Case study by Kristel Verhoef, ACTIAM; Nadira Narine, Interfaith Center on Corporate Responsibility; Peter van der Werf, Robeco; and Mary Beth Gallagher, Tri-State Coalition for Responsible Investment

A group of PRI signatories led by Dutch investment managers ACTIAM and Robeco initiated the process to engage with Archer Daniels Midland (ADM) on water risks in its agricultural supply chain in 2015. ADM, an agricultural processor, primarily focused on operational water issues. Despite reporting on its social and environmental sustainability initiatives related to commodities, it was unclear whether the company was taking any action with its suppliers or conducting risk assessments in relation to water. The company disclosed limited information on supply chain water risk awareness and no comprehensive plan for managing these risks among the growers from whom it sourced commodities.

During a visit by ADM’s CEO to Robeco in June 2015, the need for increasing resources in the sustainability function to properly address deeper supply chain ESG risks and opportunities was expressed. After this meeting, however, ACTIAM and Robeco received only written responses from the company, creating a barrier to effective engagement. It was presumed that the lack of commitment to conference calls was due to the company’s limited resources to work on sustainability management. After failing to secure a call with ADM, ACTIAM and Robeco approached the Interfaith Center on Corporate Responsibility (ICCR) to join its existing dialogue with the company led by the Sisters of St. Dominic of Caldwell NJ and the American Baptist Home Mission Society. ICCR, a network of faith and values-driven investors based in the US, has been engaging with ADM for several years on various ESG topics including water risk, with a focus on water risk assessment in the supply chain.

During the collaboration, the PRI and ICCR investors found synergies in their aims for ADM, including:

  • ADM to demonstrate awareness of water as a risk and to have a strategy for managing its water footprint;
  • ADM to respond to the CDP Water questionnaire in 2016;
  • ADM to conduct a supply chain water risk assessment; and
  • ADM to adopt a Human Right to Water Policy.

Combining the engagements allowed the PRI and ICCR investors to meet ADM, underline shared concerns and bring together a broad range of investors with common objectives. This collaborative effort enabled PRI investors to speak with the company while contributing to the existing dialogue and strong relationships. The group of investors encouraged ADM to address the four points above.

ADM has been enhancing its disclosure on water risks and allocating more resources to the sustainability team, including appointing a Chief Sustainability Officer in the first half of 2017. The company also responded to CDP Water in 2016 after repeated encouragement from the PRI and ICCR investors. In September 2017, ADM incorporated Human Right to Water into its Human Rights Policy in response to investor encouragement.

This included disclosure around the company’s activities to conduct water risk assessments across its direct operations and supply chain. However, the company recognises that there is still room for improvement. ICCR investors are committed to continuing discussions with ADM to encourage more robust management of water risks throughout the supply chain and enhance the data provided to create impact on the ground.

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    Investor guide on water risks in agricultural supply chains

    March 2018