Chatham House report
Published 8 July 2020
Updated 17 December 2020
ISBN: 978 1 78413 404 4
Malnutrition acts as a brake on the development of individuals, communities and economies around the world. This report is the first of its kind to reveal the hidden costs of malnutrition for business, and the extent to which these costs are recognized and addressed by multinational companies (MNCs).
Tackling malnutrition would bring benefits for many aspects of the sustainable development agenda, from poverty reduction to gender equality. Equally, work in such areas can indirectly improve nutritional outcomes.
Adequate nutrition is the missing link for sustainable growth. It is an integral input to – and outcome of – the 17 SDGs (Figure 10), yet progress in this area continues to be hampered by chronic underinvestment. Success in tackling malnutrition in all its forms can have a multiplier effect at both household and economy level, improving health, boosting consumer incomes and stimulating economic development. A recent World Bank analysis estimated that every $1 invested in interventions to meet the World Health Assembly nutrition targets (Box 2) would yield an economic return of between $4 and $35, while reductions in childhood stunting could increase economic productivity in Africa and Asia by an amount equivalent to between 4 and 11 per cent of GDP.48
For enlightened investors and companies, the potential for improved nutrition – both in the workforce and in the communities in which firms are embedded – to drive inclusive and sustainable growth should be a compelling impetus for investment. Success in delivering on the nutrition-focused targets under SDG 2 could unlock growth in developing markets and create an enabling environment for achieving the broader SDG agenda. This in turn would help companies to deliver enduring shareholder value in a way that does not undermine their corporate sustainability commitments.
Stronger, healthier and more economically productive societies give rise to new investment opportunities, and support greater discretionary spending on goods and services. The human capital gains to be reaped through improved nutrition outcomes can support the development of a workforce that is skilled and prepared for the future of work: digitization and automation are heightening the demand for advanced cognitive skills,49 skills which are hampered by the low literacy associated with high rates of malnutrition.50 Improved nutrition can also help to de-risk investments: pervasive malnutrition has a destabilizing effect not only on economies but on whole societies, with food insecurity and malnutrition frequently being important contributors to armed conflict in low-income countries, particularly when prevalent among rural populations.51
In our interviews with MNC representatives, a number of participants noted the importance of good nutrition to boosting productivity gains among the workforce in the near term, and to supporting human capital development and market growth in the longer term:
There is higher morbidity with those with malnutrition. Those costs and impacts are shown through decreased productivity.
If you improve the health of your workers, the workers will pay you back in productivity.
Even if it doesn’t affect core business, it may relate to […] unlocking growth.
These people are potentially part of our future workforce. And these communities are those who will be using our products.
Yet despite the prospect of long-term benefits to business, corporate engagement with nutrition as an integral part of the SDG agenda remains low compared with other areas. A 2019 review by the World Business Council for Sustainable Development (WBCSD) of its members’ sustainability strategies found that SDG 2 is under-represented compared with other SDGs: some 41 per cent of WBCSD members referenced SDG 2 and targets on nutrition, compared with 87 per cent for SDG 13 (climate action), 81 per cent for SDG 12 (responsible consumption and production) and 76 per cent for SDG 8 (decent work and economic growth).52 Our interviews with company representatives reflected a similar deprioritization of nutrition in the context of broader sustainability efforts:
To be frank, it has been low on the list. The key thing is that we do not do enough justice to other sustainability issues other than climate change.
Diversity, social mobility, learning – these are the points of focus.
It’s doubtful that we will be able to source the resources, trust and goodwill internally to push forwards this agenda any time soon.
Rather than being distinct and peripheral to these other priority areas, however, improved nutrition can be a catalyst – and even a prerequisite – for delivering against them. Good nutrition and the achievement of the targets under SDG 2 have been identified as critical to tackling a range of health and social challenges, from ending the AIDS epidemic53 and improving outcomes from pandemics such as COVID-19 54 to achieving gender equality55 and driving inclusive economic growth.56
As the investment community awakens to the fundamental role of improved nutrition in delivering sustainable and inclusive growth, companies in all sectors will likely come under pressure to integrate nutrition-sensitive approaches across their workplace and CSR programmes. Among interview participants, scrutiny of company performance on social sustainability in general, and on health and nutrition as part of that, was thought to be increasing, bringing a heightened reputational risk for companies unable to demonstrate positive action:
There is definitely increasing attention to ESG reporting. So we are paying attention to this and it will be part of the integrated health strategy.
There is a practical reason to look at these things, not least because pressure from all directions – investors, shareholders, staff – is growing to do the right thing for the company and morally.
We need to adopt a pre-emptive, preventative response because scrutiny and pressure around this will only grow.
Beyond reporting, good performance in tackling malnutrition – where it is a prominent social challenge in and around a company’s area of operation – will be important to maintaining a social licence to operate, in the eyes both of ‘host’ governments and among employees and consumers. Protecting the company’s reputation was highlighted as a key driver of action on sustainability by interview participants:
We need to build a social licence to operate – demonstrate authentic and impactful investments in the community.
Research shows that companies with a strong social sustainability agenda fare better than their peers, for lots of reasons – better government relations, and less risk of litigation, higher staff retention rates, stronger supply chain resilience.
If we were to ignore local social issues in the country, then it could bring us down to our knees – reputationally – both locally and internationally.
Environmental, social and governance (ESG) risk and reporting frameworks are increasingly integrating all dimensions of the SDG agenda, and including metrics relating to a company’s impact on the health and nutrition of employees and wider society. The SASB Materiality Map already includes metrics on the impact of company activities on the nutrition and well-being of customers and employees,57 while the forthcoming World Benchmarking Alliance, which aims to ‘incentivize and accelerate’ private-sector efforts towards achieving the SDGs, will evaluate companies on their nutrition performance under its Food and Agriculture Benchmark.58 Other efforts to foster more comprehensive corporate reporting against the SDGs include: the ‘Business Reporting on the SDGs’ initiative,59 run collectively by the Global Reporting Initiative and the UN Global Compact, which offers guidance to companies and investors on how to align existing reporting practices with the SDG framework; and WBCSD’s Reporting Exchange,60 which offers a bank of resources to guide companies in their reporting practices and to raise awareness among investors of ESG risks and indicators.
ESG reporting on company efforts to support employee and supplier nutrition is currently limited,61 but a number of companies have implemented initiatives to monitor and improve the impact of their supply chain operations on the nutrition security of stakeholders. Examples include Unilever’s ‘Seeds of Prosperity’ partnership with the Global Alliance for Improved Nutrition (GAIN) and the Sustainable Trade Initiative (IDH) to improve workers’ diets along Unilever’s tea supply chain in India; and Olam’s ‘AtSource’ platform, which offers social footprint data (including on farmers’ food security) in respect of its commodity supply chains (Box 5). Alongside these company-level initiatives, the Global Access to Nutrition Index – produced by the Access to Nutrition Foundation – monitors and reports on the performance of the largest food and beverage companies in tackling undernutrition and obesity through their practices on, for example, the marketing of healthy and unhealthy foods, product reformulation, and consumer and employee health and wellness.62
ESG risk and reporting frameworks are increasingly integrating all dimensions of the SDG agenda
Looking ahead, outside scrutiny will continue to be greatest for companies in the food and beverage sectors. The influence and impact of businesses in promoting unhealthy food choices, through irresponsible practices including child-targeted advertising of high-fat and high-sugar foods and through non-compliance with the International Code of Marketing of Breastmilk Substitutes, have been extensively explored in the literature.63 At the same time, the risks posed by corporate malpractice to the fulfilment of the rights of the child, and human rights more broadly, with regard to food and nutrition security are increasingly under the spotlight,64 particularly for those companies that are well positioned to take direct action to support the fulfilment of these rights.
Other sectors are by no means immune to nutrition-related reputational risk, however. Companies that have a large footprint in countries with a high prevalence of malnutrition will likely face criticism if found not to be addressing the issue. Particular focus will fall on those industries with highly localized operations to which good community relations are key – mining, for example – and among which ESG reporting on areas such as health and safety and social development is already commonplace. Here, poor performance on so-called ‘hygiene factors’ – whether community engagement through sustainable development initiatives or workplace conditions and policies for employees – risks employee dissatisfaction, high staff turnover and a reduction in the underperforming company’s social licence to operate among local communities and its consumer base.65
In 2018, Singapore-based food and agribusiness company Olam International launched AtSource, a ‘sustainable sourcing platform’. AtSource is structured in three tiers, with AtSource+ (the middle tier) providing environmental and social footprint data on Olam’s products.66 Users access the data via a digital dashboard. They can review information on suppliers across nine sustainability areas, grouped under the three outcome targets identified in Olam’s corporate purpose ‘to reimagine global agriculture and food systems’. These three targets are (1) ‘prosperous farmers and food systems’, (2) ‘thriving communities’ and (3) ‘regeneration of the living world’. Information and risk assessments provided across the nine sustainability areas are subject to independent verification.67
One sustainability area is ‘health and nutrition’, which sits under ‘thriving communities’. The AtSource platform is in its early stages, and information is currently provided for a selection of Olam’s supply chains. For those supply chain participants already reporting via the platform, information is provided on the food security of households among the communities in which the suppliers operate, and on the number of farmers and community members receiving nutrition support where relevant. Food insecurity is measured using the Months of Adequate Household Food Provisioning (MAHFP) indicator. 68 The metrics for measuring other areas of nutrition and health, such as diet diversity, are under review.69
The AtSource platform is aimed at demonstrating, through traceability and transparent supply chain information, Olam’s commitment to social and environmental sustainability. In addition, the platform offers a means for Olam’s customers – predominantly food and beverage companies – to demonstrate supply chain due diligence in reporting on the social and environmental footprint of their inputs. The platform also offers ‘consumer-ready stories’, including individual stories from farmers along Olam’s supply chain, which Olam’s customers may then incorporate into their reporting and marketing materials.70
According to Olam International, AtSource is designed in the longer term to deliver positive transformation along its supply chains. Where data indicate an area of risk – for example, where food security among farmers and their households is found to be low – Olam plans to work with customers to agree appropriate interventions and to report on these transparently through the platform.71
