The environmental challenges have particular relevance for businesses that have agricultural supply chains given that global agriculture was responsible for an estimated 5.2M gigagrams CO2e emissions in 2014, agriculture accounts for about 38% of the world land area and the FAO estimates that global agriculture uses 2,722km3 of water per year (or 69% of total water extracted).
Agricultural raw materials are produced by many thousands of individual farmers, with farms ranging in size from less than one hectare to many thousands of hectares. In order to tackle the challenges of reducing greenhouse gas (GHG) emissions, reducing land degradation and efficient and fair water use, it will take small actions from many thousands of individuals to contribute to an overall reduction in environmental impact.
Agricultural raw material production can make up a significant part of the emissions or water use from a food supply chain. It is therefore, important for the food industry, as a whole, to look at ways to tackle not only their direct impacts, but the impacts of their supply chains, including farmers as part of the solution. There is a role for government in providing legislation and guidance to farmers, but in order for real, rapid change to occur the whole supply chain must work together both horizontally and vertically, to drive improved practices. Food businesses have an enabling role through supporting skills development, supporting access to finance for capital investment or through the recognition of the efforts that farmers are making through fair pricing policies.
Why should agri-food businesses act?
Sustainability issues are starting to move back up the agenda in light of the recent publication of the Sustainable Development Goals and the COP21 agreement. The food industry is a good position to help drive reductions in environmental impact through their networks of suppliers and farmers. Demonstrating a proactive stance on environmental issues can enhance brand value, whilst the increased transparency and understanding of the supply chain, that develops through closer links, will reduce the reputational risk relating to poor practice within parts of the supply chain. Ensuring that supply chains are minimising their current impact on the environment will also help to ensure that those suppliers remain viable into the future and therefore helps to increase the security of future supplies.
In the past businesses have tended to assess and act on their scope 1 and scope 2 GHG emissions. These are the emissions from the operations that sit within their control (e.g. the factory) and have avoided assessing the wider emissions from their supply chain (scope 3). Where supply chain emissions are considered though, these can be considerable. For example, Unilever have calculated their 2014/15 GHG footprint to be 59 million tonnes CO2e, of which manufacture accounts for just 2% of total emissions. Raw materials (predominantly from agriculture) account for 29% of total emissions, whilst consumer use (predominantly heating water) accounts for 61% of total emissions.
The majority of profitable businesses that are planning for the future will be looking to grow their business, this means they will need more raw materials and therefore run the risk of increasing GHG emissions, degrading more land and using more water. Therefore, any growth strategy going forwards needs to consider how growth can be achieved in a sustainable way, releasing fewer GHG emissions, minimising land requirements and minimising water use. NGOs such as OXFAM are already monitoring what food and beverage businesses are doing and reporting on any failures, therefore taking action to work with the supply chain will help to demonstrate to these groups that the food and drink business is serious about tackling key environmental sustainability challenges.
One way to ensure sustainable business growth is to work closely with those farmers and growers who are supplying their raw materials in order to help them reduce their environmental impact. Food companies are often purchasing from hundreds or even thousands of individual suppliers and therefore they have the potential to reach a huge number of individual farmers. 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.
What can be done?
There are a range of different approaches that the supply chain businesses can take to address the global sustainability challenges. The first and most straight forward step is to look at the impact of the operations that are within their control, e.g. energy use and water use in manufacturing facilities. However, as identified above, in many supply chains the manufacturing impacts are relatively small compared to those of the raw materials. So the next step is to look at how raw material impacts can be addressed. This can be done through a range of different approaches, requiring different levels of engagement and investment from the food supply chain business.
An initial starting point can be to identify standards or commitments that demonstrate that the raw material has been produced using certain production methods that are ‘sustainable’. There are a range of different types of standards available that delivery different aspects of environmental sustainability, the ISEAL alliance sets codes of practice for standards, including aspects around sustainability, and therefore standards that have been prepared using these codes of practice will have some consistency in approach. Some standards are generic across a wide range of crops, for example LEAF uses a self assessment tool to support farmers in monitoring their sustainability around soil management and fertility, energy efficiency and water management amongst other things and is applicable to most agriculture systems. Other standards are specific to one or more crops, often those with high environmental impacts, e.g. certification from the Roundtable on Sustainable Palm Oil (RSPO). In this situation the companies are tending to rely on the standards to drive improvements in practice, but they have no real influence over where this happens or on what aspects of environmental impact they focus.
Where the food supply chain has sufficient transparency to allow contact between the manufacturer and the farmer there are opportunities for more direct links between the food company and the farmers. This type of interaction can facilitate specific changes that benefit both the farmer and the supply chain. Supply chain companies can approach these relationships in a variety of different ways. One approach is to set high level principals or corporate strategies around GHG emissions, water use or land degradation and then work with specific groups of farmers in areas of high risk to help them address those sustainability challenges.
What is in it for the farmers?
Farmers have a key role to play in reducing the environmental impact of food production. They have a vested interest in ensuring that their land is productive well into the future, and they need their businesses to be sustainable going forwards, both environmentally in terms of having sufficient land and water to produce the crops or livestock, and economically, they need to ensure that they are making enough money to live off and to reinvest back into the business. There is a role for both government and the food industry in enabling farmers to become more sustainable.
From the government farmers need a stable domestic agriculture policy, uncertainty leads to challenges planning for the future and can lead to short term thinking. They also need proportionate regulation, that encourages best practice, but does not hamper productivity and profitability and they need fair trade agreements to ensure that there is a market place at a suitable price for what they are producing.
Government programmes and legislation can only go so far in engaging with farmers and driving changes in practice, and in some of the less developed countries the environmental policies are yet to be well formed. There are some actions which once the farmer understands the benefits make both environmental and economic sense, for example increasing fuel efficiency and optimising nitrogen use. Other actions require farmers to make capital investments, e.g. investing in renewable energy sources, building reservoirs or installing drip irrigation systems. These investments all carry an element of risk with them and this means that there is a role for the food industry in enabling farmers to meet sustainability challenges. Many farmers already have the skills to be able to address the challenges. Knowing that they have a customer who can support them through the changes helping to manage the risk, e.g. through guaranteed pricing, long term contracts, provision of advice (or access to it) or even through capital investment in projects can facilitate the move towards more sustainable practices that reduce GHG emissions, reduce land degradation and conserve water.
In order for these discussions between farmer and supply chain to work effectively the supply chain needs to be able to provide the evidence of why they are asking for action and the impact of that action, particularly on the farming business (although the wider environmental benefits are also important). This evidence can be provided through discussion, at training events, workshops or seminars, or through well targeted information booklets. The ultimate aim for the individual farmer should be to have an economically viable, sustainable business that can continue to produce food well into the future without negatively impacting on the environment.
For further information on how ADAS can help facilitate the relationship between farmers and the supply chain please contact: Sarah.firstname.lastname@example.org