Food production generates more than a third of all global emissions. As the worldwide battle against climate change continues, the food and drink industry must adopt a strategic, sector-wide approach to make a real impact. David Crump, Corporate Finance Director specialising in Food and Beverage at PKF Smith Cooper, explains.
74% of food and drink businesses do not monitor their food waste and more than 60% do not report on their supply chain emissions.
With demands from regulatory bodies and consumers for more sustainable working practices mounting, what action is the food and drink industry taking to combat climate change?
Industry initiatives – the current position
In 2015 the Waste and Resources Action Programme (WRAP) established the Courtauld Commitment, an agreement that calls for collaborative action across the UK food chain to reduce food waste, greenhouse gas emissions and water stress.
The initiative has already proven to be a success, having achieved its target of reducing food waste in the UK by 55% five years ahead of schedule. Valuable progress has also been made on lowering emissions and water stress.
In addition, there has been a number of voluntary initiatives aimed at encouraging transparency in goal setting and progress reports for companies in the industry, such as the Zero Carbon Forum and the United Nations Global Compact.
Controversy has surrounded food waste and emissions reporting for a while, demonstrating the need for standardised reporting protocols within the food and drink industry. In May this year, WRAP published the Scope3 GHG Measurement and Reporting Protocols for Food and Drink to facilitate systematic action against greenhouse gas (GHG) emissions by providing methodical guidance on measuring and tracking emissions.
Last month, the UK Government Food Strategy launched the Food Data Transparency Partnership with the objective of driving transformation in health, animal welfare and environmental outcomes through our food. The initiative includes plans to conduct future consultations on mandatory public reporting against health metrics, as well as sustainability measures. It will also aim to incentivise the industry to produce healthier and more sustainable food.
Mandatory food waste reporting could also be on the horizon with the UK Department of Environment, Food & Rural Affairs’ ongoing consultation for improved reporting on food wastage from large businesses in England, which is set to conclude in September 2022. The European Framework for Sustainable Food Systems is also just completing a consultation that explores ways to make the transition to sustainable food systems easier for businesses.
In addition, non-binding guidance on climate-related financial disclosures was released earlier this year, and there is certainly a possibility that it could be extended to non-financial disclosures in the future.
Consumer and stakeholder pressure
Sustainability is at the forefront of consumers’ minds, evidenced by 85% of the global population having altered their purchasing habits over the last five years to be more sustainable. Although consumers are taking responsibility for climate change on an individual level, that does not mean that businesses are off the hook. Consumers view large corporations as partially responsible for the climate crisis and expect the companies they buy from to also be doing their part.
It is no longer enough for organisations to simply say they have embraced a sustainable approach; consumers want to see proof.
Consumers are not the only ones putting pressure on businesses to take action against climate change. With £6 trillion in assets under management, the Investor Coalition on UK Food Policy are calling for the Government to make health and sustainability standards mandatory for food companies.
As the societal shift towards environmental action continues, businesses that cannot evidence their commitment to climate conservation risk losing customers to more sustainable competitors.
There are three different types of emissions that companies can report on:
- Scope 1 – fuel combustion, fugitive emissions, company vehicles
- Scope 2 – purchased energy (electricity, heat and steam)
- Scope 3 – the emissions that a company contributes to indirectly (e.g. purchased goods and services, investments, waste disposal etc.)
Only 39% of companies report publicly on all three emissions. Scope 3 emissions are estimated to account for up to 90% of the food and drink sector’s total emissions but are difficult to measure precisely – perhaps explaining why so few report them.
In the EU, the Corporate Sustainability Reporting Directive is due to come into force at the end of this year, requiring organisations to provide more comprehensive environmental reporting from the start of 2023.
While it is great to see directives calling for action within the sector, the overall effectiveness of emissions reporting is still debatable. However, fast-developing digital tracking of the entire supply chain from start to end is already proving to be instrumental in the implementation of evidence-based action within the industry, and should help reduce emission levels and increase efficiency in processes, inventories and deliveries.
An opportunity for growth and efficiency
Although the move to more sustainable practices will require significant investment and changes to the way companies do business, in the long run it is a challenge that has to be embraced. Climate accountability presents opportunities for businesses to innovate and progress, as we all do our part to preserve the planet for future generations.