Ralcorp Supply Chain Water Risk Report 2013
|Company||Ralcorp Holdings Inc.|
|Subject(s)||Supply Chain; Water Pollution; Worker Safety|
|Resolved Clause Summary||Water risk report|
|Status||No Vote For Technical Reasons|
RESOLVED: Shareholders request that the Board of Directors issue a report identifying water risk throughout the operations and value chain of the company. This report, prepared at reasonable cost and omitting proprietary information, shall be released by August 1, 2013.
SUPPORTING STATEMENT: Ralcorp does not disclose the amount of water used by its facilities, or water risks within its supply chain. Yet food manufacturers increasingly face direct water-related risk, such as flooding of manufacturing plants, severe drought that may cause work stoppages, heightened competition over water resources, and increasing water prices.
The greatest water risks to food companies lie within their supply chains, where extreme weather has contributed to volatile and increasing commodity prices. In an August 2012 report, the World Bank stated that corn and soybean prices reached all-time highs, due principally to severe drought. Climate change increases the unpredictability of quality, price, and availability of raw materials. Although food manufacturers temper commodity price risk through hedging, many companies now also address this risk by reducing water issues directly -- modifying products to favor less water-intensive ingredients, or preferring suppliers that address water efficiency. Many companies work with stakeholders to promote sustainable agriculture – which typically addresses water use – in collective efforts to influence how crops are grown.
Ralcorp peers address direct water risks of their operations, such as Hain Celestial, Ralcorp’s closest competitor when measured by market capitalization. Larger competitors, such as General Mills, Kellogg, and Campbell Soup, also disclose water use. Moreover, all of these companies have programs in place to address water used in their value chains as well, putting them well ahead of Ralcorp in water risk management.
Ralcorp has operations in areas designated as having “extremely high” or “high” water risk, as defined by the World Resources Institute Water Risk Atlas, including Azusa, California, Tolleson, Arizona, and other locations. Third party research institutions have also determined that Ralcorp – by failing to address water efficiency in its own operations – performs below industry average in this area and poses a risk to investors.
Ralcorp’s largest customer is Walmart, accounting for 18% of fiscal 2011 net sales. Walmart and other major Ralcorp customers increasingly score suppliers on environmental indicators, including water use. Preference is given to suppliers that score highest or demonstrate improved scores over time. There is concern that if Ralcorp fails to disclose water use, it may be locked out of key markets.
Measuring water use is not an onerous business task or expense. Free tools are available to assist corporations in measuring water use and determining water risk. Eighteen water tools are catalogued in the 2012 Water for Business guide by the World Business Council for Sustainable Development.
Investors understand that water risk is often material to company performance. In 2012, 470 financial institutions with assets of US$50 trillion were signatories to the Carbon Disclosure Project (CDP) Water Disclosure survey.
THEREFORE, please vote FOR this proposal that the company undertake reporting on water risk in its operations and value chain.