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Investors urge Cargill, Smithfield to address water pollution

The waste and nutrient runoff caused by massive meat-processing facilities is increasingly under scrutiny. The associated risk has already been the subject of shareholder proposals at Tyson Foods and Hormel Foods, among several other companies.

The matter took on even more urgency last month in the aftermath of Hurricane Matthew, which caused more than a dozen manure lagoons associated with hog and chicken farms to overflow their banks, spewing bacteria and nitrogen into the state’s groundwater supply. 

This week, a group of institutional investors representing more than $1 trillion in assets is urging four of the largest meat producers in the world—Cargill, JBS, Perdue Farms and Smithfield Foods—to take more action to address both potential contamination and scarcity.

The CEOs and corporate sustainability executives of these companies were targeted Monday with letters coordinated by two non-profit Ceres and the Interfaith Center on Corporate Responsibility. While all of the letters were tailored to circumstances of the individual organization, they all sounded this common refrain: 

As investors analyzing water risks in our portfolios, we believe that robust management of water challenges is a critical aspect of risk management in the meat industry, and one of increasing importance in the context of climate change and growing weather extremes.

Water risk among the meat-processing industry isn’t exactly a new concern: investors allied with Ceres have been pushing its case for months. What’s changing is the focus on quality—and the fines that organizations face for incidents. Back in 2010, for example, JBS was fined $1 million for violations related to the Pennsylvania Clean Streams law, for violating is wastewater permits. The company was also required to spend an estimated $6 million to improve its related systems.

The 45 leading institutional investors that signed the letters want more information about how each company is addressing the following concerns: 

  • How wastewater is released into community waterways
  • How animal waste is stored and managed
  • How fertilizer runoff is minimized (this is mainly a concern for the feed companies that supply each organization)

According to a draft of the letter to Smithfield CEO Kenneth Sullivan viewed by GreenBiz, for example, the signatories praise the company’s decision to consciously conserve the amount of water used in its facilities—Smithfield hopes to reduce its water intensity by 10 percent by 2020. You can credit the company’s sustainability chief, Dennis Treacy, with a lot of the progress that has been made over the past decade. (Treacy is set to retire on Dec. 31.)

As investors analyzing water risks in our portfolios, we believe that robust management of water challenges is a critical aspect of risk management in the meat industry.

However, the investors are looking for information about its plans to improve water quality. “We ask the company to also assess water quality-related risks associated with the company’s direct operations as well as in its supply chain (including contract growers and feed suppliers),” they write in the draft of the letter.

One company responding visibly to the water quality issue is Hormel Foods, which last month was one of seven companies to join the AgWater Challenge initiative coordinated by Ceres and the World Wildlife Fund. The company’s commitment requires it to create a “comprehensive water stewardship policy” including management of policies for addressing both scarcity and quality. The effort extends to the company’s feed suppliers. No timeframe was declared, but a one-year progress report will be issued in October 2017.

Cargill’s director of sustainability communications, Chris Schraeder, said the company is working with customers, competitors, suppliers, and conservation groups to evolve its water stewardship. 

Schraeder noted:

In our operations, we have reduced water use in our North America protein business by 15 percent over the last decade. We monitor and upgrade our systems to effectively treat wastewater, which is then used to irrigate local farms surrounding many of our facilities. Several of our meat processing facilities provide 100 percent of their treated wastewater to local farm irrigation. Our facility design and operations have built-in water recycling systems to safely use water several times before it is finally treated for discharge.

In a statement sent to GreenBiz, Smithfield's vice president of regulatory affairs and chief sustainability officer Stewart Leeth noted that Ceres has ranked Smithfield No. 1 for water management practices among leading meat producers.  

We’ve moved beyond regulation compliance and entered an era of innovation that drives our industry-leading, proactive approach to water management across our farms, facilities and throughout our supply chain," Leeth wrote. "We continue to leverage cutting-edge science to handle manure responsibly including our significant investment into water treatment facility improvements, which help protect local waterways."

JBS and Perdue — which has been working on runoff issues since 2009 as part of a settlement with the Environmental Protection Agency -- did not immediately respond to requests for comment by the deadline for this article. We’ll update this story as necessary to accommodate their responses.

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