Brazilian meat manufacturers’ compliance with emissions targets is under scrutiny

Every day in slaughterhouses across Brazil, tens of thousands of cattle are slaughtered in select cuts and burgers and ready meals are sold at home and around the world.

While a thriving multibillion-dollar trade has made the Latin American country the world’s largest exporter of beef, the exact origin of the animals is often a mystery.

“There is a man who produces the calf, one raises it and another fattenes,” said Gilberto Tomazoni, CEO of JBS, the world’s largest meat factory with annual revenues of $50 billion. “Basically, there was a lack of information to monitor our suppliers’ suppliers.”

The Sao Paulo-based group, which earlier this month suffered an attack كانت Internet attack On their systems in North America and Australia, it has long been accused of links to environmental damage. But it is now embarking on a sweeping sustainability campaign while facing Brazil Threats to divest And boycott produce over the Amazon rainforest.

In its vast industrial park in Lins, within the state of São Paulo, JBS is promoting initiatives such as recycling plastic waste and the renewable energy provided by a power plant fueled by sugarcane residue as evidence of its endeavors.

However, as the country’s top meat manufacturers pledge to cut greenhouse gases, solving the mystery of where their livestock come from will be vital to efforts to clean up an industry that is one of the driving forces behind deforestation – and a major contributor to global warming.

JBS recently set a target to be net zero by 2040, which would include reducing its own and indirect emissions, then offsetting any remaining.

Its main competitors, Marfrig and Minerva Foods, are pursuing similar ambitions.

“Given the gravity of the situation with deforestation in Brazil, this is very timely,” said Kieran Aziz, chief analyst at KLP, Norway’s largest pension fund, which excluded JBS from its portfolio in 2018 due to corruption risks. “What is more important is the implementation.”

The trio agreed more than a decade ago to prove that they do not buy animals, directly or indirectly, from farms that deforest the Amazon. Because of their ability to absorb carbon dioxide, rainforests are a bulwark against climate change.

The Australian red meat and cattle industry also aims to reach carbon neutrality By the end of the decade, while the largest US meat company, Tyson Foods, is working to cut greenhouse gas emissions by 30 percent by 2030.

However, the vast majority of the world’s largest meat and dairy companies have not made zero net pledges, according to recently. Research conducted by New York University.

distance The destruction of the Brazilian Amazon It jumped to a 12-year high in 2020, and meatpacking manufacturers there have come under pressure to prove the pledges weren’t just an eco-friendly wash.

An area of ​​the Amazon rainforest destroyed by a fire in 2019

An area of ​​the Amazon rainforest ravaged by fire in 2019 © AFP via Getty Images

Inaction involves financial risks. The Big Three Brazilian groups rely on European investors and banks for at least a quarter of their funding, including debt financing and equity holdings, according to Chain Reaction Research.

“They risk a backlash from European institutions, such as the withdrawal of Nordea Investments from JBS,” said Matthew Piotrowski, director of policy and research at Climate Advisors, referring to the Finnish asset manager’s decision to ditch the stock last year last year. Environmental concerns and other issues.

“Overall, investors are quite supportive, but many are skeptical about how to achieve net-zero targets,” said Maria Letini, director of the Fairr Initiative, an investment research and advisory network.

Although the largest beef manufacturers in Brazil have successfully monitored direct livestock sellers, they have not yet implemented full traceability of the scattered and sometimes small-scale farms that feed the production chains and where the animals can spend most of their lives.

While official paperwork is required for each stage of animal crossing, the documentation is not public and privacy laws prevent third party data from being shared. When the different stages of breeding are not carried out on the same farm, this makes it difficult to trace the source outside the direct seller.

“[The] The complexity in livestock production here in Brazil is that we have 2.5 million producers with livestock spread across a large area across the country,” said Paulo Pianez, director of sustainability at Marfrig. “For every direct supplier, we can have 10 indirect suppliers.”

satellite images It is already being used as a tool to verify compliance of direct service providers with the rules against deforestation and encroachment on indigenous lands. JBS monitors 60,000 farms in this way across an area 1.5 times the size of Germany and says it excludes any sellers found in breach.

A flow chart showing the beef production process in Brazil

Now the big task is to increase visibility down the chain. JBS has developed a system based on blockchain To securely and confidentially track the certification of each head of livestock, so animals cannot be “washed” from lands that have been illegally felled by legitimate farms that supply the group.

The data is then sent to an industry association for validation and the result is shared with the livestock seller. All direct suppliers on Amazon must register by 2025 in the JBS digital ledger, which will be independently audited or face exclusion.

Marfrig has identified the assets of 62 percent of all its livestock from the Amazon and 47 percent of the Cerrado Savannah biome, including direct and indirect suppliers, and is logging the information through a blockchain-enabled platform.

For its part, Minerva claims to be the first meatpacking company to conduct geospatial monitoring extending beyond the Amazon, to track direct suppliers in areas including Cerrado, the Atlantic Forest and the swampy Pantanal region.

It is now integrating the tracker into its existing system in order to gather more information about risks related to indirect suppliers in the Amazon region.

Taciano Custódio, Minerva’s director of sustainability, said his analysis showed that most of the characteristics overlapping with the occurrence of deforestation in rainforests were relatively small in size. If it’s a livestock farm, you probably only provide a few animals each month.

“The challenge of deforestation in Brazil is more than just the environment – it is linked to social development,” he added. “This is the survival of these guys.”

Herders raise livestock in the deforested Amazon rainforest in 2013

Herders raising livestock in the deforested Amazon rainforest in 2013 © Reuters

However, even if deforestation is eliminated from the beef industry in Brazil, livestock farming naturally leads to large amounts of methane, a much more potent greenhouse gas than carbon dioxide.

Nearly 70 percent of all agricultural emissions in Brazil come from cow digestion, as well as activities associated with it, according to Immaflora.

“It’s a lot, and if you add that to the emissions from deforestation for livestock, it’s even bigger,” said project coordinator Isabel Garcia Drigo.

Line chart of the B3 cattle futures contract (reals per 15 kg of Arabs) showing the Brazilian cattle price increase

The researchers say possible solutions include more intensive farming methods to improve land productivity, along with shortening the lifespan of livestock, which tends to be longer than in the United States or Canada. Another focus is animal feed, be it supplements or different types of herbs, to reduce the methane gas generated by the animals.

“The costs of changing the model are not trivial,” said Drigo. “So they [the meatpackers] Putting in a huge amount of money to help producers reduce their emissions, and then yes, it is possible.”

JBS has committed $1 billion in decarbonization investments over the next decade and Tomazoni points to “regenerative” agricultural projects that combine livestock, crops and reforestation, helping to sequester carbon. JBS plans to spend $100 million on research and development by 2030 to support this type of farming.

The food conglomerate recorded a net income of 4.6 billion Brazilian reals (860 million US dollars) last year.

Minerva has committed R$1.5 billion to reduce emissions and Marfrig R$500m, primarily toward a vision for the entire livestock supply chain by 2030. Last year, the companies generated net income of R$697 million and R$3.3 billion respectively.

Despite the increased scrutiny, some fear there may be insufficient business momentum for meat manufacturers to act quickly.

Despite awareness of the climate emergency, global demand for beef remained strong and cattle prices in Brazil reached record levels. While Minerva’s stock is down a bit, JBS and Marfrig’s stock prices are up by at least a quarter in 2021, outpacing the broader Brazilian market.

Activists have criticized the sector’s commitments as being too far off. For example, JBS has pledged to end illegal logging in the Amazon supply chain by 2025, in other Brazilian biomes after five years — and finally to no deforestation globally by 2035.

As a seller’s market, producers may look to take their materials elsewhere if they dislike the conditions of a meatpacking plant.

It would be naive to trust again more in the promises of an industry at its core. . . They are an emissions producer,” said Daniela Montalto, a Greenpeace activist. “We are talking about land grabbers, farms that launder illegal livestock in the slaughterhouse supply chain.”

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