Shareholder Exchange

Resolution Text

WHEREAS: Meat production is the leading source of water pollution in the U.S., exposing 5.6 million Americans to nitrates in drinking water and toxic algal blooms.[1]

Cultivation of feed ingredients for the 45 million chickens[2] produced weekly by Pilgrim’s is a source of water pollution from fertilizer washing off fields if improperly managed. Manure from over 4,900 poultry farms supplying Pilgrim’s[3] may contain nutrients, antibiotic-resistant bacteria, and pathogens which can pollute waterways, endangering public health and the environment. Pilgrim’s is therefore vulnerable to regulatory actions to mitigate these pollution streams.

Several states where Pilgrim’s has processing operations[4] have tightened requirements related to nutrient management, manure disposal, field application of manure, and groundwater monitoring for animal agriculture.[5] At the federal level, the Farm System Reform Act would pose significant operational challenges to vertically integrated meat processors. Introduced in May 2020, the law is motivated by concerns pertaining to the health and environmental externalities associated with meat production.[6]

Pilgrim’s disclosures and policies lag those of its peers. Tyson Foods has committed to support improved fertilizer practices on two million acres of corn.[7] Sanderson Farms now uses SASB standards to report its plans to manage risks specifically associated with supply chain water pollution.[8] Sanderson’s disclosure renders Pilgrim’s the sole remaining large, publicly-traded poultry processor failing to report to shareholders how it intends to manage these risks.

Additionally, many of Pilgrim’s largest customers increasingly expect their meat suppliers to improve mitigation of pollution streams.[1] Failing to address this risk may harm Pilgrim’s position as a competitive supplier.

Pilgrim’s is working to reduce the quantity of the water it uses and has a policy requiring “vendors” to comply with applicable environmental laws and regulations, encouraging them to “use best efforts to meet industry best practices and standards and responsibly manage the environmental impact of their operations.”[2] However, neither Pilgrim’s disclosures nor its policies specifically address the primary drivers of the company’s water pollution footprint, including manure from contracted facilities and nutrient runoff from feed crops. Pilgrim’s disclosures lack sufficient detail to assure investors that it is adequately managing the risks associated with water pollution within its supply chain.

RESOLVED: Shareholders of Pilgrim’s Pride Corporation request a report assessing if and how the company plans to increase the scale, pace, and rigor of its efforts to reduce water pollution from its supply chain. This report should omit proprietary information, be prepared at reasonable cost, and be made available to shareholders by December 1, 2021.

Supporting statement:

Although we defer to management for the precise contents, investors believe that meaningful disclosure within the report could include:

requirements for manure management practices intended to prevent water pollution
requirements for leading practices for nutrient management and pollutant limits throughout contract farms and feed suppliers, with a focus on verifiably reducing nitrate contamination
plans to verify suppliers’ compliance with Pilgrim’s policies

[1] https://www.epa.gov/nutrientpollution/sources-and-solutions

http://www.fao.org/3/CA0146EN/ca0146en.pdf

https://ehjournal.biomedcentral.com/articles/10.1186/s12940-018-0442-6

[2] https://ir.pilgrims.com/static-files/e3600306-6cfa-4e6e-bae6-30bd760a13c5

[3] Ibid.

[4] https://www.epa.gov/toxics-release-inventory-tri-program/tri-basic-data-files-calendar-years-1987-2017

[5] https://www.opb.org/news/article/washington-dairy-pollution-regs/

https://www.environmentalintegrity.org/wp-content/uploads/2017/02/Shenandoah-Report.pdf

https://www.jsonline.com/story/news/politics/2017/01/07/state-wants-jump-start-manure-project/96212456/

https://www.nytimes.com/2018/07/09/us/algae-blooms-florida-nyt.html

https://www.flgov.com/wp-content/uploads/2019/01/EO-19-12-.pdf

[6] https://www.congress.gov/bill/116th-congress/senate-bill/3221/text