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).
Malnutrition has multiple health, economic and societal impacts. It reduces sufferers’ earnings, entrenches poverty and can even make armed conflict more likely – yet businesses often underestimate its risks and costs.
Malnutrition is a global challenge. Around the world, malnutrition has wide-ranging health impacts which are costly to individuals, their families and societies as a whole. The term (see Box 1) encompasses both undernutrition and overnutrition, and includes conditions from stunting and anaemia to overweight and obesity.7 Malnutrition at any stage of life can make people less productive and reduce their ability to cope with disease, negatively affecting their earnings and the well-being of families. Malnutrition in early life can have whole-of-life impacts, as it impairs physical and cognitive development. At a societal level, malnutrition is a drag on inclusive economic growth, increasing the public health burden while hindering the participation of at-risk populations in productive employment and limiting economic output.
Malnutrition arises when an individual’s dietary intake is either deficient or excessive relative to basic energy requirements, or when there is an imbalance of essential nutrients in the diet. Its underlying causes are often complex (Figure 1).
As of this year, 2020:
The impacts of malnutrition are long-lasting and can pass from generation to generation. The effects of malnutrition experienced by children today will be felt throughout their lifetimes, in a number of ways (Figure 1). Stunting, wasting and overweight/obesity in childhood contribute to lifelong disability and undermine the development of the brain and the body, reducing children’s ability to access and progress within education.9 Childhood malnutrition has long-term negative impacts on physical and mental productive capacity in adulthood,10 resulting in reduced labour productivity (Chapter 2). It also influences a person’s susceptibility to non-communicable diseases throughout life.
Childhood malnutrition has long-term negative impacts on physical and mental productive capacity in adulthood
Good health is not possible without good nutrition. Nutritional deficiencies are the underlying cause of almost half of all deaths in children under the age of five.11 Poor-quality diets are now both the leading cause of death worldwide12 and the single most important risk factor in the global burden of disease.13 They are also a significant underlying health issue contributing to heightened mortality from infectious diseases such as COVID-19.14
Malnutrition drives poverty. Stunting in childhood can be expected to reduce an individual’s lifelong earnings by 9 per cent,15 while those who suffered from anaemia in childhood experience an estimated 2.5 per cent loss in hourly earnings owing to lower cognitive skills.16 In turn, poverty drives malnutrition as individuals are unable to earn enough income to purchase nutritious food,17 thus creating a harmful poverty-malnutrition trap.
We use the following terminology and definitions provided by the World Health Organization (WHO):18
Malnutrition: deficiencies or excesses in nutrient intake, imbalance of essential nutrients, or impaired nutrient absorption or utilization (as the result of disease, for example).
Undernutrition: wasting, stunting, underweight, micronutrient deficiencies.
Childhood wasting: low weight-for-height. Often the result of recent and severe weight loss.
Childhood stunting: low height-for-age. The result of chronic or recurrent undernutrition, usually associated with poverty, poor maternal health and poor maternal nutrition.
Underweight: in adults, low weight-for-height; in children, low weight-for-age.
Micronutrient deficiencies: a lack of vitamins and minerals that are essential for body functions.
Overweight/obesity: excessive weight-for-height, resulting from an imbalance between energy consumed (too much) and energy expended (too little).
We also talk in this report about the double burden of malnutrition, which we define as undernutrition and overweight/obesity co-occurring in the same population, household or individual.
Businesses are not immune to the impacts of malnutrition. For companies of all sizes operating in low- and middle-income countries where the prevalence of malnutrition is high, the direct costs of malnutrition-related productivity losses are estimated to total between $130 billion and $850 billion a year, equivalent to between 0.4 per cent and 2.9 per cent of the combined GDP of those countries.19 In the longer term, pervasive malnutrition limits the pool of human capital from which employers may draw, while its effects in slowing economic growth and lowering incomes inhibit company earnings by reducing discretionary consumer spending (Figure 2).
Left unchecked, malnutrition contributes to a risky operating and investment environment for the private sector. Good nutrition is key to the success of many of the Sustainable Development Goals (SDGs) (see Chapter 3), and is essential to driving inclusive and sustainable economic growth. Widespread malnutrition, on the other hand, significantly reduces the resilience of populations to external risks, including infectious disease outbreaks and extreme climate events, and is closely linked to the incidence of social unrest and armed conflict in low-income countries. As governments and businesses alike look to ‘build back better’ in the wake of the COVID-19 pandemic, improving the nutrition of vulnerable communities will be a critical step in mitigating the risk of future economic destabilization on the scale of today’s crisis.
The ability of companies to demonstrate a positive impact on the health and well-being of employees and other stakeholders is a growing concern for institutional investors and asset managers. The sustainable investment agenda is broadening, and the role of business in delivering social goods as well as capital returns is receiving increasing attention. For businesses operating in low- and middle-income countries, particularly those with a high malnutrition burden, failure to address the impact of their policies and practices on the workforce, and on the communities in which they are embedded, risks undermining the credibility of their commitments to the sustainability agenda and threatening their social licence to operate.
Despite the costs and long-term risks it creates for business, malnutrition remains an issue under the radar for companies around the world. The costs of malnutrition, in all its forms, appear to be routinely overlooked or underestimated (Chapter 2), and action to improve nutrition is often considered to be beyond the power or remit of individual companies. Private-sector engagement with the global nutrition agenda has been predominantly limited to food and beverage companies.
Companies are nevertheless in a strong position to take action to tackle malnutrition. Certain of the driving factors behind malnutrition lie within companies’ direct spheres of influence: inadequacies in the food environment in which workers spend a large share of their day, for example, or lack of access to a fair living wage. Other problems require society-wide, collaborative action: to improve dietary quality in the first 1,000 days of a child’s life, for example, or to tackle intergenerational cycles of malnutrition and poverty among informal workers. Businesses of all sizes, both small or medium-sized enterprises (SMEs) and multinational companies (MNCs), will need to bring their resources and expertise to bear to effect positive change.
While few are cognizant of the full impact of malnutrition on their business, MNCs are nevertheless implementing a range of strategies that can contribute to improved nutrition. Over 80 per cent of the 180 MNCs sampled for this report are active on nutrition to some degree, whether through alliances with international development partners to deliver nutrition programmes, nutrition-focused corporate social responsibility (CSR) programmes to support local communities, or workplace initiatives aimed at improving nutrition among employees. Some pioneering MNCs are also taking steps towards monitoring and reporting on the impact of their supply chains on nutrition security in low- and middle-income countries.
For companies that have yet to take action on nutrition, engagement and investment in a number of key areas should be a priority. Nutrition-focused CSR and workplace programmes are an important avenue for engagement, as is investment in existing programmes run by third-party organizations and financial commitments through frameworks such as the Global Nutrition for Growth Compact. Commitments to good corporate citizenry – including fair living wages and the full payment of taxes – to create the conditions under which individuals, households and societies can escape the poverty-malnutrition trap are equally important.
Now is the time for an inclusive and ambitious action agenda for business on nutrition. Five years remain to deliver on agreed international nutrition goals in support of SDG 2 (‘zero hunger’) and the wider SDG agenda (Box 2). Yet public investment in nutrition is stalling. Progress made in reducing the prevalence of childhood stunting risks being undone by a global recession resulting from the COVID-19 pandemic, while overweight and obesity are on the rise around the world. The costs of malnutrition for business and society look set to increase, exerting a drag on economic growth.
The next 18 months offer a window of opportunity for renewed corporate engagement. The upcoming Tokyo Nutrition for Growth Summit, currently scheduled for December 2020, will mark a milestone in international efforts to accelerate progress in tackling malnutrition. The UN Food Systems Summit, the UN Framework Convention on Climate Change summit, and the Convention on Biological Diversity summit – all due to take place in 2021 – will also provide moments to champion nutrition in support of the broader sustainability agenda. An upswell of engagement and investment from the private sector – through philanthropic funding, business investments, and nutrition interventions targeting the workforce and wider communities – could help deliver substantive progress on financing and action in support of SDG 2. At the same time, failure to leverage these opportunities risks harming business prospects in low- and middle-income countries for decades to come.
In 2012, the World Health Assembly agreed to a set of six global nutrition goals, to be achieved by 2025. These goals were as follows:20
1. Achieve a 40 per cent reduction in the number of children under the age of five who are stunted;
2. Achieve a 50 per cent reduction in anaemia in women of reproductive age;
3. Achieve a 30 per cent reduction in low birth weight;
4. Ensure that there is no increase in childhood overweight;
5 .Increase the rate of exclusive breastfeeding in the first six months of life, up to at least 50 per cent; and
6. Reduce and maintain the incidence of childhood wasting to less than 5 per cent of national child populations.
In 2015, these targets – and their 2025 delivery deadline – were subsumed into Goal 2 of the SDGs (Target 2.2), as part of the overarching targets to end hunger and all forms of malnutrition by 2030.21
This report offers a first-of-its-kind assessment of the scale of malnutrition-related productivity losses in low- and middle-income countries, and of the extent to which these losses are recognized and mitigated by MNCs active in these countries. Our analysis is based on three primary research components:
The structure of the report is as follows:
This study aims to provide an initial estimation of the scale of the costs to business of malnutrition in low- and middle-income countries, and of the extent to which these costs are recognized and mitigated by the private sector. The scope of our analysis is limited in three important ways.
Firstly, the Vivid Economics model estimates the direct costs of the physical impacts of malnutrition among today’s adult workforce. The indirect costs to companies – for example, of additional training and staff turnover, or of employee healthcare – are beyond the scope of the modelling exercise, as are the direct costs of the long-term cognitive impairments associated with malnutrition experienced in childhood. With additional time and resources, these aspects could be integrated into a similar model – with important caveats (discussed in Chapter 2 and Annex I) – and could be expected to increase significantly the total estimate of the costs to business. Our calculation is therefore an underestimate, demonstrating that even partial consideration of the impacts of malnutrition reveals enormous financial implications for business.
Secondly, the semi-structured interviews and desk-based review of corporate reports do not capture the perspectives and activities of SMEs. SMEs play a central role in improving nutrition – they supply the majority of the food consumed worldwide22 – but efforts to engage SMEs in this research proved unsuccessful owing to limited time and capacity among the organizations contacted, and to the absence of comparable online reports and resources. The extension of this research in the future to include SMEs would allow for an interrogation of how different-sized businesses understand and experience the impacts of malnutrition among the workforce and wider society, and would enable a comparison of approaches between foreign-owned and domestically owned businesses. Both exercises would add important value to the existing literature.
Thirdly, our analysis focuses primarily on inadequate dietary intake as a driver of malnutrition. While offering examples of and recommendations for corporate action in other nutrition-relevant areas such as water, sanitation and hygiene (WASH) and education, the study does not explore fully the range of interventions and investments to be made in these areas in support of improved nutrition. Opportunities for investment in these broader areas as a means of tackling malnutrition in general, and undernutrition in particular, are well explored in the existing literature. Further in-depth analysis of the current scale of corporate activity would nevertheless add to our understanding of the role that businesses are and could be playing to address the underlying determinants of malnutrition.
