Deforestation Policy

Resolution Text

Whereas: Kraft Heinz (KHC) uses palm oil, soy, beef, paper/pulp, coffee, cocoa, and sugar in its products and packaging. These commodities are leading drivers of deforestation and native vegetation conversion (DNVC) globally. The conversion of native ecosystems drives climate change and biodiversity loss, and undermines ecosystem benefits critical to agriculture, including soil protection, pollination, and precipitation patterns.

KHC’s 2020 materiality assessment identifies responsible sourcing as a top issue, but KHC has done little to mitigate DNVC exposure. The company has not disclosed evaluations nor set responsible sourcing goals for most of its forest-risk commodity supply chains (palm oil excluded). Even though KHC acknowledges that 38% of its soy comes from “potentially high-risk regions,” KHC has not committed to reducing its exposure. Nor has KHC set goals for its Scope 3 emissions, despite agriculture/forestry accounting for 38% of KHC’s total GHG emissions in 2019.

In 2019, CDP, an environmental disclosure platform backed by 528 investors representing $96 trillion USD, ranked KHC in the lowest 10 percent for addressing DNVC risk, including for failing to identify potential risk-mitigating opportunities. Trase Finance, a soft commodity transparency tool, scored KHC at 7 percent for its overall approach to DNVC-free sourcing.

In its 2019 10-k, KHC lists adverse publicity about the company’s environmental or social impacts as a risk to its profits; and it further states that a depressed stock price impairs KHC’s ability to raise capital. In 2020, KHC received unfavorable media coverage, including in mainstream outlets like the Financial Times and Bloomberg, for underperforming on sustainability, including on deforestation. Chain Reaction Research highlights that reputational damage can depress a company’s value by as much as 30%.

KHC’s peers have adopted policies that are reducing their DNVC risk:

  • Unilever, Danone, Nestlé, and PepsiCo have time-bound commitments to eliminate DNVC across their supply chains
  • Unilever, Danone, Nestlé, Kellogg, PepsiCo, and General Mills have adopted plans to reduce their Scope 3 emissions and disclose quantitative progress on multiple commodities to CDP
  • Nestlé, PepsiCo, and Kellogg employ third-party monitoring for their supply chains
  • Mondelez’s Scope 3 commitment encompasses emissions from land use change

Failure to adopt and implement policies that mitigate DNVC exposure may subject KHC to significant systemic and company-specific risks.

Resolved: Shareholders request KHC issue a report assessing if and how it could increase the scale, pace, and rigor of its efforts to eliminate deforestation and the conversion of native ecosystems in its supply chains.  

Supporting Statement: Proponents defer to the board’s discretion, but recommend assessing the relative benefits and drawbacks of integrating the following best practices:

  • Adopting a deforestation- and conversion-free policy for all relevant commodities;
  • Adopting monitoring and verification processes, including third-party monitoring, and time-bound supplier non-compliance protocols;
  • Setting absolute Scope 3 emission reduction targets, inclusive of DNVC impacts;
  • Annual disclosure of quantitative progress toward these best practices.

 

Lead Filer

Jessye Waxman
Green Century Capital Management, Inc.