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April 21, 2022

Restaurants’ calories disclosure lesson for ESG

By Alison Taylor

As the UK forces large restaurants to publish calories on menus, there are ESG lessons to be learned from the US experience – and interesting parallels between tackling obesity and climate change.

Obesity rates in many western countries keep growing. In 2018, 42 per cent of US adults were classified as obese, with an estimated 325,000 annual deaths. There is no simple cause, but inactivity, the widespread availability of processed foods and ever-increasing portion sizes all play a role, as do our genes and entrenched habits.

To address the issue, so far we’ve come up with one idea: to force restaurants to publish calorie counts on their menus. US chain restaurants have been required to do this since 2018, and the UK government has introduced similar measures this year. Given that humans tend to underestimate calories by as much as 50 per cent, more transparency and information would seem useful: learning that a salad has 1,200 calories helps us realise we might as well get the burger after all.

Yet one study in the southern US revealed that the average customer initially responded by cutting eight calories, only to boost their caloric intake as the measures were introduced over the following year. Diners ordered fewer side orders, but more sugary drinks.

Calorie data can even cause anxiety and disordered eating, as we fixate on cutting calories at the expense of nutrition and exercise. Tellingly, obesity continued to rise during the pandemic, with one study predicting half of Americans will be obese by 2025. 

Counting emissions

What does this have to do with ESG reporting? Practically everything. Climate change and economic inequality rank high among our systemic global crises, and the corporations that have played a decisive role in causing them have far more power than individuals to develop meaningful solutions at scale. 

To address this, we’ve come up with the direct equivalent of calorie counts on menus – and that’s to force companies to disclose their carbon emissions. The thinking here is familiar: we manage what we measure, so climate disclosure mandates that help companies clarify energy costs, govern risks, and set and meet targets should enable investors and the public to evaluate company performance and punish laggards. 

This thinking is not entirely misguided. Accurate, transparent information can raise awareness and inspire solutions. It elevates an issue’s importance in popular discourse (notwithstanding the off-putting alphabet soup of ESG frameworks). But disclosing data is not the same as taking action – in itself, it might affect company behaviour to the tune of eight calories a day.

Publishing calorie data is a neutral exercise. It dumps responsibility on diners: if they don’t use it to demand healthier choices, restaurants need do nothing further. And since calories have some relationship to weight gain but are a poor gauge of nutrient intake, the measure alone is unlikely to improve diets.

Restaurants are more likely to offer artificial sweeteners and salad dressings that contain fewer calories but may damage your health. Most will still focus on their core goals: price, convenience and service.

Hooked on data

Just as calorie counting focuses us on sugar highs but not a nutritious diet, obliging companies to publish carbon emissions data merely points out their shortcomings without forcing them to change. Emissions are a limited indicator of corporate responsibility as the data means little without wider context and are easily manipulated. For example, there is nothing to stop a company from publishing carbon emissions (or calories) while also lobbying against a carbon (or sugar) tax.

If you are an advertising firm or a social media platform operator, you can still play a huge role in maintaining oil (or sugar) addiction in your work for other companies while touting your own low emissions and shiny ESG scores. Oil and gas giants can use the equivalent of saccharin to meet carbon targets by selling Russian assets. And anyone can offset carbon by planting trees without improving their underlying practices, business models or mindsets but often, the new trees do little to increase biodiversity or overall planetary health.

Mandating further ESG reporting is not an answer in itself as a single ‘score’ tells us almost nothing since it is a set of context-free numbers. ESG reporting will only work if investors, employees and regulators analyse whether there is progress over time and hold companies to account for this. It requires analysis, interpretation, tough questions and contextual knowledge. It’s hard work.

Action is key

Consistency of data makes it only marginally easier. Gathering information can be expensive and time-consuming. But the really tough part is doing something. As long as we bear in mind that compiling ESG data is just one tool – not a solution – we can make progress. But it becomes a problem if we fixate on it as an end in itself, or if we incentivise companies to twist the stats to impress investors, rather than focusing on a few strategic, material priorities.

It’s a problem if we rate companies on the quantity, not quality, of their disclosures; or prioritise what’s needed for investors to make more money in the short term, rather than help companies to be strategic, honest and ambitious. Or if we fail to understand that disclosure dumps can be so complex and dull that they can obscure insight, not reveal it. 

If we don’t acknowledge these truths, all we are doing is embracing another fad diet, not tackling the problem. And the world will keep getting fatter – and hotter.

Alison Taylor is adjunct professor at NYU Stern School of Business and executive director of its Ethical Systems research platform

A service from the Financial Times