As sustainability reporting is becoming a global requirement, becoming accountable for sustainable practices is no longer a nice-to-have; it’s a strategic imperative. Driven by high stakeholders' expectations, the promise of long-term business success, and tighter government regulations, the demand for sustainability is on the rise. Yet, the subtleties of current sustainability reporting practices can be hard to grasp.
In this article, we extract three main takeaways from the current state of sustainability reporting. Our analysis is based on data from top agri-food companies in the dairy, bakery, potato, and fruit and vegetable industries, so you can start drawing qualitative insights from your competitors’ sustainability reports.
Current sustainability reporting is hard to navigate
While more and more companies want to analyze their competition’s sustainability reporting; its fragmentation and complexity are often a big hurdle when it’s time to draw conclusions. We can pinpoint two reasons for this:
1. Sustainability reporting standards are not set in stone. Quite the opposite, as they either don’t exist or are constantly evolving due to the need for improvement and understanding of current methodologies. Plus, the sustainability frameworks in place differ depending on countries or areas. While most regions adopt the TCFD framework (such as the EU, and the UK, as detailed in our report), others follow the ISSB framework (China) or have yet to determine their framework (US). This variation in reporting frameworks can lead to important differences in reporting practices. This is the case, for example, between Danish cooperative Arla, and US-based cooperative Dairy Farmers of America. While Arla focuses on a large variety of metrics and does so with great transparency, Dairy Farmers of America mainly reports on explaining its set targets.
2. Sustainability reporting doesn’t serve the same purpose for every company. Whereas some companies integrate sustainability into their strategic plans and extensively report on it in their annual reports, others view sustainability reporting as a mere checkbox to tick off – a marketing tool. In these cases, the report may showcase a reduction of emissions without any context, providing little insight in the end.
Adding to the complexity, sustainability reporting appears to be inconsequent, as some companies file sustainability reports in some years, but not in others. All in all, the lack of consistency makes it harder to draw comparisons and track progress over time.
Understanding the industry is key
Understanding the industry in which your competitors operate is the first step to take to address the complexity of sustainability reporting. As most companies prioritize reducing their CO2-eq emissions, identifying opportunities for emission reductions is key. But specific areas for improvement vary across producers.
In the dairy industry, producers such as Arla and FrieslandCampina can make significant progress by focusing on their dairy farmers and purchased products, as these account for over 65% of the total emissions for these companies. On the other hand, potato producers have lower emissions from animal agriculture but greater energy usage per unit of product (figure 1, see our report for a complete explanation of scopes 1, 2, and 3).
Looking at the big picture, all processors can benefit from setting goals and collaborating with partners in their value chain to bring down scope 3 emissions. However, processors in energy-intensive industries such as Bakery and Potato still have much to gain from reducing emissions in scopes 1 and 2.
Metrics and context matter
Understanding the industry is not enough to extract qualitative insights from your competition’s sustainability report: metrics and context should always be considered for a comprehensive analysis.
While companies often use emissions relative to net sales (CO2/ revenue) as a benchmark to track their progress, the metric can be misleading during inflation periods, as it may create the illusion that emissions are decreasing when, in fact, revenues can increase even if emissions stay the same or even rise. This is why it is important to go beyond the numbers and consider the impact of inflation, for example, when analyzing reported emissions.
In addition, our report emphasizes that comparing companies' emissions to the volume of products they produce is the most effective way to measure their efficiency. In the Agri-food processors industry, La Doria stood out in 2021 with the lowest emissions per tonne (0.109tCO2-eq), most likely due to their smaller conserved production compared to Bonduelle and Conserve Italia. While Conserve Italia's total emissions decreased slightly (as shown in Figure 2),their emissions per product might have increased due to a decline in overall production.
Emissions per-produced product only help to benchmark companies and do not provide information on waste or other sustainability goals. It is essential to understand the full context and production process of a company when benchmarking.
Check out our latest report
Curious about how you can use sustainability reporting as a benchmark with your competition? Our latest report uncovers the challenges of current sustainability reporting practices and helps you draw thorough and meaningful insights. Download it now for free below.