The Pinnacle of Urgency: Pinnacle Foods’ Efforts at Addressing Climate Change
Pinnacle Foods reaches 85% of American households. But its brands’ raw materials – agricultural products – are at risk due to climate change. What is the company doing to address this existential threat?
Pinnacle Foods, owner of Duncan Hines, Birds Eye, Aunt Jemima, and many other iconic food brands, relies on the quality and quantity of agricultural yield to produce and sell its countless food products. However, these critical raw ingredients that underpin Pinnacle Foods’ business are in jeopardy. Studies estimate that climate change over the next 25 years will continue to put stress on the agriculture industry. Irregular and unpredictable precipitation patterns, extreme weather conditions,[1] and changes in terrestrial and marine ecosystems, are expected to contribute to a continued decline in yield of major U.S. field crops by 2020.[2] As shown in Figure 1, studies suggest that even the “best” case scenario of a slower to warm climate will result in crop yield declines across several types of crops.[3]
Figure 1:
If Pinnacle Foods does not address these environmental issues, their business will be at risk.
So what is the company doing?
Pinnacle Foods has adopted practices at several steps throughout the supply chain to mitigate its activities that negatively affect the environment (and in turn, its business). In particular, it is focused on the following five areas: electric usage, natural gas usage, greenhouse gas emissions, water usage, and solid waste to landfill.[4]
The company has found ways to create efficiencies that reduce energy and natural gas usage and greenhouse gas emissions. For example, it partners with SmartWay, a U.S. Environmental Protection Agency to transport its freight in the most fuel-efficient way possible. This reduces CO2 emissions and oil usage and cuts company fuel costs.[5]
Pinnacle Foods has also instituted new processes to conserve water, an increasingly scarce natural resource. For example, in Fennville, Michigan the team replaced water chutes previously used to transport apples throughout the plant with dry conveyors that accomplish the same task. This single change saves 4 million gallons of water each year.[6] In addition, employees measure and record water usage at every manufacturing site.[7] This process creates accountability for water usage and encourages new ideas for further usage reductions.
To reduce waste, Pinnacle Foods tries to reuse and recycle materials that would otherwise be discarded. Through its packaging on brands such as Birds Eye, it uses the minimum amount of material possible to cover its products. It also employs text on the packaging to actively encourage consumers to recycle the waste.
The company reinforces its internal focus on climate change by engaging with others who are similarly dedicated to the cause. For example, its Birds Eye brand ensures that ingredients are sustainably sourced. It partners with growers and farmers who optimize for nutrition and yield and minimize waste, while considering their impact on soil erosion, biodiversity, and energy use.[8] This environmentally responsible behavior may incentivize growers to practice sustainable farming and, perhaps inadvertently, drive other companies to adopt similar behaviors to remain competitive.
Concrete targets for 2020 hold the company responsible for making progress on its purported commitment to climate change mitigation. In fact, the company has already made significant strides, per Figure 2.[9]
Figure 2:
What else can be done?
As seen in Figure 2, Pinnacle Foods has made the least progress on reducing waste. I would recommend a reexamination of their production processes to uncover the most wasteful practices and then consider potential efficiencies. Solutions may include using the same type of packaging material across products or finding ways to reuse scrap in order to reduce the amount of material needed.
Beyond their current internal initiatives, Pinnacle Foods should consider taking a public and industry-wide stance on climate change. Given its scale and influence, it could become a role model for companies strategizing about climate change mitigation. Together, companies can discover more creative environmentally friendly operating techniques. In addition, Pinnacle Foods should explore the emerging plant-based meat category, which requires fewer resources, including water, to produce. As the population in need of food grows and food yields shrink, this may be a mechanism to bridge that gap and strategically fulfill a market need.
Food for Thought
At the beginning of 2016, Pinnacle Foods had already almost reached most of its 2020 targets. Were they aggressive and lofty enough? It might be time for the organization to reassess the positive progress it has made and push itself to achieve more for the sake of the environment. Doing so will not only benefit the environment, but the long-term viability of the Pinnacle Foods’ business.
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[1] National Climate Assessment, U.S. Global Change Research Program, 2014, http://nca2014.globalchange.gov/highlights/report-findings/agriculture#statement-16364, accessed November 2017.
[2] “Climate Change and Agriculture in the United States: Effects and Adaptation,” USDA Technical Bulletin 1935, http://www.usda.gov/oce/climate_change/effects_2012/CC%20and%20Agriculture%20Report%20(02-04-2013)b.pdf, accessed November 2017.
[3] The California Climate & Agriculture Network, “Climate Change Impacts on Agriculture,” http://calclimateag.org/wp-content/uploads/2011/09/Impacts-fact-sheet.pdf, accessed November 2017.
[4] “Sustainability,” 2017, http://pinnaclefoods.com/responsibility/sustainability.html, accessed November 2017.
[5] Ibid.
[6] Ibid.
[7] Ibid.
[8] “Our Sustainability Standards,” 2017, https://www.birdseye.co.uk/forever-food-together/our-sustainability-standards#HealthierMealChoices, accessed November 2017.
[9] “Sustainability,” 2017, http://pinnaclefoods.com/responsibility/sustainability.html, accessed November 2017.
Pinnacle Foods should continue to invest in responsible eco-friendly practices but I don’t know if this will be enough to reduce the risk they will face due to climate change. If they implement all of these initiatives fully, will that decrease the risk of crop yield declines? Figure 1 seems to suggest that even in this “best” case scenario, Pinnacle will face shortage of raw materials. Pinnacle may need to develop a contingency plan for this future. Can they encourage their suppliers to develop new crops that are more resistant to fluctuations or change their recipes to avoid the products which may be most at risk?
As you stated, Pinnacle Foods seems to have already made substantial progress on a majority of their 2020 targets. That seems to suggest that the Company was not aggressive enough in setting its initial goals, and I hope that the Company can revise its targets to make even more improvements in the future. However, they will likely experience decreasing marginal benefits as they work to further increase their sustainability efforts. At this point in time, they have most likely taken care of all the “low hanging fruit” in terms of identifying sustainability initiatives that are both relatively easy to implement and saves the Company on costs. The real test of Pinnacle’s commitment to sustainability will be whether it pursues more difficult initiatives that may not have an immediate or obvious benefit to the Company’s P&L.
Really interesting write-up!
JIT’s correct to note that Pinnacle has already made material (and frankly, quite impressive) strides in improving their sustainability processes since setting their reduction targets in 2012. With that said, I would not be quite so quick to jump to saying that the company had therefore set unambitious goals initially (e.g., I imagine that reducing energy consumption by a third was no small feet for such a large company). Instead, I’d suggest that their success gives them an opportunity to set new goals across the first four categories of electrical, nat gas, and water usage, and ghg emissions.
My primary reason for recommending moving the goal posts would be to take strides to guard against the complacency that Justin flagged as a risk. While it can be easy for a company to pat itself on the back for making solid progress, I see this as a case where continuous improvements can and must be made if Pinnacle wants to remain on as the dominant player – in particular under the backdrop of the imminent threats faced by the industry that Mel noted. By doing so, Pinnacle has the opportunity to simultaneously increase their value (by reducing costs) while also throwing around their weight as the industry leader in a way that could (hopefully) convince their peers to take similar steps. Such a move could also serve to reinvigorate the team to think more transformational vs. incremental when looking for ways to drive further improvements.
Lily raises important issues around climate change’s potential impact on Pinnacle and the company’s ability to respond. I commend Pinnacle’s efforts to improve their own environmental impact and see the brand and social value in doing so, but agree with “Mel Searches'” assertion that these will hardly move the needle on the actual problem.
Pinnacle would be wise to begin hedging against climate change risk for its core businesses over the long term. One approach might be investing more aggressively in R&D and consumer education around foods that are less susceptible to these climate change issues. Figure 1 shows variation in response to climate change across different crops, suggesting that some may be more likely to endure than others. If Pinnacle can get ahead of the trend by shifting its product mix and educating consumers, it may be better positioned for the future.