ExaminingESG: Whole Foods + Aldi
Welcome back, I hope you remain as curious about ESG as I do! Over this month, I took a look at the sustainability reports of Whole Foods and Aldi, and they are less alike than I expected.
Do you have a favorite grocery store?
I do, and you can probably guess it. It’s Whole Foods.
I’ve been shopping there since I could make my own choices in college, driving to shop in my hand-me-down Honda minivan after my 8 a.m. stats course.
My budget may have been $60, but I made that stretch to fill my basket with college essentials like rice and beans and frozen chicken patties. But organic.
Even now, I’ll happily scrimp in other areas of my life to drop over $100 on groceries each week. I even worked at Whole Foods (WFM) for 4 months after grad school — and what a way to build character.
I needed to clean my entire workstation alone, usually while fending off an overworked, highly paid pharmaceutical bro eager to order a $9 juice at 9:55 pm, only after I finished scrubbing the 30-pound industrial juice machine.
But anyway, despite this being my newsletter, this isn’t about me. It’s about Whole Foods and Aldi.
Quick facts: Whole Foods + Aldi
If you are unfamiliar with these two stores, here are some basics to get you primed.
Neither company is publically traded, so finding any profitability data is tough. I was considering measuring sustainability metrics against profitability, but it was not meant to be.
Aldi originated in Germany in 1961 and now has over 2,000 stores across the U.S.
WFM originated in Austin, Texas in 1980 and has over 500 U.S. stores
Whole Foods, while a private entity, is owned by an ESG inspiration, Amazon. I say this with a bit of sarcasm, I do owe Amazon’s Climate Pledge a read.
Important note: I will use the term “Sustainability Report” when speaking about each report together but will use the company’s report title when speaking about them individually
I reached out to members of the sustainability team at both Whole Foods and Aldi, but LinkedIn is a liminal space and I had no luck. Maybe if you suggest that your friends subscribe, I will be popular enough to garner attention for the next round :)
Sustainability and climate change factors that can affect grocery stores
I want to take a moment to set up my mindset, a mindset that comes from constantly connecting the links between climate change and the effects it has on society.
Here is a non-exhaustive list of the ways that a changing climate can affect the supply chain of grocery stores:
Water shortages and droughts can affect crop output globally, and lead to shortages for both human and livestock consumption. We’re currently seeing this with an increase in olive oil prices.
High heat, both in terms of heatwaves and a higher temperature overall can affect food production.
Power outages due to old utility grids and unpredictable weather can lead to the loss of an entire grocery store full of food, something that happened in 2022 at my local WFM.
With those potential effects in mind, it’s time to take a look at whether Whole Foods and Aldi consider these threats within their supply chain, and how their businesses can decrease their contribution to these effects.
The Whole Foods 2022 Impact Report
As someone who is known to impulse buy vegetables, talk about a gorgeous report that leaves me with a hunger for leafy greens.
I love the store and the brand, but I reviewed the report with as little bias as I could.
WFM's purpose is to nourish people and the planet. As such, WFM considers the environment a key stakeholder, and this has not changed since its sale to Amazon.
What things stood out:
WFM is the only certified organic grocer in the U.S.
To be certified organic, farms must practice, among other things, using non-fossil fuel-based pesticides, and to weed by using machines or by hand instead of by using things like Round-Up. These practices lead to healthier soil that can then sequester more carbon — meaning organic farms can help take CO2 out of the atmosphere.
WFM reduces food waste, they either compost or donate food that cannot be sold. And this I know to be true, I’ve hauled the compostable bags full of juice scraps to the compost bin, and have arranged the dented boxes of food for local charities to pick up.
Source: Whole Foods. WFM practices food waste reduction in many forms WFM relies heavily on third-party rating sources, which indicates credibility because an independent source is verifying their data. For example, WFM was the first U.S. retailer to collaborate with the Marine Stewardship Council to source sustainably caught fish.
Also, they only sell yellow or green-rated seafood, a rating system that WFM developed with the help of Monterey Bay Aquarium.
In 2022, WFM became the first U.S.-based retailer to verify labels that used the term “regenerative agriculture” to reduce greenwashing claims. Prior to this, the term was not regulated and was an easy way for companies to add some sustainable clout to their packaging that they did not deserve.
Here’s what was lacking:
Low renewable energy implementation, only 66 stores have solar panels. However, those store locations might not be owned by WFM.
There are EVgo car chargers at some stores, but I could not find a verified amount for 2023 on either the EVgo site or the WFM site.
Aldi’s 2022 Progress Report
Aldi’s goal as a company is to provide high-quality food at the lowest possible prices. I think their Progress Report reflects that.
Aldi’s sustainability information is easy to find on their newsroom site. Many different categories are represented, from their climate & energy initiatives to the inclusion of community impact stories. But quantity is winning out over quality.
Here is what stood out:
Aldi does mention their progress towards reducing refrigeration pollutants - or the pollutants that put a hole in the ozone layer - much more than Whole Foods.
Aldi was recognized for this achievement by the EPA, winning the Green Chill Award in 2023, which awards retailers for their efforts to reduce emissions from refrigerants.
Aldi takes renewable energy seriously. The Solar Energy Industries Association, or SEIA, lists Aldi in the top 25 companies across the U.S. with installed solar capacity within their Solar Means Business Report.
Aldi plans to eliminate plastic bags in stores by 2023, or, now.
Since it is 2023, I wanted to double-check. But I am in New Jersey, where there are no plastic bags in stores at all, so I could not accurately verify.
What seems off:
There are many lofty quotes with no data to back up how this will be done, or compared to any baseline. Such as, “Reduce packaging material by 15%.” 15% from what baseline? For every product in the store or Aldi branded only? Many terms could one day be pointed to as greenwashing examples.
Non-binding language like “we will encourage” in the pollinator statement - I know this is a niche document to review, but it seems like words that hold no true value because Aldi cannot be held accountable for not “encouraging” enough.
After reviewing most of the sustainability documents from each company, it is clear that their company values are reflected within them. Throughout WFM, the core ESG focuses are on protecting the earth through restorative agricultural practices.
These practices are a less direct route, than say adding solar panels to every store, to mitigate climate change. The agricultural practices of WFM suppliers help to maintain a healthy ecosystem that can store carbon, support biodiversity, and reduce pollution.
That type of agriculture is not cheap, which is why I think there is less of an appearance within the Aldi resources. Aldi excels by adding renewable energy to power their stores and by installing better refrigeration systems.
Aldi can stand to improve some of their non-binding language by either making more concrete goals or removing some of their unsupported goals. It is better to focus on one thing well than on many things half-heartedly.
Whole Foods can increase its renewable energy implementation and overall green-building practices.
Each company acknowledges a changing climate and their business operations climate impacts, even if risks to their supply chains were not reviewed within their reports.
That’s all for the sustainability reports, but if you are interested in an ESG tangent, keep reading below.
A quick note (not really) on ESG ratings for public companies:
When companies began to take note of a growing public interest in sustainability factors, they realized that rating their companies based on sustainability metrics could give them an edge, acting as a new trust factor to point to - It is hard to be a bad company if your ESG rating is an AAA.
Publically traded companies quickly gravitated towards this and an industry sprung up to rank and rate them. BlackRock was one of the first investment management agencies to publically tout the need for businesses to incorporate sustainability as a means for survival in a climate-changing world, or to be seen as a company that cares.
I fell for this, having owned shares of BlackRock’s ESG-focused ETF fund, iShares. I dropped it about this time last year because, yes, it lost me money but I was also disillusioned with the companies within the fund, like Chevron. I probably could have researched it more before buying, but I too was swept into the ESG frenzy.
The credibility of these ratings is beginning to crack. Laws are popping up to punish companies for greenwashing, and a favorite of ESG ratings, carbon credits, are facing renewed scrutiny.
Carbon credits are a moonshot fix —much like geoengineering — allowing companies to pour money into protecting forests to offset their emissions, without having to change their habits.
In theory, it is a good idea to keep trees in place instead of cutting them down. But, there is more carbon being emitted than these saved trees can offset, and credits are being sold to companies with no tangible forest to back them up.
As I said in my first newsletter, I will not be focusing on financial ESG ratings, or investing aspects of companies. But because there is more noise around ESG being a scam, and so far the ratings have been, this has left a negative image for companies who are genuinely doing their part to be sustainable much like WFM and Aldi.
Like the CSRD standards that I mentioned in my first newsletter, legislation is starting to take shape that should help reduce the popularity contests of ESG ratings and should make them more trustworthy. But where ESG ratings and sustainability reports currently stand, they are more of a way for companies to make themselves sound great and tout their self-reported successes.
The same can be said about financial reports, where companies can manipulate data to make themselves sound the best. But the difference with this is the fact that consumers can be more easily swayed by the sustainability promises behind Fair Trade products than they are about a nicely formulated earnings report.
Because data is self-regulated, third-party sources can act as a reference to point to as proof of the claims made. I won’t get into what that means for financial ESG ratings, but in the grocery industry, these can include Rain Forest Alliance, Fair Trade Certified, and Marine Stewardship Council.
If you’ve read this far, I hope you will join me next month when I completely switch industries to compare the Peloton and Lululemon sustainability reports. I’ll also include an explanation about why I chose them and what makes them competitors, even with their new brand collaboration.
ESG legislation details
I know I said I would include a deep dive into the new CSRD legislation, but I figured a quick overview might be easier:
Both private and public companies that are located in the European Union, or those that do significant business within the EU, will be subject to CSRD rules.
Companies that have two or more of the following are subject to reporting: 250+ employees, €40m+ annual revenues, and/or €20m+ balance sheet. Non-EU-based companies can choose to report on their European subsidiary or globally for now, with global requirements rolling out in the future.
Companies will need to report on carbon emissions, pollution, water use, waste, and biodiversity. I will be looking more into what these metrics will actually be and will report back.
These will need to be reported on within financial annual reports and will be subject to audits — so, maybe I was too quick to write off traditional CPAs and consultants. But, their work did help Chevron get a high ESG rating.
And with that, til next time!
Ana
Learn more about me
This month, I started taking an ESG Fundamentals course through Terra.do, and so far it has helped back up my understanding that ESG is only now becoming more defined.
Outside of ESG, you can watch me answer some of the most popular solar questions found on Reddit.
You may have noticed that my wonderfully talented friend Amanda DeRosa created a logo for my newsletter, which unfortunately might only be visible if you read this on SubStack. Someone respond and let me know.