Taken from Diligent Market Intelligence’s ‘Activism and Voting this Week’ newsletter.
More industries are coming under scrutiny for their contributions to public health thanks to growing pressure on global health systems and tighter regulations governing healthy food and drink.
Nestlé is one such company, with a $1.68-trillion investor coalition filing a shareholder proposal calling for the Swiss food giant to set targets to increase the proportion of its sales from healthier products.
“A reliance on unhealthy food not only contributes to poor public health impacts but also exposes companies and investors to unnecessary risks,” Thomas Abrams, co-head of health at proponent ShareAction, told me. “On the regulatory front, there is the risk of being subject to marketing restrictions for these products, while sugar and unhealthy food taxes are becoming increasingly common around the world. These can eat into companies’ profits.”
According to the Obesity Evidence Hub, at least nine countries have national policies restricting food marketing towards children, while at least 54 countries have introduced a tax on sugar-sweetened beverages (SSBs).
The Nestlé proposal, which was the first of its kind to be subject to a vote at a consumer defensive company, called for disclosure of the proportion of sales derived from healthy food and drink, in line with internationally accepted standards. It secured 11.1% support at the company’s April 18 annual meeting.
While Nestlé does disclose sales of healthy versus unhealthy food using a government-endorsed nutrient profile model, the company had “warped the profile quite substantially, by including coffee in the scoring system (contrary to the nutrient profile model’s guidelines), to inflate its own score,” Abrams said. “As a result, investors couldn’t compare the company’s disclosure to its peers, which felt misleading.”
Nestlé’s Chair Paul Bulcke recommended shareholder oppose the proposal, claiming in a public statement that the resolution would “restrict Nestlé’s strategic freedom and limit management’s ability to make responsible decisions.”
ShareAction filed similar proposals in the past at peers Danone and Unilever but withdrew them after the companies engaged and provided greater transparency.
While food producers are currently the focus of ShareAction’s Healthy Markets Initiative, the engagement has spanned across various industries. Engagements on healthy food sales first began with food retailers, before expanding to U.S. and European food manufacturers, such as the likes of Coca-Cola and Kraft Heinz. Fast-food companies are next on the list.
“Looking ahead, we will start engaging with the out-of-home sector, primarily fast-food restaurants,” Abrams said. “Discussions will likely concern disclosure in the first instance, then selling more healthier meals.”
Investors from across the pond are also engaging with companies on public health, citing the growing regulatory and health risks stemming from use of harmful additives, as well as pesticide and antibiotics use in agriculture.
Both PepsiCo and Coca-Cola are set to face proposals concerning the use of non-sugar sweeteners at their May 1 annual meetings, submitted by members of the Interfaith Center on Corporate Responsibility (ICCR). Similar proposals won 13% and 11% support, respectively, in 2022.
These engagements also touch on wider ESG concerns, with references to a 2022 Rudd Center report which found that some companies “disproportionately targeted Hispanic and Black youth when marketing high-calorie, low-nutrient products.”
“There is a real opportunity to be a leader in this space,” Abrams said. “Research shows that customers want more healthy options, and those that lead stand to benefit the most in the long run. Don’t be the last one selling unhealthy foods, or you could be at risk of stranded assets or be in trouble reputationally.”
Rebecca Sherratt 