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Farm animal welfare: an emerging ESG issue

First benchmark report expected to be published later this year.

Farm animal welfare is an increasingly important issue for companies across all sectors of the food industry, from retailers and service companies, through to manufacturers, processors and producers. This has been driven by a range of factors, including regulation, consumer concern, pressure from animal welfare NGOs, and the brand and market opportunities for companies that adopt higher farm animal welfare standards. Despite the growing recognition of farm animal welfare as an important business issue, most investors have, to date, paid relatively little explicit proactive attention to farm animal welfare matters. The exception has been those situations where companies have hit the headlines for particularly poor or controversial practices.

There are several reasons why farm animal welfare issues are continuing to receive relatively limited attention from investors, including:

• The common perception that animal welfare is primarily an ethical issue rather than being underpinned by a robust business case.
• A general lack of familiarity in the investment industry of farm animal welfare issues, in terms of the technical aspects and associated standards. This is compounded by the fact that there are multiple species and multiple geographies involved, and there is no clear consensus about the specific expectations of companies. This lack of consensus makes it difficult for investors to identify clear aims and objectives when engaging with companies and, taken with the complexity of farm animal welfare issues, has resulted in investors being unwilling to engage with companies on this issue.
• A lack of publicly available information on how companies manage farm animal welfare issues, which makes it difficult to differentiate between companies.• A lack of evaluation tools to enable investors to assess and benchmark the relative performance of companies.
The Business Benchmark on Farm Animal Welfare (BBFAW), an initiative funded by two leading animal welfare NGOs, Compassion in World Farming and the World Society for the Protection of Animals – was established in 2011 to help overcome these obstacles to greater investor engagement on farm animal welfare issues. Since its establishment, BBFAW has published a series of articles and reports on the business and legal case for farm animal welfare, engaged with over 60 investment-related organisations on farm animal welfare issues (including a seminar in conjunction with UKSIF, a webinar through the PRI’s Clearinghouse and a roundtable hosted by Co-operative Asset Management), and has issued a reporting framework for companies setting out expectations of company practices, processes and performance reporting on farm animal welfare. This information and engagement has been broadly welcomed by investors, with a significant number participating in BFAW seminars and more signing up to receive periodic BBFAW alerts and briefings. Right from the start of BBFAW, we recognised that this type of awareness raising and information sharing would only take us so far and that there was a need to encourage companies to report on their farm animal welfare performance and to develop tools that investors can use to assess the relative performance of food companies. Therefore, the central element of BBFAW’s work is a benchmark of how large companies manage farm animal welfare. Benchmarking was seen as filling a number of roles: delineating between strong and weak performers, creating normative expectations around policies, practices and processes, and providing investors with a robust basis for engaging with

companies and for building farm animal welfare into their investment decisions. In June 2012, BBFAW launched a consultation on the criteria that it planned to use to evaluate the farm animal welfare management practices of European food businesses later in 2012. The final criteria and the list of the companies that will be benchmarked (approximately 70 large food companies, with headquarters or significant operational footprints in Europe) were published in August 2012. The first benchmark report is expected to be released in late 2012/early 2013. In the course of the consultation, we received feedback from 38 stakeholders across the US, Australia, the UK, France, Switzerland and the Netherlands, of whom 40% were investors. There was a striking degree of support for the proposed criteria (acknowledging that there were some technical issues that had to be addressed) and for the idea of benchmarking company performance inthis area. Our hope (and expectation) is that the work of BBFAW will catalyse changes in the importance that investors assign to farm animal welfare as a business issue, in the pressure that investors exert on companies to improve their management and reporting of farm animal welfare issues, and in the weight that investors assign to farm animal welfare in their evaluations of companies in the food sector. BBFAW does not underestimate the challenges ahead. But the evidence to date suggests that, with the right tools and the right encouragement, investors will start to elevate the importance of farm animal welfare as an investment issue. This should, in turn, increase the pressure for companies to adopt higher farm animal welfare standards.
Nicky Amos is the Programme Director of the Business Benchmark on Farm Animal Welfare and has over 20 years’ experience in leading and advising on corporate responsibility strategies in global organisations.
Acknowledgements: I would like to thank Rory Sullivan, Expert Adviser to the Business Benchmark on Farm Animal Welfare, for his comments on an earlier draft of this article.