Food brands struggling to weather the 'polycrisis' unleashed by war and climate change
- Climate-induced crop failings and and war-fuelled energy problems creating crisis for sector
- Agricultural and food producers who have future-proofed their business best-placed to weather global turmoil.
- World Benchmarking Alliance report warns sector not on track to realise a sustainable food system
- Only 26% of world's 350 top ranked food companies have set holistic time-bound sustainability targets
- Unilever, Nestle and Danone top WBA food and agriculture benchmark
March 13 - If you were looking to make a Greek salad in the UK in late February of this year, you would have had to get creative in the kitchen. With national shortages of tomatoes and cucumbers, not to mention peppers and lettuce, salad of any description was proving somewhat of a culinary luxury.
Colder temperatures in Spain, the main supplier of British vegetables, meant that a significant proportion of the country’s vegetable crops had been damaged. Record high energy costs in the UK were also making it prohibitively expensive for domestic producers to heat glasshouses, and thrown into the mix was Brexit. It was a perfect storm of climate change-induced crop failings, war-fuelled energy problems and import dilemmas. The word “polycrisis” encapsulated.
It’s a buzzword that’s making the rounds, with the World Economic Forum (WEF) describing it as “a cluster of related global risks with compounding effects, such that the overall impact exceeds the sum of each part”. Such risks range from the cost-of-living crisis, which the WEF ranks as the most severe global risk within the next two years, to large-scale involuntary migration and erosion of social cohesion. While business and government leaders have been dealing with risks such as geopolitical tension and natural disasters for centuries, others, like ecosystem collapse and the consequences of failing to mitigate climate change, feel more like uncharted territory.
Sitting at the eye of the storm, is the food and agriculture industry. Exceptionally vulnerable to extreme weather and climate change-related events, geopolitical turmoil, natural resource scarcity as well as biodiversity loss, the sector has all manner of challenges to face. Add to that the urgent need to decarbonise, and food sector leaders have their work cut out for them. How are they navigating this crisis agglomeration?
“It depends who you talk to,” says Helle Bank Jorgensen, the chief executive and founder of Toronto-based Competent Boards. The advisory firm offers training around environment, social, governance (ESG) and climate for board directors and senior business professionals. “If you talk to some of those that have started to look a little bit out into the future, they're probably in a good spot now,” she says – companies that have invested in vertical farming, renewable energy, or water conservation measures, for example. Such forward-thinkers, however, seem to be in fairly short supply.
According to the World Benchmarking Alliance’s 2021 Food and Agriculture Benchmark report, the sector is not on track to realise a sustainable food system, let alone one that is resilient enough to weather repeated global blows such as pandemics, wars and energy crises. The report measured and ranked 350 of the world’s most influential food and agriculture companies, which account for upwards of half of the planet’s food and agriculture revenue, and employ more than 23 million people. Occupying first, second and third places, respectively, were Unilever, Nestlé and Danone.
The benchmark found that just over three-quarters of companies had a sustainability strategy in place, but only 26% had set holistic time-bound targets. What’s more, 80% of companies did not provide any evidence that they are improving accessibility and affordability of nutritious food.
“There are a handful of companies that are pushing on, improving their sustainability targets despite the multiple crises we are facing, or perhaps because the effects of climate change, increased poverty and biodiversity loss are becoming ever more apparent,” says Viktoria de Bourbon de Parme, food and agriculture transformation lead at the World Benchmarking Alliance. “(But) the vast majority are holding on to outdated strategies and continuing business as usual.”
Meanwhile, governments are having to bail out food and drink companies due to untenable energy and fertiliser costs, with higher prices inevitably being passed down to consumers. Ruediger Hagedorn, a director at the Consumer Goods Forum who specialises in the end-to-end value chain, says that food and agriculture companies are, on the whole, reasonably prepared for future shocks. What they are not prepared for, he says, is subsequent events, like we have been seeing.
“They have no real master plan, but they are doing a lot of experiments,” says Hagedorn. This includes around shortening the supply chain and local sourcing, where strategies are tested in local markets and then possibly widened out.
Another big trend, he says, is around digitalisation. “The big topic now is 'real time'. They want to get away from having to wait on stock and inventory updates. Product information management systems (PIMs) and also supply chain and traceability system providers, they’re having a bonanza, it’s a gold rush, because everybody is trying to do something here,” he says. But the hottest tech isn’t blockchain – “that would have been five years ago. They are talking about the cloud. And now, of course, also artificial intelligence.”
Finding the right people to steer the ship is a fundamental challenge, though. As supply chains and operations become more digital, skilled staff are increasingly prized.
“(They don’t want) the kind of logical worker that they’ve had thus far,” says Hagedorn, “the people that have been doing the same job for 20 years. The second thing is that they need people who think more broadly, not just siloed thinkers, but people who see the interconnected ripple effects of any kind of crisis.”
Food and agriculture business leaders today also need to fill another big role, says Jorgensen. “The food industry is actually the business of peace,” she says. It’s big shoes to fill but the consequences of being poorly prepared for a world that is in a constant state of polycrisis aren’t pretty. In the next two years, the WEF ranks large-scale involuntary migration as the least severe on its list of 10. But in 10 years, that risk will rise to fifth place. The Institute for Economics and Peace estimates that over one billion people could become climate refugees by 2050. “People invading countries not with arms, but with hunger,” says Hagedorn.
So, with peacebuilding now among the food industry’s many and varied tasks, is the pressure on chief executives, chief sustainability officers and boards going to reach unmanageable levels?
Jorgensen says that it wasn’t so long ago that scrutiny and pressure was reserved for those occupying the top job. These days, not so much. “You have investors now asking ‘how are you dealing with all of these different issues? What does your scenario planning look like? And do you have ESG-, climate-, and biodiversity-competent board members serving, who are able to see all this?’”
In a recent poll, Competent Boards asked business leaders if there would be a “great resignation” of boards, and 59% said “yes” or “maybe”. And revealingly, in answer to the question, “Do you see new competencies, (e.g climate, biodiversity, DE&I, human rights, cyber security etc) as necessary for the future boardroom?”, 100% said “yes”.
It will be a lot to fit onto the CV, but Hagedorn says that in order to attract the right talent, companies are leveraging sustainability. In fact, the pace with which companies are incorporating sustainability is accelerating at an unprecedented rate, he says, but they are reluctant to shout about their successes too soon.
“You will see companies surprisingly coming up with better numbers than they promised. In the past, it was the other way around – they would promise something then never deliver,” he explains. When that sustainability report is released and the numbers are better than promised, however, that is a competitive advantage. “If you have the better report, you attract better talent.”
Sustainability is now seen as a sort of special weapon, the Swiss army knife of strategies, says Hagedorn. Not only can it help you to attract the right talent, but “it can help get fresh capital from investors, it can put the right label on your products… and so on – the list is long.”
In the long-term, a permanent state of polycrisis feels almost inevitable, and Jorgensen stresses that incremental changes to the food system are not going to cut it. “You have a lot of smart people out there that are willing and able and interested (to make change), but we need to ensure that we think in the shorter but definitely also longer term,” she says.
Otherwise Greek salad will likely be the least of our worries.