The world is craving a more sustainable food system and some players lead the way. The players in the food industry that rise to the challenge will see significant business advantage.
Think of the horse meat and aflatoxin scandals in Europe last year. And, on a much larger scale, the 20 million people currently threatened by famine in the Sahel belt in Northern Africa. Our food systems are not currently in balance. Supply chains are inefficient, while food quality varies from region to region. That’s why the debate about a more sustainable food supply system is so critical.
The really big driver is, of course, this planet’s limits to growth. By 2040, there could be as many as nine billion people on earth – a tripling of the population in just eighty years. Already, nearly a billion people are malnourished – and half of that billion are poor farmers. Meanwhile, most of the rest of the world’s population is getting more affluent. This is leading to a rapid increase in consumption. The results are devastating and interlinked: climate change, loss of top soil, water scarcity, biodiversity loss, deforestation. The list goes on.
These limits to growth are the primary reason leaders in the food industry are taking this issue so seriously. They know if they don’t act now, their business models are in jeopardy. Business as usual is not an option.
Leading players respond
As the major brand owners like Unilever, Nestlé, Kraft – and the big retailers – have engaged with sustainability, they’ve realised they can only achieve meaningful results through working with their supply chains. They demand that their tier-one and tier-two suppliers – often giant multinationals in their own right – reach certain standards. Sustainability has become a stark commercial matter for many of the food supply companies.
Food companies also realise that they cannot achieve their goals through supply chain standards alone. They are also acting to build capacity at the top of the supply chain, through working directly with farmers to improve their agricultural practice. For some commodities, there has even been a race to buy up land in strategic production areas – and some commentators have become concerned about the wider social impact of this so called ‘land grab’.
There’s also a ‘keeping up with the Joneses’ effect. As the biggest brand owners take radical action to secure supply in years ahead, smaller players realise they need to follow suit. If not, they risk terminal disadvantage.
ROI on sustainability
The standout example of a leading player is Unilever. The consumer products giant has signed up to some audacious goals, including halving the environmental impact of its products and sourcing 100 per cent of agricultural raw materials sustainably – all while doubling the size of the business. Sustainability has been a key focus in their business strategy for some years, and Unilever is now able to present hard evidence that it is driving the growth of the business while addressing social and environmental issues in their value chains and in the communities where they operate. Unilever has become so successful that they topped DNV GL’s Tomorrow’s Value Rating survey in 2013, which examines the sustainability programmes of 50 companies listed in the Dow Jones Sustainability Index and identifies the top sustainability leaders in key sectors.
When asked to what extent Unilever could demonstrate a financial return on their investment in sustainability, Gail Klintworth, Unilever’s senior vice president of sustainability, commented:
“Brands that have made sustainability central to their brand proposition or product innovation have accelerated sales during 2012. Eco-efficiencies in Unilever factories from reducing energy, water, materials and waste have enabled the company to make savings or avoid cost of €300 million since 2008. The company has also reduced risk at a time of volatility in food commodity prices by increasing its purchases of agricultural raw materials from sustainable sources from 14 per cent in 2010 to 36 per cent in 2012.”
Increased focus on standardisation
Many of the leading food players are also signing up to certification schemes. The Roundtable on Sustainable Palm Oil is probably the most significant scheme in the food industry given the size of the market and the issues at stake. Cargill, General Mills, Nestlé, Mars and Carrefour all big names who’ve recently pledged to source 100 per cent of their palm oil from RSPO-certified sources. Meanwhile, Fairtrade and Rainforest Alliance have made big inroads in fruit, chocolate, coffee and tea. New schemes, such as the ASC salmon standard for sustainable farmed seafood is embraced by the industry and leading companies like the world biggest salmon farmer Marine Harvest has committed to a complete sustainable production by 2020.
Governments, NGO’s and consumers are all placing greater responsibility on the food industry to provide traceable food from farm to fork, with sustainability at the core. But it should not be seen as a threat! Rather a great opportunity. Sustainability is not just an investment in our common future; it is also good for your company’s bottom line.