The Kraft Heinz Company | Report on water risks at The Kraft Heinz Company

Status
7.83% votes in favour
AGM date
Previous AGM date
Proposal number
5
Resolution details
Company ticker
KHC
Lead filer
Mercy Investment Services, Inc.
Resolution ask
Report on or disclose
ESG theme
  • Environment
ESG sub-theme
  • Water and oceans
Type of vote
Shareholder proposal
Filer type
Shareholder
Company sector
Consumer Staples
Company HQ country
United States
Resolved clause
Considering the growing pressure on water supplies posed by climate change, shareholders request that Kraft Heinz conduct and report to shareholders, using quantitative indicators where appropriate, an assessment to identify the water risk exposure of its supply chain, and its responsive policies and practices to reduce this risk and prepare for water supply uncertainties associated with climate change.
Whereas clause
According to the 2021 IPCC report, climate change is intensifying the water cycle, resulting in more intense droughts globally.1 Climate change related water scarcity poses material risk to our company, including lowered production capacity and disruption of supply chains.

For companies in the food sectors, the vast majority of their water footprint comes from agricultural supply chains.23 While Kraft Heinz has conducted water risk assessments on its annual water withdrawals for its manufacturing operations, it neglects to provide the same disclosure for water use in its agricultural related ingredient production – the most water intensive function of its business.
It is likely that some portion of Kraft Heinz source ingredients are supplied by growers in water vulnerable locations. Given the Company has acknowledged 19 elevated water stress areas out of 79 within their own operations, these risks are likely to be extended within the supply chain. Because Kraft Heinz either does not assess supply chain water risk, or does not disclose such risk to investors, the company’s water related risk remains in question.

To identify water risk and reduce costs, many peer companies – including Conagra Brands, Unilever, General Mills and Campbells have conducted water risk assessments for both operations and supply chains. By doing so, these companies have laid a foundation to mitigate future business risks associated with water and take the proper steps to future goal setting.
Kraft Heinz acknowledges that “having access to sufficient amounts of quality fresh water…is critical to our business.” With water being a “vital component” to growing and as a direct ingredient in many products, conducting a water risk assessment is imperative to mitigating future water concerns. Without a full value chain water risk assessment, and disclosure of quantitative performance metrics and best practices for water management in areas of water stress, investors cannot gauge whether Kraft Heinz adequately manages its water risk.
Supporting statement
Proponents request the report disclose, at management’s discretion:
• Identification of water assessment tools used by Kraft Heinz or its suppliers to assess supply chain water related risk
• Results of water risk assessments across its agricultural supply chain, including identifying the regions of at-risk ingredient production and supply chains
• Any additional monitoring of supply chain water resources
• Water scarcity planning and responsive actions
• A description of how water management is integrated into governance mechanisms
• A description of water-related engagement with value chain partners

How other organisations have declared their voting intentions

Organisation name Declared voting intentions Rationale
Anima Sgr For A vote FOR this resolution is warranted. Shareholders would benefit from the requested report as it would provide additional information on the company's water supply and conservation practices, particularly in its supply chains, thereby accounting for water risk throughout the entire value chain. Furthermore, the disclosure would allow the company to better manage water related risks and align company commitment to long term shareholder value.
PGGM Investments For Kraft Heinz's current water stewardship approach focuses on its direct operations, whereas this proposal requests a water risk assessment that covers the entire supply chain. According to the scientific literature, for companies in the food sector, the vast majority of their water footprint comes from agricultural supply chains. Kraft Heinz therefore conducts a water risk assessment that covers only a small fraction of the company's water footprint. Without a supply chain risk assessment, investors have little assurance that the company's supply chain interventions to manage water risks are being deployed in areas facing the most severe risks.

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