Today's program : true cost of food and the cost of sustainability

Welcome to "nouveau monde", sort of a "nouveau genre" newsletter to better understand how to make the world better through the lens of retail. This is #27!

Let’s talk in nouveau monde this week about the cost of a dollar and the cost of sustainability for Walmart. Just before the weekend, isn’t it a good idea?!

Things move fast in retail and sustainability, we’re really happy to help you get the right tips and be inspired…and. wish you a great Sunday!

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Today's newsletter is 875 words, a 4-minute read.

Making debts for pursuing sustainability

by Phil

Walmart just raised the largest green bond ever in the U.S. corporate bond market. Fro the record, the bond market (also debt market or credit market) is a financial market where participants can issue new debt, known as the primary market, or buy and sell debt securities, known as the secondary market. The bond market has largely been dominated by the United States, which accounts for about 39% of the market. Green bonds are fixed-income securities issued by countries, institutions and corporates. The proceeds are committed to finance environmental and climate-friendly undertakings, such as renewable energy projects, green buildings or resource conservation. The $2 billion bond deal illustrates that U.S. investors’ interest in green bonds is not going anywhere. Companies are tapping into that demand, and putting money behind efforts to battle climate change.

Walmart has successfully priced the company’s first green bond. Over the next few years, the company plans to allocate an amount equal to the net proceeds of the $2 billion bond toward a portfolio of eligible green investments that meet certain eligibility criteria within the areas of renewable energy, high-performance buildings, sustainable transport, zero waste and circular economy, water stewardship, and habitat restoration and conservation.

The green bond is part of $7 billion of new senior unsecured notes that Walmart has successfully priced across five-, seven-, 10-, 20- and 30-year tranches.

“Walmart has a lot of influence and control over its supply chain. That's important, and it gets other retailers to think about their supply chains”, says Shawn Keegan, credit portfolio manager at AllianceBernstein. “Walmart's deal is important for the green bond sector because until now, most deals have largely been concentrated in just three industries: real estate, utilities and autos”, noted Matt Lawton, portfolio manager at T. Rowe Price.

You see: sustainability has a cost.

For the complete details about Walmart’s Global Responsibility agenda, just review their latest Environmental, Social & Governance Report

Source: Walmart Sustainability

How Much a Dollar Cost ?

by Anthony

In Sustainability as in many other areas, it's difficult to have a full view of complex matters if we don't take in account what matters most on earth (unfortunately, I don't talk about water or fresh air but money $$$)

We can see a start of pricing CO2 so that it begins to have a certain value, therefore people start to consider it.

The Rockefeller Foundation produced a really interesting study this summer, trying to chase the hidden costs of the US food system.

You can find it here with its appendix chowing us all the data they gathered but, of course, I will summarize the key points for you ;-)

As an introduction, we'll have to say that this study is focused on the US  system that really is different from other countries (the food system itself but also how the health system is managed,...) but we can definitely extend this study to other countries.

Also, as a disclaimer, the study insists that calculating hidden costs of the food system is really hard as it has multiple involvements so the study is rather preservative and the costs are much higher than what the study shows.

It's also important to notice that the food system in the US now employs 10% of American workers in its whole value chain. This means that on top of the effects of the food itself, the study also spotted what costs the value chain has on its workforce.

That said, let's deep dive in the report !

First, the emerged part of the iceberg : the total value of the US food system is estimated to 1.1 trillion dollars for the year 2019.

On top of that, we'll have to add what the hidden costs in different areas :

  • Human health : 1.1 T USD (that's the same amount as the whole value chain !)

  • Environment and biodiversity : 805 bn USD

  • Livelihoods ans Economy : 155 bn USB

That brings us to 3.2 T USD, which is huge ! And the chart shows that the i merged part of the iceberg certainly doubles that number !

Let's have a closer look to the main causes identified. Of course, when you talk about food in the US, you think about obesity, diabetes, hypertension, and so on... Less top of mind, but food also brings cancer. All these diseases together represent a cost of almost 1 T USD. That means that the food that when an American spends $1 on its food, he and the whole American system pays another dollar to repair American's health due to the food consumed !

And, again, a lot of hidden costs are not taken into account, like mental health, lack of education...

If we look at the environmental side, the US food system has a great impact on GreenHouse Gas, use of water, alteration of soils... which can be accounted and where a lot of actions could be taken to decrease the amount spent and the direct impact on the environment. The impacts that don"t have a clear economical impact are also gigantic : food insecurity due to climate change, migrations, biodiversity collapse, animal welfare, new pandemics...

That said, the report also has a clear stand : even if there are many hidden costs, all of these shouldn't be reported into the shelf price of food, otherwise good food wouldn't be affordable to the people who need it the most. Regarding health matters for instance, "Food is Medicine", so the American health system could invest in a healthier food and therefore make benefits on the illness side and start a positive loop.

I recommend you to read the entire study, as it has a  real practical approach : on all these environmental matters, if we are not able to transform problems into dollars, we won't be able to change anything because it's today's unique universal standard.

Bonus Track by Anthony