3 ways food and beverage companies can lead on sustainability

3 ways food and beverage companies can lead on sustainability

Image by 06photo via Shutterstock

Few of us give much thought to where our food comes from, how it is grown or raised and how it gets from the farm or field to our table. We rarely consider, for example, the amount of water it takes in drought-stricken California to grow our lettuce, the impacts of access to water on corn production, the carbon emissions generated by flying our grapes in from Chile and our sole from Dover, or the far-reaching environmental impacts of fertilizers and pesticides.

Globally, agriculture accounts for 70 percent of all water consumption, and the run-off from fertilizer, manure and pesticides are a major source of water pollution. Agriculture also accounts for 75 percent of global deforestation and about 17 percent of total global greenhouse gas emissions.

This means that the food and beverage sector faces enormous financial and operational risks and challenges as the need for action on climate change, water scarcity and other sustainability issues becomes more urgent. As global warming reshapes precipitation patterns and alters ecosystems worldwide, the global food production system will be forced to reckon with unprecedented and often unpredictable shifts in growing seasons, grazing patterns and the availability of water.

The sector faces other vulnerabilities, too: Human and labor rights risks abound in an industry that traditionally has relied on low-cost labor in both direct operations and throughout the supply chain.

Food for survival, survival for the food industry

To be successful in a warming and increasingly resource-constrained world, companies in the food and beverage sector need to embrace sustainability as a core corporate value and shape long-term strategic business decisions accordingly. Integrating sustainability principles isn't just a matter of corporate social and environmental responsibility; it's a survival strategy in a changing world.

 CeresA recent study by Ceres and Sustainalytics, Gaining Ground, indicates that some companies already understand this and are working to integrate sustainability into their business strategies. Far too many, however, are still at the starting gate. The report — which evaluates how well or poorly the largest publicly traded companies in the U.S. are preparing to meet the sustainability challenges of the 21st century — examines 24 food and beverage companies ranging from Campbell Soup Company to ConAgra Foods to PepsiCo.

A promising trend is that more companies in the food and beverage sector are starting to prioritize sustainability in at least some aspects of their business. For example, more than half of the food and beverage companies assessed have put responsibility for sustainability strategy and implementation in the executive suite or with an executive level committee, signaling that they take sustainability seriously.

Surprises about ESG, energy and supply chain

Another encouraging sign is the number of companies engaging with stakeholders on environmental, social and governance issues. Three-quarters are making an effort at ESG, a marked increase since 2012. This, too, signals more companies ramping up commitments to operate sustainably and understanding that sustainability risks are business risks.

The food and beverage sector is also demonstrating leadership in efforts to reduce greenhouse gas emissions in operations. Nearly 80 percent of those we studied have GHG reduction targets and programs in place to meet them. Paradoxically, and for reasons that are not clear, only 25 percent of these companies are using renewable energy sources as a method for meeting these GHG reduction goals.

Despite the progress made by the food and beverage sector, it is falling short in a critical area: sustainable sourcing of ingredients in its supply chain. Climate change, and its impact on water, already is having profound effects on the agricultural supply chain, and worker and human rights issues are prominent and immediate concerns requiring action. To get on the right track, food and beverage companies should do these three things:

1. Build a robust risk assessment process. Set measurable, time-bound goals and targets to source key agricultural inputs sustainably and outline clear timelines and targets for progress.

2. Improve public disclosure about agriculture sourcing. When companies publicly disclose information about their performance, whatever the subject matter, they tend to improve that performance.

3. Establish clear programs and incentives for farmers and agricultural producers to implement sustainable practices at the field level and to measure improvement.

Some companies are beginning to make progress. General Mills, for example, has sustainable sourcing commitments for its 10 priority ingredients, and outlines a four-step sustainable sourcing model that lays out a path for achieving these goals. PepsiCo, through the Sustainable Farming Initiative, sets out a framework to measure the environmental and local economic impacts associated with its agricultural supply chain and develop plans to improve performance in key crops.

No sector of the economy is more vulnerable to climate change, water scarcity and other sustainability challenges than the food and beverage sector. How these companies respond to these challenges will have major consequences for the billions of people who depend on them, and for the future of the global economy.

Top image of grocery store by 06photo via Shutterstock.