Recent studies point to an emerging business case for healthier foods which is good news for the health of billions of people, says Greg S Garrett.
Today, poor diets pose a greater risk to mortality and morbidity than the combined effects of alcohol, tobacco, drugs, and unsafe sex. The failures of our food system leave around approximately 150 million children under the age of five stunted, several billion deficient in essential vitamins and minerals, and more than two billion people worldwide overweight or obese.
ATNi (Access to Nutrition initiative) and Planet Tracker launched the first-ever global assessment of the materiality of nutrition in 2024.
The report analysed 20 of the largest food manufacturers with total revenues worth $6.6trn (£5.4trn), representing 10% of the global food and beverage market. It compared the healthiness of their food product portfolios with their profits and market valuations.
The results are tantalising but also concerning. First, the report summarised the latest evidence confirming that the macroeconomic case for nutrition is as clear ever. As the October 2024 World Bank investment framework for nutrition tells us, for every dollar spent on nutrition, $23 is returned to society – a return on investmentwhich policymakers need to recognise and drive.
Second, the report uncovered a slow and emerging microeconomic case for nutrition, albeit with caveats. It showed that the major food companies with broad, mixed food portfolios that focus on a healthier range of products achieved a higher average profit (EBIT) margin at 15.2% compared to that of their peers that focus on more unhealthy food product portfolios (13.4%). Focusing on health can actually make business sense, even for ‘Big Food’.
However, the report found that the companies with the most narrow, unhealthy food product portfolios had the highest average EBIT margin, at 16.7%.
And therein lies the crux of the problem: unhealthy foods and less healthy food portfolios make great money.
Until markets shift more fundamentally, we will not see the rapid progress required to fix unhealthy diets.
So how do we merge the strong nutrition macroeconomic case that has been evidenced for years, while building a stronger microeconomic case for nutrition?
Enter the responsible investor with his ally, the progressive policymaker. Enter more intentional investing in healthier food companies and more routine nutrition disclosures from food companies. Enter a regulatory and legislative environment where healthy is incentivised and unhealthy penalised.
In September 2024, ATNi was joined by 88 institutional investors, representing $21trn in assets under management, calling on more systemic reporting from food businesses on the healthiness of food portfolios. All 88 of these investors have signed ATNi’s investor expectations document, recognising that packaged foods adversely contribute to diet-related mortality and morbidity. This group asks all food and beverage manufacturers and retailers to benchmark their product portfolios against at least one of the three recognised benchmarks – Health Star Rating (HSR), Nutri-Score, and/or the UK’s Nutrient Profiling Model – and to utilise ATNi reporting guidelines so that investors can better compare the healthiness of their products and sales and make sound investment decisions.
There is also a growing recognition in sustainability reporting frameworks, such as those from ISSB and GRI,on the need to make nutrition a more formalised part of ESG or sustainable investing.
“Investors need to play a role, but to date they have been hampered by a lack of disclosure on nutrition. At ISSB, we are establishing a new global accounting language for sustainability to create clear accountability in disclosures to capital providers, and a link with the financial statements”, said Emmanuel Faber, chairman of ISSB and former CEO of Danone, when he spoke to ATNi in June 2024.
The next step is for these frameworks to align on nutrition metrics and then to move from voluntary disclosures of healthiness to mandated disclosures.
In 2025 and 2026, ATNi, our partners and our investor network will continue to support this alignment and widespread voluntary disclosures. However, in the medium- to long-term, we are calling for governments to mandate corporate reporting on the healthiness of product portfolios. By doing this, financial investments can indeed become the fix for unhealthy diets, and help ensure the long-term business case for healthy foods and prevent the untold costs of the food system on mortality and morbidity.
Greg S Garrett is Executive Director of ATNi
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