Rabbit Advocacy Animal Matters

Animal welfare: how investors can engage on the farm

February 28, 2012 ethicalcorp.com

Driven by food scares and scandals and growing NGO attention, investors are under increasing pressure to pay greater attention to how the companies in which they invest address farm animal welfare issues.

Farm animal welfare is an important issue for companies across all sectors of the food industry – be they retailers, service companies, manufacturers, processors or producers.

There are a number of reasons for this issues higher profile:

• tightening farm animal welfare-related regulation (particularly within the EU);
• growing consumer willingness to pay a premium for higher welfare farm produce;
• scares and scandals such as salmonella in eggs in the UK and concerns about growth hormones in the EU and the US;
• media/NGO campaigns against companies such as Tesco and KFC; and
• the pressure on food producers to meet the ever higher welfare standards expected by the retailers that they supply.

Corporate response

Companies are responding. For example, Unilever has identified farm animal welfare as a priority area in its Sustainable Living Plan and has publicly communicated its commitment to tackling impacts in this area.

UK food retailers have also voiced their commitment. Sainsbury’s has proclaimed that it wants to become the number one supermarket in terms of farm animal welfare. Morrisons is working with the Scottish Agricultural College to develop supply chain standards on housing, feeding and welfare. And Tesco has published its supplier standards and minimum animal welfare requirements.

While on paper the business case for adopting good animal welfare practices is reasonably clear, most investors have paid relatively little attention, other than in cases where a company has hit the headlines for particularly poor or controversial practices. There are signs that this is changing, for two main reasons.

Bigger impact

First, investors are beginning to realise that animal welfare cannot be dismissed simply as a niche ethical issue. If poorly managed, it can have major negative business impacts.

Second, investors are increasingly being targeted by NGOs about how they address this issue in their portfolios. Significantly, two major animal welfare organisations – Compassion in World Farming and the World Society for the Protection of Animals – have recently initiated a programme of dialogue with investors, to increase investor awareness of farm animal welfare, and encourage investors to exert positive influence on the companies in which they are invested.

Even with the confluence of a strengthening business case and growing investor pressure, progress is likely to be gradual rather than immediate.

Ethics, not business?

There are a range of obstacles to be overcome. There is a common investor perception that animal welfare is primarily an ethical rather than a business issue. Publicly available information on how companies manage farm animal welfare issues is scarce. And, it is perceived to be inevitable that intensive farming practices will be required to feed the ever growing global populations.

These factors suggest that a significant amount of work is required to raise investor awareness of farm animal welfare issues.

The next steps are to develop consensus on what “good practice” looks like, to explain how the perceived conflicts between higher farm animal welfare standards and higher food prices can be addressed, and to produce information that enables investors to assess meaningfully how individual companies are managing farm animal welfare issues.

That said, all the signs are that we are close to a tipping point in how investors view farm animal welfare issues. Regulation is tightening, the costs of poor performance are becoming clear and NGOs are starting to focus on the role that investors can play in encouraging higher standards of farm animal welfare.

Clearly, investors can and should play a role in encouraging higher welfare standards across the food industry. The challenge for them will be to ensure that they have the necessary information and tools to engage effectively with and understand the issue, have it properly built into their investment analysis, and be assured that the risks are being effectively managed by the companies in which they have invested.

This article is based on a briefing paper – Farm Animal Welfare as an Investment Issue – by Rory Sullivan, Nicky Amos and My-Linh Ngo and produced by the Business Benchmark on Farm Animal Welfare, a joint initiative of Compassion in World Farming and the World Society for the Protection of Animals.