Mars and Nestlé urged to be more transparent about supply chains

Investors oil the engines of big corporations by providing them with the money they need to do business. But in a world where doing good business is more and more important – because profit margins are increasingly entwined with ethical behaviour, sustainability and risk – investors need to know where their money is going.

To that end, Oxfam launched its Behind the Brands scorecard for investors to better measure the 10 biggest food and drink companies – Nestlé, Unilever, Coca-Cola, Mars, Pepsico, Mondelez, Danone, General Mills, Kellogg's and Associated British Foods – on seven themes important for development: land, water, women, workers, farmers, climate change and transparency.

Just six months later, 33 key investors, including Aviva, F&C Asset Management and BNP Paribas, called on these "Big 10" to do more to reduce social and environmental risks in their supply chains.

In a joint statement, they committed to "working closely with food and beverage companies to achieve the changes necessary to positively impact the communities and environments at source". Given that these investors manage more than $1tn in assets, this is no mean feat. It's a hefty amount of oil that could be shifted to other engines if the companies don't act.

NGOs have long explored opportunities to work with institutional investors to promote corporate responsibility. Post-crisis, finance is catching up and companies need to respond by being more transparent so that investors know what their money is funding and what risk they are taking. Failure to respond puts companies at risk - a company without investment flows cannot run on empty.

Investors and banks are already trying to resolve this. For example, Bank of America markets a carbon modelling tool which allows investors to track emissions across an investment portfolio, calculating proxies for companies that fail to report. Such innovation is an important piece of the sustainable investment jigsaw.

Our scorecard helps investors manage social risk, identifying blind spots in supply chain policy. It seeks to fill a gap for investors as it offers researched data and analysis from 270 questions about what the Big 10 are doing to address core business in company supply chains.

We're deliberately provocative, raising issues that are often far from investor decision-making. Few brands for example have implemented policies to respect land-rights in countries with weak land governance. But we believe this information is of real value to investors. Such risk can and does cause financial loss.

The tragic factory collapse at Rana Plaza in Bangladesh was a harrowing example of just why it is vital for companies to have ethical supply chain policies. The tragedy shamed the entire industry, despite Associated British Foods – Primark's owner – reacting quickly and decisively, committing to compensation for the families of victims.

Investors can use their power to reduce the likelihood of such tragedies. At the same time, banks have disproportionate influence within the financial sector so cannot be ignored. They make investment recommendations; doing so on the back of Behind the Brands is a powerful motivation for the food and beverage companies to score well.

The brands are responding. Earlier in the year, for example, Mars, Mondelez and Nestlé signed up to the UN Women's Empowerment Principles committing to tackle hunger, poverty and unequal pay facing many women cocoa farmers. We will continue to measure them, apply pressure and work with them so they can raise their game.

Our financial sector allies strengthen the business case. A company that knows its supply chains, respects land rights, limits water consumption, pays women the same as men, pays a living wage, mitigates and adapts to climate change, and reports transparently, is a company that manages most things well; is a company that has long-term value; is a company that makes a good investment.

But importantly for us, the rewards go beyond the balance sheets and can make a difference in the world where one in eight people go hungry every day. Many of these are the people working in the supply chains of the Big 10. It is only right that food and beverage companies are part of the solution so that everyone has enough to eat, rather than exacerbating the problem.

Will Martindale is Oxfam's financial sector policy adviser

This content is brought to you by Guardian Professional. Become GSB member to get more stories like this direct to your inbox