Constellation Brands Inc. | Managing supply chain water risk at Constellation Brands Inc.

Status
Filed
AGM date
Previous AGM date
Proposal number
4
Resolution details
Company ticker
STZ
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 Discretionary
Company HQ country
United States
Resolved clause
RESOLVED: Shareholders request that Constellation Brands issue a report assessing the feasibility and practicality of establishing time-bound, quantitative goals to reduce supply chain water usage to mitigate value chain risks related to global water scarcity in high-risk areas. The report should be prepared at reasonable expense and omit proprietary information.
Whereas clause
WHEREAS: Consumption of freshwater surpasses the rate at which it can be naturally replenished in many regions, creating water shortage risks for companies, communities, and ecosystems. Compounded by climate change, the World Resources Institute predicts the world will be unable to meet 56 percent of global water demand by 2030.

Companies without a plan to adapt could be exposed to risks including increased input costs, price volatility, shifting production zones, stranded assets, government targets, and loss of social license to operate. Barclays warns that the consumer staple sector, including agriculture, food, and beverage companies, faces a potential $200 billion impact from water scarcity risks.

Constellation Brands acknowledges the financial materiality of supply chain water risks noting that a reduction in water supplies could result in material crop losses and product shortages.1 In 2022, Constellation Brands experienced a $665.9 million financial loss from water scarcity concerns in Mexicali, Mexico.2 Constellation Brands’ supply chain is reliant on high water risk regions; the company sources 100 percent of hops and 68 percent of grapes from areas of high water stress, including Central California, Mexico, and Italy2

CDP predicts the financial impacts of water risks are five times greater than the costs of addressing them. While Constellation Brands conducted a water risk assessment of its value chain and engages with suppliers, it has not disclosed water-related benefits of these efforts or a measurable strategy to mitigate water risks in the supply chain or improve supplier resilience.

Given Constellation Brands’ dependence on freshwater, water shortages pose a financial risk to the company. For investors to feel confident in the Company’s water risk management, Constellation Brands should align with best practices such as those outlined by the Corporate Expectations for Valuing Water and set quantitative, timebound targets to reduce water use across its supply chain, especially in water- stressed areas.3 Peers including PepsiCo and Diageo have established such targets.

RESOLVED: Shareholders request that Constellation Brands issue a report assessing the feasibility and practicality of establishing time-bound, quantitative goals to reduce supply chain water usage to mitigate value chain risks related to global water scarcity in high-risk areas. The report should be prepared at reasonable expense and omit proprietary information.
Supporting statement
SUPPORTING STATEMENT: In the report, proponents recommend Constellation Brands consider, at
management’s discretion:
•discussing how the targets could be established to help ensure implementation mitigates supply chain water risks, including reputational risks;
•explaining how the company works with suppliers in high-risk watersheds to implement agricultural practices that reduce water risk such as soil health practices;
•describing how the company provides technical, educational, or financial support to agricultural suppliers to strengthen water stewardship practices and reduce risk.

DISCLAIMER: By including a shareholder resolution or management proposal in this database, neither the PRI nor the sponsor of the resolution or proposal is seeking authority to act as proxy for any shareholder; shareholders should vote their proxies in accordance with their own policies and requirements.

Any voting recommendations set forth in the descriptions of the resolutions and management proposals included in this database are made by the sponsors of those resolutions and proposals, and do not represent the views of the PRI.

Information on the shareholder resolutions, management proposals and votes in this database have been obtained from sources that are believed to be reliable, but the PRI does not represent that it is accurate, complete, or up-to-date, including information relating to resolutions and management proposals, other signatories’ vote pre-declarations (including voting rationales), or the current status of a resolution or proposal. You should consult companies’ proxy statements for complete information on all matters to be voted on at a meeting.