What’s the value in the value chain approach?
A food company’s entire supply chain has a significant impact on environmental and social progress. There is growing pressure on all food businesses to invest in enhancing the integrity of their supply chains, in a manner which balances their operational objectives with their reputational risks.
A value chain is inclusive of all activities that a food business performs in order to deliver a valuable product or service for the market. This includes the full life cycle of a product or process, material sourcing, production, marketing, consumption and disposal/recycling processes. Value chain collaboration is where value chain partners work closely together, to efficiently meet mutually agreed objectives (Figure 1).
Figure 1: A simplified depiction of a typical agri-food value chain
Value chain partners are finding innovative ways to make collaboration work for mutual benefit. The benefits of successful relationships in agri-food value chains extend beyond improved efficiency and effectiveness to include helping each value chain partner meet evolving customer and investor expectations (e.g. for QHS, environmental performance and ethical trade), grow markets, and increase competitive market share.
The majority of profitable food businesses that are planning for the future will be looking to grow their business to meet a growing demand, this means they will need a consistent supply of a greater quantity of raw materials. However, competition for increasingly constrained resources and the impacts of climate change, challenge the viability of such plans. Value chain partners need to work together to achieve sustainable and resilient growth that meets the various operational objectives of the different partners, preserves natural capital and meets the growing demand for food.
Examples of value chain partnerships meeting shared objectives
One way to ensure sustainable business growth is to work closely with the businesses (particularly the farmers and growers) who are supplying their raw materials. Food companies are often purchasing from hundreds or even thousands of individual suppliers and therefore they have the potential to influence farming practice on a huge number of individual farmers. Due to the international nature of agricultural commodity markets many food companies have the potential to influence farmers in countries or regions where the policy drivers for change are only in the early stages of development.
Companies who have short transparent supply chains, i.e. they are buying direct from the farm, or through just one intermediary will find it more practical to influence the raw material producers. Those with longer supply chains, e.g. where commodity products or processed products are purchased have a bigger challenge and will need to work with a wider range of stakeholders to help enable change. Examples of both forms of value chain collaboration toward more sustainable sourcing are set out in the case studies below.
Case study 1 – PepsiCo ‘50 in 5’
Since 2010, ADAS and PepsiCo have been working alongside Walkers Crisps’ UK potato growers with an aim to reduce the greenhouse gas (GHG) emissions from potato production by 50% in 5 years; the 50 in 5 initiative. This ambitious project required engagement from all parts of the potato supply chain, especially the growers, with support from experts, and of course a will from PepsiCo to make it all happen. At the end of the 5 years the Walkers Crisps potato growers have achieved an average reduction in GHG emissions of 50%. See here for video.
ADAS worked closely with both the growers and the team at PepsiCo to understand where the emissions hotspots were in potato production, plan actions to reduce the emissions and then monitor progress over time. This work was facilitated through the use of the Cool Farm Tool, a crop product specific carbon calculator, to measure GHG emissions, and Carbon Management Plans, developed by ADAS to identify actions to reduce emissions in future years.
Case study 2 – Responsible soy sourcing strategy
The responsible sourcing of Soy is an area of growing importance for many businesses. Soy enters the supply chain both directly (e.g. soy sauce) and to a greater extent indirectly (embedded in livestock feed rations). The embedded nature of soy in supply chains presents a number of challenges which can only be overcome through value chain collaboration. This collaboration is needed both at a strategic level (through industry wide initiatives) and at an operational level (through suppliers):
- The Round Table of Responsible Soy (RTRS) is a collaborative initiative that aims to encourage growers to produce soy in a responsible manner, to reduce social and environmental impacts, while maintaining or improving the economic status of the producer. It is the most widely adopted platform for responsible soy production. Through this platform food businesses can engage with representatives of the soy value chain and promote the responsible production, processing and trading of soy on a global level.
- Food businesses need to engage directly with their suppliers to increase their visibility on the soy entering their supply chain both directly and indirectly. This engagement will allow the business to target the highest risk suppliers and move them towards sustainable sourcing practices – protecting their business, the environment and vulnerable communities.
Improved operational efficiencies
Operations incorporates distribution, storage, stores and packaging for own label products. This is the area that tends to be under the direct control of the farm, manufacturer, retailer or foodservice business but decisions taken at different points across the value chain can have a significant impact on the operations of the other supply chain actors.
Case study 3 – WRAP Whole Chain Resource Efficiency
Last year WRAP launched Courtauld 2025 - an ambitious voluntary agreement that brings together organisations across the food system to make food and drink production and consumption more sustainable. Value chain collaboration, whereby supply chain partners work closely together, is a key part of Courtauld 2025, and has recently been successfully piloted in a number of WRAP projects, which identified waste reduction opportunities and other resource hotspots in fresh produce supply chains – apples, onions and potatoes. The projects involved retailers, food manufacturers, marketing groups and farmers and growers working together as industry partners.
Within these projects, ADAS worked with Oakdene Hollins, using a ‘lean manufacturing’ or continuous improvement approach, which is a systematic method to look strategically at resource use across the whole supply chain, so as to eliminate all forms of waste within a process. The project used an approach to mapping the ‘value stream’, which analyses the current state of the supply chain process and designs a future state for all stages of the value chain, from its beginning through to the customer. This mapping details levels of resource consumption, identifies resource ‘hotspots’ and where they occur in the supply chain. The whole supply chain projects are a team effort where partners identify the root causes of each resource hotspot brainstorming potential solutions, and agreeing improvements to generate resource efficiencies.
Promoting social sustainability
Social sustainability is a broad, and often opaque aspect of sustainability looking to extenuate the positive aspects of a business’s operations and the practices of their value chain partners have on society.
Case study 4 – Modern slavery
The introduction of the Modern Slavery Act (2015), specifically the supply chain clause, means that businesses are under pressure to demonstrate what their business is doing to ensure their supply chains are free from slavery and human trafficking. This can only be achieved through the enhanced transparency and influence achieved through value chain collaboration. New tools and indicator systems need to be developed, implemented and monitored that consider the specific social, cultural and geographical context of supply regions. If slavery, or conditions that could lead to instances of slavery, are detected - collaboration through multi-stakeholder partnerships, community-centred approaches and supplier development tend to be the most effective responses.
Origin Green and the Retail & Foodservice Sustainability Charter
Origin Green, Ireland’s National Sustainability Programme, aims to establish Ireland as a leading source of sustainably produced food and drink products. It is a voluntary programme that seeks to demonstrate the collective commitment of the Irish food industry to operate in the most sustainable manner possible. The programme incorporates sustainability measures at farm level (through Bord Bia's Quality Assurance infrastructure), through manufacturing (manufacturers have to develop and implement sustainability plans for their business). There are now more than 550 Irish manufacturers registered for Origin Green, with 227 verified members with a sustainability plan in place and who have a proven and measured commitment to sustainability.
The scope of Origin Green has recently been extended to incorporate the retail and foodservice elements of the supply chain. This will mean that Origin Green will now cover all elements of the supply chain to the point where consumers purchase or consume the final product. The Retail & Foodservice Sustainability Charter offers a clear, and independently verified, structure that can support food businesses in enhancing supply chain integrity, building operational resilience and delivering continuous improvement.
ADAS provides insight and solutions to businesses within the food and beverage industry. We support our clients to develop and implement sustainable sourcing, risk management and resource efficiency strategies, generating cost savings and building business resilience. Our long history of engaging with the agri-food industry ensures we understand the different commercial drivers across the food chain, from farm to consumer.
For more information please contact:
Conor Mc Mahon
Sustainable Supply Chain Consultant