A new report from Macquarie has shed light on Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL) shares' alignment with ESG metrics.
ESG investing is based on environmental, social, and governance considerations and is becoming increasingly important to investors.
Investors chase capital growth and passive income. However it is becoming increasingly popular to prioritise optimal environmental, social, and governance outcomes when making investment decisions.
In Macquarie's report, the broker said this reporting season it was pleasantly surprised with the number of companies that have achieved or are on track with their emissions reductions or renewable energy targets.
Reporting season highlighted a shift to greater compliance obligations with incoming mandatory climate reporting as well as growing Safeguard compliance costs. In September, the Federal Government is expected to release Australia's 2035 emissions target (media are reporting between 65%-75%), climate risk report and net zero plan which will set the tone for Australia's future decarbonisation ambition, policies & funding.
Here is what the broker had to say about Woolworths and Coles shares from an ESG perspective.
ESG highlights
Macquarie highlighted that Woolworths Group has already achieved 100% renewable electricity for Bunnings and Kmart.
It is also on track to deliver 100% renewable electricity this year.
Coles has a target to achieve greater than 85% of eligible packaging being reusable and/or recyclable by the end of FY30.
Beef and deforestation ESG
Both Coles and Woolworths have established Forest, Land and Agriculture (FLAG) targets, including a no deforestation commitment.
Woolworths has a no deforestation policy covering key commodities. These include paper, pulp, timber, cocoa, palm oil, and soy used in animal feed.
Coles has a similar deforestation goal but also includes Australian beef in its policy.
Woolworths, however, excludes Australian beef, citing a recent EU decision that classifies Australia as a low-risk country for deforestation.
Seafood Sourcing ESG
Salmon farming has been topical over the last 12 months, with both supermarkets providing greater depth on their actions.
Coles sources salmon for its own-brand products from Tasmanian suppliers, including some from Macquarie Harbour.
They ensure it meets their Responsible Sourced Seafood Policy, certified by BAP and GLOBALG.A.P.
Coles has also reduced the amount of salmon sourced from Macquarie Harbour due to environmental concerns.
Woolworths moved to ecologically responsible sourcing for all own-brand seafood in 2022. It is extending this to seafood ingredients by 2025.
Regarding Macquarie Harbour salmon, Woolworths is reviewing its practices against the new ASC standard.
Both supermarkets are responding to concerns about salmon farming in Macquarie Harbour. Coles has cut back sourcing from the area, while Woolworths is evaluating compliance with stricter sustainability standards.
S&P Global ESG Scores
From another lens, S&P Global measures a company's performance on and management of material ESG risks, opportunities, and impacts informed by a combination of company disclosures, media and stakeholder analysis, modelling approaches, and in-depth company engagement via the S&P Global Corporate Sustainability Assessment (CSA)
Scores are measured on a scale of 0 – 100, where 100 represents the maximum score.
Woolworths has an ESG score of 46, while Coles is slightly ahead with an ESG score of 50.
These scores were last updated in December 2024 – January 2025.
