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Sustainability and supply chain management in the food and drink sector

Sustainability and supply chain management in the food and drink sector

Highlights from the briefing, run by DNV GL and Institute of Food Science & Technology (IFST).

An increasing number of sustainability issues are working their way up the agenda of companies in the Food and Drink sector and an overwhelming number of these are prominent within the supply chain.  As the global population swells and the demand for food surges, we find ourselves seeking answers to an ever-growing list of pressing questions.

DNV GL’s briefing, in collaboration with IFST, saw speakers from Waitrose, Caffè Nero and Kolak Snack Foods Ltd reinforce the need for a clear sustainability strategy embedded across the organization, debate the importance of supply chain integration, and offer practical tips for delivering against a retailer’s sustainability demands.

Common conversation points included the magnitude of food wasted along the supply chain; the legitimacy of the Genetically Modified (GM) debate; the need to speed up our ability to blend science and technology with ‘traditional’ food production and to overcome imminent food shortages; the resilience of agriculture to fluctuating energy prices and dwindling oil supplies, and the West’s ability to compete against growing South-South trade.  Against this backdrop, the UK retail sector is currently in turmoil, with many supermarkets facing a critical decision: to join a price war and potentially compromise on their values, or begin competing on a different basis.

A summary of key discussion points:

Communicate with Authenticity

  • Lead with your values. Your values should underpin your organization’s sustainability strategy and communications, linking to your brand purpose.
  • Measure what you manage. Stakeholders want to see demonstrable evidence behind your communications.
  • Apply the role of ‘self-evidence’. Consumers trust less and expect more. Rather than relying on stakeholders to believe what you tell them, allow them, where possible, to discover your values for themselves, for example, through reduced packaging, improved quality, or better nutritional profile.

Put the ‘triple’ back into the triple bottom line

Don’t forget the economics in your triple bottom line. To maximize effectiveness and buy-in from across the business, the approach to sustainability initiatives should also consider the bottom line and potential return on investment as well as ESG benefits (environmental, social; and governance).

Make the business case. Whilst many organizations recognize the business case for sustainability, their focus tends to be on non-financial benefits including enhanced reputation, efficiencies, and improved traceability. The majority have yet to make the link between their sustainability performance and financial success.

Traceability – Where to draw the line?

Traceability from farm to fork. Visibility across large and complex supply chains is notoriously difficult, as demonstrated by the horsemeat scandal of 2013.  As stakeholders demand greater accountability from manufacturers and retailers, where should they draw the line?  The feasibility and value of managing and monitoring supplier practices along the entire length of the supply chain was discussed.  Some draw line at their tier two suppliers, while others have begun a transition to direct, vertically integrated sourcing by cutting out intermediaries and establishing direct relationships with suppliers.

Managing the real risks to deliver real value.  Increased monitoring and move to vertical integration helps secure food quality and traceability. However, participants noted the importance of commercial balance and a value driven approach.  For every sustainability initiative within the supply chain, is it something that will improve the commercial proposition, manage risks to reputation, or save costs? If not, what is the benefit, and can the business afford to subsidize it?

Two heads are better than one

Scale-up your impact. Some things are too big to tackle individually, while others require management on a broader scale. Collaborating with others and, in particular, with suppliers creates a win-win situation. By sharing technical knowledge, insights and resources, organisations can assist their suppliers in realising their sustainability initiatives in a fraction of the time, ultimately benefitting both parties.

Price Wars

Spot the difference between price and cost. By treating the supplier relationship as a commodity, you’ll likely be driven by price. By treating it as a partnership, you’ll become more values-led.

View the bigger picture. Although tempting to buy on price alone, this approach can often cost more in the long-term, through greater administrative efforts, management of a wider pool of suppliers that you may not know, and auditing and assessment of suppliers unlikely to share your values. Paying a higher price to a smaller number of more reputable suppliers who share your values can result in lower financial costs in the long run.

Health hits the headlines

Consider consumer choice. Health is hitting the headlines, calling into question the legitimacy of the sale of food and drink products high in sugar, saturated fat and salt. Retailers cannot respond by removing all ‘unhealthy’ products from their shelves, thus reducing customer choice. So what’s the answer? Manufacturers and retailers are increasingly turning to ‘choice editing’. By working to improve the health impacts of products ‘behind the scenes’, organizations aren’t forcing customers to choose – they’re doing it for them.

Sustainability Journey – What is the destination?

Sustainability is a driver which brings with it both challenges and opportunities.  Many future solutions will result from responsible research and innovation which includes collaboration between retailers, manufacturers, academics, Government departments, and NGOs all bringing different areas of expertise.

 

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