I’m thrilled to (finally) have some positive news to report on the climate change front.

Last year, we wrote about a shareholder proposal that Trillium Asset Management (Trillium) and Calvert Investment Management (Calvert) filed with the J.M. Smucker Company urging the company to disclose climate-related risks in their coffee supply chain. Nearly a year later, and after organized pressure urging the company to act, Smucker’s has taken promising first steps to address climate risks.

Smucker’s, better known for their jelly and jams, is a lead distributor of Folgers and Dunkin’ Donuts coffee brands with coffee accounting for nearly half of its profits. Coffee is particularly susceptible to climate-related risks, such as temperature variability and weather extremes, and coffee farmers often lack the resources to support their families in the face of increased unpredictability in crop yield.

In 2010, the Securities and Exchange Commission (SEC) adopted guidance for publicly traded companies, requiring them to disclose climate change risks, such as physical risks to a company’s assets and supply chains. Smucker’s reported on some climate risks in its 10-K filings, but had failed to demonstrate to shareholders how they were managing these risks.

While last year’s shareholder resolution received a strong vote of support, the company did not commit to any meaningful actions in response, leading Trillium and Calvert to file a similar resolution this year. Oxfam America, a Smucker’s shareholder, supported this resolution and in June of 2012, our President Raymond Offenheiser sent a letter to Mark Smucker, Director and President of US Retail Coffee for Smucker’s, urging the company “to adopt a strategic plan which addresses temperature changes, changes in rainfall patterns, and the company’s responsibility to the coffee farming families in its supply chain.”

In response to the growing pressure, the company recently announced a set of new initiatives in their 2012 corporate responsibility report ahead of the company’s annual meeting. The move has lead Trillium and Calvert to withdraw their shareholder proposal. Smucker’s coffee sustainability initiatives include:

• A goal for certified coffee purchases to reach 10 percent of its total retail purchases by 2016.
• A partnership with the Hanns R. Neumann Stiftung Foundation to focus on agronomy training, organizational development, and climate change adaptation strategies in order to improve the farming conditions, yields, and incomes of small-scale coffee farming families.
• A partnership with World Coffee Research with a focus on the science of coffee in order to develop hybrid varieties using classic breeding techniques.

While these actions only represent a first step, it’s critical that the company is beginning to publicly recognize climate change risks in their coffee supply chain. It is a sign that corporate pressure can pay off and that that extreme weather events, like the devastating drought that’s currently gripping much of the US and threatening global food security, are serving as a wake-up call to companies about the economic realities of a changing climate.

Public disclosure of climate risks and the development of a strategic plan to address these risks are important next steps that the company should take to ensure that the company is held accountable and that small-scale farmers in Smucker’s supply chain have adequate resources to prepare for and respond to climate threats. Not only will such resources protect farming communities, they will surely benefit global companies, like Smucker’s, who rely on a stable supply of high-quality coffee beans.

Today’s blog post is an update to a previous post, With a Name Like Smucker’s…

Today’s shareholder vote at the Smucker’s annual meeting marked an important step towards getting the company to report on climate risks associated with their coffee business and supply chain. The proposal received roughly 30% support (based on preliminary numbers). While 30% might not sound notable, a recent report on the 2011 proxy season puts the vote in perspective: the report found that investor support for shareholder resolutions on environmental and social issues rose to a 20.5% average approval rate (the first time support has ever reached the 20% mark). 30% sure sounds like a lot when measuring against that baseline. Analysts at Trillium Asset Management and Calvert Investment Management also report that first year resolutions generally garner far less support as investors are initially introduced to the proposals.

This vote sends a clear signal to Smucker’s leadership that shareholders are raising legitimate concerns around disclosure of social and environmental risks in their coffee supply chain. Trillium and Calvert will engage with company representatives in the fall pressing them to respond meaningfully to investor concerns about coffee and climate change. While the two investment firms hope to make progress with the company over the course of the next year, they will reserve the right to re-file the resolution in 2012 if necessary. 

Oxfam will help keep the pressure on Smucker’s to adequately respond and we’ll keep you updated on opportunities to engage.

When you think of Smucker’s, jelly and jams typically come to mind, but they are just the tip of the iceberg. The J.M. Smucker Company is actually a leading distributor of Folgers and Dunkin’ Donuts coffee brands (who knew?), with coffee accounting for 40% of the company’s net sales and nearly half of its profits. That’s a whole lot of coffee, considering that the company sells and manufactures many other widely-used household brands like Crisco, Jif, and Pillsbury.

Coffee crops are highly sensitive to weather and temperature fluctuations making it particularly vulnerable to climate change. This past year the cost of coffee skyrocketed following increased demand and poor harvests in high-producing countries like Colombia and Brazil.   In 2010 the Securities and Exchange Commission (SEC) adopted new guidance for publicly traded companies, requiring companies to disclose climate change risks, such as physical risks to a company’s assets and supply chains. 

Disclosing these risks will create much needed transparency to help investors understand how companies’ supply chains, and the communities that support them, could be impacted by increasingly extreme weather and other likely results of climate change.

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