性视界

Founded in 1869, Campbell Soup Company (鈥淐ampbell鈥檚鈥�) is an iconic American food company with ~8B[1] in revenue. Best known for soups and its eponymous brand, Campbell鈥檚 has diversified into other products such as pasta sauce (Prego), salsas and dips (Garden Fresh Gourmet, Pace), juice (V8), salad dressings (Bolthouse Farms), and snack foods (Pepperidge Farms).[2] A common attribute of many of its products is a high degree of water and fruit/vegetable content, which contribute meaningfully to COGS, which is 61% of total revenue.[3]

Climate change poses challenges for Campbell鈥檚 supply chain in a number of ways. First, climate change directly affects the availability of water, an important direct ingredient in Campbell鈥檚 products. For example, the Natural Resources Defense Council found that 1/3 of counties in the U.S., where much of Campbell鈥檚 manufacturing occurs[4], are at risk of water shortages due to climate change by mid-century.[5] Second, water shortage also affects ability to grow crops, including Campbell鈥檚 five key agricultural ingredients (tomatoes, carrots, celery, potatoes, and jalapenos). Third, climate change can lead to more extreme temperatures and precipitation, which can directly affect crop yields.[6] Producing and sourcing water and agricultural products is essential to Campbell鈥檚 business, and the effects of climate change could substantially increase costs in those parts of the supply chain.

In the last decade, Campbell鈥檚 has increasingly emphasized its concerns over climate change in its external communications and exhibited a commitment to action. In 2005, Campbell鈥檚 set its first global greenhouse gas (GHG) emission reduction target as part of the U.S. Environmental Protection Agency鈥檚 Climate Leaders Program.[7] In 2010, Campbell鈥檚 announced a 2020 sustainability goal to reduce environmental footprint (water and GHG emissions per ton of food) by 50% relative to 2008 baseline.[8][9]

So far, Campbell鈥檚 has made meaningful progress. It has reduced water use by 18% per ton of food produced relative to 2008 baseline [10] by making capital improvements to reduce water use, especially after relaunching it Sustainable Agriculture Program. For example, for tomatoes, its biggest agricultural ingredient which it grows almost exclusively in California, it has increased use of more water-efficient drip irrigation from 29% of crop grown in 2012[11] to 51% in 2016, leading to a significant reduction in water use.[12] Campbell鈥檚 also reduced water use at its California tomato processing sites by 35% between 2010 and 2015.[13]

Campbell鈥檚 has also reduced GHG emissions by 24% by reducing energy use, increasing reliance on renewable energy, increasing recycling, decreasing packaging per product, and increasing sourcing of packaging materials from sustainable sources.[14]

Campbell鈥檚 has also ramped up support of efforts to reduce climate change more broadly, especially through public policy. In 2015, it joined the California Water Action Collaborative aimed at improving water security in California.[15] More recently, Campbell鈥檚 joined We Mean Business,[16] a global coalition of environmental non-profits and 600+ companies, aimed at working together to promote sustainability and lobby for pro-climate policy.[17] In July 2017, Campbell鈥檚 publicly expressed its objection to the U.S. decision to exit the Paris Climate Agreement.[18]

So far, Campbell鈥檚 has shown itself to be a leader in sustainability. Unsurprisingly, it has been part of Dow Jones鈥� Sustainability Index for nine consecutive years.[19] Campbell鈥檚 should continue with the general framework of its approach: (1) reduce water use so that its supply chain is less reliant on a resource likely increasingly scarce due to climate change; (2) reduce its own GHG emissions to do its part to combat climate change; (3) partner with non-profits and other businesses to promote collective action and advocate for policy solutions on climate change. For each of these three items, Campbell鈥檚 should go further in the coming years.

With regards to (1) and (2), Campbell鈥檚 should create a new sustainability target for the next decade (i.e. 2030). In conjunction with this, it should invest further in R&D and capex to improve operations to waste less water and energy and improve product design to further reduce packaging. Doing so will likely require investments in next-generation water-saving, renewable energy, and energy efficiency technologies. These technologies may currently be quite expensive, but without early adoption, they will likely remain cost prohibitive for the broader market for much longer.

On (3), Campbell鈥檚 should further ramp up its support of organizations/initiatives promoting collective action in sustainability and advocating for policy solutions. Given the current resistance to addressing climate change from the Trump Administration, Campbell鈥檚 will likely need to further shift its focus to achieving policy wins on the state/local level as opposed to federal level.

Questions for Discussion:

To what extent can Campbell鈥檚 pass along the costs of its sustainability efforts to customers without losing market share?

How can Campbell鈥檚 better address the collective action problem around combating the effects of climate change? Is there a better way to coerce free riders?

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[1] Campbell Soup Company, FY鈥�17 Annual Report, p. 41, , accessed November 2017.

[2] Campbell Soup Company, 鈥淥ur Businesses, 鈥� , accessed November 2017.

[3] Campbell Soup Company, FY鈥�17 Annual Report, p. 41, , accessed November 2017.

[4] Campbell Soup Company, FY鈥�17 Annual Report, p. 18, , accessed November 2017.

[5] Theo Spencer, 鈥淐limate Change, Water, and Risk: Current Water Demands Are Not Sustainable鈥�, , July 2010, accessed November 2017.

[6] U.S. EPA, 鈥淐limate Impacts on Agriculture and Food Supply鈥�, , accessed November 2017.

[7] Campbell Soup Company, 鈥淢AKING A DIFFERENCE AS THE CLIMATE CHANGE DIALOGUE HEATS UP鈥�, , October 17, 2014, accessed November 2017.

[8] Campbell Soup Company, 鈥�2017 Corporate Responsibility Report鈥�, p. 42, , accessed November 2017.

[9] Campbell Soup Company, 鈥淐AMPBELL UNVEILS 2020 SUSTAINABILITY AND CITIZENSHIP GOALS IN 2010 CORPORATE SOCIAL RESPONSIBILITY REPORT鈥�, , accessed November 2017.

[10] Campbell Soup Company, 鈥�2017 Corporate Responsibility Report鈥�, p. 40-44, , accessed November 2017.

[11] Campbell Soup Company, 鈥淢AKING A DIFFERENCE AS THE CLIMATE CHANGE DIALOGUE HEATS UP鈥�, , October 17, 2014, accessed November 2017.

[12] Campbell Soup Company, 鈥淲ATER, SUN AND STEAM鈥擨NGREDIENTS IN OUR SUSTAINABILITY STORY鈥�, , April, 22, 2016, accessed November 2017.

[13] Campbell Soup Company, 鈥淭APPING OUR RESPONSIBILITY TO CONSERVE WATER鈥� , March 22, 2016, accessed November 2017.

[14] Campbell Soup Company, 鈥�2017 Corporate Responsibility Report鈥�, p. 40-44, , accessed November 2017.

[15] Campbell Soup Company, 鈥淲ATER AS A HERITAGE鈥�, , March 22, 2017, accessed November 2017.

[16] Marc Gunther, 鈥淲hy Won鈥檛 American Business Push for Action on Climate?鈥�, , February 16, 2017, accessed November 2017.

[17] We Mean Business, 鈥淎bout,鈥� , accessed November 2017.

[18] Campbell Soup Company, 鈥淥UR POSITION ON THE PARIS CLIMATE AGREEMENT AND CLIMATE CHANGE鈥� , June 2, 2017, accessed November 2017.

[19] Campbell Soup Company, 鈥淐AMPBELL NAMED TO THE DOW JONES SUSTAINABILITY INDICES FOR NINTH CONSECUTIVE YEAR鈥�, , September 7, 2017, accessed November 2017.