Leading food companies around the world already recognise the business case for driving sustainability. For example, research from the Stern Centre for Sustainable Business established that products marketed as sustainable grew six times faster than those that were not. Food is a sector that particularly benefits from growth in brand loyalty and revenues when the product and company can demonstrate credible sustainability credentials. Consumers are increasingly demanding that companies embrace principles of sustainability, due in part to higher awareness of environmental and social issues, and the influence of millennials and Generation Z. McKinsey describe one of the key shifts in consumer behaviour is the search for truth in products they buy and their relationships with brands.
Risks presented by sustainability
Food companies also recognise - and experience firsthand - the risks presented by sustainability challenges. According to the US Department of Agriculture, recent severe drought (Aug 22) in the US impacted 80% of agricultural land, resulting in $14 billion in loss payments, with reduced food supply and increased prices along the supply chain. The financial sector is now demanding comprehensive and credible information about the sustainability performance and risks in supply chains, as a key element of decision-making for investment, loans, and insurance.
A key characteristic of the food sector is that the sustainability of products – and the risks to supply chains - are highly determined through activities and decisions early in the value chain – such as food processing, farm operations, and agribusiness inputs. For example, according to a recent report from CDP – a respected and well-established organisation enabling corporate sustainability disclosure in supply chains - typically 90% of the GHG emissions for food products occur upstream of arriving at the manufacturers or retailer sites. Similarly, other impacts such as deforestation and water footprint are concentrated in the first part of the value chain. This explains why today more than 95% of major buyers use sustainability performance in sourcing and supplier management decisions.
How to engage your suppliers in sustainability
So, engagement with suppliers is accepted as critical for food companies to be able to reliably measure sustainability, and more importantly to work together to drive sustainability improvements for food products. Which begs the question, how do food companies engage suppliers on sustainability?
It’s a question that we at TELUS Agriculture & Consumer Goods are particularly close to, as we work with a range of customers who have progressive and impactful supplier sustainability programmes. Looking across our customers and the food industry at large, we see broad consensus around the following 4 themes for engagement:
- Firstly - Align: be clear with suppliers about why and how you wish them to work with you on sustainability and what is important to you. Enable education where necessary and be consistent with the terminology and be clear on process and consequences.
- Secondly - Ease: ensure you have good systems in place to make it easier for suppliers to work with you – such as information sharing platforms. Suppliers will need clarity on what tasks they need to perform and how to perform them successfully – ranging from acceptance of code of conduct, evidence of certificates and approvals, to the provision of richer sustainability information.
- The third theme is Assess: be transparent on how you measure the supplier sustainability performance of your suppliers, and if you produce a supplier sustainability scorecard share the scorecard with them and consider sharing benchmarking information to help suppliers gauge comparative performance. Clearly, it’s important to be fair about cohorts included in a supplier benchmark and to fully protect sensitive data.
- The final theme is Collaborate: work together on agreeing on hotspots for sustainability improvement with the customer and supplier or grower exploring what’s feasible and attractive to do as a manageable program. Let’s face it, the complex nature of the food industry means that sustainability cannot be solved by individual companies acting in isolation. The entire industry is on a sustainability journey and we need to promote continuous improvement across supply chains with clear incentivisation for continuous improvement.
There are some great initiatives and developments in supplier sustainability collaboration, such as the CDP Supply Chain program, the Sustainable Procurement Pledge and SAI Platform’s Sustainable Dairy Partnership. As someone who started as a sustainability practitioner 15 years ago, it’s exciting to see how food businesses and the agricultural sector are working more closely to address key issues of our time.
References - Publications & Resources - NYU Stern; Generation Z characteristics and its implications for companies | McKinsey; USDA