Nutrition is unequivocally a shareholder issue, Joseph Mariathasan argues

Should malnutrition be an issue for responsible shareholders? The answer is an unequivocal yes. The issue is not so much one of starvation but the opposite. By 2030, close to 50% of the world’s population is projected to be overweight or obese, I am told by Lauren Compere, a board member of the Access to Nutrition Foundation.

Obesity already costs the global economy approximately $2trn (€1.8bn) annually, nearly 3% of global GDP. Much if this can be blamed on dietary changes in the last 50 years or so promulgated by food companies. In emerging markets, we are seeing rapid increases in diseases, such as diabetes, that are associated with obesity as populations change their diets to include more processed food with high sugar content, more red meat, etc.

Food companies are not, by nature, undertaking activities that are evil. Yet perceptions of what is acceptable are rapidly changing. Will sugar become the new tobacco? That debate has already begun. Rising global healthcare costs linked to obesity have led to the adoption of sugar and fat taxes in 10 countries, signifying the beginning of a trend. In middle-income countries such as Mexico, the rising double burden of under-nutrition and obesity puts pressure on the government to adopt a sugar tax.

Not surprisingly, increasing global obesity rates, especially in children, have led investors to question marketing practices to children and low-income and minority communities in places like the US, says Compere. NGO campaigns are also increasingly targeting companies offering cereal and soft drink products in emerging markets. Cereals have been touted for decades as the healthy breakfast in the West. Foisting high-priced sugar-laden coco-puffs as a healthy replacement for traditional breakfasts across the globe may increase the profits for food companies, but it comes at the expense of the health and wealth of the new consumers.

In January, the Access to Nutrition Foundation launched its 2016 Global Access to Nutrition Index (ATNI), ranking the 22 largest food and beverage companies on their nutrition practices. The index evaluates companies on corporate strategy, management and governance related to nutrition, the formulation and delivery of appropriate affordable and accessible products, and positive influence on consumer choice and behaviour through nutrition information, food marketing and labelling. The index report concludes that, while some companies have taken positive steps since the last ranking in 2013, the food and beverage industry as a whole is moving far too slowly.

It is interesting that among the top-rated companies is Nestlé, which achieved notoriety in the 1970s when it marketed breast-milk substitutes in poor countries as a tastier and healthier replacement for breastfeeding. This, of course, was later proved false, but the image that Western foods such as breast milk substitutes are healthier still persists among many of the world’s poor.

Nestlé, to its credit, has been rated amongst the top three in the index along with Unilever and Danone as having done more than their peers in integrating nutrition into their business models and producing healthier products. According to the report, they aim for lower levels of sugar, salt or fats, and higher levels of healthier ingredients. They also ensure affordable pricing and wider distribution of healthier products in emerging markets.

As the debate over better nutrition develops, global food and beverage companies continue to face significant headwind risks to their business models. As the index report outlines, changing consumer preferences towards healthier foods is decreasing sales of sugary drinks and snacks. The Top 25 global food and beverage players have lost $18bn in sales since 2009.

The winners in the food and beverage industry are likely to be those players able to follow these changing trends. That means less unhealthy ingredients such as salt, sugar or saturated and trans fats in processed foods and clearer labelling so consumers can actually understand the nutritional information on food packaging.

The biggest issue may lie in emerging markets, where, with rising income levels, packaged foods sales are growing 10 times faster than in high-income countries. Companies have a responsibility to apply the same standards they use in their home country – such as nutritional profiling, product reformulation, marketing practices and labelling – to global markets. Agreeing they can lower standards because local market regulations allow them to do so is a lame excuse that may ultimately damage the brand, as companies selling breast milk substitutes found to their cost.

Joseph Mariathasan is a contributing editor at IPE