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ADM: Don’t Bet the Farm on It

By Michelle Bernhart on March 10, 2011 at 10:30am.
With so many large food and beverage companies focusing so seriously on sustainability risks, commitments, improvements, and transparent disclosure (think: Coca-Cola, Campbell Soup, Unilever, and Danisco, to name just a few), it’s somewhat startling to encounter one that isn’t. Unfortunately, global food behemoth Archer Daniels Midland Company (ADM) just doesn’t seem to be there yet, at least from a reporting perspective.


Content:

To get straight to the point, the ADM 2010 Corporate Responsibility Update and Highlights and its more detailed companion at http://www.adm.com/responsibility fall somewhat short of the mark. They lack meaningful discussion of the company’s sustainability or corporate responsibility context and challenges. They lack reference to any sort of standard, such as the GRI Sustainability Reporting Guidelines or its 2010 Food Processing Sector Supplement, which might facilitate comparison against peers. They make no mention of the operations covered in this year’s report. And they include just four graphs—two related to energy and climate, one on safety statistics, and one on cocoa farmer enrolment in ADM’s Socially and Environmentally Responsible Agricultural Practices program. The photos are lovely, the colours pleasant, and the text highly readable, but it all leaves this reviewer wondering: where are the numbers behind these bright images and happy faces? What are the challenges? How can readers determine whether the participation of 180 Ghanaian cocoa workers and their family members in a health program is meaningful? For all we know, ADM could employ thousands more people in Ghana who do not receive health services.

It is this absence of data, and especially contextual data, that most erodes the quality and credibility of the report. Instead of providing the hard information readers most want to access, the report primarily consists of upbeat, overwhelmingly positive text describing ADM’s efforts—and to a lesser extent its progress—in various environmental, social, and economic issues. Even the three issues identified as material (energy, water resource management and supply chain integrity), do not appear to receive additional consideration or depth beyond any of the others included in the report, and it’s notable that particularly scant information is provided about at least one of these—water. Since identifying water resource management as a material issue in 2008, the company has completed a global water assessment and developed a water use and discharge data collection system, both of which are extremely admirable, but ADM won’t begin to account for water use until 2011. Considering that water represents one-third of the issues identified as material 3 years ago, some stakeholders might wonder whether the company has devoted sufficient resources to addressing its water-related challenges. They might also wonder about the missing math in ADM’s presentation of water risk. The report indicates that ADM determined that 75 percent of these facilities are located in regions where local water resources are not stressed, while just 7 percent are located in areas considered water-scarce, but doesn’t reveal the water status of the remaining 12 percent.

Speaking of materiality, it’s not altogether clear how a reader is to know whether the company is focused on the right issues. If one were to ask the average person at a cocktail party what comes to mind when thinking of ADM, he or she might offer up factory farming, genetically modified organisms (GMOs), and—if the person happened to be in the United States where ADM is headquartered—perhaps something about government subsidies and tax breaks. To be sure, this list is speculative and unscientific, but ADM has been in the news in relation to all these topics, and stakeholders can reasonably be expected to associate the company with them. Stakeholders would be surprised, however, to discover that none of these is covered in the 2010 report. While it is certainly possible that ADM did a thorough materiality analysis and these issues didn’t emerge as significant for the company and its stakeholders, it’s impossible to know what issues ADM considered. The 2010 report only says that they conducted supply chain and materiality analyses that prompted them to designate energy, water resource management and supply chain integrity as key focus areas for their sustainability efforts.

With some help from Google, the ADM site search function, and a browse through her own library of books and magazines, this reviewer located an October 2010 Ethisphere article by ADM’s Mark Bemis (Chairman of the Sustainability Steering Committee) that does a better job of discussing the supply chain issues ADM faces than the corporate responsibility report. Mr. Bemis also sheds some light on the materiality analysis.

‘In 2008, after working with experts from Business for Social Responsibility to complete a comprehensive materiality assessment of the various social and environmental issues that touch our business, we decided to make the integrity of our supply chain a principal focus of our overall sustainability platform’, Mr. Bemis says. What’s not clear, however, is which supply chain issues are of greatest concern. The need for better human and labor rights practices, as well as more environmentally responsible sourcing have all plagued ADM at one time or another in the media, but these issues are not explored in the report, although particularly astute readers can draw conclusions based on the report’s coverage of topics such as new health and educational programs for West African cocoa farmers and commitments to responsible soy and palm oil.


Communication:

Perhaps if I were an ADM investor—albeit one not overly concerned about sustainability-related risk—I would feel good reading this report. There is little here to suggest serious risk associated with climate change, decreasing water supply, or rising water and energy costs. Indeed, if I were less informed about these issues and their likely impacts on the food and beverage industry (not to mention its precarious ability to feed the world’s burgeoning population), I might come away from this report secure in the sense that ADM has all of these issues well under control. That would be because the report unfailingly covers the good news without discussing the true difficulties associated with at-risk water sources, dependence on petrochemical-based pesticides and herbicides, the heightened challenges associated with securing a social license to operate from global communities, and other very real concerns.

In general, the report’s discussions about environmental concerns don’t get any more detailed than this decidedly soft statement: ‘At a time when concerns about the environment are especially pronounced, we at ADM believe that finding suitable, serviceable and sustainable replacements for petroleum-based products represents an important part of our effort to make the most of agriculture’s potential’. Do the report authors believe there will be a time in the future when concerns about petroleum-based products won’t be especially pronounced?

Another communications issue concerns the need for better connections between the company’s previous report and its current effort. ADM communications professionals no doubt found themselves facing the tricky, but increasingly common, quandary of deciding how to link the previous online report to the current year’s report—or whether to do so at all. When performance data is presented over time, as it should be, links to previous online sustainability reports become less necessary, reserved for occasional references to earlier challenges or decisions that don’t bear full repetition in the current year’s disclosure. The ADM 2009 and 2010 reports, however, appear to share no links except for a small box pointing stakeholders to downloads and an archive. Unfortunately, the only real discussion of materiality—such as it is—takes place in the earlier year’s report, and is only findable through diligent searching. There is nothing in the current report to indicate that the previous year’s report contained some of the information this reviewer spent so much time seeking on ADM.com and other sources.


Credibility:

As noted, ADM has been targeted by human rights and other watchdog groups over the years, and the company’s business involves petrochemicals, GMOs, and other controversial practices. Against this backdrop, the company has an obligation to its stakeholders to report comprehensively, transparently, and credibly about its challenges, successes, and shortcomings with respect to sustainability. Instead, however, the 2010 report is so overwhelmingly positive and light on data that its credibility is undermined throughout.

In addition, the report isn’t informed by the GRI guidelines, has not been assured, isn’t well integrated with other parts of the company’s operations (or even to the previous year’s report), and doesn’t disclose much about the materiality assessment process. In short, it doesn’t feel very real.


Recommendations:

1.    Consider using the GRI guidelines to improve content, context, materiality, and other reporting practices.
2.    Revisit the materiality assessment, since issues change over time and the first and only assessment was done in 2008; also, disclose what issues were considered, which stakeholders (or stakeholder organizations) were involved, and how the final determination was made.
3.    Cover more fully the issues determined by the materiality analysis to be relevant and significant. Water strategies, in particular, deserve extra real estate in future reports.
4.    Provide much more data over time, at least for each material issue and preferably for all issues deemed valid enough to be covered in the report.
5.    Consider using assurance to further drive internal accountability and enhance credibility.

Michelle Bernhart is the founder of True Blue Communications LLC, which helps organizations strengthen sustainability performance, achieve strategic objectives, enhance brand, and manage risk through credible and engaging communications. www.truebluecomm.com