From laggard to leader? Why Kraft Heinz is betting on ESG to turn its sustainability story around
EXCLUSIVE: Kraft Heinz's decision to shift its sustainability approach away from CSR and towards ESG is designed to help it avoid repeating "past mistakes" and transform the way it is perceived in the environmental sphere, the company's global ESG lead has revealed.
September saw the food and beverage giant produce its first ESG report and launch a dedicated ESG microsite. As well as providing a platform through which the report can be downloaded, the microsite outlines Kraft Heinz’s strategy and goals, provides information about collaborative initiatives and tells multimedia “stories” around specific projects and employees.
It also contains a tab specifically for ESG ‘milestones’ – even though it is widely known that Kraft Heinz will not meet several of its key environmental goals by the end of the year. The company had been hoping to reduce its emissions, energy use, waste and water use per metric tonne of product between 2015 and 2020. Instead, it has seen emissions increase by 8%; energy use fall by 1%; water intensity increase by 1% and waste increase by 16% to date.
Results such as these have led to Kraft Heinz performing poorly in many sustainability benchmarks. It has been named as a laggard on plastic packaging by As You Sow; on the shift to plant-based diets by FAIRR, and on eliminating deforestation by CDP.
The shift from framing sustainability through a traditional CSR lens to a more modern, ESG-focussed approach, was, therefore, “very intentional”; it forms the cornerstone of the company’s bid to change its sustainability story, Kraft Heinz’s global lead for ESG Jonah Smith told edie.
“Historically, CSR has been really heavily associated with initiatives a company is doing,” Smith, who was appointed to his newly-created role in January, said.
“ESG, to us, is really the framework that investors will use to evaluate how good of an investment will be from a sustainability standpoint.”
To that end, Kraft Heinz launched the ESG report and microsite to coincide with its investor day – where a refresh to the company’s overall enterprise strategy was presented. Smith believes that this approach will demonstrate to investors and to other key external stakeholders that ESG will form a “key pillar in how Kraft Heinz is going to go forward”.
“The more you are able to integrate people, planet and profit, the better – and this is our way of doing that,” he added, noting that the company is “starting to move towards” integrating its financial and ESG reports and is “continuing to evaluate” how it will make that shift.
There seems to be a trend towards this form of reporting. Research conducted by the Carbon Trust last year found that two-thirds of the UK’s largest companies had plans to better integrate reporting in the near future. Since then, the Financial Reporting Council (FRC) has begun undertaking a major review of climate reporting trends and regulations. On a global scale, the Task Force on Climate-related Financial Disclosures (TCFD) surpassed 1,000 supporting organisations earlier this year.
Walking the talk
At a time of increased awareness of the twin climate and nature crises, of course, any talk of sustainability-focused transformation is likely to be welcomed - particularly from the agri-food sector, which is both highly exposed to climate risk and a major contributor to many problems. Indeed, increased ambition across the board is necessary to the growing green recovery movement. But stakeholders of all kinds are getting better at identifying the gaps between brands’ ambitions and actions and pointing out loopholes in targets for which proper accountability is not embedded in the business.
For Smith, the benefits of shifting from CSR to ESG are as much about changing company culture as about storytelling.
“In terms of a new direction, ESG is embedded at the highest level and all the way through the business, down to employees on the line in manufacturing facilities,” he said.
The executive leadership team will now receive a monthly progress report compiled by the business’s new ESG steering group. Across the group’s seven sub-committees, which each focus on a dedicated issue such as packaging or human rights, all core business functions are represented by at least one member.
While the board has always looked at sustainability progress annually, the shift to a new enterprise and ESG approach has been compounded by the pandemic and resulted in “almost bi-weekly” meetings on this topic. Smith believes this will result in “continuous improvement” of environmental performance, as issues can be addressed in a timelier manner and with stronger buy-in.
Kraft Heinz’s chief executive Miguel Patricio has also been given ESG-linked KPIs for the first time, along with more than 130 other senior members of staff including heads of department, in a bid to “build in accountability”. The buck ultimately stops with Kraft Heinz’s senior VP and global head of CSR Rashida La Lande, recently promoted from her role as General Counsel.
Smith believes that these changes in approach will “maximise collective knowledge sharing”, leading to “deeper collaboration and better tracking of progress”.
With the company now set to report annually against new 2025 targets to reach 100% certified sustainable tomato sourcing; to ensure that renewables account for the majority share of its electricity use and to fully assess emissions across all scopes, time will tell whether Kraft Heinz’s new approach will pay off. Given that it is the fourth largest in the global food and beverage sector, the opportunities of getting this right – and the consequences of getting it wrong - are not to be underestimated.