Open letter to Nortura from an ESG analyst
Dear Trine Hasvaag Vang, Anne Marit Panengstuen and Cecilie Hultmann as representants for Nortura (Norway’s leading supplier of meat and eggs),
A shocking state of some pig farms in your supply chain
We have all been shocked by the recent articles on the unacceptable state in some Norwegian pig farms in a country that hold a high position in ethics. Sources can be found at the end of this letter (be aware of strong images).
We need to discuss your supply chain handling.
But first of all, let me tell you what an ESG analyst do to ensure that you actually read this all the way.
Why Nortura should listen to the ESG analyst
An ESG analyst is assessing risks and opportunities for a company, based on the extra financial factors. I’ll focus on risks in the following. Today, we are classifying the ESG factors in three different groups: Environmental, Social and Governance factors. We are looking at typical risks for different sectors, the food sector can be one of them. For a specific company, like Nortura, we thereafter look at how the company is dealing with the earlier identified risks. Of course, a company can be present in several sectors, so we also take this into account. Once your dealings with the risks (risk mitigation) understood, we have a good view of the remaining risks, that we call residual ESG risks.
I am a Certified ESG Analyst (EFFAS) and I would like to give you some advice based on what investors already or at least very soon expect from you. I pull in the investors here, because they buy our research, and we highlight the residual ESG risk and we suggest questions the investors should ask you about (engagement). They also invest in bonds that you emit to finance your activity through a bond and certificate programme with a ceiling of 4,25 billion NOK. Not dealing with ESG risks properly can lead to higher cost of financing.
First as an in introduction, we will only look at what the journalists and activists have brought up to surface, this is not a full ESG risk assessment of Nortura.
Nortura should only work with a supply chain that can deliver what you promise your clients
In the ESG research, the Social factors are about your relationship to stakeholders. Among the stakeholders we find shareholders (the farmers owning you), employees, clients, suppliers, local communities, NGOs (the activists), regulatory bodies and the state.
A sustainable business has a clear idea how to deal properly with all these stakeholders.
What went wrong here?
You buy live animals that, for some, have been raised in horrible conditions. It does not matter that “this is not representative”, the society will always judge you on the maybe non representative. Can you imagine a global apparel (clothing) company saying, the child labour is their supply chain “is not representative” and expect understanding from their stakeholders? Human and animal conditions are very sensitive areas that can move client attitudes very fast and hurt your reputation a lot.
2x – What made the damage double up? In 2019 this was already a topic. And promises were made to your stakeholders. And in 2021, this has not been properly addressed.
3x – What made the damage triple up? You have an extensive communication about animal health and how you can guarantee that the meat the consumer is buying, and eating is not coming from animals having lived in horrible conditions.
Expected stakeholders’ reactions
- Shareholders (the farmers) – Very silent on that side in this case. See also below under Suppliers.
- Clients – Too big group and no spokesperson, but this is where it can hurt the most, short term and long term. Short term, when you have the pork meat package in the shop from Gilde still promising the virtue of the Norwegian pork meat, you see the pictures in your head from the articles. What if just this meat comes from one of the animals from the pictures? More people will choose something else. Longer term you are strengthening the alternative protein trend among the young (and some less young), so reducing the business potential of pork meat. Both very negative for Nortura and Gilde.
- Suppliers – Pig farmers – Among them are the likely few farmers offering horrible conditions for the pigs. But they will all have the eyes on them and questioning if they are or not a “good” pork farmer. Their social acceptance and stature may be reduced. Negative for them and their relationship to Nortura.
- Local communities – Living close to a pork farm has its charms in terms of smell. The acceptance for this will be reduced as a result of this. Negative for the suppliers of Nortura. They are also Clients, see above.
- NGOs – They were on you in 2019 with the same topic, you promised improvements. They caught you in failing to deliver on your promises. They will not leave you a third chance, they have all eyes on you and your doings. They may extend their work to other areas of your business. What will they find on the Prior side, including the supply chain? Negative for a company with bad practices, like here Nortura.
- State/Regulator – Ministers and politicians have seen the reportages with images and videos and have publicly expressed their outrage and non-acceptance for what they have been shown. Expect more scrutiny and regulation. Negative as more bureaucracy is costing time and money, but maybe good for animal health.
As you see this is negative for all stakeholders, and it reduces the sustainability of your business model. Many consumers will turn to alternative food and alternative providers. Are they better, maybe not, but at least you have showcased how your promises in 2019 were, and still are through labelling of meat packages in the shops and on your website, made from empty words.
What need to be done now Nortura?
First of all, no, do not ask Mattilsynet do your job. Do not make them the scapegoat here or try to push the responsibility in their direction. They have by the way shown they are not capable of taking responsibility for this very important issue for you.
You are solely responsible to ensure your promises to your stakeholders carry weight. Since you have missed it twice, urgent and serious action is needed. You need to restore your reputation through transparent and real action to earn back what you have destroyed in your stakeholder relationships.
I suggest the following:
- Add a sustainability expert to your Board of Directors. Drill this down in the organization. Focus on delivery and less on glossy web pages, this is not a communication advisor’s job.
- Add an animal health expert to your Board of Directors, make a separate Board committee for this. Drill this down in the organization. Focus on delivery and less on glossy web pages, this is not a communication advisor’s job.
- Build a new team that is in charge of auditing the pork farmers. Why not hire some of the NGO persons to advice you on this? Any pork farmer that does not sign and accept to be audited unannounced; you dismiss as a supplier. In today’s situation all will accept. While you are at it do the same for the chicken supply chain.
- Set aside 50m NOK of the revenues from pork meat sales to immediately take care of the mistreated animals. Not enough? Set aside more, this is not a moment to be greedy Nortura. If you do and tell the world about it, define KPIs and update monthly on the progress.
A good move was to postpone the decision to close a slaughterhouse that would lead to 8 hours longer truck transport of live animals. Let you potential new Board of Directors member responsible for animal health join before proceeding with this decision.
Lastly, there is absolutely no “dilemma between stopping pork farming in this horrible way and taking away the financing of living for the farmer” responsible for this. Farmers responsible for this shall do something else. I presume voluntary treating animals like this is criminal in Norway?
And then to all of us that consume pork meat, we can contribute by paying higher price for “better” meat! But then whole supply chain has to deliver first, because it cannot permit having another blow out like this!
I see you start your sustainability narrative with a focus on the 17 SDGs, be careful about this as this can instate a sustainability culture in a company that is turned only to the positive aspects and future dreams and less on the current state of affairs, it can become soft. A soft sustainability culture may be reluctant to dig into the real sustainability risks of a company and be a hinder for some tough decisions they may have to take in the future. If you refer to the 17 SDGs, please also state to all of them where you have a negative impact today, because you have as everyone else.
Do not hesitate to contact us at sustainAX if you wish to discuss any of this.
Sources (in Norwegian, but the pictures and films talk for themselves, once again be aware of strong pictures):