THE BLOG
04/21/2016 04:28 pm ET Updated Apr 22, 2017

Taking Antibiotics off the Menu

Since they were first discovered in 1928 antibiotics have revolutionized modern medicine and saved millions of lives around the world. Unfortunately less than 100 years on, we are on the verge of what the World Health Organization has called a, "post-antibiotic era" - due to the misuse and overuse of these important drugs in humans and in livestock.

That is why Boston Common and a $1 trillion coalition of 53 other investors are taking action by calling on ten of the world's largest food companies to end the excessive use of antibiotics in their meat supply chains last week. These include companies such Domino's Pizza Group which holds its AGM this week and where a question about the issue is expected to be raised with the Board. The coalition is brought together by the Farm Animal Risk and Return (FAIRR) initiative and NGO ShareAction.

Burgers and superbugs

Most of the meat we eat comes from factory farms, and farm animals - and the factory farming system is now the biggest consumer of antibiotics globally. In the US it consumes 80% of all antibiotics produced, in the UK it is 45% and in China - the world's largest aggregate meat producer - it is 50%. While these numbers are alarming, of more concern is why they are given to animals. Most antibiotics are usually given to farm animal not to treat illness, but rather are administered daily at low doses to promote growth or to prevent common illnesses which spread easily in the crowded environments of factory farms.

Academic research has established that the overuse of antibiotics in livestock is causing the development of antimicrobial-resistant bacteria which can spread to humans, and that antibiotic-resistant bacteria are transferring between humans and animals more frequently than initially thought.

It is already estimated that there are 23,000 deaths and more than two million cases of antibiotic resistant infections occur every year In the US. The Centre for Disease Control (CDC) estimates that 20% of these infections are caused by germs from food or animals, and research indicates that antibiotic superbugs are transferring between humans and animals with greater frequency than previously thought.

Human and financial health at risk

The overuse of antibiotics in livestock production not only endangers human health, it also presents significant regulatory, reputational and financial risks, which if not adequately managed can endanger a company's financial health. Therefore investors are increasingly interested in how food companies manage the use of antibiotics within their supply chains.

Looming regulatory changes

The most pressing risk for investors comes from changes to the regulatory landscape. Stricter regulations for the use of antibiotics in agriculture are already on the horizon in both the US and EU as governments from Beijing to Brussels seek to take action on antibiotic resistance. For example in February, ENVI the European Parliament's environment, public health and food safety committee voted in favor of an amendment to ban the non-therapeutic use of antibiotics in animals. And in the US California passed a bill to sharply limit antibiotic use in farm animals in October. Companies that do not manage and minimise the use of antibiotics within their supplies chains now expose themselves to increased costs and delays in production, when these regulations come into force.

Consumer tastes are also changing

Recent data from Mintel International shows that more than 42% of chicken consumers now say that hormone or antibiotic free meat is an important to them, and the sales value in the US for antibiotic free chicken rose 34% in 2013. Some companies are already responding to meet these changes in appetite. For example, Perdue - the third largest chicken producer in the US has announced that antibiotics will be eliminated from its chicken strips and nuggets by June, and sandwich giant Subway introduced an antibiotic free sub to its menu in March.

Worryingly however, a new report from FAIRR and ShareAction shows that none of the 10 largest food companies in the US and UK currently have a comprehensive policy in place for tackling antibiotic overuse and only half have publicly available policies regarding antibiotic overuse in their supply chains.

A high price to pay

Many in the food industry will argue the cost of reducing and eliminating antibiotics from the supply chain will be too expensive. However, antibiotic resistance already costs the US $20bn every year in excess direct healthcare costs and an additional $35bn in costs. While a recent research paper from the UK government estimates drug-resistant infections could cost the world $100 trillion in lost output by 2050. Ultimately the cost of inaction is a return to the medical dark ages - where the risk of infection makes simple operations and cancer-fighting chemotherapy too dangerous and a scraped knee could be fatal, and for me that is too high a price to pay.

The information in this document should not be considered a recommendation to buy or sell any security.