AMDP Proposal Draft

TO: Clark Hansen, CEO, AMDP

FROM: Taylor Vu, R&D Analyst, AMDP

DATE: October 21st, 2022

SUBJECT: Investment Proposal – Ben & Jerry’s

I am writing to bring Ben & Jerry’s, a subsidiary of Unilever, to your attention as a promising opportunity for ESG investment. I believe it fits within AMDP’s funding standards for the following reasons:

1. History of environmentally conscious practices
2. Strong performance in third-party ESG ratings
3. Independent governance structure
4. Response to ESG criticism

For structure, I will first lay out key definitions I used in my analysis to ensure we start on the same page, then provide some metrics to demonstrate its financial performance, and later dive into each reason and my conclusion.

ESG Primer

Triple Bottom Line: firms should commit to measuring their social and environmental impact—in addition to their financial performance—rather than only focusing on profit. It can be broken down into “three Ps”: profit, people, and the planet (HBS)

Corporate Social Responsibility: a business model in which companies make an intentional effort to enhance, rather than degrade society and the environment (Investopedia)

Social Enterprise: an enterprise whose social mission drives operations and not the other way around, with income generation playing an important, yet supporting role (Community Wealth)

Carbon Footprint: the total amount of greenhouse gases* (including carbon dioxide, methane, and nitrous oxide) that are generated by our actions (nature.org). Emissions of methane and nitrous oxide are converted to carbon dioxide equivalent units – this is how carbon footprint is measured (Rutgers)

*Greenhouse gases, sometimes abbreviated as GHGs, are the gases that absorb energy and release them as heat (what scientists call “in the thermal infrared spectrum”).

Why it’s important to reduce carbon footprint: companies reducing their carbon footprint improve their bottom line by finding more efficient business practices and improving employee productivity (Center for Climate and Energy Solutions)

Financials: Compared to 2021, Unilever (Ben & Jerry’s parent)’s sales have grown 8.1% while operating profit has grown 4.1%, demonstrating increasing efficiencies in the overall organization’s business processes. This is doubly impressive due to the broader trend of cost inflation affecting business profitability negatively in the past year – Unilever still found a way to post both sales and profitability growth. 

With that in mind, here’s why I believe Ben & Jerry’s fits into our investment criteria.

1. History of Environmentally Conscious Practices 

Explicit Climate Change Data: Ben & Jerry’s publishes that each one of its dairy pints are roughly equivalent to two pounds of CO2 emissions. Compared with the 17.6 pounds of CO2 emissions generated from a gallon of milk, both the openness in communication and general effectiveness of B&J’s environmental consciousness is well-demonstrated (Ben & Jerry’s)

Responsible Packaging: the cardboard packaging of B&J’s pints are Forest Stewardship Council certified, which means the practices used to source the wood don’t threaten things like deforestation and biodiversity loss. Also, they have a stated goal of making 100% of their packaging free from petroleum-based plastics. (Ben & Jerry’s)

Lobbying for More Sustainable Storage: In 2011, Ben & Jerry’s successfully petitioned the US Environmental Protection Agency to allow the use of hydrocarbon in freezer storage units, as opposed to the industry standard– and less energy-efficient– hydrofluorocarbon. This shows that not only does B&J’s have sustainable practices right now, but that it has been environmentally conscious for a while now (Ben & Jerry’s)

2. Strong Third-Party ESG Ratings

Superior Performance in Aggregate: Ben & Jerry’s is ranked in the 90th percentile of 30,984 companies in aggregate ESG ratings, confirmed by 15 sources (CSRHub)

EPA Recognition: Ben & Jerry’s were among the top 40 companies in the EPA’s National Green Power Partnership Top 100, which ranks companies nationally by kilowatt-hours of green power used (EPA)

Strong Performance Among Comparables: Ben & Jerry’s parent, Unilever, ranks in the top quintile of its industry group for companies for lowest ESG risk posed, ahead of Estee Lauder and Procter & Gamble (Sustainalytics)

3. Independent Governance Structure

Ben & Jerry’s maintains a separate Board of Directors from its parent, Unilever, in which it houses professionals who have a more focused interest in preserving Ben & Jerry’s progressive mission (Ben & Jerry’s). Among these individuals are:

• Anuradha Mittal: Chair of the Board, published author and expert on human rights and agricultural issues, as well as environmental justice 
• Daryn Dodson: Audit Committee Chair, with background in impact measurement and implicit bias reduction, as well as being a Managing Director in an investment firm
• Jennifer Henderson: community organzier-turned business strategist with a focus in racial equity and civil rights

4. Response to ESG Criticism

Greenwashing Concerns: Some pushback has been raised by websites like regnerationvermont.org who claim the ice cream brand’s marketing about ethical animal treatment is a sham. They say this because Ben & Jerry’s still sources milk from cows raised on CAFOs: concentrated animal feeding operations. 

The same website explains that CAFOs are known for less-than-humane living conditions for animals including overfeeding and overcrowding, which has resulted in a mortality rate of 10% in 2017, up from under 4% in 2002.

In addition, the brand came legal attack in early 2020 as animal welfare lawsuits from an environmental advocate and the Organic Consumers Association rolled in with the same claims about Ben & Jerry’s association with CAFOs (Today). 

Response to Criticism: While the brand could not deny association with CAFOs, Ben & Jerry’s removed the phrase “Happy Cows” from its packaging and placed further emphasis on its Caring Dairy program. This program saw Ben & Jerry’s be the first in the dairy industry to partner with the Global Animal Partnership to foster more ethical treatment of cows, as well as adopt the Milk With Dignity program to incentivize farms to provide better working conditions for their employees.

I believe Ben & Jerry’s response to ESG criticism was genuine and meaningful, and I see no reason to doubt that it will continue to be into the future as standards evolve.

Recommendation

For its history of environmentally conscious practices, strong third-party ESG ratings, independent governance structure, and effective responses to ESG criticism, I recommend AMDP invest in Ben & Jerry’s. The first three components illustrate responsibility as it relates to the environment, social issues, and governance structure, while the last demonstrates the brand’s resiliency against falling behind in the ESG race as times change. 

Please let me know if you have any questions, and please see below for sources. I look forward to discussing.

Works Cited

https://online.hbs.edu/blog/post/what-is-the-triple-bottom-line

https://www.investopedia.com/terms/c/corp-social-responsibility.asp

https://community-wealth.org/strategies/panel/social/index.html

https://www.nature.org/en-us/get-involved/how-to-help/carbon-footprint-calculator/#:~:text=A%20carbon%20footprint%20is%20the,are%20generated%20by%20our%20actions.

http://mpe.dimacs.rutgers.edu/2013/05/21/measuring-carbon-footprints/

https://www.c2es.org/content/reducing-your-carbon-footprint-at-work/#:~:text=For%20many%20companies%2C%20reducing%20greenhouse,environmental%20impact%20on%20the%20world.

https://www.benjerry.com/values/issues-we-care-about/climate-justice

https://www.benjerry.com/values/how-we-do-business/cleaner-greener-freezers

https://www.benjerry.com/values/how-we-do-business/sustainable-packaging

https://www.csrhub.com/CSR_and_sustainability_information/Ben-and-Jerrys-Homemade-Holdings-Inc

https://www.epa.gov/greenpower/green-power-partnership-national-top-100

https://www.sustainalytics.com/esg-rating/unilever-plc/1007986724

https://regenerationvermont.org/20-years-of-greenwashing/

https://www.today.com/food/ben-jerry-s-tries-dismiss-lawsuit-about-its-happy-cows-t172302

https://www.benjerry.com/caringdairy