In 2022, the Intergovernmental Panel on Climate Change advised that that the window for limiting global warming to 1.5 degrees Celsius (1.5°C) is quickly narrowing and that immediate, dramatic emissions reduction is required of all market sectors and industries.[1]
Food companies like Papa John's International Inc. (“Papa John’s”) are particularly exposed to climate risk. In September, the United Nations’ Climate Change High-Level Champions group reported that, due to escalating climate and nature risk, "food and agriculture companies could lose up to 26% of their value by 2030, with permanent sector-wide losses equivalent to the 2008 financial crash.". The report identified eliminating deforestation as the highest priority call to action, stating that, “unless we end net deforestation, achieving net zero and a 1.5°C world is impossible”. Deforestation directly impacts agricultural productivity by altering precipitation patterns and other ecosystem services. The deforestation of the Amazon could halve Sierra Nevada snowpack, dramatically reducing irrigation capacity in California, which produces 95% of the processing tomatoes grown in the U.S.
Papa John’s most recent 10-K specifically identifies the impacts of climate change and adverse weather on the California tomato crop as a risk that could negatively affect the results of its operations.[6] Papa John’s uses beef, palm oil, soy, and fiber-based packaging in its products. These commodities are the leading drivers of deforestation, which is responsible for approximately 15% of global greenhouse gas emissions and contributes to biodiversity loss. Papa John’s 10-K notes that, “if we are not effective in addressing social and environmental sustainability matters, consumer trust and investor confidence in our Company may suffer.”[8] Yet in contrast to competitors like Domino’s and Yum! Brands, Papa John’s lacks any disclosures or policies related to supply chain deforestation.
Financial institutions with nearly $9 trillion in assets under management have committed to eliminating agricultural commodity-driven deforestation from their portfolios by 2025.[9] Failing to end deforestation may make Papa John’s less attractive to investors, less competitive, and have a negative effect on shareholders’ financial returns.