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Sector Reports - 30/01/2019

As the UN estimates that a third of world food is wasted annually, is the Supermarket sector doing enough to address its ESG risks?

Although Supermarket companies have made improvements by implementing measures to address food safety, energy use and human capital, frequent controversies remain a key challenge for the sector

This new report provides Vigeo Eiris’ exclusive opinion on the sector’s strengths, innovations and best practices as well as emerging risks, vulnerabilities and controversies. Performance scores and advanced indicators are provided on critical issues such as food safety, information to customers, energy transition, business ethics, due diligence on social and environmental risks in the supply chain, human capital and human rights.

Key Findings:

  • The Supermarket sector contains companies that retail and distribute food and non-food products and manage hypermarkets, convenience stores and specialty stores which provide health and beauty care products.
  • Vigeo Eiris awarded an average overall score of 29.1 to companies in the Supermarket sector, on a scale of 0 to 100. The sector’s performance remains unchanged since our previous analysis.
  • The sector ranks 26th out of Vigeo Eiris’ 39 sectors, covering a total research universe of 4,500 companies. Previously, the sector ranked 28th.
  • Sector leaders such as Groupe Casino and Jeronimo Martins are concentrated in Europe, whilst laggards are mostly listed in Asia Pacific and Emerging Markets.
  • The Supermarket sector’s reporting rate is 56%, slightly above the universe average (55%), with European companies Groupe Auchan and Tesco communicating most comprehensively on their ESG policies, practices and performance.
  • ESG risk mitigation scores are limited in relation to reputation (33/100) and operational efficiency (31/100), and weak in relation to human capital (26/100). In terms of managing issues affecting legal security, Supermarket companies display a limited average score (33/100), which is slightly higher than the universe average (32/100). The industry’s performance in operational efficiency, reputation and human capital is slightly below the universe average.
  • The sector’s capacity to tackle climate change and support the transition to a low-carbon economy remains weak (26/100). European companies such as Jeronimo Martins and Kesko lead the sector in efforts to integrate climate change into their risk management strategies. 52% of companies within the sector display a weak energy transition performance, whilst 7% display advanced performance.
  • The Supermarket sector faces 83 controversies. The severity level is high for 26% and significant for 12% of cases. The most recurrent controversies relate to anti-competitive-practices, a lack or misleading information to customers, failures in audit and internal controls, insufficient product safety and failures in the integration of social standards in the supply chain. 61% of companies do not face any controversies.

Key Takeaways:

  • Ensuring food safety and providing transparent information to customers remain key areas for improvement within the Supermarket industry. The average score for product safety is 30/100 and only a minority of companies report on systems in place for crisis management, product recalls and customer alerts. Companies’ performance on information to customers remains limited (33/100) due to frequent controversies.
  • According to the United Nations, one third of the world’s food is wasted annually, calling retail companies and supermarkets to take decisive action on waste management. Yet generally, the Supermarket industry’s efforts appear to be weak in terms of the measures developed and indicators disclosed to address waste management, with an average score of 18/100.
  • The management of working hours and measures implemented to improve health and safety conditions in Supermarkets represent a material risk. Human Capital management within the sector is weak due to a lack of visibility and accounting about companies measures and commitments regarding employees’ wellbeing. The sector’s average performance on Health and Safety and Working Hours remains weak with scores of 28/100 and 12/100 respectively.
  • According to the International Labour Organization, 22 million people work for food manufacturing companies alone. Ensuring social standards in the supply chain and fair-trading relationships with suppliers are key responsibilities for the sector, yet our findings show that the sector’s average performance in relation to social standards remains limited (30/100).

Best performing areas:
o Shareholders
o Board of Directors
o Audit and Internal Controls

Worst performing areas:
o Working Hours
o Atmospheric Emissions
o Transportation

Top Performing Companies:
o Europe: Groupe Casino (67/100)
o North America: Wal-Mart Stores (37/100)
o Asia Pacific: Aeon Company (36/100)
o Emerging Markets: Pick N Pay Stores (37/100)

Companies making best progress since 2017:
o Europe: Jeronimo Martins (+15)
o North America: George Weston (+10)
o Asia Pacific: No progress
o Emerging Markets: No progress

To view an excerpt of our 2018 Supermarket sector report, download the document below.

To enquire about accessing our sector reports, please contact the relevant team below:
If you are an investor: investorcustomer.service@vigeo-eiris.com
If you are a corporate entity: corporatecustomer.service@vigeo-eiris.com
If you are an NGO or a university: contact.academique@vigeo-eiris.com
If you are a journalist: news@vigeo-eiris.com

Download :
icon-download-34x36 Key Findings_Supermarkets_September 2018
Keywords : ESG, Supermarkets