Putting Farm Animal Welfare on the Investment Agenda
The Business Benchmark on Farm Animal Welfare (BBFAW) was established in 2011 with the aim of catalysing mainstream investor interest in farm animal welfare.
BBFAW produces an annual benchmark that measures how large food companies manage farm animal welfare. In the benchmark, companies are assessed on the basis of their published information on their animal welfare policies, their governance and management processes, their farm animal welfare-related objectives and targets, their supply chain management processes, their commitment to promoting farm animal welfare across the food industry, and their performance.
The 2013 Benchmark assessed 70 global food companies, across the three food industry subsectors, i.e. food retailers and wholesalers, restaurants and bars, and food producers. The most significant finding was that the management of farm animal welfare remains relatively underdeveloped. While over 70% of the companies covered by the Benchmark acknowledged that farm animal welfare was a business issue, only 56% had published a formal farm animal welfare policy, just 39% described their board or senior management oversight of their approach to farm animal welfare, and 41% had published objectives and targets for farm animal welfare.
The 2013 Benchmark did, however, identify some encouraging signs of progress. For example, the number of companies that had published a formal farm animal welfare policy had increased since the first Benchmark in 2012 from 46% to 56%. Similarly, the number with published objectives and targets for farm animal welfare had increased from 26% to 41%, and the number reporting on performance against these objectives and targets had increased from 19% to 30%.
Changing Investors’ Views
Over the past two years, we have had extensive discussions with European and North American investors about farm animal welfare. Over this period, we have seen much more interest in the investment implications of farm animal welfare, driven by the growing awareness of the business case (e.g. threat of regulation, product labelling, consumer demand, NGO campaigns) for companies to focus on farm animal welfare. BBFAW has helped by providing investors with a tool that enables them to delineate between strong and weak performers, and that provides investors with a robust basis for engaging with companies and for building farm animal welfare into their investment decisions.
A number of investors are now integrating farm animal welfare into their investment processes. Some are doing this directly, by analysing the farm animal welfare-related risks, opportunities and value drivers for the companies in which they are invested. Others are using the Benchmark to measure how well companies are managing farm animal welfare-related issues specifically or as a wider measure of the quality of companies’ risk management and supply chain management systems. Others are using the Benchmark as an engagement tool, either to make specific requests of companies (e.g. to improve certain of their management practices) or to understand how certain companies have managed to establish leadership positions in the Benchmark.
While farm animal welfare remains a relatively novel issue for investors, there are clear signs that investors are starting to acknowledge the business risks presented by farm animal welfare, and to encourage companies to improve their management of farm animal welfare-related risks and opportunities. We are optimistic that, as more investors start to focus on farm animal welfare, this will increase the incentives for companies to improve their practices and processes and, in turn, contribute to significant improvements in farm animal welfare across the entire food industry.