just-food’s 2016 confidence survey includes respondents from varied functions within food companies and professionals in fields related to the industry, aiming to identify the most important factors weighing on the industry and business confidence. Sustainability featured in the survey and Ben Cooper analyses the response – and reflects on the issues in the field industry professionals should consider next year.
The responses to just-food’s 2016 confidence survey question on sustainability reflected the key issues in the area facing the industry as it moves into a new year.
Respondents were asked if their companies would be investing more, less or the same in sustainability in 2016 compared with 2015. The fact only 6% said they would be investing less while 36% and 58% respectively said they would be spending more or the same as last year reflects the increasing emphasis being placed on sustainability.
Embedding sustainability into your business
That the figure saying they would be spending more is not higher may be partly due to a defining trend in sustainability, namely its embedding across all business functions. And this also helps to explain why the respondents to the survey, who reflected a variety of different roles and functions within companies, gave such an accurate picture of current sustainability issues.
Embedding sustainability into the business model means investment and innovation in sustainability may both frequently – and probably increasingly so – not be identified as part of a company’s sustainability strategy. The objective for companies is to make sustainability part and parcel of the way they do things. Sustainable choices should increasingly become second nature.
The tie-in between cost efficiency and sustainability is relevant here. As would be expected, when asked whether their companies would be increasing the focus on improving efficiency in 2016, 84% said yes. Only 15% said the focus would be the same as 2015 with less than 1% saying they would be reducing their focus. Investment in resource efficiency, particularly water or carbon intensity, will no longer be seen as an investment in “sustainability” per se.
With regard to resource efficiency, the rising cost of water will be an increasingly important factor in 2016 and beyond. Concern over water stewardship is also reflected in responses to the survey. When asked on which sustainability issues they expected their companies to focus in 2016, over half nominated water, the second most popular response.
Other responses to this question speak to the increasing emphasis on a “value chain” approach to sustainability taken by food companies, with packaging (48.4%), sustainable sourcing of commodities (41.2%) and, top of the poll, waste (60.8%) all featuring prominently.
Sustainable sourcing of commodities is an area that will receive increasing attention during the coming year. The recent move by Mars Inc to commit to sustainably sourcing all its rice by 2020, announced with the launch of the Sustainable Rice Platform’s sustainability standard for rice, points also to a broadening of activity around commodities.
For some years, the agenda around sustainable sourcing has been set principally according to areas of most public sensitivity. So, cocoa and palm oil, for example, have received much attention. Activity around sustainable sourcing is likely to expand into commodities, such as rice, which have perhaps not received so much publicity but which present considerable sustainability challenges.
The association between sustainable sourcing and addressing risk will also be an increasingly an important factor in shaping the priorities of food companies.
Does survey under-state importance of carbon?
It was slightly surprising to see carbon specifically was nominated as a key issue by fewer than a third of respondents (just shy of 32%) in the survey. In the wake of the COP 21 climate change summit and the certain advent of more ambitious national carbon reduction targets, carbon will undoubtedly be a more prevalent issue in 2016 than that figure suggests. Pressure on food companies to set carbon reduction targets aligned with the global aim of limiting climate change to less than 2°C compared to pre-industrial temperatures will increase in the coming year.
That the figure in the survey understates the importance of carbon could be due to the issue of carbon emissions intensity being perceived as relating primarily to a company’s manufacturing activities.
Respondents with a partial awareness of how companies have engaged in sustainability will have seen the considerable progress companies have made in reducing the carbon footprint of their operations over recent years. However, reducing carbon emissions is now seen as a challenge across the value chain. Emissions during the production phase are often relatively small in comparison with the carbon cost (and water use) further up the agricultural supply chain and “downstream” in the delivery and post-consumer phases.
The emphasis on total footprinting of carbon and work to reduce emissions at the most costly stages of the value chain will increase in the coming year. In this context, the fact waste was identified by the most respondents as the sustainability issue their companies would be focusing on in 2016 is no surprise.
Diet and health
When respondents were asked which from a list of key trends they expected to drive innovation initiatives in 2016, the findings again underline the growing importance of sustainability.
Sustainability in general was identified as a factor by 29% of respondents, ranking it on the same level as price. Arguably the findings also speak to the particular impact diet and health issues are having on food companies. It could be said these issues impact on a food company’s licence to operate every bit as much as environmental concerns and this was clearly reflected in the survey.
Some 63% of respondents identified health as a factor they expected to drive innovation in the coming year and 21% nominated reformulation specifically as a factor.
Rising public and political concern over sugar consumption has been the major health issue for food companies over the past couple of years and this shows no sign of changing in 2016.
The food industry is now constantly facing the possibility of tighter regulatory overview on matters of labelling and advertising across numerous markets as pressure from campaigners increases. One response, as seen perhaps most vividly in the US, is political lobbying but the other weapon in the food industry’s armoury is reformulation of existing products and the introduction of healthier product variants.
The reformulation trend can be expected to gather pace in 2016. In this area, food companies face something of dilemma. With regard to the reformulation of mainstream brands, there is a strong argument for reformulation “by stealth”, where consumers are not made aware of the changes and are gradually weaned off a higher salt or sugar content, for example. Evidence shows palates adapt relatively quickly to changes in taste and companies are becoming ever more adept at affecting incremental reductions to certain nutrients of concern by substituting ingredients or changing processes so the actual changes in taste profile are gradual and subtle.
The only drawback for companies is this process is by its very definition rather unheralded. So, while it will certainly be going on in 2016 – and arguably given the mounting concern and a perceived need for the food industry to be part of the solution at a faster pace – this will not be one of the most discernible trends in the coming year.
On the other hand, a more visible trend will be the more overt face of reformulation – the introduction of healthier product variants. When weighing up investment in this area, companies have to be market-led to a degree but they also lead consumer behaviour too, so this is another field where more spending can influence the standing of food companies in diet and health debates.
New product activity around healthier variants looks set only to increase in the coming year. However, to be truly effective the rather questionable reputation of “functional” foods is a challenge companies will have to overcome. If they can, this is an area where the food technology resources and marketing capabilities of major food corporations could be a considerable force for good.
How business views sustainability is changing
This also speaks to the maturing and evolving view of sustainability. Engagement in issues pertaining to a company’s licence to operate is no longer associated solely with mitigating impact but also about proactive engagement in improvement. Multi-pronged water strategies, where companies engage not only in water efficiency but also the protection of watersheds and improving access to safe drinking water in water-stressed areas, are a prime case in point, and such engagement will become more common.
Overall, the increasingly holistic view of sustainability taken by food companies could well partly explain why the results of a survey of a varied sample of industry professionals provides such an accurate picture of the industry’s sustainability priorities. It suggests sustainability is more ingrained and embedded than it once was.
Nevertheless, in our final Sustainability Watch interview of 2015, even PepsiCo – an early mover on sustainability – stressed the embedding of sustainability remains an ongoing process, suggesting the implanting of sustainability across all operations must itself be seen as a continuing trend and a business imperative for food companies for 2016.