How Asda is making fresh efforts to protect produce
<p>Walmart-owned U.K. supermarket is rethinking its supply chain with 95 percent of its produce at risk from climate change.</p>
According to Paul Kelly, Asda’s vice president for corporate affairs, retailers face the perfect storm right now. A changing climate, rising populations and extreme weather events are proving tough obstacles for retailers to jump as they strive to get healthy, sustainable and affordable food onto people’s plates. “It’s the biggest challenge our industry has faced in half a century,” he admits.
However, the Walmart-owned U.K. supermarket chain is a step closer to understanding just how high those obstacles actually are — and how they can be overcome.
Working with consultants PwC, the business has mapped its entire global fresh produce supply chain. And, using models practiced by the Intergovernmental Panel on Climate Change, it has found that a staggering 95 percent of its fresh produce category is under threat from the impacts of a changing climate.
The impacts are already being felt — not just by Asda, but for food businesses the world over. In 2011, the New York-based global agri-business Bunge lost $56 million in one quarter thanks to severe droughts in its main growing regions. In 2012, the U.S. federal government slashed its forecast for drought-hit corn production by 17 percent, sparking fears that we were heading for another major worldwide food crisis.
And last year, Freeland NL had to buy its iceberg lettuces from the U.S. for the first time in 30 years because the supply just wasn’t there in Spain and the Netherlands.
The worrying thing is, things are likely only to get worse.
Asda, the U.K.’s second largest supermarket chain by market share, should be applauded for taking some action. Driven by a consumer base increasingly demanding that their retailer-of-choice take sustainability issues seriously (its huge green customer panel — the largest of its kind in Europe with 6,000 customers signed up — attests to that), it knows it must act.
It is morally unacceptable to its consumers to stand idle. Yes, it could act tactically and try to buy its way out of trouble in the future. And yes, one could argue that the ingenuity, flexibility and capacity of the food supply chain to cope with numerous pressures is likely to insulate consumers.
But, as Kelly said, “we cannot be certain, which is why we need to make these studies and review the implications.”
“I joined the business seven years ago and we were at the start of a journey,” he said. “We made good progress on dealing with waste, saving energy and being more transparent. But those internal impacts only make up 10 percent of our overall impact as a business. We knew we had to tackle the important impacts in the supply chain.”
The retailer, a subsidiary of the U.S. business Walmart since 1999, started working with PwC back in 2012 to really help them understand the full implications of climate change on an important aspect of its offering: fresh food. “We didn’t want to know what was going to happen in 10 years’ time; we needed to understand the clear and present issues of today and how we are going to tackle them," Kelly said.
The result of the last 12 months’ work is a climate resilience framework, designed to map risk across the value chain — from its suppliers to its own stores, depots and warehouses. It offers a way to signpost priorities and help the sustainable business team engage with colleagues facing more traditional operational issues. “We wanted to make this relevant to traders on trading floors, who previously concentrated on lowest cost prices,” said Kelly.
It is a truly impressive piece of work that applies a consistent methodology to identify hotspots in the supply chain related to climate risk across a huge range of products. Asda uses these numbers and applies them to sales risk. If a product has a high climate-resilience risk factor, but sales volumes are fairly low, the risk is deemed to be "low."
In fact, the Climate Adaptation Framework, as it is known, has been applied across the company’s entire trading operations — from sourcing to processing and logistics. Will some of its warehouses be disrupted by the types of floods witnessed in the U.K. earlier this year, for example? How might growers in water-scarce regions be educated in smarter irrigation practices?
As the infographic below demonstrates, Asda has a strong handle on where it ought to focus its efforts:
“Climate change will change growing conditions in markets we source from,” said Kelly. “Couple that with extreme weather events, and it is clear that we must start to plan now; otherwise we will end up with a huge challenge in delivering affordable food at time when there is even more demand for it.”
So, what is Asda going to do to alleviate this risk? The team at Asda must be aware of the magnitude of the fact 95 percent of its fresh food produce is at risk — a third of which is deemed to be at "high risk."
The company’s work with U.K.-based Linking Environment and Farming (LEAF) is beginning to bear fruit with more farmers managing water resources more sustainably.
And the Sustain & Save Exchange, its online collaboration platform hosted and facilitated by 2degrees, is encouraging suppliers to become more efficient, identify risks and drive out waste to create savings that the suppliers are free to keep and reinvest in further efficiency programs and technologies.
But crucially, the commercial team is starting to integrate sustainability into buying decisions in fresh produce. “It’s not about corporate responsibility; this is about doing the right thing," Kelly said. "It’s about traders protecting P&Ls and making the right decisions for the long-term success of the business.
“For traders, it’s about making sure we develop long-term relationships with our stakeholders and reengineer relationships. We are at the start of that journey.”
Chris Brown, Asda’s senior director for sustainable business, is clear that this piece of work will be used first to gain first mover advantage. “Once that has happened, we will make our methodology more available,” he told me.
Whatever happens next, Kelly acknowledged that a partnership approach across the supply chain will be necessary to work through building up resilience to the risks. He also wants to see customers involved. “The Asda customer increasingly does care,” he said. “93 percent of them say it’s important. They want to see the business adapt to these issues and help them adapt too.
“This is a really important piece of work and probably not what you’d expect from Asda.”
Mapping the risk of fresh food is just the start. Next up, the more complex, multiple-processed food product lines will be assessed.
Watch this space.