Grocers' ESG Boost: Tips for Better Reporting

In a recent comprehensive examination of 82 food retailers, critical gaps in their communication of environmental, social, and corporate governance (ESG) progress and goals have been identified.

This assessment serves as a valuable guide for enhancing their ESG reporting practices.

As the significance of sharing metrics and maintaining transparency in Environmental, Social, and Governance (ESG) initiatives grows, a newly released report by the Ratio Institute underscores the need for food retailers to improve their public communication regarding their ESG endeavours.

This report, published this week, delves into the ESG reporting practices of 82 North American food retailers, offering insights into the industry's current state in terms of ESG communication.

The Ratio Institute utilised 124 criteria, adapted from its own ESG reporting standards, to evaluate the depth and breadth of the information these companies shared and ranked them accordingly. While ESG reporting standards differ in various aspects, such as scope, depth, format, length, and structure, certain trends have emerged, highlighting areas where grocers excel and areas that require improvement.

Here are some key takeaways that shed light on where grocers need to enhance their ESG reporting, as well as recommendations based on the findings of the Ratio Institute.

Consistency is Key

The report reveals that grocers' reporting on different ESG categories exhibited fluctuations in comparison to the Ratio Institute's 2022 analysis. For instance, the industry-wide average scores for "Food Safety Governance" remained relatively stable between 2022 and 2023, but the number of companies reporting on this category increased significantly in 2023.

However, increased reporting doesn't necessarily equate to better information. Notably, the category "Health and Wellness" experienced a substantial decline in the depth and breadth of reporting, likely due in part to decreasing concerns related to the pandemic.

To bolster reporting on health and wellness, companies can elaborate on employee well-being initiatives, nutrition guidance for customers, and company policies concerning prohibited ingredients or chemicals and align these initiatives with broader company goals or relevant U.N. Sustainable Development Goals.

Another imperative is ensuring the consistency of reiterating commitments each year or appropriately addressing their status, completion, or infeasibility.

For example, while "Source Reduction" was one of the categories with in-depth reporting, grocers in the current year made approximately 40% fewer source reduction commitments compared to the previous year.

Many companies are reporting progress on source reduction without contextualising it within an overarching commitment, making it challenging for stakeholders to gauge its significance. This inconsistency and the lack of details about goals, commitments and progress were consistent shortcomings identified in individual companies' ESG reporting.

In summary, maintaining consistency is fundamental to effective ESG reporting.

Enhancing Reporting Quality

However, consistency alone cannot resolve the ESG reporting issues faced by grocers. It is equally crucial to substantiate claims with adequate data. The Ratio Institute observed that grocers with more comprehensive, transparent reporting on supply chain-related criteria are more likely to set science-based targets for greenhouse gas objectives, report within a global climate and sustainability framework, or make reference to U.N. Sustainable Development Goals.

For a basic level of reporting, the Ratio Institute recommends that grocers should:

• Clearly state the current status of a specific ESG topic.

• Define company goals, along with the associated timelines for achievement.

• Describe the progress towards goals across multiple reporting periods.

• Elaborate on the methods and processes used to work towards these goals and expound on the value they bring to stakeholders.

For companies embarking on the measurement of greenhouse gas emissions, the Ratio Institute advises starting with Scope 1 emissions. This meticulous approach, involving the establishment of baseline metrics across various ESG areas, goal setting, and consistent tracking and reporting of progress, positions companies well to effect operational changes that enhance performance and profitability.

While it may seem apparent, the Ratio Institute underscores that grocers should endeavour to provide a single, comprehensive publicly available report whenever feasible, with links to regularly updated ESG datasets within their reports.

Food retailers with higher scores often produce longer reports or include links to supplementary documents or web pages. Nonetheless, even companies lacking the resources for elaborate formal reports can engage in high-quality reporting through less resource-intensive formats, such as dedicated web pages. The report emphasises the use of consumer-friendly language to make the reporting accessible, given that these reports are public-facing.

Shifting Focus to Climate Change

The report's findings reveal that grocers are shifting their ESG reporting emphasis from pandemic-induced operational changes to climate change. This trend aligns with a broader shift in media attention from pandemic-related workforce management news to climate change discussions.

All publicly traded companies under examination have acknowledged in public filings that climate-related events like fires, floods, and extreme temperatures pose substantial risks to their business operations. However, of the 82 evaluated companies, only 14, comprising 12 public and 2 private entities, have made commitments to limit global warming to 1.5°C. This indicates that there is considerable work ahead for food retailers in this domain.

Setting science-based targets conveys to the public a company's dedication to implementing operational changes aimed at reducing global emissions. Retailers can contemplate adopting greenhouse gas reduction targets in line with the Paris Agreement's goal of limiting warming to 1.5°C.

In conclusion, this analysis underscores the imperative for food retailers to enhance their ESG reporting practices to meet the evolving expectations of stakeholders and address critical environmental and social challenges.

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Source: Grocery Dive