Farm animal welfare is often linked to environmental impact, product safety, and human health. Links to climate change and pressure on land is also gaining increased attention. Controversies such as the European horsemeat scandal in 2013 may cause companies reputational risk and reduced revenues. End consumers are very concerned and companies are currently facing increased pressure from animal welfare organisations. Regulation is also becoming stricter, especially in the European Union.

Unfortunately, there is little investor interest. This is a missed opportunity as there is significant room for improvement, which could benefit a company’s long-term continuity and long-term shareholder value creation. Perhaps even more worrying is the lack of attention the issue receives from companies involved in relevant industries. Most are reluctant to publish or share detailed animal welfare standards or supplier guidelines. They are generally just starting to make improvements in their supply chain, with any initiatives being largely reactive and anecdotal. As a result, most companies do not fully meet our minimum standards.

Dialogue with the industry

Based on these observations, in October 2014, we contacted ten carefully selected companies in the Food Retail and the Hotels & Restaurants industries, explaining our viewpoint and concerns. The companies are leading sustainability performers in their industries and we wanted to learn from them and encourage further improvement. We believe that companies using large quantities of animal food ingredients, or companies that retail animal food products, should at the very least show commitment to animal welfare by having a global group-wide animal welfare policy. Their policy should go beyond legal requirements for all own-brand products, and should be implemented with robust standards on key issues, preferably by animal type, and compliance should be structurally monitored. The response to our engagement was positive, with seven companies agreeing to discuss matters further. Two other companies provided additional information.

Actions speak louder than words

Generally, companies undervalue farm animal welfare. Whilst they acknowledge the relevance, most companies do not see it as a business risk or opportunity. Despite the relevant industries being slow to move and the lack of investor interest, there is some promising progress. Several companies are starting to pay attention to the issue because of consumer demand and have started to diversify their product offering. Others, such as Whitbread , Sainsbury’s , and Colruyt , consider it to be an important aspect of their corporate responsibility and have set up comprehensive programmes with suppliers to improve animal welfare performance.

Global standards on animal welfare will be difficult to achieve. Differences in culture, local regulations, and pricing make it difficult to apply uniform standards across the board. Local circumstances also play a role. As an example, Sainsbury’s described a case where it wanted suppliers to provide more straw in animal housing, but farmers in Ireland had difficulty complying with the request because of the lack of locally available straw and associated high costs. In the United States, farm animal welfare regulation is very limited, which means it is relatively easy for companies to set their own standards and to distinguish themselves from their competitors. For example, Whole Foods Market has successfully developed its own animal welfare rating system.

Our next steps

In the coming months, Triodos will write a summary report of key findings of its engagement activities and highlight best practices. We will use these best practices to develop recommendations for each company. Based on where the company stands, and how they respond, Triodos will reassess progress and engage further. We will also use the outcomes as an opportunity to improve our own minimum standards.   

Note: The issues explored in this article are relevant for sustainable investments on the stock market. Triodos Bank believes that our socially responsible investments are a powerful means of promoting our values and working for greater sustainability, while enabling us to offer a complete range of attractive investment options to customers who choose to invest on the stock market.