The Restaurant Sector And Antibiotic Risk

Generated Summary

This document is a progress report from the FAIRR Initiative, focusing on the restaurant sector and the associated risks of antibiotic use in livestock. The report evaluates the responses of ten major restaurant and fast-food companies to investor engagement aimed at reducing the non-therapeutic use of antibiotics in their meat and poultry supply chains. The methodology involves analyzing publicly available information and company responses to understand their progress, policies, and practices regarding antibiotic use. The scope includes the examination of recent developments, legislative and operational risks, reputational risks, and shareholder resolutions concerning antibiotic use in the livestock sector. The report also offers guidance for investors and outlines next steps for further action. The goal is to mitigate financial and public health risks associated with antimicrobial resistance (AMR) by encouraging sustainable practices within the food industry.

Key Findings & Statistics

• Antibiotic resistance is estimated to cause 700,000 deaths worldwide each year.
• A $1 trillion group of investors formed to engage with ten of the world’s largest restaurant and fast-food chains in March 2016.
• The investor group backing this engagement has grown to 71 institutions with over $2 trillion AUM.
• Around 40 per cent of antibiotics in the UK are used in livestock production.
• Two-thirds of antibiotics in the European Union (EU) are used in livestock production.
• 75 per cent of antibiotics in the US are used in livestock production.
• In early 2016, an initial coalition of 54 investors managing over $1 trillion of assets launched a company engagement campaign.
• The coalition has since grown to include over 70 institutional investors with combined assets under management of over USD $2 trillion.
• McDonald’s USA has committed to eliminate the use of antibiotics important to human medicine in their chicken supply.
• The UK’s BPC poultry companies, representing 90% of the industry, will no longer use fluoroquinolones in chicken production.
• In 2016, 26 per cent of McDonald’s shareholders voted in favour of a proposal urging the company to prohibit the administration of medically important antibiotics in its global meat supply chain.
• A resolution at Sanderson Farms achieved 30% of the votes cast.
• 80% of targeted companies are now actively engaging with suppliers to monitor antibiotic usage.
• Olive Garden ranked F (4% score – +4% from previous report) on Chain Reaction II Report.
• In March 2015, McDonald’s Europe announced plans to phase out use of fluoroquinolones and macrolide antibiotics from their chicken supply chain.
• McDonald’s has bought more than 13 million cage-free eggs annually since 2011.
• By end of 2022, McDonald’s USA will only source pork from supply chains that do not use gestation stalls for housing pregnant sows.
• As of December 28, 2014, five independent processors supplied all of Wendy’s hamburgers in the US.

Other Important Findings

• The use of antibiotics in livestock production is a key factor behind the emergence of AMR superbugs.
• Significant progress has been made in the use of antibiotics in poultry, but little change has been seen in pork and beef production.
• Companies have been hesitant or unwilling to set timelines to apply appropriate standards across their global supply chain.
• Food companies must take action both within their own operations and along their supply chains to ensure consistent global policies and practices that apply to all species.
• Within the food industry, market-leading companies with globally recognized brands are facing scrutiny and pressure to act on the overuse of antibiotics.
• By tackling this issue head on, leading corporations can instigate a wider industry shift by requiring their suppliers to produce meat without the routine use of antibiotics.
• Companies are now working with suppliers to establish the current status of antibiotic use in their livestock supply chains.
• Producers who work to improve production methods and animal welfare standards can position themselves favorably as part of a supply chain that is resilient to regulatory changes.
• The legislative landscape will have material implications, potentially causing significant operational disruptions and loss of livestock.
• Companies are also encountering reputational risks as consumer preferences shift.
• A consumer initiative survey indicated that 87% of companies made no mention about handling antibiotics responsibly in their meat supply chains.
• The report highlights the need for more holistic, multi-sectoral action plan to address this issue even more forcefully.
• Eight of the ten companies report that they are now working with their suppliers to address prophylactic antibiotic use.
• A majority of companies acknowledge the importance of the issue, have been willing to engage, and are becoming more transparent in their approach.
• Legislative and operational risks and the changes in consumer preferences.
• The report provides guidance for investors in driving forward improvements with investee companies, thereby mitigating risk in their portfolios.
• The report also provides an overview of progress within the 10 restaurant sector company targets.

Limitations Noted in the Document

• The report notes that most companies are failing to either communicate details such as policies or timelines to shareholders.
• There is a clear need for greater transparency and good governance around this issue.
• The report does not provide a comprehensive analysis of the progress made by all the companies.
• The report does not address the issue of antibiotic use in all species across all supply chains.
• The report mentions the FDA guidelines, but notes a loophole in that the prophylactic use of antibiotics will still be possible.
• The report highlights that the US legislation on antibiotics still allows for the prophylactic use of medically important antibiotics.
• The report also notes that few companies have instituted specific timelines to phase out the prophylactic use of antibiotics for all species.
• In the US a number of companies have not adequately addressed the investor ask, failing to communicate any intention to move beyond the minimum legal baseline.

Conclusion

The FAIRR Initiative’s progress report highlights the critical need for the restaurant sector to address the risks associated with antibiotic use in livestock. The report underscores the growing momentum among investors, consumers, and regulators in demanding more sustainable practices. The evidence points to significant risks and a clear need for action. Key findings include the growing investor support, with over 70 institutional investors now managing over $2 trillion in assets, and the increasing number of shareholder resolutions on the issue. The report acknowledges the progress made by some companies, particularly in poultry production, but emphasizes that much more needs to be done. The report highlights the importance of setting realistic timelines and comprehensive targets to phase out the overuse of medically important antibiotics. It stresses that companies must ensure consistent global policies and practices across their supply chains and all species. The legislative and operational risks are under increasing scrutiny. The report emphasizes the need for a more integrated surveillance of AMR in food-producing animals, foods, and humans. In order to drive meaningful change, the report calls for a concerted effort from investors, food companies, and other stakeholders. The report recommends that companies work closely with their supply chains. Companies should be encouraged to work in partnership with suppliers to put in place an agreed policy and timeframes for implementation. As companies start to make progress with transparent policies, a focus should be paid to ensure that robust programmes of implementation are also in place. In addition, robust auditing by a third party should be implemented. The report concludes that the scale of the problem demands concerted, coordinated attention and engagement to encourage leadership and hold laggards to account. The FAIRR Initiative and ShareAction invite institutional investors to share their perspectives on how this collaborative engagement should expand to respond to the global threat of antimicrobial resistance. The report suggests several steps to help guide dialogue with investee companies, including conducting supply chain reviews, developing comprehensive antibiotics policies, and agreeing on timeframes for implementation. The goal is to encourage further reductions in the routine use of medically important antibiotics while advancing animal welfare standards.