Exploring the geopolitical factors affecting pet food players’ ESG efforts

It is a testing time for those working on environmental, social and governance (ESG) activities. Against the backdrop of a chaotic and rapidly changing political situation, pet food businesses must hit sustainability targets, up their social responsibility game and maintain consumer trust – all while facing extremely challenging economic conditions.

Supply chain disruptions

The war in Ukraine has been a notable disruptor, affecting the supply chain of several raw materials used in pet food. As a knock-on effect, there have been problems with ESG sourcing transparency.

Similarly, boycotts and supply chain disruption due to the current situation in the Middle East are prompting some players to prioritize supply continuity over sustainability.

“The geopolitical and economic turbulence we’re seeing today has undoubtedly made certain terms politically charged,” says Jim Lamancusa, Executive Director and CEO of the Pet Sustainability Coalition (PSC).

“We’ve had a few members not renew their membership because there was a corporate directive to cease all Diversity, Equity, and Inclusion (DEI) activity.”

Terminology shifts

He adds that the terminology around sustainability work is shifting: “Terms such as ‘DEI’ have evolved to ‘community/employee engagement’ or ‘culture of belonging’ and ‘global warming’ has been replaced with ‘climate resilience’ and ‘future ready’.”

Despite this linguistic wrangling, Lamancusa is keen to emphasize that geopolitical turmoil isn’t necessarily causing a reduction in ESG efforts. “If anything, we’re seeing the opposite,” he confirms.

Increases in sustainability projects

“The PSC has observed a 500% increase in the number of sustainability-related projects with our members this year compared to last,” Lamancusa continues.

“For example, we’ve seen companies such as Tuffy’s, Earth Animal, Morris Packaging, Petcurean and Champion conduct Materiality Assessments to help them focus on the areas of sustainability that are most important to their business.”

Other businesses are focusing on emissions. “We’ve also seen our members such as Company of Animals, Bimini Pet Health and Moderna conduct greenhouse gas accounting projects to understand their emissions and chart a path towards reduction,” he continues.

Driven by consumers

Lamancusa highlights that consumer behavior remains a key driver for companies to prioritize sustainability work. He mentions a recent Harvard Business Review article which revealed that Amazon products labeled as sustainable via programs such as Climate Pledge Friendly see about a 13% lift in demand during the first 8 weeks after adding the certification.

“This statistic speaks volumes: it shows that consumers reward verified sustainability claims and that credible ESG signaling directly translates to business value, even in volatile times,” he says.

ESG trendsetters

Lamancusa and his team at PSC recently launched a new solution designed to track ESG progress in pet food: the Annual PSC Benchmark. In the first 3 months following the launch, 25% of PSC’s membership did the evaluation.

“A really positive sign is that companies are using the results to help them focus on specific areas for their sustainability initiatives. Because sustainability can be such a broad subject, gaining focus and setting targets is often the most important first step,” he adds.

When asked who the pioneers in ESG work for the pet food sector are, Lamancusa reels off such a long list of trailblazers there simply isn’t space to include them all.

But interestingly, they are all small- to medium-size businesses – in other words, it’s those without enormous ESG budgets that are making the most difference.

Focusing on the bigger picture, Lamancusa observes: “These pioneering players are not only advancing sustainability within their own operations but are also helping to shift expectations across the entire industry.”

Battling headwinds

Another person keeping a close eye on the entire industry is Gerald Kühr, CEO of European pet food manufacturer, Partner in Pet Food (PPF).

“The current geopolitical turbulence is undoubtedly creating headwinds for ESG efforts across industries, including pet food,” he comments.

“From supply chain disruptions to inflationary pressures and shifting regulatory landscapes, the challenges are real and evolving.

In the US, sustainability initiatives are facing increased scrutiny, while in the EU, the proposed Omnibus legislation signals a potential rollback in sustainability reporting and due diligence requirements,” adds Kühr.

Doubling down on sustainability

These observations have prompted him to double down on PPF’s own approach to sustainability and prioritize it to such a degree that the company becomes somewhat protected against external turbulence. In an apt illustration of this, PPF recently announced the start-up phase of a photovoltaic power plant project at its Veselí nad Lužnící site in the Czech Republic.

“Our commitment to sustainability remains unwavering. For us, ESG is not just a strategy, it is part of our identity,” Kühr explains. “We continue to embed sustainability throughout our operations, driving responsible innovation and long-term value for all stakeholders, regardless of external pressures.”

Robust framework

Efforts in ensuring traceability and ethical sourcing are other examples of PPF’s focus. “We’ve built a robust framework of sourcing policies and compliance tools to guide responsible procurement across our supply chain. In 2024, we took a significant step forward by updating our Supplier Code of Conduct and Sustainable Sourcing Policy,” outlines Kühr.

“These updates reflect the latest industry standards and the evolving expectations of our stakeholders. By year’s end, 89% of our direct suppliers – by value – had formally embraced the new policy, underscoring our shared commitment to sustainability,” he continues.

Reinforcing resilience

PPF also has an internal version of an ESG strategy, called ‘PETS’. While this strategy has long been the cornerstone of PPF’s sustainability journey, the company recently took intentional steps to evolve it in response to today’s increasing geopolitical and regulatory complexity.

Kühr says: “In preparation for the EU’s Corporate Sustainability Reporting Directive (CSRD), we conducted a double materiality assessment (DMA) to identify and prioritize the ESG topics most critical to our business and stakeholders. Our revised strategy reinforces our resilience and ensures we remain aligned with stakeholder expectations, even in a challenging geopolitical landscape.”

All together now

As a global player with the company motto ‘Working Together for a Planet of Plenty’, US animal feed company Alltech is well placed to comment on the importance of cooperation for the greater good, including during challenging times.

Tara McCarthy, the company’s Global VP of ESG, observes that tangible change for the better tends to come from the top. “Policy and regulation play a huge role in shaping industry’s responses to its commercial environment,” she says.

“Our own research found that the top 3 influences on sustainability – in order – are government policy, regulation and the consumer.”

Dealing with regulatory delays

McCarthy explains that shifting sands on the regulatory front are proving challenging but also generating some positive outcomes: “Recent policy and regulation shifts – for example, delays in the implementation of the EU Deforestation Regulation (EUDR) and the CSRD – have been viewed with a mixture of relief by some and disappointment by others.”

She adds that: “The delay has, however, provided an opportunity to build more complete and robust responses for industry. The strong messaging from policymakers to reassure affected actors that the goalposts have not changed is an important one.”

The importance of collaboration

So, how is Alltech evolving its own sustainability strategy as regulatory and political backdrops change? “We regularly undertake reviews of the context in which we operate,” notes McCarthy.

“Tangible drivers of our current strategy are the dual focus on data-driven proof points and a producer-centric mindset. Alltech remains steadfast in its commitment to the vision in our company motto, ensuring our sustainability reporting is robust and our alignment to relevant regulation proactive,” she continues.

On the importance of collaboration, McCarthy comments: “Supporting our pet sector customers in making measurable impact is key, particularly to mitigate any greenwashing risks. For example, we have continued to provide verified Life Cycle Assessments (LCAs) on a growing range of our products to support our customers in their ESG data collection and impact journey.”

Reasons for optimism

Although concrete data is sketchy, it appears that some companies are choosing to invest in projects related to secure sourcing and building in resilience, rather than sustainability projects such as carbon footprint reduction. It is too early to determine the long-term effects of this.

Nevertheless, despite the unprecedented degree of uncertainty across the sector, there are reasons to be cheerful, as highlighted above.

Whether by analyzing and benchmarking their ESG performance, doubling down on sustainability or intensifying collaboration, many companies throughout the pet food supply chain are still striving to create a fairer, greener and more resilient future.