November 27, 2019
A new Climate Advisers report reveals the risks a complex beef production industry imposes on Grupo Exito, the largest food retailer in Colombia.
Grupo Exito is the largest food retailer in Colombia and holds a leadership position when it comes to sustainability. However, its dependence on sourcing beef from a complex and opaque Colombian market for beef leaves it open to risks associated with deforestation during a current period of poor financial performance. These issues are at risk of being sidelined as a deal establishing Brazilian Grupo Pao de Açucar as the new majority owner will be finalized at the end of November.
In our latest report, we recommend that Grupo Exito uses its significant position within the Colombian market to initiate a zero-deforestation commitment for cattle. A time-bound, commodity-specific commitment would help move the industry forward in terms of developing transparency across supply-chains as the Colombian cattle market is poised for growth. It would also send a signal to investors that Grupo Exito has effective policies in place to deal with long-term risks associated with deforestation and other ESG factors.
Colombia’s beef market is growing, meaning deforestation risks will likely rise for the entire cattle sector. Approximately 96 percent of beef produced in Colombia is consumed domestically. With the potential for major growth in exporting beef on the horizon, deforestation in Colombia may rise from further land being cleared for more cattle. In addition, due to the system of smallholder farms, separate slaughterhouses, and no clear system of tracking beef production, Grupo Exito has found it challenging to establish a “sustainable livestock model”.
Risks from deforestation posed by Colombia’s unique market outlined in our report are reviewed in parallel with Grupo Exito’s current financial performance slump over the past five years. Since its stock price plunge in 2015, the company has still not regained investor confidence. Against this backdrop, risks from deforestation and other ESG-related issues could have a significant negative impact if Grupo Exito does not adopt a zero-deforestation target for beef and maintain its path of increasing its commitment to a strong sustainability strategy.
To learn more and download the report, click here.