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October 1, 2021updated 01 Feb 2022 11:10am

COP26 – Total responsibility, partial control: the food company’s climate conundrum

Food companies have to take responsibility for greenhouse gas emissions throughout the value chain and product lifecycle, which predominantly means effecting change in areas outside their direct control.

By Ben Cooper

In the face of common challenges, it is said one sector can often learn from another. While climate change is an issue shared by companies from every sector, food manufacturers may find few handy rules of thumb among their peers to help them reduce their greenhouse gas footprint.

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What’s the forecast for the food and grocery industry?

The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
by GlobalData
Enter your details here to receive your free Report.

The principal difference is the food industry does not conform to the norm of fossil fuel use being the dominant source of greenhouse gas emissions – but this is far from being the only unique nuance of the food industry’s greenhouse gas footprint. When it comes to addressing emissions, the food industry would be best served by, literally and metaphorically, ploughing its own furrow.

According to the UN’s Intergovernmental Panel on Climate Change (IPCC), the food system accounts for around a third of total greenhouse gas emissions, an estimate supported by EDGAR-Food, a new, exhaustive food emissions database compiled by the EU Commission’s Joint Research Centre as part of the Emissions Database for Global Atmospheric Research (EDGAR).

Officially unveiled in March, EDGAR-Food provides granular detail on greenhouse gas emissions from food by country and for every year between 1990 and 2015. Emissions from the production, consumption and disposal of food represented 34% of global greenhouse gas emissions in 2015, with 71% coming from agriculture and “associated land use and land-use change (LULUC) activities”.

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The research offers evidence of some improvement over the 25 years, with food emissions growing by 12.5% against a 40% increase in global food production. Meanwhile, food emissions per capita fell from 3tCO2e to 2.4tCO2e. Globally, carbon dioxide accounts for 52% of food emissions. Reflecting emissions from animal agriculture, methane represents 36%, followed by nitrous oxide (11%) and fluorinated gases (2%).

Reducing GHG footprint from farm to fork

The food system’s agricultural foundation is also reflected in the breakdown of the food greenhouse gas footprint by stage in the value chain. As the IPCC analysis has done, the EDGAR-food database separates emissions from agriculture from those resulting from land use and land-use change (LULUC), reflecting the impact of deforestation and soil degradation.

In 2015, agriculture accounted for 40% of GHG emissions from the food system globally, with LULUC the second-largest contribution at 32%. The relatively small contributions from the other stages in the value chain – transport (5%), processing (4%), retail (4%), packaging (5%), consumption (3%) and end of life (9%) – speak to the unique challenge food companies face in addressing emissions, with only 14% coming from parts of the value chain over which they have direct control.

These figures are not revelatory. The significance of the industry’s agricultural inputs has been well understood by food companies ever since climate change began to grow as an issue of concern. But, with obvious solutions far less apparent, there was a tendency to focus on the areas over which they had direct control. Latterly, multinational food companies have stepped up engagement on sustainable agriculture but heightened concern about climate change over the past few years has resulted in rising consumer and investor pressure on companies to step up the pace.

“Companies in the food sector must ramp up their level of ambition and pace of adopting key mitigation measures in order for the sector as a whole to meet the goals of the Paris Agreement,” Julie Nash, director for food and forests at sustainability non-profit Ceres. “The Achilles heel of the food sector are Scope 3 emissions, also known as value chain emissions, which make up the majority of the emissions from the sector.”

Announcements in recent weeks show how major multinational food companies are increasingly adopting strategies looking further up the chain, with PepsiCo unveiling its Pep+ programme and Nestlé releasing more details about its CHF1.2bn regenerative agriculture programme.

“It’s critical for a business like ours, when we’re looking at how we can address both climate change the state of nature and our natural ecosystems as well, to look at its entire footprint, and at how we can address those challenges on a value chain basis,” Andy Griffiths, head of value chain sustainability at Nestlé.

Building resilience

In terms of supply chain priorities, agriculture is naturally the prime focus. “Agriculture represents 60% of our carbon footprint. So, if we want to succeed in our carbon footprint ambition, we need to succeed with agriculture,” Yann-Gaël Rio, vice president for nature and agriculture at Danone, tells Just Food. “So, agriculture is front and centre to this, and we have embraced the concept of regenerative agriculture.”

The emphasis on regenerative agriculture means the climate objectives are integrated with measures also addressing other environmental issues, such as biodiversity loss or water scarcity, along with aims in relation to farmer livelihoods.

Regenerative agriculture can produce the results Danone is seeking regarding emissions but also “builds resilience”, Rio adds. Echoing the point, Griffiths characterises Nestlé’s regenerative agriculture programme as an “integrated proposition”, combining emissions reduction aims with others relating to landscape restoration and social equity that are also “key outcomes that we need to deliver against”.

Investing in regenerative agriculture also brings increased potential for carbon sequestration which in the long term could make a significant contribution to food companies’ net-zero carbon goals. While sourcing agricultural commodities means food companies have a greater emissions burden than their counterparts in other consumer sectors, their agricultural supply chains offer a unique capacity for substantial carbon removal if appropriate policies are put in place.

Not surprisingly, therefore, interest in carbon sequestration is increasing. As Pablo Modernel, climate researcher in global farm sustainability within the R&D team at Netherlands dairy cooperative FrieslandCampina, puts it “the credit sector is developing quickly”.

With other partners, including Mars and Nestlé, FrieslandCampina is participating in a pilot programme called C-Sequ, thought to be the world’s first life-cycle assessment-based methodology for calculating carbon sequestration in cattle production systems.

“Carbon sequestration is one of the tools on the way to net-zero,” Modernel says. Rio concurs, describing sequestration as “one of the most useful levers” Danone has in pursuit of its climate objectives. Rio is optimistic the required scientific and methodological consensus will be achieved within the next couple of years.

The Science-based Targets Initiative and the GHG Protocol are both working towards incorporating sequestration into their methodologies. Meanwhile, the inclusion of carbon sequestration in a report from Ceres and responsible investment advocacy group Principles for Responsible Investment (PRI) detailing key expectations investors have of food and drinks firms in relation to climate change, suggests investors expect sequestration will be featuring in corporate climate reporting sooner rather than later.

“The new investor expectations report encourages companies to look at both emissions reduction and carbon sequestration within their own value chains to mitigate their Scope 3 emissions,” Ceres’ Nash says. “However, companies should not rely on carbon sequestration as a panacea; reducing emissions in the value chain is critical, especially via eliminating deforestation. Preserving existing forests has much greater benefits to climate, biodiversity, and local communities than replanting trees later on.”

Large multinational food corporations are investing heavily in regenerative agriculture, as well as in other areas of the value chain where emissions reductions can be realised, such as sustainable packaging. Clearly, that level of investment is not possible for the hundreds of thousands of SMEs that populate the food sector all over the world. However, Emma Piercy, head of climate change and energy policy at UK industry association The Food and Drink Federation, believes by moving first the larger companies are absorbing some of the “learning costs”, making innovation more accessible for smaller operators.

“I think it’s fantastic what Nestlé and PepsiCo have been doing because the amount that they’re investing in this is going to be of benefit to all food and drink manufacturers,” Piercy says. “There’s going to be a lot of shared learning.”

The C-Sequ initiative is a notable case in point, with the partners companies deciding from the outset to make its findings publicly available. “Sharing the knowledge publicly is also a step for other companies, governments, institutions to follow and receive feedback to have continuous improvement,” FrieslandCampina’s Modernel says.

Much more is now expected of food companies with regard to reducing emissions in their agricultural supply chains than was the case only a few years ago. While this may be an area of the value chain where corporations do not have direct control, it is an area where they can bring enormous influence to bear. Multinational food companies are more directly engaged with farmers than ever before. As grave and alarming as the climate emergency and other environmental and social issues affecting agricultural communities undoubtedly are, if they are prompting a stronger connection between food companies and agriculture that can only be a good thing.

GlobalData analysis: ESG (Environmental, Social, and Governance) in Consumer Goods – Thematic Research

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What’s the forecast for the food and grocery industry?

The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
by GlobalData
Enter your details here to receive your free Report.

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