As a corporate engagement firm, part of our job is staying up-to-date on the activist zeitgeist. We read thousands of corporate proposals every year, and as a result we often find trends under the radar that other groups tend to miss. Recently, we’re seeing a concerning new trend: ESG activists are using their utopian ideals to attack the modern food production industry.
I don’t mean merely attacks on meat in favor of plant-based products, although such crusades have caught the movement’s fancy before against brands like Starbucks. This year, we’re seeing proposals that increasingly target companies’ agricultural procedures for everything from meat and poultry to eggs, and pushing for a faster and faster transition to what’s been dubbed “sustainable” food. Activists are taking demands to the biggest names in food distribution and arguing that their solutions are the ethical way forward for modern businesses.
The problem? Their premises are dead wrong.
Let’s be clear: sustainable food is not de facto a bad thing. Some of the practices activists are pushing for are perfectly defensible in and of themselves, including cage-free eggs at Wendy’s and the importance of animal welfare in McDonald’s poultry. Under the framework of shareholder capitalism, companies work for shareholders, and there’s nothing keeping companies from transitioning to sustainable food if it’s in the best interest of the company and creating shareholder return. There’s good evidence to support the case for companies committing to sustainability, particularly in areas where existing practices incentivize inefficiency. Efficient systems of food production not only build shareholder returns but increase the global food supply and our ability to feed billions across the globe. So, where exactly does this all go wrong?
Simply put: because businesses want sustainability on a business timeline, and activists want sustainability on an activist timeline. For an example, let’s look at the case of Walmart. An activist proposal at yesterday’s annual meeting pushed the company towards phasing out gestation crates, small cells in which breeding pigs are kept during pregnancy, in its pork supply. Management stood against the proposal (it didn’t pass), but the revealing moment came when we asked them about the rationale. Unsurprisingly, Walmart’s reticence to side with activists was over the increased costs associated with speeding up the timeline.
“We’ve engaged suppliers, veterinary scientists, NGOs, farmers, to determine the right way to move forward,” said Walmart chief sustainability officer Kathleen Mclaughlin. “The transition’s in motion—but it’s expensive.” Further, Walmart’s response in its proxy laid out the issue even more clearly: “The market does not currently support a speedy transition away from the use of
gestation crates.” If Walmart is committed to achieving sustainability on a timeline it’s determined to be economically beneficial, what basis do activists have to say that such a timeline simply isn’t good enough?
What basis, indeed. The truth of the matter is, activists like the ones assailing Walmart don’t need a basis for their claims. They view unquestioned deference to environmental and social concerns as the ultimate goal of corporate governance—and if shareholder returns suffer because of a botched sustainability timeline, so be it. That’s the framework of activists, and this unserious approach illustrates with perfect clarity why companies aren’t buying into their solutions. Businesses that make the transition to sustainable food production practices aren’t doing it out of the goodness of their heart, but out of a belief that augmenting brand growth and generating returns for the shareholders they ultimately work for is the real definition of sustainability. And that definition couldn’t be further from the minds of ESG activists, even if they’re using the same words.
