How to build a sustainable agri-food supply chain
Social and environmental issues caused by the way the world currently grows its food are firmly on the global agenda. At the UN Climate Conference (COP27) this November, agrifood systems had five interactive discussion pavilions and a whole day of the high-level negotiations dedicated to them for the first time.
World leaders gathered to discuss how they could take action to maintain food security and tackle the climate emergency. They covered topics ranging from ensuring fair livelihoods for farmers, through upholding the rights of indigenous people and empowering women, to protecting forest and other natural habitats.
But as national leaders consider these topics from an international and regulatory perspective, how can corporates make sense of the developments and what action should they be taking?
Two weeks before COP27, BRODIE joined over 250 other business-focussed representatives at Innovation Forum’s Sustainable Landscape and Commodities Forum to discuss “how to build community resilience and tackle supply chain emissions with a landscape approach”. The conference was attended by global brands, commodity traders, supply chain experts and NGOs and focussed on social and environmental issues related to agri-food commodities including palm oil, soy, beef, and coffee.
In this blog, we introduce three main ways companies are addressing critical challenges in their supply chains and reflect on the latest developments we heard. We explain the role these solutions can play in corporate and sustainability strategies, share best practice examples, and consider what needs to happen next to create a truly equitable and sustainable agri-food system.
1. Tracing ingredients back to origin
Tracing commodity ingredients back to the farm that grew them is an essential first step for any company that is serious about addressing social and environmental issues in its supply chain. Understanding where and so how commodities were grown is essential to calculating a company’s scope three greenhouse gas emissions, ensuring there is no deforestation or conversion, and safeguarding against child or forced labour issues.
New rules for forest risk commodities proposed by the European Union to prevent the import of deforestation-linked beef, soy and other crops were top of mind for many delegates at the conference. If approved by the EU Council and member states, companies will have to verify commodities were not produced in deforested or degraded areas including providing GPS coordinates for each origin before they can sell their products.
Aside from concerns around the expense and resource required to carry out this due diligence, companies raised concerns that the effort will not actually prevent further a reduction in deforestation. Companies pointed out that the legislation will lead to greater clarity and transparency in European supply chains, but it will not stop deforestation in key hotspots that occur outside of these supply chains. They argued that it is relatively well known where most deforestation occurs, and this is generally outside of UK and European direct supply chains. By focussing resource on traceability not direct action to protect forests and prevent deforestation, limited actual progress will be made. In other words, traceability is a means towards a transparent chain, but not a solution to tackle the social and environmental challenges themselves.
In BRODIE’s view however, being able to determine the forward supply chain for ingredients back to their origin is essential as a first step for a company that seriously wants to stop deforestation, prevent human rights abuses, reduce its greenhouse gas emissions, and ensure fair livelihoods for farmers. We missed hearing strategic sourcing strategies from procurement professionals as a critical solution in the discussions.
2. Certifying commodities to higher social and environmental standards
Certification is a common means companies use to guarantee the commodities they are buying do not contribute to forest loss or adverse social impacts. Companies often advertise their use of certifications, such as Fairtrade, Round Table on Sustainable Soy, or the Roundtable on Sustainable Palm Oil (RSPO), on product labels.
Certifying commodities can be expensive however – and it can be prohibitively challenging to agree who in a value chain should pay for this additional cost. Major commodity traders - including Cargill, Bunge, and ADM – may be willing to set up a separate supply chain for a customer at a cost, but thus far have resisted making significant strides towards ensuring all the commodities they trade are free from deforestation by default. This can lead to a stalemate except where brands and/or consumers are willing to pay the premium.
Tony Chocolonely presented a compelling example of business leadership in the cocoa industry at the conference. It has established 5 sourcing principles including a commitment to pay a higher price than Fairtrade certification to enable a living income for the farmers in Ghana and the Ivory coast that grow its cocoa. Describing itself as an “impact company that sells chocolate,” further, the company has open-sourced its 5 principles. Through Tony’s Open Chain initiative it is encouraging other brands to adopt the principles and join it in seeking a structural solution to the “unequally divided chocolate supply chain” that enables poverty.
Certifications and standards such as these rely on the existence of segregated supply chains, and this means investing in the additional infrastructure and resource needed. Physical separation of this type ensures commodities are no longer anonymous, can be distinguished from those sourced anonymously to lower standards, and so command a premium. However, as for traceability, taking this approach can divert investment and resource away from tackling the root cause of social and environmental challenges themselves.
Although Tony Chocolonely’s commitment to a higher price, high standards and collaboration is commendable, to drive transformative change companies must build relationships with suppliers and peers who are truly committed to the same shared values of a fair and sustainable supply chain. To achieve fair and sustainable supply chains, de-commoditisation must be the end game.
3. Buying commodities from a protected landscape
A third solution put forward at the conference was for companies to take a landscape approach to sourcing. Stakeholders at the conference explained that that this approach is about working towards common objectives in collaboration with multiple stakeholders across multiple sites and commodities within an area of over 100,000 hectares. Projects might involve hundreds of farmers, local and national governments, local people, as well as sourcing companies. They require a keen attention to the root causes of challenges to support the co-creation of solutions – and take years to establish. One stakeholder shared that it took five years to establish a proof of concept in palm oil supply chains.
Although companies including Unilever and PepsiCo do invest in landscape approaches, getting senior buy-in for such long-term investments can be difficult. Brands don’t generally want to be associated with complex social and environmental challenges abroad and so it requires brave leaders who see the case for leaning into such issues rather than avoiding them, for example by finding alternative sources or ingredients. A business case might exist if alternatives are more expensive, unavailable, or likely to become unavailable – or if the company buys into the benefits of building long term relationships to support its growth strategy.
To persuade executives, delegates recommended ensuring they have a clear view of where ingredients are coming from and recommended getting them out into landscapes to see the physical impacts and potential results for themselves.
Who shapes the conversation and what are our assumptions?
The conference was attended by sustainability practitioners, intermediaries, consultants, and non-profits, with limited representation from those setting the purchasing strategies of major brands.
This enabled a central, unstated assumption to persist that companies will continue to rely on commodity crops for the foreseeable future. While this may be a pragmatic assumption for sustainability practitioners looking to influence business leaders and procurement functions, it did lead to key solutions being ignored.
We heard no discussion on the important role that developing short, direct supply chains could play in a corporate supply chain strategy, for example. Nor did we hear discussion of any multi-stakeholder initiatives seeking to support new, fully transparent intermediate suppliers.
Similarly, although frequently leant on as an excuse for lack of funding, direction, or ethics, CEOs and government representatives were notably absent from discussions.
We couldn’t help but wonder what could happen were governments, procurement executives and CEOs fully engaged with the current solutions to critical social and environmental challenges. Would we still be content to rely on anonymous commodities as a basis for building sustainable and resilient supply chains?
By Dave Pendlington & Rosie Powell-Tuck
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BRODIE develops sustainability trends and market insights for a number of leading companies. We have also developed a breadth of sustainability strategies and action plans, including executive and stakeholder engagement and communications as well as business analysis and planning.
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