Impact Investing in the Food & Beverages Sector
This profile covers the processing of meat, vegetable, fish, shellfish and fruit into value-added food and beverage products for human consumption.
Business activities that fall within the scope of this sector profile include:
Industrial bakeries
Breweries
Dairy processing
Drinks bottling
Fish/shellfish (‘fish’) processing
Fruit and vegetable processing
Meat and poultry processing
Grain mill products
Sugar production
Vegetable oil processing
Wine making.
Key environmental and social aspects
Management commitment, capacity and track record (CCTR)
Companies need management’s commitment and sufficient capacity to ensure that the necessary resources are available for E&S management. Refer to Investment cycle: Assessing companies’ commitment, capacity and track record.
Environmental and social management system (ESMS)
Companies should develop and implement an ESMS commensurate with the level of risks and impacts associated with its activities. For further advice refer to E&S topic: Environmental and social management systems (company-level).
Food safety
Risks for the business
Permanent or temporary loss of licence to operate due to breaches of the applicable food safety regulations.
Direct and indirect costs of quality failures (e.g. lost production, fines and reputational impacts).
Lack of access to markets where entry requires certification/meeting certain E&S requirements (e.g. international supermarket chains).
Opportunities for the business
Operational benefits and sales/margin growth resulting from the attainment of internationally recognised food safety standards and certifications (e.g. ISO 22000, BRC Global Standard, IFS Food).
Access to markets can be enhanced where approved supplier or certification programmes include ESG requirements related to ingredient traceability, product attributes (e.g. organic, Fairtrade) or provenance.
Sales/margin growth through ability to meet the requirements of trade buyers (e.g. international supermarket chains) whose approved supplier programmes include E&S requirements.
Food safety is of critical importance, as it is paramount to ensure that products are in appropriate condition for human consumption. If significant food safety issues are identified or recognised as being likely to arise in a company, they should be addressed as a matter of priority.
Therefore, a company must implement and maintain a system to ensure appropriate food safety standards. This system should cover suppliers, contractors and distributors, as well as the production facilities themselves, and include:
Adherence to international Good Manufacturing Practice (GMP).
Effective implementation of Hazard Analysis and Critical Control Points (HACCP) systems.
Product traceability systems and product recall procedures.
Certification to international standards on food safety management systems, if appropriate.
For further guidance refer to Codex Alimentarius international food standards, guidelines and codes of practice (WHO/FAO) and IFC Food Safety Toolkit (World Bank Group, 2014).
Labour and working conditions
Note – Occupational health and safety is covered separately below.
Companies shall operate in accordance with applicable labour laws and regulations and ILO Fundamental Conventions. Refer to E&S topic: Labour standards.
Occupational health and safety (OHS)
Risks for the business
Companies may face prosecution or fines (or have their licenses revoked in extreme cases) if workers or contractors are injured or killed.
Damage to or loss of the company’s assets, loss of production, loss of clients/business, increased insurance premiums and legal claims (both in the short- and long-term) can result from poor OHS practices.
Low workforce morale and erosion of trust can lead to higher staff turnover, lower productivity, additional training and recruiting costs, and reputational damage.
Opportunities for the business
Proactively involving workers and contractors in key decisions can help to identify and maintain good OHS practices, and improve their acceptance if new or significantly different to previous practices.
Productivity can be improved and insurance premiums for workers’ and compensation payments can be reduced.
OHS is an important consideration for any business, regardless of sector, and all companies must have in place appropriate OHS and emergency preparedness and response management systems, commensurate with level of risks.
If contractors are involved in operation and maintenance activities, companies should implement measures to ensure contractors work in accordance with applicable regulations and GIIP. Such measures should be covered in companies’ OHS and emergency preparedness and response management systems.
Specific OHS risks in the food and beverage industry include:
Physical hazards (e.g. manual handling, repetitive work, slips on wet or food contaminated floors, falls from height, workplace transport, injuries from sharp knives or processing and packaging machinery).
Exposure to noise (e.g. in canning plants and from bottling machines, conveyors and blanching applications).
Biological hazards (e.g. development of infections resulting from exposure to microorganisms present in meat, fish, vegetables and other products involved in the processing process).
Chemical hazards (e.g. chemicals used in cleaning/disinfection operations and cooling systems such as ammonia).
Exposure to heat (e.g. from steam peeling, pasteurisation, and canning processes) and cold (e.g. working in refrigerated areas/rooms).
Fire and explosion hazards such as explosive/combustible dusts (such as grain and flour), fermentation processes and the use of hazardous chemicals such as industrial alcohol.
For further sector-specific guidance refer to World Bank Group Industry Sector EHS Guidelines for Breweries, Dairy Processing, Fish Processing, Food and Beverage Processing, Meat Processing, Poultry Processing, Sugar Manufacturing and Vegetable Oil Processing.
For further general guidance on GIIP relating to OHS refer to E&S topic: Occupational health and safety, IFC Performance Standard 2: Labour and Working Conditions, World Bank Group General EHS Guidelines and CDC Good Practice: Preventing Fatalities and Serious Incidents.
Pollution prevention and resource efficiency
Risks for the business
Fines and penalties can be imposed for non-compliance with national pollution prevention and hazardous materials / waste management laws.
Excessive expenditure on energy and water supply.
Excessive expenditure on the management of emissions, solid waste and wastewater quality.
Opportunities for the business
Lower operating costs, reduced environmental footprint and better preparedness for resource shortages or increased price of resources can result from adopting energy efficiency, water efficiency and cleaner production measures.
Use and, where possible, re-use of food packaging with lower environmental footprint and reduced transportation costs.
Enhanced access to markets where approved supplier programmes include E&S requirements.
Energy efficiency: Food and beverage processing activities typically require thermal energy for process heating, cooling and refrigeration — and there are costs associated with this energy consumption. Opportunities to adopt energy efficiency measures should always be explored, as should opportunities for on-site renewable energy generation (e.g. biogas from organic waste).
Air emissions: The main air pollutants from food and beverage processing operations are generally particulate matter (PM) and odour. Odour can be a significant concern to local communities. Companies should implement air emissions control and monitoring measures in accordance with applicable regulations and standards.
Water management: Food and beverage companies typically require a reliable supply of large quantities of good quality water for washing raw ingredients, cooling and cleaning production lines, and/or for use as an ingredient in their final product. The costs associated with this supply can be significant. High levels of water consumption can also lead to large volumes of wastewater, which can be expensive to treat and may require special permits.
Companies in this sector may face water scarcity and quality risks. Good quality water supplies may be under pressure due to low rainfall, groundwater pollution from agricultural run-off or industrial waste, as well as rising water demand from neighbouring communities and businesses. Food and beverage companies should assess water scarcity and pollution risks and implement measures to reduce water consumption in their production processes.
Waste management: This sector can generate significant volumes of organic, putrescible solid waste in the form of inedible materials and rejected products. The handling, storage, treatment and disposal of solid waste can entail significant risks and can be expensive. Hence, a Waste Management Plan should be implemented. Reducing the amount of solid waste produced makes raw material use more efficient.
Packaging: Selecting and designing the right packaging can have a positive impact on business including lower production costs and better transport efficiency. It can also help to reduce impacts associated with packaging waste (e.g. Improve packaging re-use or recycling, increase packing biodegradability).
For further sector-specific guidance refer to World Bank Group Industry Sector EHS Guidelines for Breweries, Dairy Processing, Fish Processing, Food and Beverage Processing, Meat Processing, Poultry Processing, Sugar Manufacturing and Vegetable Oil Processing.
For further general guidance on GIIP relating to pollution prevention and resource efficiency E&S topic: Pollution prevention, E&S topic: Resource efficiency, IFC Performance Standard 3: Resource Efficiency and Pollution Prevention and World Bank Group General EHS Guidelines.
Supply chains
Risks for the business
Risks related to weaknesses in supply chain reliability, sustainability and resilience to climate change; lower agricultural productivity and/or natural resource quality or availability due to inadequate E&S management practices (e.g. poor working conditions, violation of human and/or labour rights, unsustainable use of soil and water, illegal and/or inadequate land acquisition practices).
Reputational risks linked to sourcing ingredients from unsustainable supply chains and/or providers that do not meet basic international standards and conventions (e.g. international conventions on child labour and forced labour).
Opportunities for the business
Achieve a more reliable, sustainable, resilient and competitive supply chain by collaborating with and, where possible, train suppliers to enhance E&S management measures to (i) improve resource use sustainability (e.g. water and soil); (ii) raise productivity and product quality; and (iii) develop stronger and better relationships with suppliers.
Enhanced access to markets where buyers’ approved supplier programmes include E&S requirements and/or where customers take into account sustainability factors when buying food and beverage products.
The adequacy and sustainability of supply chains can be a significant business success factor for many food and beverage companies. Challenging issues at the supplier level can include:
Pollution prevention
Labour and working conditions (including the use of child labour and/or forced labour)
Inappropriate or illegal land use or acquisition
Impacts on water resources
Ecological and social impacts resulting from the conversion of natural habitats (such as through deforestation)
Animal welfare
Where the company can reasonably exercise control, its ESMS and supply chain policies should seek to identify and manage such risks and impacts. Where control of risks is not possible due to insufficient influence on its supply chain, companies should seek to gain an understanding of the scale, type and significance of E&S issues and assess the risks associated with continuing the relationship with that supplier. If risks are significant it should explore alternatives.
E&S matters can also be important positive features in the development of more sustainable supply chains in the food and beverage sector. Agricultural extension measures (especially directed towards smallholders) can include advice and education leading to E&S and other benefits from improved labour practices, improved irrigation and resilience to water scarcity, better use and handling of pesticides, more effective use of fertilisers and better soil management, and reduced food wastage resulting from better product quality.
For further sector-specific guidance refer to Sector profile: Agriculture and aquaculture and Sector profile: Fisheries and E&S topic: Supply chains.
For further general guidance on GIIP relating to supply chains refer to E&S topic: Supply Chains, IFC Performance Standards.
Business integrity considerations
The most prominent business integrity risks in the food and beverages sector are around government permits and inspections, i.e., paying off inspectors to ignore health and safety breaches. Companies should have clear processes in place for managing government permits and inspections.