Creating a better world by using resources responsibly to preserve the environment and enhance communitie's health has become paramount in the pet food industry. Shareholders expect recyclable packaging and a dip in deforestation to remain catalysts. Industry leaders prioritize making the highest quality foods to run business with transparency, integrity and ethical behavior. Leading players could invest in identifying the ESG opportunities and challenges for the continued success of the business. The assessment of ESG dynamics, including product safety & quality, energy use, water use & management, waste management, employee well-being and responsible marketing, will reshape the global landscape.
Lately, consumers have exhibited profound traction in assessing pet food’s health and environmental impact. Pet food manufacturers are likely to count on agriculture that is in line with the sustainable environment. Prominently, regenerative agriculture has come to the fore to help reverse climate change by restoring degraded soil diversity and rebuilding soil organic matter.
Environmental Perspective
Pet food brands are pushing for regenerative farming that can make products sustainable by eliminating or reducing the use of chemical fertilizers, boosting cover cropping and expanding the nutrient density of crops. Incumbent players, such as Petco Health and Wellness Company have propelled their sustainability profile. For instance, in April 2021, Petco expressed its commitment to making 50% of its product sustainable. The pillars of Petco’s sustainability are sustainably sourced materials; responsible manufacturing; responsible packaging; sustainably sourced ingredients; and animal welfare. Leading players are well-positioned to emphasize reducing water usage and sustainable sourcing of pet food ingredients.
Social Perspective
Stakeholders have upped their focus on ensuring access to quality food, connecting to community resources, ensuring workers’ safety and prompting equitable treatment for all. J.M. Smucker mentioned in its 2022 Corporate Impact Report that it coordinated over 22,000 hours of employee training and development in 2021. As of December 2022, the American manufacturer announced that the direct purchase of liquid eggs, shell eggs and egg ingredients would be from cage-free hens. The company also suggested that it had partnered with Feeding America and Greater Good Charities in FY 2022 to donate over 23 million meals for pets and people. The food company propelled its employee benefits programs by providing access to pet insurance and child development centers.
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Governance Perspective
A robust governance framework has become a yardstick to provide sustainable value creation. Transparency, engagement on climate action and efforts on human rights could augment the top-line and bottom-line growth with increased capital efficiency. At the 2021 AGM of Nestlé, its shareholders vouched for a detailed Net Zero Roadmap as the company is contemplating halving GHG emissions by 2030 and achieving net zero by 2050. In 2021, the Board created a Sustainable Committee to oversee strategies for diversity and inclusion and response to human rights due diligence program and climate change. The food giant has propelled its diversity profile—over 85% of management committee positions are held by local employees in the countries it operates. A concerted effort on governance can help companies strike the right balance in pursuing ESG goals.
Prominent companies have furthered their emphasis on technological advancements, product offerings, innovation and mergers & acquisitions to underscore their sustainability profile. For instance, in November 2020, Clearlake announced the acquisition of WellPet to expedite organic growth and boost value creation. The company will likely cash in on pet humanization and ownership trends. It is worth noting that the pet food market size stood at USD 94.76 billion in 2021 and is poised to witness around 4.4% CAGR through 2030.
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