossil fuel

energy costs—particularly natural gas, which is

used heavily in the industry—by diversifying their

energy portfolio across a range of sources.

Additionally, companies in the industry rely on

third-party distribution as well as directly owned

systems to transport their products to consumers.

Efficiencies can be gained in fleet fuel

management to reduce costs and limit the carbon

footprint associated with product transportation.

Company performance in this area can be

analyzed in a cost-beneficial way through the

following direct or indirect performance metrics

(see Appendix III for metrics with their full detail):

• Operational energy consumed,

percentage grid electricity, and

percentage renewable; and

• Fleet fuel consumed, percentage

renewable.

Evidence

The Processed Foods industry utilizes various

forms of energy to transform raw ingredients into

finished products. Currently, industry participants

maintain an even split between purchased

electricity and energy generated directly from

purchased fuels, mainly natural gas. For example,

ConAgra currently generates roughly 51 percent

of its GHG emissions through electricity

purchases and 49 percent through direct

emissions.40 A majority of the industry’s direct

Scope 1 emissions are released as a result of

burning natural gas to generate heat and

electricity. Companies use natural gas to power

food processing ovens and production facilities.41

Additionally, some companies manage their own

fleet of vehicles to transport finished products,

which further contributes to overall energy

usage.

Processed Foods industry expenditures on fuel

and electricity represent roughly 1.07 and 1.80

percent of total cost of materials, respectively,

representing a combined 2.87 percent of costs


spent on energy.42 As a result of a relatively high

reliance on energy to generate finished products,

companies in the industry recognize the risk of

rising energy prices and constrained supply as

material concerns for their operations in their

Form 10-K filings. Specifically, PepsiCo stated in

its 2015 form 10-K that “[i]f commodity price

changes result in unexpected or significant

increases in raw materials and energy costs, we

may not be able to increase our product prices or

effectively hedge against commodity price

increases to offset these increased costs without

suffering reduced volume, revenue, margins and

operating results.”43

Currently, the U.S. food processing sector spends

roughly $7 billion annually on energy costs alone,

representing significant opportunity for

companies to implement projects to improve

energy efficiency and generate cost savings. 44 For

example, ConAgra received Energy Star ratings

for three of its potato processing plants, which

utilize 20 percent less energy than comparable

food processing plants. Through the company’s

initiatives, the three plants are expected to save

ConAgra more than $10 million in energy costs

each year, equivalent to roughly one percent of

its net income in 2014,45 and reduce annual

emissions by 40,000 metric tons.46

Companies have begun setting goals to reduce

energy intensity within operations. For example,

General Mills set a goal to reduce energy usage

by 20 percent by 2015 from 2005 baseline levels.

The company is implementing numerous energy-

saving projects, including optimizing machinery

such as dryers, ovens, freezers, heating and

cooling equipment, and lighting. In 2013, such

efforts at seven of the company’s locations saved

$3.7 million and reduced electricity usage by six

percent. By 2015, the company plans to

implement energy-saving processes in 15 of its

largest plants and expects to save an additional

$20 million in energy costs.47 These energy-

efficiency initiatives are part of a larger cost-

saving program that General Mills’ Chief Financial

Officer (CFO) believes is a “first line of defense to

offset input cost inflation and protect gross

margins.”48 PepsiCo’s energy-efficiency initiatives

resulted in $70 million in energy-cost savings in

2012.49 These initiatives have the potential to

provide shareholders with millions in reoccurring

cost savings every year, providing significant

value to the firm.

Companies have adopted various initiatives to

address rising energy costs and GHG emissions,

including hedging, efficiency, and renewable

energy initiatives. For example, Mars Inc., a

popular producer of chocolate candy and pet

food products, has launched an initiative to be

carbon neutral by 2040 in an effort to limit the

company’s carbon emissions and exposure to

fossil fuel energy sources. In April 2014, the

company invested in a large-scale, 118-turbine

wind farm in Texas that will generate more than

100 percent of the electricity needs of the

company’s U.S. operations. The project is

currently the largest commitment to renewable

energy made by any food producer in the U.S.50

Nestlé is pursuing similar initiatives in Mexico,

where it is investing in large-scale wind projects

to reduce the company’s energy use by 39

percent per ton of food. Currently, wind power

accounts for 85 percent of Nestlé’s operational

electricity needs in Mexico.51 On-site renewable

energy makes up 13.3 percent of the company’s

total facility energy use.52 In 2011, Snyder’s-Lance

Inc., a pretzel manufacturer, completed the

largest solar project in Pennsylvania outside the

company’s headquarters. The 3.5 MW solar

project is projected to eliminate more than 230

million pounds of CO2 emissions over a 25-year

period and save the company an estimated 30


percent annually in energy costs.53 The company

received $4.2 million in federal grants to

complete the project.54

Improving fleet fuel efficiency is also important

for processed foods companies that operate large

vehicle fleets to distribute finished products to

consumers. Frito-Lay currently operates a fleet of

more than 20,000 vehicles, making it the

seventh-largest privately owned fleet in the U.S.,

and the company has a goal of making it the

most fuel-efficient fleet in the country. At the

end of 2013, the company had more than 269

all-electric trucks, the largest electric fleet in the

U.S. This initiative will save the company 500,000

gallons of fuel annually and will reduce GHG

emissions by 75 percent compared to diesel

trucks.55 Both Frito-Lay and General Mills have

invested in compressed natural gas (CNG)

vehicles to reduce carbon emissions and improve

operational efficiency. While the network for

CNG refueling is sparse in some areas around the

U.S., the companies have launched test fleets and

invested in CNG infrastructure to improve the

reliability of this new form of fuel.56 General Mills

believes there are not only emissions benefits

from CNG vehicles, but also cost savings and

reduced risk compared to diesel vehicles.57

Through fuel and transportation efficiency

initiatives, the company hopes to reduce its fuel

usage rate (fuel use per metric ton of product) by

35 percent by the end of 2015 from 2009 levels.

By the end of 2014, the company reduced fuel

usage by 22 percent from 2009.58

Value Impact

Energy management can have ongoing impacts

on operating costs due to volatile energy prices

and rising energy consumption associated with

increasing processed food production. In the face

of rising electricity costs, processed foods

companies that develop more energy-efficient

methods of production can gain a competitive

advantage by offsetting rising costs and

protecting margins. In addition to impacts on

operating costs, there could be one-time effects

on cash flows through capital expenditures for

energy-related projects. Through energy

efficiency and the use of alternative energy,

companies can benefit from significant cost

reductions and reduce operational risks arising

from fluctuations in fossil fuel prices.

Another source of operational risk is the reliability

of future energy supplies, which can influence

decisions about generating power on-site and

diversifying energy sources versus purchasing

electricity from the grid. The more a company

relies on purchased fuels and electricity from

traditional sources of energy, the more vulnerable

it is to cost increases for specific energy sources

as well as the indirect impact of utilities’ costs for

internalizing carbon prices. The use of

independent (non-grid) energy sources also

indicates that a company has a degree of control

over its energy sources and demonstrates its

ability to provide continuous energy for its

facilities. The percentage energy generated from

renewable sources indicates a firm’s ability to

mitigate its environmental footprint and its

exposure to energy cost increases as well as its

energy independence. Additionally, improving

vehicle fleet efficiency can help to reduce

operating costs and emissions. Due to the

consumer-facing nature of this industry, these

initiatives can improve companies’ brand value in

the long term.

The probability and magnitude of these impacts

could increase in the future as emerging

governmental regulations on environmental

impacts continue to influence energy costs.


Water Management

Water management is an increasingly material

issue for companies in the Processed Foods

industry, as large amounts of water are required

for cooking, processing, and cleaning finished

goods. The total use of water depends on the

type of food being prepared. Companies may

face additional risks associated with discharging

polluted water from the food-making process,

which can lead to costly fines and stricter

regulations.IV

As the global population is predicted to grow to

9.2 billion by 2050, the demand for water will

increase.59 At the same time, increasing pollution

and climate change will create major operational

risks for processed foods companies, especially

those operating in water-scarce regions.





• Total water withdrawn and total water

consumed, percentage of each in regions

with High or Extremely High Baseline

Water Stress;

• Number of incidents of non-compliance

with water quality and/or quantity

permits, standards, and regulations; and

• Discussion of water management risks

and description of strategies and

practices to mitigate those risks.

Evidence

According to MSCI research data on industries

exposed to water-use risk, the packaged food

industry ranks sixth behind other industries

including brewers, water utilities, paper products,

IV This issue does not cover water scarcity as it relates to the company’s agriculture supply chain, which is covered later in the

and independent power. While the majority of

the risk lies with upstream agriculture operations,

processed foods companies also utilize large

volumes of water for food processing.60

Companies in the industry recognize the risk of

changing weather patterns and their impact on

the availability of clean water.61 Specifically,

Diamond Foods, a snack food company, stated in

its 2014 Form 10-K that “water shortages, raw

material shortage or any other reason, whether

or not covered by insurance, could interrupt our

manufacturing operations, disrupt

communications with our customers and

suppliers and cause us to lose sales and write off

inventory,” and “[i]ncreases in the cost of water,

electricity, natural gas, fuel or labor and failure to

ship products on time, could increase our costs of

production and adversely affect our

profitability.”62

Processed foods companies have begun

implementing programs to reduce water

consumption in order to address these risks in

direct operations. For example, in 2007, Heinz

was able to reduce water consumption by 50

percent at a plant in Australia as a result of

installing motion sensors and new equipment

that regulated and turned off water when a line

was not in use.63 Campbell Soup Company has

set a goal of reducing its water use by 50 percent

per ton of food produced by 2020 from 2008

baseline levels. So far, the company’s initiatives

have produced savings of more than 20.7 percent

and reduced water usage by more than one

billion gallons annually. The company reported

saving more than five billion gallons since 2009.64

Hershey implemented water-efficiency projects in

a number of its plants, which the company

brief in the Environmental & Social Impacts of Ingredients Supply Chain section.


expects will save more than $900,000 a year

starting in 2014.65

In addition to the cost efficiency of limiting water

consumption, companies are recognizing the

need to understand the risks of water scarcity

throughout their operations. Campbell Soup

Company worked with the World Business

Council for Sustainable Development to map

water-risk exposure for its entire operation.66

ConAgra assesses water scarcity around its

production facilities, and in 2013, the company

estimated that 7.4 percent of its operations were

located in water-scarce and water-stressed

regions, 3.6 percent in medium-stressed regions,

and the remainder in low-stressed regions.67 In

2014, the company reassessed its water-risk

exposure and highlighted the fact that 38

locations, representing 37.5 percent of the

company’s total water usage, were located in

medium- to high-risk regions. Additionally, the

company had 10 locations in high-risk regions,

representing 3.3 percent of the company’s total

water usage.68 Companies with operations in

water-stressed regions can implement water-

efficiency initiatives to reduce the risks of

shortages and price increases in these regions.

For example, Heinz was able to reduce water

usage in its San Joaquin, Venezuela, plant,

located in a water-stressed region, by 56

percent.69

Companies that utilize significant quantities of

water must ensure that the water they release

meets local quality standards. If companies fail to

manage wastewater effectively, they may face

significant fines. Seneca Foods, a producer of

canned fruits and vegetables, was fined $9

million by the city of Modesto, California,

because the level of biochemical oxygen in its

wastewater exceeded city regulations. The

company has since installed new equipment to

properly treat its wastewater in compliance with

local limits.70 Similarly, ConAgra paid a $475,000

settlement for violating the CWA’s Spill

Prevention, Control, and Countermeasure

requirements. As part of the settlement, the

company must submit annual reports verifying

compliance.71 In 2013, ConAgra disclosed that

the company received 20 Notices of Violations

(NOVs) at 13 of its operating facilities, a 30

percent reduction from the previous year’s

violations.72 In 2014, the company received 36

NOVs and paid a total of $1,109,500 in

environmental fines. Half of the NOVs received

were associated with wastewater parameters.73

Value Impact

Water use and contamination can affect ongoing

operating costs and can impact cash flows

through one-off capital expenditures or

regulatory penalties. Additionally, companies may

face unexpected capital expenditures, water-

treatment costs, regulatory compliance costs, and

an increased cost of capital for operations in

water-stressed regions. Water-use efficiency can

reduce overall costs and improve gross margins.

Disclosure around a company’s total water

withdrawal and exposure to water-stressed

regions can help identify direct cost savings

associated with water efficiency, as well as risks

related to operating in water-stressed regions.

Additional disclosure around fines and water

quality violations can help to identify direct costs

from fines as well as identifying corporations that

are better at managing compliance risks.

Due to increasing water scarcity and the potential

for increases in water prices, the probability and

magnitude of the impact of water management

on financial results in the Processed Foods

industry are likely to increase in the near term.


SOCIAL CAPITAL

Social capital relates to the perceived role of

business in society, or the expectation of business

contribution to society in return for its license to

operate. It addresses the management of

relationships with key outside stakeholders, such

as customers, local communities, the public, and

the government. It includes issues around public

health, responsible business practices in

marketing, and customer safety.

Consumer preferences and tastes ultimately have

the largest influence over the products produced

and sold by the Processed Foods industry. The

quality and nutritional content of these food

products, however, have a direct influence on the

health of consumers. Food allergies and adverse

health and safety effects of processed food

ingredients are shifting consumer purchasing

decisions and perceptions of the industry, and if

poorly managed, these concerns may lead to

erosion of a company’s brand value and social

license to operate. Additionally, inaccurate

labeling and misleading marketing of products

can further erode brand value and a company’s

social license to operate, as consumers maintain a

certain level of trust in processed food producers

to label their products with accuracy and

integrity.

Food Safety

Food safety, as it relates to production quality,

spoilage, contamination, supply chain traceability,

and allergy labeling, can affect company

operations through product recalls, lawsuits,

fines, and capital expenditures. Food safety

recalls can happen for numerous reasons,

including packaging defects, food contamination,

spoilage, and mislabeling. Adding to the

complexity of the issue, food safety issues often

arise within a company’s supply chain, yet

ultimately end up causing recalls of final

products. Because of this, supply chain

traceability and inspection of suppliers is

beneficial for processed foods companies in order

to mitigate the potential reputational risks

associated with poor safety performance of

suppliers and comply with proposed legislation.

The FDA maintains oversight of the operations of

companies that process food in order to ensure

that proper procedures are followed and unsafe

food is prevented from being distributed.

Additionally, the FDA oversees product recalls

and procedures to remove and correct issues

when they occur, presenting an added layer of

regulatory burden for the industry.

Poor management of food quality and safety may

lead to recalls and lawsuits that can materially

impact a processed foods company’s operations

through fines and tarnished brand reputation.

Disclosure around the topic of food safety may

give investors a better understanding of a

company’s operational risk characteristics and the

potential impact of recalls on future operations.





• Global Food Safety Initiative (GFSI) audit

conformance: major non-conformance

rate and associated corrective action rate

and minor non-conformance rate and

associated corrective action rate;

• Percentage of ingredients sourced from

supplier facilities certified to a GFSI

scheme;

• Notice of food safety violations received,

percentage corrected; and


• Number of recalls issued, total amount of

food product recalled.

Evidence

While many companies have procedures in place

to address food quality and safety, issues still

occur. There about 48 million cases of foodborne

illness in the U.S. every year, suggesting that one

in six Americans is exposed. According to the

FDA, roughly 128,000 cases involve

hospitalization and more than 3,000 result in

death every year, and many of the illnesses result

from improperly canned foods and mishandling

during manufacturing.74

Nearly every company in the Processed Foods

industry recognizes the risk of product recalls in

their Form 10-K filings, in addition to the

potential for product liability claims, which can

cost millions in added expenses and tarnished

brand reputation.75 Specifically, Mondelez

International stated in its FY 2013 Form 10-K that

it “could decide to, or be required by law or

regulation to recall products due to suspected or

confirmed product contamination, spoilage or

other adulteration, product misbranding, or

product tampering. Any of these events could

materially and adversely affect [its] reputation,

product sales, financial condition, and results of

operations.”76

According to analysis of recent recalls, the

average food recall costs a company $30 million,

which drops directly to the bottom line,

highlighting the direct business risk that recalls

pose to companies.77 Most notably, Kellogg

Company, in its Form 10-K, provided insight into

the reduction in sales, added expense, and

impact on earnings per share that were

associated with a product recall resulting from

the presence of metal fragments in packages of

its Mini-Wheats cereal. The company disclosed

that the recall resulted in a reduction of sales by

$14 million and increased cost of goods sold by

$12 million, a total impact of $26 million. This

resulted in a reduction in company value by five

cents per share in 2012.78

Another noteworthy example is a 2007 peanut

butter recall by ConAgra. The company engaged

in a 100-percent recall of its Peter Pan brand of

peanut butter after the product was linked to

600 cases of salmonella. The company spent

more than $78 million recalling the product and

indemnifying consumers. The recall also resulted

in missed opportunities and lost sales of $55

million. When ConAgra identified the source of

contamination, it spent an additional $15 million

to correct the problem.79 Overall, this recall led to

more than $148 million in additional costs and

missed opportunities for the company, not

including damage to brand reputation. ConAgra

has since made progress on food safety initiatives

and in 2013 conducted more than 250 audits in

both company-owned and supplier operations to

ensure compliance with GFSI standards.80 The

Peter Pan peanut butter line has recovered since

the incident and was the fastest growing peanut

butter brand in 2011, according to the

company.81 In 2015, the company pled guilty to

lawsuits brought by the U.S. Department of

Justice for distributing the contaminated peanut

butter and settled by agreeing to pay an

additional fine of $11.2 million.82 This highlights

the long-term impacts that food recalls can have

on a company’s operations.

Recalls can be particularly troubling for smaller

companies, with costs representing a relatively

significant portion of company sales and net

income. For example, in Q1 2015, Inventure

Foods Inc. voluntarily recalled a portion of its

frozen food products after products were

exposed to Listeria moncocytogenes, a harmful


bacteria. This recall cost the company $15.9

million and represented 20 percent of its $77.6

million quarterly sales, leading to a Q1 loss of

$14.6 million.83 By comparison, the company

generated total net income of $10.6 million and

$6.6 million in 2014 and 2013, respectively,

highlighting the large impact recalls can have on

a company’s profitability.84

Companies take food safety seriously and

appropriate specific budgets for food-safety

initiatives. General Mills currently spends three

percent of its capital budget every year on food

safety initiatives, equating to $15 million in 2013.

Currently, General Mills certifies 100 percent of

its facilities using globally recognized food-safety

criteria to ensure the highest quality of its

products.85 These initiatives may not only help

companies prevent safety issues but also position

them ahead of future regulation.

As described in the Legislative and Regulatory

Trends section of the brief, the FSMA allows for

FDA oversight of food safety issues in the areas

of prevention, inspection and compliance, recall

response, and imports.86 The FSMA also

addresses issues associated with food chain

visibility and effectively requires companies to

improve the traceability of their supply chain for

products and ingredients, from farm to final

consumer. 87 Beyond satisfying regulation

requirements, an improved level of traceability

can also provide a company with direct business

benefits. As food safety issues can arise

throughout a food company’s value chain,

companies that improve the traceability and

auditability of their supply chains may be better

positioned to avoid and mitigate crises as they

occur. These companies will have better vision

into the troubled areas of their supply chains and

can more quickly make sourcing decisions to

mitigate risks and protect their brand

reputation.88

Appropriate allergy warnings and labeling are

considerable concerns for processed food

manufacturers, as mislabeling a product’s

ingredients can result in costly recalls and harm

to consumers. Product mislabeling and

undeclared allergens were the second- and third-

largest causes of food recalls in the fourth

quarter of 2013, each representing 16 percent of

total recalls.89 An estimated nine million adults

and nearly six million children have food allergies

in the U.S., representing roughly five percent of

the population. Currently, there are about eight

foods responsible for 90 percent of food allergic

reactions, namely milk, eggs, peanuts, tree nuts,

wheat, soy, fish, and shellfish.90 Allergic reactions

can be fatal, representing serious risk to

companies if products are not appropriately

labeled.

Value Impact

Food recalls resulting from contamination,

packaging defects, or improper labeling can lead

to costly recalls and write-downs, directly

harming company profitability. This can result in

liabilities that lead to significant one-off costs and

fines to compensate consumers for harm done. In

the long term, recalls can lead to diminished

brand reputation, which can result in the loss of

customer trust and, ultimately, decreased product

demand. This can lead to a decline in sales in the

short to long term. Firms that have a high

percentage of ingredient suppliers that meet or

exceed the GFSI requirements may be seen by

investors as lower risk because such companies

have a more robust ability to track the

ingredients in their products that could lead to

recalls.


Companies prone to food recalls and safety issues

may be viewed as more risky, resulting in an

increased cost of capital. Companies that focus

on quality and food safety within their operations

and those of their suppliers may be better

positioned to avoid costly recalls and strengthen

their brand reputation.

Health & Nutrition

Key nutritional and health concerns such as

obesity, ingredient safety, and nutritional value

are shaping the Processed Foods industry’s

competitive landscape. Health and nutrition are

real concerns for consumers, regulators, and the

healthcare system. These concerns about food

products can affect a company’s license to

operate and its ability to provide long-term value

to shareholders.

Processed foods producers are recognizing the

consequences of consumers’ shifting preferences

and increased awareness of the health of their

products. New regulations or imposed taxes on

processed foods such as snack foods have the

ability to influence industry profitability and pose

risks for industry participants. Studies, as

discussed below, have suggested adverse health

consequences from consuming large quantities of

food with little nutritional value, which can lead

to health issues such as higher levels of

cholesterol, increased risk for heart disease, and

higher levels of obesity.91 These studies have

begun to change perceptions of the industry’s

products, which can lead to long-term shifts in

consumer demand. Addressing shifting diet

trends may also create new opportunities in the

food industry and long-term value for

shareholders.





• Revenue from products labeled and/or

marketed to promote health and

nutrition attributes;

• Revenue from products that meet Smart

Snacks in School criteria or foreign

equivalent; and

• Description of the process to identify and

manage products and ingredients of

concern and emerging dietary

preferences.

Evidence

The Processed Foods industry is facing increased

scrutiny from consumers and regulators regarding

health and nutritional concerns about the

industry’s products. While there are multiple

causes of obesity, including work schedules, lack

of exercise, and diet, high-calorie snack foods

and other unhealthy foods are targets of

regulatory scrutiny due to their high density of

calories and lack of nutritional value relative to

other options. The consumption of unhealthy

food can contribute to high rates of obesity,

which place a burden on a country’s healthcare

system. It is estimated that obesity-related

medical costs amount to $190 billion a year, or

roughly 20 percent of U.S. healthcare

expenditures. In addition to leading to higher

medical costs, obesity leads to lost productivity.

Research found that obese men and women bear

an additional $1,152 and $3,613 a year in

medical expenses compared to their non-obese

counterparts.92

Avoiding the burden that obesity can have on

society overall has been a high priority for many

regulators. The USDA banned multiple forms of

unhealthy snack foods in schools, allowing only

products that are below certain thresholds for


sugar and calorie content.93 As mentioned

previously in the regulatory section, some

countries have begun to implement junk food

taxes to address obesity concerns. In 2013,

Mexico approved a five percent tax on unhealthy

snack food to abate the country’s rising obesity

levels and the associated burden on health care

costs.94 Other countries and cities have

implemented similar taxes on high-fat products.

Snack food companies including PepsiCo and

Snyder’s-Lance recognize material risks associated

with regulation and taxes on their products and

ingredients, which can result in increased costs or

weakening demand from customers.95

Concerns about the long-term health effects of

food additives, preservatives, and artificial

ingredients are also shaping the Processed Foods

industry. Concerns about partially hydrogenated

oil, a controversial artificial ingredient that is the

primary source of trans fats, have led the FDA

restrict its usage as an ingredient, as studies

showed that it is not “generally recognized as

safe” for use in processed foods.96 The restriction

requires food companies to seek approval

beginning in 2018, before the ingredient can be

included in various processed foods.97 Partially

hydrogenated oil is used widely in desserts,

popcorns, frozen pizza, snack foods, and other

processed foods, largely to improve texture and

taste for consumption. Reduction in the intake of

trans fats can prevent thousands of heart attacks

and deaths, according to the FDA.98 Negative

health effects have also been linked with the

consumption of monosodium glutamate (MSG),

which is used widely as a flavor enhancer in many

processed food products including chips and

canned soups. Studies have shown that

consuming MSG can lead to obesity and has

other negative health effects such as headaches

and nausea. Research published in the American

Journal of Clinical Nutrition followed 10,000

adults in China for more than five years to

monitor their intake of MSG. They found that

men and women who consumed the most MSG

were 30 percent more likely to become

overweight.99

These potentially harmful ingredients can present

unnecessary risk to both consumer health and

corporations that produce processed foods.

Nestlé faced a $5 million class action lawsuit for

its use of trans fats in frozen pizza products after

a mother claimed the product presented

unnecessary health risks to her children and other

consumers.100 While the lawsuit was dismissed, it

shows the potential liabilities associated with

unintended health impacts. The case was

dismissed after the plaintiff failed to present

evidence of direct harm to her situation,

presenting only facts from long-term health

studies.101 The J.M. Smucker Company, producer

of Crisco oil and fats and Jif peanut butter, faced

several lawsuits over a two-year period as a result

of using trans fats in its products while

misleading customers about the nutritional

characteristics of its products.102 While the claims

were ultimately dismissed, the company

reformulated some of its products to remove

trans fats.103 This evidence highlights just a

portion of the harmful ingredients used in

processed foods and the unnecessary risks they

can create for consumers, and ultimately for food

producers as well.

Companies in the Processed Foods industry are

beginning to recognize these risks as well as

opportunities associated with addressing the

health and nutritional characteristics of their

products. Processed foods companies regularly

compete to offer new products that meet the

quality, taste, and nutritional value preferences of

customers.104 In their Form 10-K filings, nearly

every company in the Processed Foods industry,


including large snack, confectionary, and

packaged food companies, recognizes the risk of

failing to address shifting consumer demands and

tastes as they relate to product health and

nutritional preferences.105 Specifically, General

Mills stated in its 2014 Form 10-K that ”[o]ur

success depends in part on our ability to

anticipate the tastes and eating habits of

consumers and to offer products that appeal to

their preferences. Consumer preferences and

category-level consumption may change from

time to time and can be affected by a number of

different trends and other factors.” The company

further states that “demand for our products

could be affected by consumer concerns

regarding the health effects of ingredients such

as sodium, trans fats, genetically modified

organisms, sugar, processed wheat, or other

product ingredients or attributes.”106

In response, companies are shifting their product

formulas to introduce healthier and more natural

alternatives. For example, Nestlé USA announced

a plan to remove artificial ingredients from its

candy by the end of 2015, as the company

recognizes that consumer preferences are

trending toward products with fewer artificial

ingredients. Market research conducted by

Nielsen found that 60 percent of Americans say

the absence of artificial colors and flavoring is

important in their food-buying decisions.107 Frito-

Lay, a producer of popular snack foods including

potato chips, tortilla chips, and pretzels, has

broadened 50 percent of its snack food portfolio

to include all-natural ingredients, meaning that

these products contain no artificial ingredients,

preservatives, or controversial ingredients like

MSG.108 Mondelez International has launched

“mindful snacking” goals for 2020, which

include offering 25 percent more of its “better

choice” products, reducing sodium and saturated

fat by 10 percent, increasing whole grains by 25

percent, and increasing the number of its

products that contain 200 calories or less by 25

percent.109 General Mills stated in its 2015

Sustainability Report that 76 percent of 2014

sales consisted of products that have been

“nutritionally improved” since 2005. This

includes products that have been reformulated to

reduce calories, fat, sugar, and sodium as well as

products that have been enhanced with

beneficial nutrients such as vitamins, minerals,

and fiber.110

Additionally, demand for organic products has

been a growing trend in the industry, presenting

opportunities for companies to capture shifting

consumer preferences. Organic packaged and

prepared food products that contain no artificial

ingredients or additives and do not contain

genetically modified ingredients experienced

double-digit sales growth from 2005 to 2014,

compared to only three percent growth in non-

organic food categories, further expressing

consumers’ interest in products that address

ingredient health concerns.111 Experts estimate

that the organic food segment of this industry

will grow 14 percent annually from 2013 to

2018, representing significant opportunity for

processed foods companies.112

Value Impact

Addressing obesity and other health concerns

may provide the Processed Foods industry with

opportunities to build better reputations and

strengthen its social license to operate. Bans and

added taxes present material risks for processed

food producers, especially if more governments

adopt policies to address obesity concerns.

Products that contain targeted ingredients may

face significant declines in sales volume.

Health characteristics of ingredients can influence

public perception, leading to shifts in demand for


unhealthy products and increasing demand for

healthier alternatives. Lawsuits stemming from

product health and safety concerns may result in

costly fines and settlements as well as negative

perceptions and reputational harm, affecting

long-term sales. As demand for products that

meet higher health and nutritional standards

continues to increase, the probability and

magnitude of the impact on financial results in

this industry are likely to increase in the near

term. To capture these growth opportunities,

processed foods companies may need to increase

their expenses towards research and

development of new products.

Disclosure around a company’s approach to

improving the health and nutritional profile of its

product portfolio can help analysts determine the

effectiveness of that company’s approach to

addressing consumer health trends, which drives

future revenue potential. Additional disclosure

around the ingredients used in production can

help analysts determine companies’ level of

overall risk from customer and regulatory

scrutiny.

Product Labeling & Marketing

Processed foods producers make product claims

aimed at winning customers by demonstrating a

perceived benefit of consumption. Companies

have often made claims about their products that

may have been misleading and untruthful,

resulting in fines and litigation that could be

materially harmful to operations. Concerns over

increasing rates of childhood obesity have also

raised questions about the marketing practices of

processed foods companies to this sensitive

subset of the population. This has led to

regulatory initiatives that monitor the marketing

of unhealthy food to children, which present new

challenges to the industry.

Additionally, new laws and regulations regarding

the use and labeling of GMOs have a direct

impact on the industry, as many of the

ingredients in processed foods are derived from

GMO ingredients. Consumers are concerned

about the fact that GMO crops are artificially

created, which creates trepidation about adverse

health effects and increases demand for GMO

labeling. These issues can affect the competitive

landscape of the industry, as companies may be

subject to litigation and criticism if they make

misleading statements, advertise toward children,

and don’t label their products containing GMOs.





• Number of child advertising impressions

made, percentage promoting products

meeting the Children’s Food and

Beverage Initiative (CFBAI) Uniform

Nutrition Criteria;

• Revenue from products labeled as (1)

containing genetically modified

organisms (GMOs) and (2) non-GMO;

• Notice of violations received for non-

conformance with regulatory labeling

and/or marketing codes; and

• Amount of legal and regulatory fines and

settlements associated with marketing

and/or labeling practices.

Evidence

The Federal Trade Commission (FTC) and FDA

have oversight of the truthfulness of advertising

in the food industry, and that includes holding

advertisers accountable. The Federal Trade

Commission Act requires that “(1) advertising

must be truthful and non-deceptive; (2)

advertisers must have evidence to back up their

claims; and (3) advertisements cannot be


unfair.”113 Processed foods producers make

multiple health claims and advertise their

products in unique and sometimes misleading

ways in order to capture demand from

consumers. For example, foods labeled as

“natural” generated more than $40 billion in

retail sales during 2013, ranking second only

behind foods labeled as “low in fat.” Currently,

however, the FDA does not have a consistent

definition of the term “natural,” and so the use

of this term by companies has led to confusion

among consumers.114 This type of claim can

create unnecessary risks for companies and result

in costly lawsuits and tarnished brand

reputations.

In 2013, it was estimated that there had been

more than 100 class action lawsuits over the

preceding two years against food and beverage

companies as a result of their use of the term

“natural” in product labeling. For example,

Kellogg’s Kashi product line, known for its health

and nutrition claims, faced a class action lawsuit

over the use of the term “all natural,” because

consumers claimed that the company’s products

contained synthetic versions of naturally

occurring substances and were not actually

natural. While admitting no liability, Kellogg

settled and agreed to remove the “all natural”

and “nothing artificial” wording from some of its

Kashi products. As part of the settlement,

Kellogg agreed to pay $5 million to consumers.115

The Kashi brand faced additional criticism for

using genetically modified ingredients, which

consumers said was in conflict with the brand’s

healthy image. Sales for the line have since

suffered due to brand criticism and a weak cereal

market, according to company CEO John Bryant.

The company is hoping to address the criticism by

using more non-GMO ingredients.116 Campbell

Soup Company, Frito-Lay, and General Mills have

all been subject to similar lawsuits based on their

use of the term “natural.”117 While the

companies maintain no wrongdoing, the risk of

tarnishing a brand’s reputation by making

misleading or non-scientifically proven claims

remains.

Additionally, childhood obesity has tripled since

1980, and there is a growing expectation of non-

predatory marketing toward children. New

initiatives have been launched by industry

participants to voluntarily monitor and control

advertising toward children, which is changing

industry marketing dynamics.118 As addressed in

the regulatory section of this brief, a U.S.

government task force was established in 2006 to

address the impact of media on childhood

obesity. As addressed in the regulatory section of

this brief, a U.S. government task force was

established in 2006 to address the impact of

media on childhood obesity, and the Better

Business Bureau launched the CFBAI to

encourage the industry to self-regulate its

advertising aimed at children.119 In 2007, Kellogg

Co. stated that advertising to children under 12

represented 27 percent of its advertising

spending, or $206 million, according to the

company’s total advertising budget. Kellogg has

since agreed to self-regulate its marketing aimed

at children and advertise only products in which

the number of calories and the amount of fat and

sugar per serving are limited, potentially altering

the advertising mix of its products, which is

something investors would be interested in.120

Consumers have grown increasingly concerned

about the use of GMOs in their food and

beverage products. As a result, states around the

U.S. have been considering laws requiring

companies to label food products containing

GMOs.121 An NPD Group research report found

that more than half of American consumers have

some level of concern about genetically modified


food products, yet many are still unclear about

the definition of GMOs.122 There are currently 30

states in the U.S. with legislative proposals

regarding GMO labeling, and more than 60

countries around the world have restrictions or

bans on the use of GMOs.123 For example, China

recently issued GMO labeling policies, as food

safety concerns in the country are growing. In

2012, more than 41 percent of Chinese

consumers considered food safety a “very big

problem.” This number is up from only 12

percent in 2008. The GMO labeling requirement

may provide increased demand for premium

brands that do not contain GMO ingredients.124

The European Union also maintains strict GMO

legislation that requires safety assessments and

clear labeling of all GMO products placed on the

market.125

Currently, many companies openly oppose GMO

labeling.126 While the safety concerns of GMO

consumption are widely debated, these new

legislative proposals and bans present pressure

for the Processed Foods industry to acknowledge

the use of GMOs in its products and label them

accordingly. Companies that oppose GMO

labeling and fail to recognize the growing trends

and concerns regarding the use and labeling of

GMO ingredients may expose themselves to

unnecessary risks that could materially harm

operating results in the future. Conversely,

companies that diversify their ingredient portfolio

into non-GMO sources may capture additional

opportunities to fulfill consumer demand for non-

GMO food products.

Value Impact

Chronic instances of presenting false or deceptive

information when advertising a product could

invite additional oversight and litigation, leading

to higher one-time costs and increased

compliance expenses that harm profitability.

Government and legal actions toward companies

with poor advertising practices are likely to have

a negative impact on reputation, leading to a

long-term deterioration of brand reputation and

a loss of market share. Conversely, proper

management of the issues can lead to new

opportunities, as consumers prefer food products

that are labeled truthfully and that align with

their health and nutritional goals.

Policies for responsible marketing toward children

present opportunities for companies to build

stronger brand reputations and strengthen their

social license to operate, while avoiding negative

regulation and litigation aimed at the company’s

products. As newer or more stringent FTC and

FDA regulations are implemented, the probability

and magnitude of these impacts are likely to

increase in the near to medium term.

Additionally, regulation around the labeling of

GMOs could impact revenue and market share, as

consumers may be less inclined to purchase

products with genetically engineered ingredients.

Outright bans on GMO ingredients present

supply chain risks that may result in increased

prices for raw materials, harming processed foods

companies’ profitability. Companies that fail to

address growing concerns about the use of GMO

ingredients may suffer from missed opportunities

and diminishing customer demand.

Disclosure around a company’s labeling and

marketing violations can help analysts determine

financial costs and risks associated with

misleading marketing policies, which harm a

company’s reputation. Disclosure around a

company’s use of GMOs can help analysts

determine the company’s exposure to risks

associated with pending and future regulation

that requires labeling of these ingredients.

Additionally, understanding of the company’s


practices regarding marketing geared toward

children can help analysts determine the exposure

to potential regulation and public outcry.

BUSINESS MODEL AND INNOVATION

This dimension of sustainability is concerned with

the impact of environmental and social factors on

innovation and business models. It addresses the

integration of environmental and social factors in

the value-creation process of companies,

including resource efficiency and other

innovation in the production process. It also

includes product innovation and efficiency and

responsibility in the design, use-phase, and

disposal of products. It includes management of

environmental and social impacts on tangible and

financial assets—either a company’s own or

those it manages as the fiduciary for others.

Emerging environmental and social trends,

stricter regulatory requirements, and increased

scrutiny of the disposal of food containers and

packaging are creating new innovation and

business opportunities for the industry. The

Processed Foods industry produces hundreds of

millions of disposable containers, which end up in

landfills, creating environmental externalities.

Industry participants are utilizing multiple

opportunities and innovative solutions to address

their packaging’s lifecycle impacts, which can

improve operating efficiency and long-term brand

value.

Packaging Lifecycle Management

Purchasing packaging materials represents a

major business cost and contributes to the

environmental footprint of processed foods

companies. Each stage of a package’s lifecycle,

including design, transportation, and disposal,

presents its own unique environmental challenges

and opportunities that should be considered by

processed foods companies. Environmental

benefits can include reducing the resources

needed for packaging materials, reducing GHG

emissions in transportation, and reducing the

amount of solid waste consumers send to

landfills, as food containers and packaging are

responsible for a significant amount of waste in

the U.S. every year.127

While many processed foods companies do not

manufacture their own containers and

packaging, they are often responsible for

designing and sourcing them, which provides

them an opportunity to engage suppliers to

reduce the negative environmental externalities

associated with packaging manufacturing and

end-of-life waste. Processed foods companies can

also be directly affected by legislation around

end-of-life treatment of containers.

The demand for packaging products is

increasingly driven by the use of materials that

require less energy and fewer non-renewable

resources, as well as packaging innovations that

requires less material. While the sustainability

performance of packaging depends largely on the

type, use, and ultimate disposal of materials,

companies that effectively manage the

sustainability characteristics of their product

packaging may be better positioned to capture

shifting consumer demand, while also potentially

reducing input and transport costs.

Processed foods companies can work with

packaging manufacturers to improve the

environmental characteristics of their packaging

through better design, which helps build a better

brand reputation and generate cost savings.


Innovations such as light-weighting materials can

result in cost benefits during the purchasing and

transportation phase for processed food

products. Other innovations can result is better

end-of-life management, e.g., through use of

recyclable or compostable materials.





• Total weight of packaging sourced,

percentage made from recycled or

renewable materials, and percentage that

is recyclable or compostable; and

• Description of strategies to reduce the

environmental impact of packaging

throughout its lifecycle.

Evidence

Processed foods companies can spend a

considerable amount of resources on packaging.

PepsiCo spent more than $6.9 billion, or 10.5

percent of its sales, on packaging for its beverage

and snack food segments in 2013, representing a

significant expense for the company.128 Pinnacle

Foods stated in its Form 10-K that packaging

costs represent more than 21 percent of the

company’s cost of goods sold.129 Other

companies recognize the risk of increasing

materials costs and the importance of packaging

design in the competitive food industry.130

Companies are setting packaging innovation

goals to improve efficiencies and reduce the

negative environmental impacts of packaging.

ConAgra has a research and development team

dedicated to sustainable packaging and

improving the company’s packaging and

environmental performance. Through multiple

initiatives, the company has reduced its use of

packaging material by 7.8 million pounds, which,

combined with other initiatives such as water and

waste management, saved the company more

than $30 million in 2013.131 The company has set

goals to reduce packaging by 10 percent per

pound of product, increase the amount of

packaging made with renewable resources, and

increase the amount of recycled content in

packaging by 25 percent from 2009 baseline

levels.132 Nestlé’s packaging initiatives reduced

the company’s use of packaging materials by

more than 133 million pounds, leading to more

than $170 million in cost savings in 2013.133

Even small changes in packaging design can

translate to real business value. For example,

General Mills redesigned its Bisquick package by

removing a handle, which reduced the amount of

material needed. This small design feature saves

the company more than $900,000 in material

and logistics costs a year.134 These costs savings

are largely permanent, recurring every year,

representing significant value for shareholders.

Additionally, as companies compete to create

appealing packaging, more companies are

beginning to experiment with new packaging

technology to meet environmental performance

goals. Heinz partnered with Coca-Cola to

produce ketchup in bottles using Coke’s

PlantBottle plastic packaging technology. Up to

40 percent of the resin used to make the

PlantBottle comes from bio-based renewable

plant materials, and the bottles are believed to be

better for the environment than traditional fossil

fuel-based plastic containers.135

Currently, packaging generates nearly 33 percent

of the total non-industrial solid waste sent to

landfills every year, a significant amount of waste

that contributes to methane emissions from

landfills.136 Processed foods producers are


responsible for much of this waste, namely paper

and paperboard, which are key to protecting

food products and which represented 28 percent

of total discarded municipal solid waste in

2011.137 The industry as a whole may be at risk

from extended producer responsibility laws,

which essentially require companies to internalize

the cost of disposing of their packaging at the

end-of-life stage. Companies have also been

targeted by shareholder resolutions seeking to

improve the recyclability of packaging. For

example, Mondelez International utilizes various

disposable packaging materials that are

sometimes unrecyclable. This spurred a

shareholder resolution vote in 2014 to improve

packaging recyclability, which received more than

28 percent support, representing more than $11

billion in shareholder value.138 Walmart recently

launched a $100 million Closed Loop Fund to

improve the recycling infrastructure for many of

the products it sells, including food packaging.

Many large processed foods companies signed on

to support Walmart’s initiative, including Kellogg,

Campbell Soup Company, General Mills, and

PepsiCo.139 Companies are also implementing

new voluntary programs, such as the

How2Recycle Label, in order to help improve the

recycling rates for their product packaging. This

labeling gives consumers convenient information

about the recyclability a product’s packaging,

including boxes and plastic liners used to protect

cereal, and the availability of recycling centers.

The program, led by GreenBlue, has been found

to be easy to understand and leads to recycling

action by consumers while also improving the

reputation of companies and their products.140

Value Impact

Collaborating with packaging partners to develop

innovations in material technology and light-

weighting may provide producers with

opportunities to address environmental concerns

and capture recurring cost savings by reducing

material usage. This effectively lowers the cost of

goods sold and can improve margins.

Companies that voluntarily improve and account

for the environmental impacts of their products’

containers across their lifecycle, especially during

end-of-life stages, may be better positioned to

build stronger brand reputation with customers

and avoid burdensome recycling legislation that

can hinder industry profitability. The level of

material impact on companies is likely to increase

in the future as the public becomes more

environmentally cautious.

Disclosure around packaging efficiency, the

percentage of packaging that is recycled, and the

amount that is made from renewable sources can

help analysts evaluate a company’s cost-saving

potential and assess its exposure to potential

regulations associated with end-of-life

management.

LEADERSHIP AND GOVERNANCE

As applied to sustainability, governance involves

the management of issues that are inherent to

the business model or common practice in the

industry and are in potential conflict with the

interest of broader stakeholder groups

(government, community, customers, and

employees). They therefore create a potential

liability, or worse, a limitation or removal of

license to operate. This includes regulatory

compliance, lobbying, and political contributions.

It also includes risk management, safety

management, supply chain and resource

management, conflict of interest, anti-

competitive behavior, and corruption and bribery.

Processed foods companies’ ingredient supply

chains are exposed to risks from climate change.


Companies also potentially contribute to

environmental and social injustices, which can

present long-term operational risks. Companies in

the industry are beginning to engage suppliers to

improve the resiliency of their supply of raw

ingredients and ensure ingredients are ethically

sourced. Through engagement with suppliers,

companies may limit their exposure to shifting

weather patterns that can cause ingredient

supply disruptions.

Environmental & Social Impacts of Ingredient Supply Chains

Companies in the industry utilize a significant

amount of agricultural inputs that are susceptible

to shifts in weather patterns, many of which are

produced in areas affected by drought. This

exposure can lead to price inflation and can

affect company profitability. Ultimately, climate

change, water scarcity, and land-use restriction

present risks to a company’s long-term ability to

source key materials and ingredients. Companies

are recognizing these risks and engaging with key

suppliers to implement sustainable agricultural

practices in order to generate a more resilient

supply of key ingredients. As defined by the

USDA, sustainable agriculture entails farming

systems “capable of maintaining their

productivity and usefulness to society indefinitely.

Such systems must be resource-conserving,

socially supportive, commercially competitive, and

environmentally sound.”141 Additionally,

companies are continually competing on ethical

sourcing practices and certifications for their

products, which address labor issues and worker

rights. Responsible sourcing and fair trade

practices have the potential to offer companies

opportunities to capture growing demand from

socially conscious consumers, while also securing

a steady supply of key ingredients.

Managing a company’s exposure to these

environmental and social risks can lead to

improved supply chain resiliency and enhanced

reputation, which provide value to shareholders.





• Percentage of food ingredients sourced

from regions with High or Extremely High

Baseline Water Stress;

• Percentage of food ingredients sourced

that are certified to third-party

environmental and/or social standards, by

certification scheme;

• Suppliers’ social and environmental

responsibility audit conformance: major

non-conformance rate and associated

corrective action rate and minor non-

conformance rate and associated

corrective action rate; and

• List of priority food ingredients and

discussion of sourcing risks due to

environmental and social considerations.

Evidence

As processed foods producers are large direct

purchasers of many agricultural ingredients, they

have a vested interest in the operations and

performance of key ingredient suppliers. The

Processed Foods industry recognizes that climate

change and water scarcity in the supply chain can

have a material impact on ingredient prices.

Nearly every company in the industry recognizes

the key risk of supply chain disruptions and

increasing prices of raw materials as a result of

climate change and water scarcity in their

Form 10-K filings.142 Specifically, ConAgra states

in its 2014 Form 10-K that “[t]here is growing

concern that carbon dioxide and other

greenhouse gases in the atmosphere may have an


adverse impact on global temperatures, weather

patterns, and the frequency and severity of

extreme weather and natural disasters. In the

event that such climate change has a negative

effect on agricultural productivity, we may be

subject to decreased availability or less favorable

pricing for certain commodities that are necessary

for our products, such as corn, wheat, and

potatoes.”143

A recent report by Oxfam states that the price of

Kellogg’s Corn Flakes and General Mills’ Kix

cereals could rise 44 and 24 percent, respectively,

over the next 15 years due to ingredient supply

disruption caused by climate change.144 General

Mills has identified more than 10 ingredients that

are crucial to its success, with which the company

can have the greatest impact through sustainable

sourcing strategies. These ingredients include

palm oil, wheat, oats, sugar beets, vanilla, cocoa,

corn, and sugarcane. Through company

partnerships and supply chain analysis for

individual ingredients, General Mills hopes to

sustainably source 100 percent of its 10 priority

ingredients by 2020, representing more than 50

percent of annual raw material purchases.145 This

effort may help the company secure a long-term

supply of key ingredients, providing it with a

competitive advantage relative to its peers.

Currently, 87 percent of corn produced in the

U.S. is grown in regions with high or extremely

high water stress, which highlights the challenges

and potential supply disruptions for industries

that depend on the crop.146 The price of corn has

risen dramatically over the past 10 years,

increasing from $2 per bushel in 2005 to around

$4 per bushel in 2007, and again in 2012,

reaching an all-time high of $8 per bushel after

severe droughts. The price of corn has since

stabilized after a record harvest in 2013, pushing

prices down to between $4 and $5 per bushel,

yet the risk remains for high levels of price

volatility in the future due to drought concerns,

presenting significant risks for processed foods

companies.147 General Mills and ConAgra both

disclose their direct and supply chain exposure to

water-stressed regions in their sustainability

reports.148 For example, ConAgra stated that

more than 42 percent of its “tier-1” suppliers are

located in regions with medium to high water

stress.149 This sort of disclosure may give investors

a better understanding of the inherent risks in

the company’s supply chain.

Beyond the risks of external exposure to climate

change, the farming of agricultural ingredients

has large environmental impacts, such as

pollution, heavy water usage, and GHG

emissions. By purchasing sustainably farmed

ingredients, engaging with suppliers, and

harnessing innovations in sustainable agriculture,

processed foods companies can have a direct

influence on their supply chains in order to

address many of the environmental impacts of

their ingredients. For example, companies may

choose to purchase organic ingredients that are

produced without synthetic pesticides and

fertilizers, helping to protect soil and local

ecosystems, or they can seek more direct

involvement in the growing process.150 H.J. Heinz

Company has developed its own proprietary

tomato seeds through traditional, non-genetically

modified breeding techniques that are adaptable

to various climates around the world. These seeds

produce higher yields that are more resistant to

disease, remain ripe longer, and require less

water, improving the overall quality and cost of

the company’s main ingredient. Heinz maintains

an influence on the planting and cultivation

process, allowing the company to improve

product quality and farmer well-being, thus

further strengthening its supply of tomatoes. The

company currently distributes its seeds to more


than 30 countries and believes that more than 30

percent of the world’s tomatoes are grown using

HeinzSeed.151 Mars Inc. has been recognized for

its supplier engagement efforts to improve cocoa

yields in Africa. The company hopes to engage

with more than 150,000 farmers in Ivory Coast in

order to triple cocoa yields in the region, a task

the company believes is feasible, requiring only

better plant materials, fertilizer resources, and

farmer training, which Mars will provide.152

Responsible sourcing initiatives can lead to direct

environmental, social, and business benefits for

companies in the Processed Foods industry. The

demand for palm oil rose after the FDA

implemented trans-fat labeling requirements, as

palm oil is a viable replacement for trans fats in

many food products. Palm oil is now the most-

produced edible oil in the world.153 The rising

demand for palm oil has led to an increase in the

rate of deforestation and increased GHG

emissions in Indonesia. As a result, Indonesia is

now the third-largest GHG emitter in the world.

The expansion of palm oil plantations in

Southeast Asia has also contributed to harming

endangered species and local communities in the

region.154 Companies in the Processed Foods

industry are recognizing these externalities and

addressing them through responsible and

sustainable sourcing initiatives. Nearly every

major user of palm oil in the Processed Foods

industry is setting goals to responsibly source 100

percent of palm oil. For example, General Mills

and Kellogg have both set full traceability and

100-percent responsible sourcing goals for their

palm oil supply chains, aiming to use only palm

oil that is from legal sources and is produced in a

way that preserves high-value lands and meets

company supplier codes of conduct. These

companies are looking to comply with various

certifications through the Roundtable on

Sustainable Palm Oil (RSPO) principles.155

Responsible sourcing initiatives also cover other

ingredients and various social and environmental

externalities. Chocolate companies, for example,

are also recognizing the need to address child

labor concerns in their supply chains, as these

may tarnish brand reputation. Nestlé is leveraging

its purchasing power to address child labor

concerns in African cocoa regions. The company

has partnered with the Fair Labor Association to

address the issue, which can be harmful to

children and local communities in the region.156

Mondelez International has invested more than

$400 million in its “Cocoa Life” initiative to

address many of the social and environmental

externalities of cocoa farming, including

improving farming techniques, promoting

community well-being, eliminating child labor,

and protecting the environment.157

Value Impact

While many of these companies do not have

direct control over farming practices, utilizing

their purchasing power to engage with farmers

enables them to influence and improve

agriculture conditions that improve their supply

of key ingredients. These efforts can help

companies address issues such as climate change

and water scarcity in their supply chain, which

can affect the availability of key raw ingredients

that impacts a company’s cost of sales and ability

to generate revenue in the medium to long term.

Additionally, investors may benefit from

disclosure around a company’s exposure to

environmental and supply chain risks from

climate change and water scarcity, which can

drive a firm’s long-term competitiveness and

influence its total risk profile. Addressing

responsible sourcing issues through programs

and certifications may provide processed foods

producers, particularly those that use palm oil

and cocoa, with opportunities to capture greater


demand, improve their brand reputation, and

strengthen their risk profile.

Disclosure around the percentage of ingredients

sourced from water-stressed regions can help to

identify the level of risk associated with supply

chains, such as a company’s ability to procure

ingredients effectively and volatility in ingredient

prices. Additionally, further disclosure around

other social and environmental considerations in

the supply chain can help analysts determine

reputational risk associated with a company’s

supply chain.

Evolving regulations focused on addressing

environmental externalities are likely to become

more stringent, making probability and

magnitude of the aforementioned impacts higher

in the future.


APPENDIX I

FIVE REPRESENTATIVE PROCESSED FOODS COMPANIESV

V This list includes five companies representative of the Processed Foods industry and its activities. This includes only companies for which the Processed Foods industry is the primary industry, companies that are U.S.-listed but are not primarily traded over the counter, and for which at least 20 percent of revenue is generated by activities in this industry, according to the latest information available on Bloomberg Professional Services. Retrieved on April 15, 2015.

COMPANY NAME (TICKER SYMBOL)

Mondelez International (MDZ)

ConAgra Foods (CAG)

General Mills (GIS)

Campbell Soup Co (CPB)

Hershey Co (HSY)


APPENDIX IIA

EVIDENCE FOR SUSTAINABILITY DISCLOSURE TOPICS

Sustainability Disclosure Topics

EVIDENCE OF INTEREST

EVIDENCE OF

FINANCIAL IMPACT

FORWARD-LOOKING IMPACT

HM (1-100)

IWGs EI

Revenues &

Costs

Assets & Liabilities

Cost of Capital

EFI

Probability & Magnitude

Exter-

nalities

FLI

% Priority


53* 83 5 Medium • • Medium • Yes

Water Management

70* 86 4 High • • Medium • Yes

Food Safety 67* 100 1 High • • • High • Yes

Health & Nutrition 73* 86 2 High • • • High • • Yes


57* 93 3t Medium • • High • Yes


20 83 6 Medium • Medium • Yes


53* 93 3t High • • • High • • Yes

HM: Heat Map, a score out of 100 indicating the relative importance of the topic among SASB’s initial list of 43 generic sustainability issues. Asterisks indicate “top issues.” The score is based on the frequency of relevant keywords in documents (i.e., 10-Ks, 20-Fs, shareholder resolutions, legal news, news articles, and corporate sustainability reports) that are available on the Bloomberg terminal for the industry’s publicly listed companies. Issues for which keyword frequency is in the top quartile are “top issues.”

IWGs: SASB Industry Working Groups.

%: The percentage of IWG participants that found the disclosure topic likely to constitute material information for companies in the industry. (-) denotes that the issue was added after the IWG was convened.

Priority: Average ranking of the issue in terms of importance. 1 denotes the most important issue. (-) denotes that the issue was added after the IWG was convened.

EI: Evidence of Interest, a subjective assessment based on quantitative and qualitative findings.

EFI: Evidence of Financial Impact, a subjective assessment based on quantitative and qualitative findings.

FLI: Forward-looking Impact, a subjective assessment of the presence of a material forward-looking impact.


APPENDIX IIB

EVIDENCE OF FINANCIAL IMPACT FOR SUSTAINABILITY DISCLOSURE TOPICS

MEDIUM IMPACT H IGH IMPACT

Evidence of

Financial Impact

REVENUE & EXPENSES ASSETS & LIABILITIES RISK PROFILE

Revenue Operating Expenses Non-operating Expenses Assets Liabilities

Cost of Capital

Industry Divestment

Risk Market Share

New Markets Pricing

Power Cost of

Revenue R&D CapEx Extra-

ordinary Expenses

Tangible Assets

Intangible Assets

Contingent Liabilities & Provisions

Pension & Other

Liabilities


•

•

•

Water Management

•

• • •

•

Food Safety • • • • •

Health & Nutrition • • • • • • •


• • • • •


• • •


• • • •


APPENDIX III

SUSTAINABILITY ACCOUNTING METRICS | PROCESSED FOODS

TOPIC ACCOUNTING METRIC CATEGORY UNIT OF MEASURE CODE


Operational energy consumed, percentage grid electricity, percentage renewable

Quantitative Gigajoules (GJ), Percentage (%)

CN0103-01

Fleet fuel consumed, percentage renewable Quantitative Gigajoules (GJ), Percentage (%)

CN0103-02

Water Management

(1) Total water withdrawn and (2) total water consumed, percentage of each in regions with High or Extremely High Baseline Water Stress

Quantitative Cubic meters (m3), Percentage (%)

CN0103-03

Number of incidents of non-compliance with water quality and/or quantity permits, standards, and regulations

Quantitative Number CN0103-04

Discussion of water management risks and description of strategies and practices to mitigate those risks

Discussion & Analysis

n/a CN0103-05

Food Safety

Global Food Safety Initiative (GFSI) audit conformance: (1) major non-conformance rate and associated corrective action rate and (2) minor non-conformance rate and associated corrective action rate

Quantitative Rate CN0103-06

Percentage of ingredients sourced from supplier facilities certified to a Global Food Safety Initiative (GFSI) scheme

Quantitative Percentage (%) by spend CN0103-07

Notice of food safety violations received, percentage corrected

Quantitative Number, Percentage (%)

CN0103-08

Number of recalls issued, total amount of food product recalled*

Quantitative Number, Metric tons (t)

CN0103-09

Health & Nutrition

Revenue from products labeled and/or marketed to promote health and nutrition attributes

Quantitative U.S. Dollars ($) CN0103-10

Revenue from products that meet Smart Snacks in School criteria or foreign equivalent


Description of the process to identify and manage products and ingredients of concern and emerging dietary preferences


n/a CN0103-12

* Note to CN0103-09—Disclosure shall include a description of notable recalls, such as those that affected a significant amount of product or those related to serious illness or fatality.


SUSTAINABILITY ACCOUNTING METRICS | PROCESSED FOODS (CONTINUED)

TOPIC ACCOUNTING METRIC

CATEGORY

UNIT OF MEASURE

CODE


Number of child advertising impressions made, percentage promoting products meeting the Children’s Food and Beverage Initiative (CFBAI) Uniform Nutrition Criteria


CN0103-13

Revenue from products labeled as (1) containing genetically modified organisms (GMOs) and (2) non-GMO


Notices of violations received for non-conformance with regulatory labeling and/or marketing codes


CN0103-15

Amount of legal and regulatory fines and settlements associated with marketing and/or labeling practices**



(1) Total weight of packaging sourced, (2) percentage made from recycled or renewable materials, and (3) percentage that is recyclable or compostable

Quantitative Metric tons (t), Percentage (%)

CN0103-17

Description of strategies to reduce the environmental impact of packaging throughout its lifecycle


n/a CN0103-18


Percentage of food ingredients sourced from regions with High or Extremely High Baseline Water Stress

Quantitative Percentage (%) by spend

CN0103-19

Percentage of food ingredients sourced that are certified to third-party environmental and/or social standards, by certification scheme

Quantitative Percentage (%) by spend

CN0103-20

Suppliers’ social and environmental responsibility audit conformance: (1) major non-conformance rate and associated corrective action rate and (2) minor non-conformance rate and associated corrective action rate

Quantitative Rate CN0103-21

List of priority food ingredients and discussion of sourcing risks due to environmental and social considerations


n/a CN0103-22

** Note to CN0103-16—Disclosure shall include a description of fines and settlements and corrective actions implemented in response to events.


34I N D U S T RY B R I E F | P R O C E S S E D F O O D S

APPENDIX IV: Analysis of SEC Disclosures | Processed Foods

The following graph demonstrates an aggregate assessment of how representative U.S.-listed Processed Foods companies are currently reporting on sustainability topics in their SEC annual filings.

Processed Foods


Water Management

Food Safety

Health & Nutrition



Environmental & Social Impacts of Ingredient Supply Chain

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

TYPE OF DISCLOSURE ON SUSTAINABILITY TOPICS

NO DISCLOSURE BOILERPLATE INDUSTRY-SPECIF IC METRICS

83%

86%

100%

86%

93%

83%

93%

IWG Feedback*

*Percentage of IWG participants that agreed topic was likely to constitute material information for companies in the industry.

REFERENCES

1 Data from Bloomberg Professional service, accessed on April 14, 2015, using the BICS <GO> command. The data represents global revenues of companies listed on global exchanges and traded over-the-counter (OTC) from the Processed Foods industry, using Levels 3 and 4 of the Bloomberg Industry Classification System.

2 Author’s calculation based on above data, April 14, 2015.

3 Data from Bloomberg Professional service, accessed on June 12, 2014, using the MDLZ FA SEG <GO> command. The data represents global revenues for Mondelez International Inc., broken down by geographic regions.

4 Martin Moylan, “General Mills looking to expand internationally,” MPR News, February 1, 2014, accessed May 27, 2015, http://www.mprnews.org/story/2014/02/18/general-mills-international-expansion.

5 Campbell Soup Co., FY2013 Form 10-K for the Period Ending July 28, 2013 (filed September 26, 2013), p. 9.

6 Mondelez International, FY2013 Form 10-K for the Period Ending December 31, 2013 (filed March 3, 2014), p.55; PepsiCo Inc., FY 2013 Form 10-K for the Period Ending December 28, 2013 (filed February 14, 2014), p.7.

7 ConAgra, FY2013 Form 10-K for the Period Ending May 25, 2014 (filed July 19, 2014), p. 10.

8 PepsiCo Inc., FY2014 Form 10-K for the Period Ending December 27, 2014 (Filed February 12, 2015), p. 7; ConAgra Foods Inc., FY 2014 Form 10-K for the Period Ending May 25, 2014 (Filed July 16, 2014), p. 4; IBISWorld, IBISWorld Industry Report 31191 Snack Food Production in the US, April 2014, p. 16.

9 IBISWorld, IBISWorld Industry Report 31141 Frozen Food Production in the US,” February 2014, p. 6; IBISWorld, IBISWorld Industry Report 31191 Snack Food Production in the US, April 2014, p. 6.

10 IBISWorld, IBISWorld Industry Report 31191 Snack Food Production in the US, April 2014, p. 27.

11 Ibid., p. 9.


13 "Major public companies describe climate-related risks and costs," CDP, May 2014, p. 8, accessed May 9, 2015, https://www.cdp.net/CDPResults/review-2011-2013-USA-disclosures.pdf.

14 Mondelez International, FY2013 Form 10-K for the Period Ending December 31, 2013 (filed March 3, 2014), p. 5.

15 “Profitability Components Mondelez,” Bloomberg Food Industry Company Analysis (BI Food <GO> command), Bloomberg Professional Services, accessed May, 28, 2014.

16 ConAgra, FY2013 Form-10K for the Period Ending May 25, 2014 (filed July 19, 2014), p. 10; Mondelez International, FY2013 Form 10-K for the Period Ending December 31, 2013 (filed March 3, 2014), p. 5.


18 IBISWorld, IBISWorld Industry Report 31123 Cereal Production in the US, January 2014, p. 24; IBISWorld, IBISWorld Industry Report 31191 Snack Food Production in the US, April 2014, p. 24.

19 “ConAgra Foods to Acquire Ralcorp, the Largest Private Label Food Manufacturer in the U.S., for $90 Per Share in Cash,” ConAgra press release, November 27, 2012, accessed May 20, 2015, http://www.conagrafoods.com/news-room/news-ConAgra-Foods-to-Acquire-Ralcorp--the-Largest-Private-Label-Food-Manufacturer-in-the-US--for-90-Per-Share-in-Cash-1761910.

20 "Berkshire Hathaway, 3G Buying Heinz for $23.3 Billion," CNBC, February 14, 2013, accessed July 31, 2014, http://www.cnbc.com/id/100442835.

21 Dana Cimilluca, Dana Mattioli, and Chelsea Dulaney, “Kraft, Heinz to Merge, Forming Food Giant,” Wall Street Journal, March 25, 2015, accessed May 5, 2015.

22 IBISWorld, IBISWorld Industry Report 31123 Cereal Production in the US, January 2014, p. 9.


24 IBISWorld, IBISWorld Industry Report 31141 Frozen Food Production in the US, February 2014, p. 9.

25 IBISWorld, IBISWorld Industry Report 31135 Chocolate Production in the US, November 2013, p. 8.

26 “Packaged Food Group Premium Spread Boosted by M&A, Lower Costs,” Bloomberg Industries Industry Primer (BI FOOD <GO> command), Bloomberg Professional Services, accessed June 8, 2015.


http://www.mprnews.org/story/2014/02/18/general-mills-international-expansion

https://www.cdp.net/CDPResults/review-2011-2013-USA-disclosures.pdf

http://www.conagrafoods.com/news-room/news-ConAgra-Foods-to-Acquire-Ralcorp--the-Largest-Private-Label-Food-Manufacturer-in-the-US--for-90-Per-Share-in-Cash-1761910



http://www.cnbc.com/id/100442835

26 Author’s calculation based on above data, April 14, 2015.

27 Barbara Boland, "USDA Bans Junk Food in Schools - Will Salty Snacks Move to Black Market?," CNS News, April 14, 2014, http://www.cnsnews.com/mrctv-blog/barbara-boland/usda-bans-junk-food-schools-will-salty-snacks-move-black-market.

28 Eric Martin and Nacha Cattan, "Mexico Tackles Obesity Epidemic with Tax on Junk Food," Bloomberg Business, October 29, 2013, accessed May 21, 2015, http://www.bloomberg.com/news/2013-10-29/mexico-tackles-obesity-epidemic-with-tax-on-junk-food.html.

29 "Foodborne Illnesses: What You Need to Know," FDA, last modified May 27, 2014, accessed June 25, 2014, http://www.fda.gov/Food/FoodborneIllnessContaminants/FoodborneIllnessesNeedToKnow/default.htm.

30 "Background on the FDA Food Safety Modernization Act (FSMA)," FDA, last modified April 9, 2014, accessed June 27, 2014, http://www.fda.gov/Food/GuidanceRegulation/FSMA/ucm239907.htm.

31 White House Task Force on Childhood Obesity, Solving the Problem of Childhood Obesity Within a Generation, May 2010, p. 29.

32 Karlene Lukovitz, "Kellogg Agrees To Drop 'All Natural' Kashi Claims," Media Post, May 09, 2014, http://www.mediapost.com/publications/article/225527/kellogg-agrees-to-drop-all-natural-kashi-claims.html.

33 "Food & Beverages: Labeling Requirements," FDA Imports, http://www.fdaimports.com/industries/food_beverages/labeling_requirements.php.

34 Tennille Tracy and Annie Gasparro, “FDA Restricts Trans Fats,” The Wall Street Journal, June 16, 2015, http://www.wsj.com/articles/fda-moves-to-ban-trans-fats-1434461350.

35 Sam Hananel, "Pom Wonderful Lawsuit Could Open Door For Litigation Against Deceptive Labeling," Huffington Post, June 12, 2014, last modified August 12, 2014, accessed May 21st, 2015, http://www.huffingtonpost.com/2014/06/12/pom-wonderful-lawsuit_n_5489003.html.

36 Mondelez International, FY2013 Form 10-K for the Period Ending December 31, 2013 (filed March 3, 2014), p. 6.

37 Reid Wilson, "Maine becomes second state to require GMO labels," Washington Post, January 10, 2014, accessed May 20, 2015, http://www.washingtonpost.com/blogs/govbeat/wp/2014/01/10/maine-becomes-second-state-to-require-gmo-labels/.

38 "Clean Water Act (CWA)," Food Processing Environmental Assistance Center, accessed July 2, 2014, http://www.fpeac.org/cwa.html.

39 Mondelez International Inc., FY2013 Form 10-K for the Period Ending December 31, 2013 (filed March 3, 2014), p. 2.

40 ConAgra Foods Inc., 2013 Corporate Sustainability Report, p. 80.

41 Kellogg Co., FY2013 Form 10-K for the Period Ending December 28, 2013 (filed February 24, 2014), p. 2.

42 Author’s calculation based on data from “Annual Survey of Manufacturers: General Statistics: Statistics for Industry Groups and Industries: 2011,” U.S. Census Bureau, December 17, 2013, accessed May 20, 2015, http://www.census.gov/manufacturing/asm/.

43 PepsiCo Inc., FY2015 Form 10-K for the Period Ending December 27, 2014 (filed February 12, 2015), p. 18.

44 Author’s calculation from data from Bloomberg Professional service, accessed on April 14, 2015, using the BICS <GO> command. Industry revenue represents global revenues of companies listed on global exchanges and traded over-the-counter (OTC) from the Processed Foods industry, using Levels 3 and 4 of the Bloomberg Industry Classification System.

45 Author’s calculation based on data from Bloomberg Professional service, accessed on May 20, 2015, using the CAG FA US EQUITY <GO> command.

46 "Simplot, ConAgra Earn Energy Star for Food Processing," Environmental Leader, January 20, 2010, accessed May 18, 2015, http://www.environmentalleader.com/2010/01/20/simplot-conagra-earn-energy-star-for-food-processing/.

47 General Mills Inc., 2013 Corporate Sustainability Report, pp. 38-39.

48 Bridget Christenson, "$1 billion saved and counting," General Mills, last modified May 15, 2014, http://blog.generalmills.com/2014/05/holistic-margin-management/.

49 PepsiCo Inc., 2013 Corporate Sustainability Report, p. 25.


http://www.cnsnews.com/mrctv-blog/barbara-boland/usda-bans-junk-food-schools-will-salty-snacks-move-black-market

http://www.cnsnews.com/mrctv-blog/barbara-boland/usda-bans-junk-food-schools-will-salty-snacks-move-black-market

http://www.bloomberg.com/news/2013-10-29/mexico-tackles-obesity-epidemic-with-tax-on-junk-food.html

http://www.bloomberg.com/news/2013-10-29/mexico-tackles-obesity-epidemic-with-tax-on-junk-food.html

http://www.fda.gov/Food/FoodborneIllnessContaminants/FoodborneIllnessesNeedToKnow/default.htm

http://www.fda.gov/Food/GuidanceRegulation/FSMA/ucm239907.htm

http://www.mediapost.com/publications/article/225527/kellogg-agrees-to-drop-all-natural-kashi-claims.html

http://www.fdaimports.com/industries/food_beverages/labeling_requirements.php

http://www.wsj.com/articles/fda-moves-to-ban-trans-fats-1434461350

http://www.huffingtonpost.com/2014/06/12/pom-wonderful-lawsuit_n_5489003.html

http://www.washingtonpost.com/blogs/govbeat/wp/2014/01/10/maine-becomes-second-state-to-require-gmo-labels/


http://www.fpeac.org/cwa.html

http://www.census.gov/manufacturing/asm/

http://www.environmentalleader.com/2010/01/20/simplot-conagra-earn-energy-star-for-food-processing/

http://blog.generalmills.com/2014/05/holistic-margin-management/

50 "Mars Moves Towards Carbon Neutral Operations With Massive Wind Farm That Will Provide Electricity From Renewable Sources Equal To Its Entire U.S. Operations," Mars Inc. press release, April 2014, accessed May 12, 2015, http://www.mars.com/global/press-center/press-list/news-releases.aspx?SiteId=94&Id=5629.

51 Toby Price, "Nestlé helping Mexico to grow wind industry," Renewable Energy Magazine, October 10, 2010, accessed May 1, 2015, http://www.renewableenergymagazine.com/article/nestle-helping-mexico-to-grow-wind-industry.

52 Nestlé Inc., 2013 Corporate Social Responsibility Report, p. 265.

53 "Largest Solar Farm in Pennsylvania Completed at Snyder's-Lance," PR Newswire, June 21, 2011, accessed May 2, 2015, http://www.prnewswire.com/news-releases/largest-solar-farm-in-pennsylvania-completed-at-snyders-lance-124292344.html.

54 Synder’s-Lance Inc., FY2013 Form 10-K for the Period Ending December 28, 2013 (filed February 25, 2014), p. 27.

55 "New York Charges Forward: Frito-Lay Increases Fleet Of All-Electric Delivery Trucks And Rolls Out Enhanced Charging Stations In The State," PepsiCo press release, September 12, 2013, http://www.pepsico.com/PressRelease/New-York-Charges-Forward-Frito-Lay-Increases-Fleet-Of-All-Electric-Delivery-Truc09122013.html; "Frito-Lay Has One Million Reasons To Celebrate," PepsiCo press release, May 10, 2012, http://www.pepsico.com/PressRelease/Frito-Lay-Has-One-Million-Reasons-To-Celebrate05102012.html.

56 "Driving The Alternative Fuel Movement, Frito-Lay Unveils Investment In Compressed Natural Gas Infrastructure," PepsiCo press release, June 19, 2013, http://www.pepsico.com/PressRelease/Driving-The-Alternative-Fuel-Movement-Frito-Lay-Unveils-Investment-In-Compressed06192013.html.

57 "Procter & Gamble, General Mills and Frito-Lay Transition to Natural Gas Fleets," Forbes, November 07, 2013, accessed May 21, 2015, http://www.forbes.com/sites/stevebanker/2013/11/07/procter-gamble-general-mills-and-frito-lay-transition-to-natural-gas-fleets/.

58 General Mills, 2015 Global Responsibility Report, p. 79.

59 "World population projected to reach 9.6 billion by 2050," United Nations, last modified June 13, 2013, accessed May 4, 2014, https://www.un.org/en/development/desa/news/population/un-report-world-population-projected-to-reach-9-6-billion-by-2050.html.

60 "ESG Issue Report: Executive Summary: Water Upstream and Downstream Impacts from a Well Running Dry," MSCI ESG Research, Last modified September 2013, accessed May 4, 2015. p. 2.

61 "Every Drop Matters," Heinz, accessed June 20, 2014, http://www.heinz.com/sustainability/environment/water-consumption.aspx; Post Holdings Inc., FY2013 Form 10-K for the Period Ending September 30, 2013 (filed November 11, 2013), p. 11; Hain Celestial Group Inc., FY2013 Form 10-K for the Period Ending June 30, 2013 (filed August 29, 2013), p. 13.

62 Diamond Foods Inc., FY2014 Form 10-K for the Period Ending July 31, 2014 (filed October 3, 2014), p. 13.

63 "Saving Water the Heinz Way," Water Crunch, accessed June 20, 2014, http://watercrunch.com/2008/03/saving-water-the-heinz-way/.

64 "Conserving a Strategic Resource," Campbell Soup Company, accessed June 20, 2014, http://www.campbellcsr.com/Opportunities/Resource_Water.html.

65 Hershey Corp, 2013 Corporate Sustainability Report, p. 38.

66 "Conserving a Strategic Resource," Campbell Soup Company, accessed June 20, 2014, http://www.campbellcsr.com/Opportunities/Resource_Water.html.

67 ConAgra Foods, 2013 Corporate Sustainability Report, p. 86.

68 ConAgra Foods, 2014 Corporate Sustainability Report, p. 102-103.

69 "Every Drop Matters," Heinz, accessed June 20, 2014, http://www.heinz.com/sustainability/environment/water-consumption.aspx.

70 Sara Jerome, "Wastewater Fine From California City Could Near $9 Million," Water Online, February 19, 2014, accessed July 22, 2014, http://www.wateronline.com/doc/wastewater-fine-from-california-city-could-near-million-0001.


http://www.mars.com/global/press-center/press-list/news-releases.aspx?SiteId=94&Id=5629

http://www.renewableenergymagazine.com/article/nestle-helping-mexico-to-grow-wind-industry

http://www.renewableenergymagazine.com/article/nestle-helping-mexico-to-grow-wind-industry

http://www.prnewswire.com/news-releases/largest-solar-farm-in-pennsylvania-completed-at-snyders-lance-124292344.html

http://www.prnewswire.com/news-releases/largest-solar-farm-in-pennsylvania-completed-at-snyders-lance-124292344.html

http://www.pepsico.com/PressRelease/New-York-Charges-Forward-Frito-Lay-Increases-Fleet-Of-All-Electric-Delivery-Truc09122013.html

http://www.pepsico.com/PressRelease/New-York-Charges-Forward-Frito-Lay-Increases-Fleet-Of-All-Electric-Delivery-Truc09122013.html

http://www.pepsico.com/PressRelease/Frito-Lay-Has-One-Million-Reasons-To-Celebrate05102012.html

http://www.pepsico.com/PressRelease/Driving-The-Alternative-Fuel-Movement-Frito-Lay-Unveils-Investment-In-Compressed06192013.html

http://www.pepsico.com/PressRelease/Driving-The-Alternative-Fuel-Movement-Frito-Lay-Unveils-Investment-In-Compressed06192013.html

http://www.forbes.com/sites/stevebanker/2013/11/07/procter-gamble-general-mills-and-frito-lay-transition-to-natural-gas-fleets/

http://www.forbes.com/sites/stevebanker/2013/11/07/procter-gamble-general-mills-and-frito-lay-transition-to-natural-gas-fleets/

https://www.un.org/en/development/desa/news/population/un-report-world-population-projected-to-reach-9-6-billion-by-2050.html

https://www.un.org/en/development/desa/news/population/un-report-world-population-projected-to-reach-9-6-billion-by-2050.html

http://www.heinz.com/sustainability/environment/water-consumption.aspx


http://watercrunch.com/2008/03/saving-water-the-heinz-way/

http://watercrunch.com/2008/03/saving-water-the-heinz-way/

http://www.campbellcsr.com/Opportunities/Resource_Water.html

http://www.campbellcsr.com/Opportunities/Resource_Water.html



http://www.wateronline.com/doc/wastewater-fine-from-california-city-could-near-million-0001

http://www.wateronline.com/doc/wastewater-fine-from-california-city-could-near-million-0001

71 Spencer Fane, "SPCC Violations by Food Company Result in $475,000 Penalty and Injunctive Relief," Environmental Law Solutions, November 03, 2013, accessed May 20, 2015, http://www.spencerfane.com/environmental_law_solutions/blog.aspx?entry=437.



74 "Foodborne Illnesses: What You Need to Know," FDA, last modified May 27, 2014, accessed June 25, 2014, http://www.fda.gov/Food/FoodborneIllnessContaminants/FoodborneIllnessesNeedToKnow/default.htm; “Worst Foodborne Illness Outbreaks in U.S. History,” Healthline, February 27, 2013, accessed June 8, 2015, http://www.healthline.com/health-slideshow/worst-foodborne-illness-outbreaks#1.

75 Pinnacle Foods Inc., FY2013 Form 10-K for the Period Ending December 29, 2013 (filed March 6, 2014), p. 19; Kellogg Company, FY2013 Form 10-K for the Period Ending December 28, 2013 (filed February 24, 2014), p. 9.

76 Mondelez International Inc., FY2013 Form 10-K for the Period Ending December 31, 2013 (filed March 3, 2014), p. 12.

77 Pricewaterhouse Coopers, Brand enhancement: The ‘hidden’ benefit of implementing food chain visibility, July 2012, p. 3.

78 Kellogg Company, FY2013 Form 10-K for the Period Ending December 28, 2013 (filed February 24, 2014), p. 65.

79 Jane McGrath, "10 Costly Food Recalls," How Stuff Works, last modified 2007, accessed May 6, 2015, http://money.howstuffworks.com/10-food-recalls.htm.


81 "Peter Pan Uncaps Simple Wonders with New Line of Natural Peanut Butter Spreads," ConAgra Foods press release, May 10, 2011, accessed May 8, 2015, http://www.conagrafoods.com/news-room/news-Peter-Pan-Uncaps-Simple-Wonders-with-New-Line-of-Natural-Peanut-Butter-Spreads-1561895.

82 Jesse Newman, “Criminal Cases Roil Food Industry,” Wall Street Journal, May 20, 2015, accessed May 27, 2015, http://www.wsj.com/articles/more-food-safety-lapses-prosecuted-as-crimes-1432165360.

83 Brandon Brown, “Listeria recalls lead Inventure Foods to a $14M loss in Q1,” Phoenix Business Journal, May 7, 2015, http://www.bizjournals.com/phoenix/news/2015/05/07/listeria-recalls-lead-inventure-foods-to-a-14m.html.

84 Data from Bloomberg Professional service, accessed on May 8, 2015, using the SNAK FA IS <GO> command. The data represents company revenue and income from Inventure Foods Inc, for 2014 and 2013 fiscal years.

85 General Mills, 2013 Corporate Sustainability Report, pp. 3-5.

86 "Background on the FDA Food Safety Modernization Act (FSMA)," FDA, last modified April 9, 2014, accessed June 27, 2014, http://www.fda.gov/Food/GuidanceRegulation/FSMA/ucm239907.htm.

87 Pricewaterhouse Coopers, Brand enhancement: The ‘hidden’ benefit of implementing food chain visibility, July 2012, p. 2.

88 Ibid., pp. 3, 6.

89 "Q4 2013 - The Recall Sprawl," ExpertRECALL, pp. 8-10, last modified 2014, accessed June 27, 2014.

90 "Food Allergy Facts and Statistics for the U.S.,” Food allergy Research & Education, accessed June 27, 2014, http://www.foodallergy.org/document.doc?id=194.

91 Adam Marcus, "MSG linked to weight gain," Reuters, last modified May 27, 2011, accessed May 9, 2015, http://www.reuters.com/article/2011/05/27/us-msg-linked-weight-gain-idUSTRE74Q5SJ20110527; "FDA takes step to further reduce trans fats in processed foods," FDA press release, November 07, 2013, http://www.fda.gov/newsevents/newsroom/pressannouncements/ucm373939.htm; "Trans Fats," American Heart Association, last modified August 5, 2014, http://www.heart.org/HEARTORG/GettingHealthy/FatsAndOils/Fats101/Trans-Fats_UCM_301120_Article.jsp.

92 Sharon Begley, “As America's waistline expands, costs soar,” Reuters, April 30, 2012, accessed May 12, 2012, http://www.reuters.com/article/2012/04/30/us-obesity-idUSBRE83T0C820120430.

93 Boland, "USDA Bans Junk Food in Schools - Will Salty Snacks Move to Black Market?"

94 Martin, "Mexico Tackles Obesity Epidemic With Tax on Junk Food."


http://www.spencerfane.com/environmental_law_solutions/blog.aspx?entry=437

http://www.fda.gov/Food/FoodborneIllnessContaminants/FoodborneIllnessesNeedToKnow/default.htm

http://www.healthline.com/health-slideshow/worst-foodborne-illness-outbreaks%231

http://money.howstuffworks.com/10-food-recalls.htm

http://www.conagrafoods.com/news-room/news-Peter-Pan-Uncaps-Simple-Wonders-with-New-Line-of-Natural-Peanut-Butter-Spreads-1561895

http://www.conagrafoods.com/news-room/news-Peter-Pan-Uncaps-Simple-Wonders-with-New-Line-of-Natural-Peanut-Butter-Spreads-1561895

http://www.wsj.com/articles/more-food-safety-lapses-prosecuted-as-crimes-1432165360

http://www.bizjournals.com/phoenix/news/2015/05/07/listeria-recalls-lead-inventure-foods-to-a-14m.html

http://www.fda.gov/Food/GuidanceRegulation/FSMA/ucm239907.htm

http://www.foodallergy.org/document.doc?id=194

http://www.reuters.com/article/2011/05/27/us-msg-linked-weight-gain-idUSTRE74Q5SJ20110527

http://www.fda.gov/newsevents/newsroom/pressannouncements/ucm373939.htm

http://www.heart.org/HEARTORG/GettingHealthy/FatsAndOils/Fats101/Trans-Fats_UCM_301120_Article.jsp

http://www.reuters.com/article/2012/04/30/us-obesity-idUSBRE83T0C820120430

95 PepsiCo Inc., FY2015 Form 10-K for the Period Ending December 27, 2014 (filed February 12, 2015), p. 13; Synder’s-Lance Inc., FY2013 Form 10-K for the Period Ending December 28, 2013 (filed February 25, 2014), p. 7.

96 Dan Charles, “FDA Moves To Phase Out Remaining Trans Fats In Food Supply,” November 7, 2013, accessed May 27, 2015, http://www.npr.org/sections/thesalt/2013/11/07/243730263/fda-moves-to-phase-out-remaining-trans-fats-in-food-supply.

97 Tennille Tracy and Annie Gasparro, “FDA Restricts Trans Fats,” The Wall Street Journal, June 16, 2015, accessed June 24, 2015, http://www.wsj.com/articles/fda-moves-to-ban-trans-fats-1434461350.

98 "FDA takes step to further reduce trans fats in processed foods," FDA press release, November 7, 2013, http://www.fda.gov/newsevents/newsroom/pressannouncements/ucm373939.htm; "Trans Fats," American Heart Association, last modified August 5, 2014, http://www.heart.org/HEARTORG/GettingHealthy/FatsAndOils/Fats101/Trans-Fats_UCM_301120_Article.jsp.

99 Marcus, "MSG linked to weight gain."

100 Gio Benitez, "Nestle Faces $5 Million Lawsuit Over Trans Fats in Frozen Pizzas," ABC News, January 30, 2013, http://abcnews.go.com/US/nestle-facing-million-lawsuit-trans-fat-frozen-pizzas/story?id=18354382.

101 Juan Carlos Rodriguez, "Nestle, California Pizza Kitchen Sink Trans Fat Class Action," Law 360, October 1, 2013, accessed May 6, 2015, http://www.law360.com/articles/477348/nestle-california-pizza-kitchen-sink-trans-fat-class-action.

102 Elaine Watson, "JM Smucker: Misguided trans-fat lawsuits are forcing manufacturers to undergo ‘wasteful’ litigation," Food Navigator USA, November 1, 2012, accessed May 10, 2015, http://www.foodnavigator-usa.com/Regulation/JM-Smucker-Misguided-trans-fat-lawsuits-are-forcing-manufacturers-to-undergo-wasteful-litigation.

103 Elaine Watson, "Judge blasts plaintiff in trans-fat lawsuit vs Smucker for claiming ‘grossly excessive’ attorneys’ fees, costs," Food Navigator USA, March 20, 2014, accessed May 6, 2015, http://www.foodnavigator-usa.com/Regulation/Judge-blasts-plaintiff-in-trans-fat-lawsuit-vs-Smucker-for-claiming-grossly-excessive-attorneys-fees-costs.

104 Kellogg Company, FY2013 Form 10-K for the Period Ending December 28, 2013 (filed February 24, 2014), p. 4.

105 Synder’s-Lance Inc., FY2013 Form 10-K for the Period Ending December 28, 2013 (filed February 25, 2014), p. 6; Hershey Company, FY2013 Form 10-K for the Period Ending December 31, 2013 (filed February 21, 2013) p. 10.

106 General Mills Inc., FY2014 Form 10-K for the Period Ending May 25, 2014 (filed July 3, 2014), p. 10.

107 Annie Gasparro, “Nestlé USA to Remove Artificial Ingredients from Candy,” Wall Street Journal, February 17, 2015, accessed May 8, 2015, http://www.wsj.com/articles/nestle-usa-to-remove-artificial-ingredients-from-candy-1424176075?mod=WSJ_hps_sections_business.

108 "Frito-Lay Launches Products Made With All Natural Ingredients," Frito-Lay pres release, December 28, 2010, http://www.fritolay.com/about-us/press-release-20101228.html.

109 "Mindful Snacking," Mondelez International, accessed June, 25, 2014, http://www.mondelezinternational.com/well-being/mindful-snacking.


111 "U.S. organic food sales by category, 2005-14E," USDA - Nutrition Business Journal, accessed June 25, 2014, http://www.ers.usda.gov/media/248848/fruitsandvegetables_d.html.

112 Stephen Daniells,"U.S. organic food market to grow 14% from 2013-18," Food Navigator USA, January 3, 2014, accessed May 22, 2014, http://www.foodnavigator-usa.com/Markets/US-organic-food-market-to-grow-14-from-2013-18.

113 “Advertising FAQ’s: A Guide for Small Business,” FTC, Bureau of Consumer Protection, April 2001, accessed January 9, 2014, https://www.ftc.gov/tips-advice/business-center/guidance/advertising-faqs-guide-small-business.

114 Roberto Ferdman, "The word ‘natural’ helps sell $40 billion worth of food in the U.S. every year—and the label means nothing," Washington Post, June 24, 2014, accessed May 20, 2015, http://www.washingtonpost.com/blogs/wonkblog/wp/2014/06/24/the-word-natural-helps-sell-40-billion-worth-of-food-in-the-u-s-every-year-and-the-label-means-nothing/?tid=trending_strip_3.


http://www.npr.org/sections/thesalt/2013/11/07/243730263/fda-moves-to-phase-out-remaining-trans-fats-in-food-supply

http://www.npr.org/sections/thesalt/2013/11/07/243730263/fda-moves-to-phase-out-remaining-trans-fats-in-food-supply

http://www.wsj.com/articles/fda-moves-to-ban-trans-fats-1434461350

http://www.fda.gov/newsevents/newsroom/pressannouncements/ucm373939.htm

http://www.heart.org/HEARTORG/GettingHealthy/FatsAndOils/Fats101/Trans-Fats_UCM_301120_Article.jsp

http://abcnews.go.com/US/nestle-facing-million-lawsuit-trans-fat-frozen-pizzas/story?id=18354382

http://www.law360.com/articles/477348/nestle-california-pizza-kitchen-sink-trans-fat-class-action

http://www.law360.com/articles/477348/nestle-california-pizza-kitchen-sink-trans-fat-class-action

http://www.foodnavigator-usa.com/Regulation/JM-Smucker-Misguided-trans-fat-lawsuits-are-forcing-manufacturers-to-undergo-wasteful-litigation



http://www.foodnavigator-usa.com/Regulation/Judge-blasts-plaintiff-in-trans-fat-lawsuit-vs-Smucker-for-claiming-grossly-excessive-attorneys-fees-costs



http://www.wsj.com/articles/nestle-usa-to-remove-artificial-ingredients-from-candy-1424176075?mod=WSJ_hps_sections_business

http://www.wsj.com/articles/nestle-usa-to-remove-artificial-ingredients-from-candy-1424176075?mod=WSJ_hps_sections_business

http://www.fritolay.com/about-us/press-release-20101228.html

http://www.mondelezinternational.com/well-being/mindful-snacking

http://www.ers.usda.gov/media/248848/fruitsandvegetables_d.html

http://www.foodnavigator-usa.com/Markets/US-organic-food-market-to-grow-14-from-2013-18

http://www.foodnavigator-usa.com/Markets/US-organic-food-market-to-grow-14-from-2013-18

https://www.ftc.gov/tips-advice/business-center/guidance/advertising-faqs-guide-small-business

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/06/24/the-word-natural-helps-sell-40-billion-worth-of-food-in-the-u-s-every-year-and-the-label-means-nothing/?tid=trending_strip_3

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/06/24/the-word-natural-helps-sell-40-billion-worth-of-food-in-the-u-s-every-year-and-the-label-means-nothing/?tid=trending_strip_3

115 Stephanie Storm, "Kellogg Agrees to Alter Labeling on Kashi Line," New York Times, May 8, 2014, http://www.nytimes.com/2014/05/09/business/kellogg-agrees-to-change-labeling-on-kashi-line.html?ref=business&_r=0.

116 Candice Choi, "Kellogg CEO: Kashi cereal got too 'mainstream'," Yahoo Finance, November 4, 2014, accessed May 12, 2015, http://finance.yahoo.com/news/kellogg-ceo-kashi-cereal-got-175058542.html.

117 "Ben & Jerry’s and Campbell Soup Co. face ‘all natural’ suits," Lexology, October 24, 2012, http://www.lexology.com/library/detail.aspx?g=9f3f3aba-3836-460c-a7a3-00092bc78c27; Elaine Watson, "NY judge in Frito-Lay lawsuit refuses to refer GMO/natural issue to FDA: ‘Agency would need far more than six months to define ’natural’," Food Navigator USA, August 30, 2013, http://www.foodnavigator-usa.com/Regulation/NY-judge-in-Frito-Lay-lawsuit-refuses-to-refer-GMO-natural-issue-to-FDA-Agency-would-need-far-more-than-six-months-to-define-natural.

118 "FTC Seeks Comments on Proposed Orders Requiring Food-and-Beverage Industry to Produce Information about Marketing to Kids," FTC, May 27, 2010, accessed June 13, 2014, http://www.ftc.gov/news-events/press-releases/2010/05/ftc-seeks-comments-proposed-orders-requiring-food-beverage.

119 White House Task Force on Childhood Obesity, Solving the Problem of Childhood Obesity within a Generation, May 2010, p. 29.

120 Ira Teinowitz, "How Kellogg's Limits on Kids Advertising Could Shake Up Industry," Advertising Age, June 14, 2007, http://adage.com/article/news/kellogg-s-limits-kids-advertising-shake-industry/117323/.

121 Reid Wilson, "Maine becomes second state to require GMO labels," Washington Post, January 10, 2014, accessed May 1, 2015, http://www.washingtonpost.com/blogs/govbeat/wp/2014/01/10/maine-becomes-second-state-to-require-gmo-labels/.

122 "Over Half of U.S. Consumers Are Concerned About Genetically-Modified Foods, But the Definition of GMOs Is Unclear Among Consumers, Reports NPD," The NPD Group, December 19, 2013, accessed May 3, 2015, https://www.npd.com/wps/portal/npd/us/news/press-releases/over-half-of-us-consumers-are-concerned-about-genetically-modified-foods-but-the-definition-of-gmos-is-unclear-among-consumers-reports-npd/.

123 Wilson, "Maine becomes second state to require GMO labels"; "GMO FACTS," Non GMO Project, accessed June 16, 2014, http://www.nongmoproject.org/learn-more/.

124 “China’s Concern Over Food Safety, GMOs May Boost Premium Brands,” Bloomberg LP – Bloomberg Industry Research (HTTP 3474511<GO> function), p.3.

125 “GMO legislation,” European Commission, last updated April 23, 2015, accessed May 27, 2015, http://ec.europa.eu/food/plant/gmo/new/legislation/index_en.htm.

126 "On GMOS," General Mills, accessed June 27, 2014, https://www.generalmills.com/en/ChannelG/Issues/on_biotechnology.aspx; Stephanie Cooper, "Companies Oppose GMO Food Labeling," accessed June 27, 2014, http://companiesopposegmofoodlabeling.blogspot.com/p/blog-page.html.

127 "Packaging," EPA, November 15, 2012, accessed May 8, 2015, http://www.epa.gov/osw/conserve/tools/stewardship/products/packaging.htm.

128 "Major public companies describe climate-related risks and costs," CDP, May 2014, accessed May 9, 2015, p. 8, https://www.cdp.net/CDPResults/review-2011-2013-USA-disclosures.pdf.

129 Pinnacle Foods Inc., FY2013 Form 10-K for the Period Ending December 29, 2013 (filed March 6, 2014), pp. 12, 15.

130 Mondelez International, FY2013 Form 10-K for the Period Ending December 31, 2013 (filed March 3, 2014), p. 55; Kellogg Company, FY2013 Form 10-K for the Period Ending December 28, 2013 (filed February 24, 2014), p. 4.

131 ConAgra Foods, 2013 Corporate Sustainability Report, p. 99; "ConAgra Foods Conserves 820 Million Gallons of Water, Optimizes Packaging, Saving 7.8 Million Pounds of Material, and Eliminates 10,500 Tons of Landfill Waste," ConAgra Foods press release, March 13, 2014, http://www.conagrafoods.com/news-room/news-ConAgra-Foods-Conserves-820-Million-Gallons-of-Water--Optimizes-Packaging--Saving-78-Million-Pounds-of-Material--and-Eliminates-10-500-Tons-of-Landfill-Waste--1908759.


133 Nestlé Inc., 2013 Corporate Sustainability Report, p. 208.


http://www.nytimes.com/2014/05/09/business/kellogg-agrees-to-change-labeling-on-kashi-line.html?ref=business&_r=0

http://www.nytimes.com/2014/05/09/business/kellogg-agrees-to-change-labeling-on-kashi-line.html?ref=business&_r=0

http://finance.yahoo.com/news/kellogg-ceo-kashi-cereal-got-175058542.html

http://www.lexology.com/library/detail.aspx?g=9f3f3aba-3836-460c-a7a3-00092bc78c27

http://www.foodnavigator-usa.com/Regulation/NY-judge-in-Frito-Lay-lawsuit-refuses-to-refer-GMO-natural-issue-to-FDA-Agency-would-need-far-more-than-six-months-to-define-natural



http://www.ftc.gov/news-events/press-releases/2010/05/ftc-seeks-comments-proposed-orders-requiring-food-beverage

http://www.ftc.gov/news-events/press-releases/2010/05/ftc-seeks-comments-proposed-orders-requiring-food-beverage

http://adage.com/article/news/kellogg-s-limits-kids-advertising-shake-industry/117323/



https://www.npd.com/wps/portal/npd/us/news/press-releases/over-half-of-us-consumers-are-concerned-about-genetically-modified-foods-but-the-definition-of-gmos-is-unclear-among-consumers-reports-npd/

https://www.npd.com/wps/portal/npd/us/news/press-releases/over-half-of-us-consumers-are-concerned-about-genetically-modified-foods-but-the-definition-of-gmos-is-unclear-among-consumers-reports-npd/

http://www.nongmoproject.org/learn-more/

http://ec.europa.eu/food/plant/gmo/new/legislation/index_en.htm

https://www.generalmills.com/en/ChannelG/Issues/on_biotechnology.aspx

http://companiesopposegmofoodlabeling.blogspot.com/p/blog-page.html

http://companiesopposegmofoodlabeling.blogspot.com/p/blog-page.html

http://www.epa.gov/osw/conserve/tools/stewardship/products/packaging.htm

https://www.cdp.net/CDPResults/review-2011-2013-USA-disclosures.pdf

http://www.conagrafoods.com/news-room/news-ConAgra-Foods-Conserves-820-Million-Gallons-of-Water--Optimizes-Packaging--Saving-78-Million-Pounds-of-Material--and-Eliminates-10-500-Tons-of-Landfill-Waste--1908759




135 Kathryn Siranosian, "Heinz Ketchup is going green with Coca-Cola," The Guardian, February 24, 2011, accessed May 8, 2015, http://www.theguardian.com/sustainable-business/gsb-network-collaboration.

136 "Packaging," EPA, November 15, 2012, accessed May 8, 2015, http://www.epa.gov/osw/conserve/tools/stewardship/products/packaging.htm.

137 "Municipal Solid Waste In The United States: 2011 Facts and Figures," EPA, last modified May 2013, accessed May 20, 2015, p. 60.

138 "Mondelez International," As You Sow, accessed July 1, 2014, http://www.asyousow.org/companies/mondelez-international/.

139 "Wal-Mart announces recycling commitments," Recycling Today, May 5, 2014, http://www.recyclingtoday.com/walmart-recycling-corporate-ceos-sustainability.aspx.

140 "Kellogg’s Adopts How2Recycle Label," Environmental Leader, March 21, 2013, http://www.environmentalleader.com/2013/03/21/kelloggs-adopts-how2recycle-label/.

141 John Ikerd, as quoted by Richard Duesterhaus in “Sustainability’s Promise,” Journal of Soil and Water Conservation (Jan.-Feb. 1990) 45(1): p.4. NAL Call # 56.8 J822.

142 Kellogg Company, FY2013 Form 10-K for the Period Ending December 28, 2013 (filed February 24, 2014), p. 9; Mondelez International, FY2013 Form 10-K for the Period Ending December 31, 2013 (filed March 3, 2014), p. 55; PepsiCo Inc., FY2015 Form 10-K for the Period Ending December 27, 2014 (filed February 12, 2015), p. 20.

143 ConAgra Foods, 2014 Form 10-K for the Period Ending May 25, 2014 (filed July 16, 2014), p. 10.

144 Tiffany Stecker, "Oxfam asks top food companies for more accountability in reducing GHG emissions," E&E Publishing, May 20, 2014, accessed May 11, 2015, http://www.eenews.net/stories/1059999843.

145 General Mills, 2014 Corporate Sustainability Report, pp. 50-52; Kris Patton, "General Mills teams up with Walmart on sustainable agriculture,” General Mills, April 30, 2014, accessed May 13, 2015, http://www.blog.generalmills.com/2014/04/general-mills-partners-with-walmart-on-sustainable-agriculture/.

146 "Water & Climate Risks Facing U.S. Corn Production," Ceres, accessed June 17, 2014, http://www.ceres.org/issues/water/agriculture/the-cost-of-corn/the-cost-of-corn.

147 Brooke Barton and Sarah Clark, Water & Climate Risks Facing U.S. Corn Production, Ceres, June 2014, accessed June 17, 2014, p. 20.

148 General Mills, 2014 Corporate Sustainability Report, p. 65.


150 Hain Celestial, 2012 Corporate Social Responsibility Report, p. 28.

151 "HeinzSeed Grows Sustainable Tomatoes," Heinz, accessed July 2nd, 2014, http://www.heinz.com/sustainability/supplychain/heinzseed.aspx.

152 Rob Bailes, "Responsible Business Awards Mini Report,” Ethical Corporation, p. 29, last modified May 2014.

153 Hershey Co., 2013 Corporate Sustainability Report, p. 27.

154 "Global Palm Oil Demand Fueling Deforestation," Worldwatch Institute, accessed July 2, 2014, http://www.worldwatch.org/node/6059.

155 "Kellogg Announces Global Commitment to Fully Traceable Sourcing Of Palm Oil," Kellogg Co. press release, February 14, 2014, http://newsroom.kelloggs.com/2014-02-14-Kellogg-Announces-Global-Commitment-To-Fully-Traceable-Sourcing-Of-Palm-Oil; "Statement on responsible palm oil sourcing,” General Mills, July 2014, http://www.generalmills.com/en/ChannelG/Issues/palm_oil_statement.aspx.

156 "Nestlé sets out actions to address child labour," Nestlé Cocoa Plan, accessed July 2, 2014, http://www.nestlecocoaplan.com/nestle-sets-out-actions-to-address-child-labour/.

157 "Mondelēz international to invest $400 million to help one million people in cocoa farming communities," Mondelez International press release, November 19, 2012, accessed July 2, 2014, http://www.mondelezinternational.com/Newsroom/Multimedia-Releases/Mondelez-International-to-Invest-400-Million-to-Help-One-Million-People-in-Cocoa-Farming-Communities.


http://www.theguardian.com/sustainable-business/gsb-network-collaboration

http://www.epa.gov/osw/conserve/tools/stewardship/products/packaging.htm

http://www.asyousow.org/companies/mondelez-international/

http://www.asyousow.org/companies/mondelez-international/

http://www.recyclingtoday.com/walmart-recycling-corporate-ceos-sustainability.aspx

http://www.environmentalleader.com/2013/03/21/kelloggs-adopts-how2recycle-label/

http://www.eenews.net/stories/1059999843

http://www.blog.generalmills.com/2014/04/general-mills-partners-with-walmart-on-sustainable-agriculture/

http://www.ceres.org/issues/water/agriculture/the-cost-of-corn/the-cost-of-corn

http://www.heinz.com/sustainability/supplychain/heinzseed.aspx

http://www.worldwatch.org/node/6059

http://newsroom.kelloggs.com/2014-02-14-Kellogg-Announces-Global-Commitment-To-Fully-Traceable-Sourcing-Of-Palm-Oil

http://newsroom.kelloggs.com/2014-02-14-Kellogg-Announces-Global-Commitment-To-Fully-Traceable-Sourcing-Of-Palm-Oil

http://www.generalmills.com/en/ChannelG/Issues/palm_oil_statement.aspx

http://www.nestlecocoaplan.com/nestle-sets-out-actions-to-address-child-labour/

http://www.mondelezinternational.com/Newsroom/Multimedia-Releases/Mondelez-International-to-Invest-400-Million-to-Help-One-Million-People-in-Cocoa-Farming-Communities

http://www.mondelezinternational.com/Newsroom/Multimedia-Releases/Mondelez-International-to-Invest-400-Million-to-Help-One-Million-People-in-Cocoa-Farming-Communities

SUSTAINABILITY ACCOUNTING STANDARDS BOARD®

75 Broadway, Suite 202

San Francisco, CA 94111

415.830.9220

[email protected]

www.sasb.org

ISBN#: 978-1-940504-53-7

The content made available in this publication is copyrighted by the Sustainability Accounting Standards Board. All rights reserved. You agree to only use the content made available to you for non-commercial, informational or scholarly use within the organization you indicated you represent to keep intact all copyright and other proprietary notices related to the content. The content made available to you may not be further disseminated, distributed, republished or reproduced, in any form or in any way, outside your organization without the prior written permission of the Sustainability Accounting Standards Board. To request permission, please contact us a [email protected].