Among the world’s biggest consumer companies, Europe’s Unilever NV, L’Oreal SA and Danone are best prepared for the effects of climate change relative to their peers, according to a report from the nonprofit CDP.
Formerly known as the Carbon Disclosure Project, CDP took a double-barreled approach in ranking the 16 largest consumer companies on measures including exposure to emissions, use of water and climate governance. It assumed that businesses will need to adjust to the effects of a warming world for the sake of the bottom line and to make a compelling case to increasingly concerned consumers.
“If we all start getting hit by the physical risks of climate change ourselves, we will be much more conscious of buying products with less impact,” said Carole Ferguson, head of investor research at CDP.
Unilever topped the list, the result of big changes to its portfolio, including the purchase of Seventh Generation in 2016, and a suite of low-carbon brands that account for a big portion of revenue.
L’Oreal was a close second, with the supply chain most protected from physical climate risks and high marks for its renewable energy program. Danone’s investments in soil health and water stewardship, as well as its wide range of vegan products, landed it in third place, CDP said.
U.S. companies including Kraft Heinz Co. and Estee Lauder Cos. ranked near the bottom of CDP’s list. The organization said that Kraft Heinz’s Kraft and Oscar Mayer brands have fallen behind on low-carbon innovations and its reliance on meat and dairy make it more vulnerable to physical risks from climate change. Estee Lauder was faulted for too little transparency into its use of palm oil, which has been blamed for widespread deforestation.
Kraft Heinz last year committed to setting “an aggressive, long-term greenhouse gas emissions reduction goal” and is looking to reduce its impact in logistics, packaging and agriculture, said Caroline Krajewski, the company’s head of global corporate reputation. Estee Lauder said it is “committed to accelerating our sustainability and citizenship practices” and continuously updates its targets in that area.
“For this group of companies there’s a whole range of risks that have become substantive, rather than something they can just manage away easily,” said CDP’s Ferguson.
Consumer goods companies have in part addressed the issue by buying smaller brands with better environmental practices. Those acquisitions are up fourfold in the last five years, including Nestle SA’s 2017 purchase of U.S. vegetarian burrito maker Sweet Earth and Danone’s takeover of nut milk maker WhiteWave Foods the same year.
Ferguson said she hoped companies would invest more in innovations that have systemic impact. For example, brewer AB InBev developed new barley varieties that can use up to 40 percent less water. As it is, through supply chains, consumer distribution and waste creation, consumer brands probably account for one-third of global greenhouse gas emissions, she said.
“The companies that are leading are looking upstream and downstream to see what the big risks and opportunities are,” Ferguson said. “The laggards might be doing some interesting things, but they’re not scaling them up sufficiently.”
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