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Interview

ESG in the Food & Beverage and Alcohol & Tobacco Sectors

Goldman SachsSandra Lawson, Liz
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Goldman Sachs Research launched the "ESG Roadmap Project," a series designed to move beyond mixed-quality data to analyze sector-specific ESG risks and opportunities over 12–18 month and 2–3 year horizons.

  • Methodology

    • The approach synthesizes current data, corporate statements, and analyst insights to identify immediate and emerging issues.
    • The framework provides a set of engagement questions for investors to assess management performance on both present and future ESG challenges.
    • The inaugural report focuses on the food, beverage, alcohol, and tobacco sectors due to their comprehensive supply chain coverage.

  • Sector-Specific Findings: Food, Beverage, Alcohol, and Tobacco

    • Environmental Scope
      • The analysis covers the full lifecycle from farm-level climate impacts and water usage to processing emissions and waste disposal.
      • Data on plastic reduction commitments is robust; companies face high public scrutiny, making retreat from these pledges unlikely despite pandemic-related hygiene increases.
      • Emissions and water usage data are rated as "pretty good," though agricultural practices and broader water stewardship require further improvement.
    • Supply Chain and Labor
      • Labor practices, including child labor, forced labor, and working conditions, remain complex and difficult to quantify via reported data.
      • While most companies maintain policies against forced labor, enforcement rigor and audit strictness vary, requiring deep-dive company-level analysis.
      • Deforestation and responsible sourcing are identified as critical, hard-to-measure supply chain risks.
    • Health and Wellness
      • Companies are actively aligning ESG strategies with consumer demand for lower sugar/salt products, smaller portions, and smoke-free or low-alcohol alternatives.
      • Despite limited data availability, the shift toward wellness-oriented products is expected to drive significant growth over the next few years.

  • Forward-Looking Flash Points and Future Risks

    • Executive Compensation
      • Fewer than 25% of companies in the studied sectors currently formally link executive compensation to ESG performance.
      • Anticipated increases in consumer, stakeholder, and regulatory pressure are expected to drive widespread adoption of ESG-linked comp structures.
    • Food Waste
      • Approximately one-third of globally grown food is wasted annually, occurring despite 700 million people facing food insecurity.
      • Stakeholder and regulatory pressure is expected to intensify on companies to optimize processing, distribution, and packaging to reduce consumer-end waste.
    • Emissions Strategy
      • Future focus will center on Scope 3 emissions and the adoption of science-based targets aligned with the Paris Agreement's 2-degree goal.
    • Broader Application
      • Goldman Sachs intends to apply this roadmap framework to other sectors, prioritizing issues such as emissions, environmental impact, waste, and compensation.