On Our Radar: The Systemic Response to Sugar
This interview originally appeared in Radar Issue 03: What Chance Change? Exploring Sustainable Finance.
Scientific consensus seems to be growing that there is a causal link between excess sugar consumption, rising obesity and Type 2 diabetes and other NCDs. Analogies such as sugar is the new tobacco have grabbed headlines recently alluding to the addictive nature of sugar, and food products such as fizzy drinks are particularly under fire due to the high sugar content that is ingested very quickly.
Although this isn’t a new issue, in recent months we have seen campaigners, governments and investors increasingly pay attention to the major health and economic costs associated with sugar-related health problems. Last year a report from Credit Suisse’s Research Institute brought into focus the staggering health consequences of sugar. The report revealed that approximately 30%–40% of healthcare expenditures in the USA are attributed to addressing issues closely tied to the excess consumption of sugar. The WHO has published draft guidelines that recommends people halve the amount of sugar in their diet from 10% of total calorie intake a day to a target of 5%.
In the US, the FDA has announced a proposed rule for revised nutrition labels, which will require more disclosure on which foods contain added sugars. The FDA estimates that changes to the labels will cost companies about $2 billion but they are forecasted to produce $20 – $30 billion in health benefits over the next two decades. Socially responsible investors, who typically avoid holding ‘death stocks’ like tobacco and weapons companies and ‘sin stocks’ like alcohol, caution that companies who manufacture products high in sugar content could be added to the list of exclusion.
Experts who have been highlighting the effects of sugar for some time are now pushing the boundaries further. The Chief Medical Officer for England warns that unless the government takes a stronger stance with food and drink manufacturers to reformulate their products, it may be necessary to introduce a sugar tax in the UK. Marion Nestle, a renowned thought leader on nutrition issues, is proposing more radical measures such as urging CVS to stop selling sugary drinks and junk foods after CVS announced that it would stop selling cigarettes in its stores across the US.
An article in the Financial Times posits that so far food companies have been responding to sugar overconsumption mostly through voluntary measures such as product reformulation, labeling, and investing in R&D on sugar alternatives. However, the growing body of research and rising public pressure on sugar could drive governments facing escalating healthcare costs to use other measures like regulation and increased taxation on sugar and food advertising and marketing to force through more rapid changes in eating habits.
SustainAbility’s report, The Changing Landscape of Liability, noted the various ways in which the food and beverage industry was increasingly becoming a target of litigation, regulation and taxation as the huge costs of obesity on the economy and society came into sharper focus. It’s been ten years since this report was published but the forecasted risks to companies still hold true. Analysts and investors who invest in food and beverage companies are paying attention to the health consequences of sugar due to real and quantifiable risks such as the 8% excise tax in Mexico on high calorie foods, which they forecast could negatively impact volume growth of soft drinks and be an indicator of likely legislation in the future.
The growth consumer markets of India, China and Mexico have high prevalence of Type 2 diabetes and the proximate causes include not just consumption of sugary products but also a host of other factors such as lifestyle choices and genetic predisposition. Companies that are selling products in these markets are one of many actors that have a role to play. They will need to evolve their overall product portfolios, not just focus on making certain product categories healthier and also be mindful of the future regulatory landscape in these countries that may come down heavily as obesity continues to spike. Food and beverage companies will need to pay attention to their marketing and advertising practices particularly around more responsible marketing to children.
Ultimately, as the past has demonstrated, there is no silver bullet to tackling obesity and associated diseases such as diabetes and NCDs either through voluntary measures, labelling transparency, portion control or taxation. The escalation of interest to address this issue from companies, governments and investors is encouraging but they must recognize that such a complex issue needs a systemic response that doesn’t depend on isolated and piecemeal measures. This will involve engaging with multiple stakeholders across sectors such as city governments, pharmaceutical companies and the healthcare sector more broadly to reduce the burden on public health systems.
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