Resolved clauseShareholders request that US Foods adopt short, medium, and long-term science-based greenhouse gas emissions reduction targets, inclusive of emissions from its full value chain, in order to achieve net-zero emissions by 2050 or sooner and to effectuate appropriate emissions reductions prior to 2030.
Whereas clauseIn 2018, the Intergovernmental Panel on Climate Change advised that greenhouse gas emissions must be reduced 45% by 2030 and reach net zero by 2050 to limit warming to 1.5° Celsius, prevent the worst consequences of climate change, and meet the goals of the Paris Agreement. In 2021, the UN reported that the world is “way off track” in its efforts to achieve these targets. Companies must therefore act rapidly to reduce emissions in line with science-based goals.
US Foods uses palm oil, soy, cattle, cocoa, coffee, and wood pulp in its products. These commodities are leading drivers of deforestation, which accounts for over 10 percent of global greenhouse gas emissions.
In its 2020 10-K, US Foods identifies consumer preference for “sustainably-manufactured food and packaging products” as an important dynamic affecting the industry, particularly among the “largest demographic cohorts.” US Foods acknowledges that this growing preference “may reduce demand for our products.” US Foods also identifies “severe weather and climate conditions” as factors that could interrupt supplies or increase product costs.
However, US Foods has no active greenhouse gas emissions reduction targets, and no time-bound commitments to set targets for reducing its Scope 1, 2, and 3 emissions. Further, US Foods has not yet measured or disclosed its comprehensive Scope 3 emissions. Scope 3, or value chain, emissions are likely to be US Foods’ greatest emissions source. For context, Sysco, a US Foods competitor, discloses that Scope 3 emissions make up 98% of its total emissions. Deforestation is a major source of Scope 3 emissions for food companies, and US Foods also lacks a comprehensive no-deforestation policy.
Competing foodservice distribution companies, including Sysco and UNFI, are setting reduction targets for their Scope 1, 2, and 3 emissions consistent with the goals of the Paris Agreement, and seeking validation of these targets through the Science Based Targets initiative. Sysco is also developing a comprehensive no-deforestation policy. Failure to keep pace with competitors and anticipate regulatory changes may pose material risks to US Foods, including restricted market share, inability to meet government mandates, and reputational damage.
Supporting statement In assessing targets, proponents recommend, at management’s discretion:
● Consideration of approaches used by advisory groups such as the Science Based Targets initiative;
● Adopting emissions reduction targets inclusive of all GHG Protocol-defined sources of scope 3 emissions—including from agriculture, land use change, and deforestation—that align with limiting
temperature increases to 1.5°C;
RATIONALE FOR A “YES” VOTE
1. Operational risk – The environmental impacts of climate change can affect agricultural productivity, which could lead to supply chain disruptions and increased product costs.
2. Competitive risk – US Foods lacks science-based greenhouse gas emission reduction targets covering its scope 1, 2, and 3 emissions and is consequently ceding competitive advantage to its
peers, some of whom are setting and making progress toward science-based emissions reduction goals.
3. Failure to meet investor expectations for climate risk mitigation – Investors are expecting companies to set targets for mitigating climate risk, aligned with achieving net zero emissions by
2050 and limiting warming to 1.5 degrees Celsius. US Foods is not aligned with these expectations.
● Increasing the scale, pace, and rigor of initiatives aimed at reducing the carbon intensity of US Foods’supply chain;
● Adopting a no-deforestation policy for all relevant forest-risk commodities.