Will supply rule the food chain?

Sensemaking / Will supply rule the food chain?

Food retailers are waking up to the risk of crop shortages, says David Burrows

19 Apr 2011

Producing a packet of crisps releases around 80g of carbon. But what about its water footprint? Or the impact of vast swathes of potato on local biodiversity? Are the farmers paid an honest price for their crop?

Conversation about how to make food chains more sustainable has often started and stopped with carbon. Climate change has been the big environmental ticket. But PepsiCo, the maker of the crisps with the 80g carbon label on the pack, is among a number of food retailers looking beyond greenhouse gases (GHGs) to guarantee their future supply.

PepsiCo recently pledged to cut the carbon and water impacts of its key crops – which include oranges for its Tropicana juices, and sugar for its famous fizz – by 50% over five years. Its motive is straightforward. As Richard Evans, President of PepsiCo UK, puts it: these crops make the company its profits. Indeed, without oranges, sugar or potatoes there would be no PepsiCo.

A shortage of such essential crops may be hard to imagine, but it's not an unlikely scenario. "We are only one poor grain harvest away from chaos in the world grain markets," warns Lester Brown, President of the Earth Policy Institute, and author of World on the Edge.

Others voice the same concern. "Land is at a premium, weather patterns are unpredictable, pressure on key resources is intensifying – and the global population is rising", notes Richard Mattison, Chief Operating Officer at environmental data producer Trucost. "Companies simply have to develop a better understanding of their dependence on natural resources, and where the risks might come in the future."

Mattison has dubbed 2011 "the year of the supply chain" – and retailers are rising to it. Cadbury's Cocoa Partnership is a case in point. The chocolate company, now owned by Kraft Foods, would be nowhere without a secure supply of cocoa. But despite our devotion to Dairy Milk, cocoa farming has become less attractive in Ghana, a principal producer. Rural farming communities are migrating to urban areas in search of higher wages, and those left behind aren't getting any younger. The trees are ageing too, and there's a lack of future planning when it comes to planting replacements. Add to this the stress of water shortage and the impact that climate change is beginning to have on harvests, and the risks for Cadbury become very real.

The Cocoa Partnership was set up to support struggling farmers to stick with their crop. It set up schools and demonstration centres in 100 agricultural communities across Ghana, offering advice in efficient land-management and support to develop more sympathetic relationships with buyers – with Fairtrade certification a major goal.

In the past, the motive for initiatives like Cadbury's may have been reputation. Not anymore. As Oscar Chemerinski, Director of Global Agribusiness at the International Finance Corporation, explains: "There is an increased realisation by global agribusiness that their success or failure in the medium and long term is tied to the success of the small farmer, both financially and environmentally."

The implication is a significant power shift in the supply chain, from buyer to producer – and from producer to the crop itself. Alison Ward, Associate Director of Agricultural Sustainability at Kraft Foods, sums it up with the Ghanaian phrase, 'Kookoo cobatanpa': "Cocoa is a good parent; it looks after you."

It's a shift remarked upon by Lester Brown, also. He claims "a new politics of food scarcity" is emerging, driven by low stocks and high volatility. "Exporting countries no longer see why they should negotiate long-term agreements, because it's a seller's market."

So for many food and drink companies, the days when sustainability just meant a one-off zero-carbon superstore, lighter tins of beans and electric lorries are gone. Supply chains are now centre stage. And as they acknowledge their vulnerability as buyers, they're developing a new sense of responsibility for the supply.


Taste the difference

We are what we eat, goes the old adage. So it's high time we knew more about the food on our plates, says Johann Tasker.

Spoilt by the constant availability of cheap food from across the world, many consumers simply don't know the environmental, production and labour cost of their diet. And they certainly don't realise they can do anything about it.

Some retailers are taking steps towards consumer education. A little over 18 months ago, Tesco became the first UK supermarket to display the full carbon footprint of the milk sold in its stores.

For Sally Uren, Deputy Chief Executive at Forum for the Future, this is a step in the right direction – "but it must involve more than putting labels on food. What retailers do incredibly well is sell stuff. So there's a real role for retailers to sell sustainability in a positive way."

Today's savvy shoppers need clearer and better information, agrees Sue Davies, Chief Policy Advisor at consumer organisation Which?. According to her research, three in every four people believe that protecting the environment is an important issue when choosing what to buy.

"Even those who consider themselves engaged about these sorts of issues find it difficult to describe what is meant by terms like 'environmental impact'", she says. "Consumers take certain things for granted. They expect their food to be safe, produced to high animal welfare standards and to be good quality. We have to bring all those drivers together while being much clearer about sustainability."

Visual media has a role to play. Take the televised "Chicken Out" campaign by chef and food campaigner Hugh Fearnley-Whittingstall. It raised £75,000 in just two days from almost 3,000 viewers eager to improve poultry production standards. The campaign was a success, explains Andrew Opie, Food Policy Director at the British Retail Consortium, because it offered consumers an easy way to make a difference.

"It wasn't asking people to stop eating chicken or to cook it in a different way, but to think about the way chicken is being produced. We saw a significant switch to free range, which has been sustained."

Johann Tasker is a journalist specialising in food, farming and rural issues. He is Chief Reporter at Farmers Weekly magazine.

The Food and Drink Federation has updated its Five-fold Environmental Ambition to reflect this change in focus. It had already driven the industry to cut carbon emissions by 21% against a 1990 baseline, save more than two million cubic metres of water, and reduce food and packaging waste to landfill to 9%. But that's not enough, says Director of Sustainability Andrew Kuyk: "We have to recognise the influence we have on either side of us in the supply chain."

It's an example of how thinking has really changed, says Trucost's Mattison. "Companies are realising that they have the purchasing power to educate their supply chain. It's not just about identifying inefficient suppliers, but working with them – building closer relationships with increased transparency."

But despite a trend for buying direct, the vast majority of raw ingredients go through a middle man. So what about commodity companies like Cargill and ADM, which trade millions of tonnes of food every year?

Commodity trading is often the weak link when it comes to sustainability. According to research by consultancy Two Tomorrows, there's a 'mismatch' between the strategies of brand owners and those of the large companies supplying them. It found that only five of the top ten food ingredient companies have produced recent, substantial corporate responsibility reports. "This poses a major challenge for food companies that need to trace where products have come from to meet their sustainability targets", says Executive Chairman Mark Line.

Steven Fairbairn is Head of External Communications on Corporate Responsibility at Cargill. He says the company is aware it has a role to play in developing sustainable supply chains and admits that "we are feeling the market demand for it already". He also recognises that "it's in our interests that smallholders have support ... for the longevity of our business as well". But this alone may soon not be sufficient. As pressures intensify, concrete commitments could be expected of agribusinesses like Cargill, along with their primary processors, as their customers – both manufacturers and retailers – look into their supply chains in scrupulous detail.

Fast-moving consumer goods giant Unilever is one of the more demanding commodity buyers. It buys 7.5 million tonnes of raw materials every year, and has recently set out a target to procure all its agricultural ingredients from sustainable sources by 2020. It simply can't do this alone: the middle men have to be on board.

"Our suppliers know the farmers and we know the suppliers," says Gail Smith from Unilever's sustainable sourcing development team. "That's how the communication channels run. If we are to have any chance of building sustainable supply chains, then there is a responsibility for everyone."

Unilever has developed a new software system to mark its suppliers' performance. The latter often cite the time spent on answering questionnaires from customers further up the chain as a drain on resources. But Smith claims Unilever's Sustainable Agriculture Code cuts out unnecessary paperwork, and "makes it very easy for them to see how they perform".

PepsiCo has also provided its suppliers with an energy assessment tool to keep them up to scratch. But they shouldn't just see it as a chore, argues Rob Meyers, the company's Group Manager for Environmental Sustainability: "There are tangible financial benefits to reap", he insists.

Paul Simpson, CEO of the Carbon Disclosure Project, agrees: "For the big supermarkets, 90% of total emissions come from the supply chain. So the big savings, in both carbon and cost, can come from their suppliers. Of course, they'll expect some of that cost saving to be passed on, but the strength of the relationship with their suppliers will improve dramatically."

David Burrows is an environmental journalist with a special interest in food. He has worked with Defra and the WWF's One Planet Food Programme.

The more the merrier

Many of us find comfort in a trip down to the local farmers' market to pick up the kind of artisanal foods that are currently the life blood of small-scale farming systems. But could the role of small farmers ever move from the niche to the mainstream?

Wal-mart thinks so. It plans to sell $1 billion worth of food sourced from 1 million small-scale farms around the world, and is throwing in some efficiency training for the farmers, too.

So what could 1 million small-scale farmers do for Wal-mart and its 200 million weekly customers that 10,000 large farms couldn't? Answer: create a supply chain that, thanks to its diverse base, it relatively resilient whatever the weather. - Will Frazer

This article is taken from the Green Futures Special Edition, Tomorrow's food, tomorrow's farms.

Image credits: richterfoto / istock; eefauscan / istock

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