To conclude just-food's management briefing on sustainable sourcing, Ben Cooper examines some of the key cross-cutting sustainability issues in agricultural supply chains and how they may influence the next steps for food companies on sustainable sourcing.
Sustainability strategies embody the desire of companies to "decouple" their environmental and social impacts from growth. They also reflect a parallel trend: an increasingly tighter coupling between sustainability and risk management.
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The recognition unsustainable conditions, whether related to poverty of smallholder farmers and workers, environmental degradation, human rights issues or other challenges, represent a "clear and present danger" to their commercial viability and progress is undoubtedly a motivation underlying what companies are doing to mitigate impacts in their agricultural supply chains.
The stakes are high in environmental terms, too. It is often stated but it is always worth re-emphasising, that agricultural supply chains account for the vast majority of a food company's water impact and this is often in areas of far greater water stress than their own plants. The greater emphasis being placed on supply chains is also a natural consequence of the involvement of external stakeholders in shaping sustainability missions. Arguably no stakeholder constituency has more at stake from a company's decisions than its suppliers, while if consulted NGOs would also place an extremely high priority on working on supply chains.
It is fair to say food companies have been talking in these terms for some time but accusations they are only acting in a meaningful fashion now because of the inherent threat is not entirely fair. However, some might suggest the level of engagement and action is now catching up with some of the early rhetoric.
Risk and the business case
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By GlobalDataWhere the greater emphasis on risk is undoubtedly significant in bringing about a step change in supply chain engagement is the closer link that can be made between an activity and the business case.
For companies, the business case has generally been easier to make in the context of improving water and energy efficiency in plants, or lightweighting of packaging. Addressing some of these challenges, particularly in early iterations of sustainability strategies, was often described as the "low-hanging fruit. In truth, however, expanding the sustainability remit into agricultural production has revealed it was all low-hanging fruit. One feature undoubtedly shared by many different agricultural supply chains is the challenges they present are tough.
Not only are the issues more complex and nuanced than those under the direct control of companies in their manufacturing operations but also a clear financial dividend, certainly in the short term, may not always be easily discernible.
The stark realities of risk to supply – along with the reputational risks associated with poor conditions in supply chains – offer a simpler rationale on which to build a strategy.
In connection with sugar supply chains, a report from the Corporate Social Responsibility Initiative (CSRI) at the Harvard Kennedy School and Business Fights Poverty (BFP), a network bringing together corporate engagement on tackling poverty, published last month, identifies the "business case" as one of six building blocks required to take the sustainable production of sugar to scale. This condition could be said to be common to all work in agricultural supply chains where sustainability issues need to be addressed.
Partnership and collaboration
Another common facet of the work companies are now undertaking across their agricultural supply chains is the critical significance of partnership and collaboration. While partnership and stakeholder engagement are stressed in many areas of sustainability, it is in fact entirely possible, if not ideal, for companies to plough their own furrow in areas such as energy efficiency or packaging design. In supply chains, as discussion of the four commodities reviewed in this latest management briefing from just-food clearly shows, partnership and collaboration is vital.
This to a degree partly explains the time lag between companies talking about addressing supply chains and evidence of tangible action. Engagement with many other stakeholders, including the farmers themselves, NGOs, development agencies, origin country governments and peer companies, takes time.
The most clear examples of collaboration are the multi-stakeholder initiatives aimed at bringing stakeholders together to drive progress on sustainability, with the Roundtable on Sustainable Palm Oil (RSPO) and the Round Table on Responsible Soy (RTRS) notable examples. While there is still widespread support for this approach, recent events have underlined they can become becalmed by having to move at the speed of the lowest common denominator.
The recent moves by some RSPO members to raise standards and increase the rate of progress underline the point that partnership and collaboration are of value when they offer to accelerate the rate of change, rather than slow it down. Some companies leading the way in sustainability point to the fact their own standards go well beyond those of the RSPO. There will always be early movers and pioneers but concerted approaches should be geared towards allowing them to accelerate the general pace of change and spur on the laggards, not to be held back by the less progressive and ambitious.
The current travails of the RSPO do not undermine the viability of multi-stakeholder approaches but certainly exemplify a weakness they can suffer from, which could be relevant to multi-stakeholder activity in any commodity.
The role of certification
Closely allied to the creation of multi-stakeholder platforms is the role certification plays in driving progress. While it is clear certification has had a huge impact to date on the sustainability of agricultural supply chains, notably in cocoa, coffee, bananas, soy, palm oil and sugar, food companies and certification bodies alike are now asking how much further can sustainability progress through certification alone. The answer appears to be in general that certification still has a role to play but will never be the whole answer.
Common to many commodities is the increasing discussion of jurisdictional approaches where, through industry partners working with actors in the local value chain, local government and development agencies, sustainability standards can be improved across entire areas.
This trend arguably places an even greater emphasis on inter-stakeholder partnership and in particular on the relationship with government. An observation made more than once in connection with various commodities is that the end users, food companies for example, have a particularly crucial role to play in terms of government relations.
The success of jurisdictional approaches will depend on effective regulation and policy, and the constructive engagement of local and national policymakers. Many other sustainability challenges, such as the eradication of forced and child labour from agricultural supply chains, also require effective and enforced regulation.
Multinational corporations have government relations resources, including smarts and nous, well beyond those of most other stakeholders. An NGO representative commented these are often used to avoid regulation but in sustainable sourcing might be used to mobilise government engagement and enable effective legislation
While the head of one multi-stakeholder initiative suggests a local policymaker may not "appreciate a foreign corporate telling it what to do", the skill and savvy of corporations in the dark arts of political lobbying and exercising influence should never be under-estimated. If there is one area where campaigners should trust companies to get it right, it would be that and, in that context, companies could have a unique and telling contribution to make.
Smallholder poverty
Jurisdictional approaches may not hold all the answers but with regard to raising standards for smallholder farmers they could be extremely significant. The vital challenge of improving the livelihoods of smallholder farming communities is a recurring theme across many agricultural supply chains, notably sugar, palm oil and cocoa.
However, the shared imperative also offers the potential for common solutions to be applied across different sectors. As organisations, food companies are well placed to transfer such experience and learnings, an attribute stressed by Mars Inc in connection with its Livelihoods Fund for Family Farming initiative which will prioritise helping smallholders engaged in sugar, vanilla and palm production.
The consumer connection
The future role of certification also speaks to the role consumers will have in driving sustainability efforts to scale in agricultural supply chains. To date, the consumer demand fostered by certified labelling schemes such as Fairtrade, Utz and Rainforest Alliance has been a key driver in improving sustainability standards in supply chains.
How labelling schemes will integrate into broader moves to bring sustainability efforts to scale is a question that the organisations themselves, along with all stakeholders across many commodities, including food companies, are now grappling with. Consumer sentiment is still spurring companies to make progress, and to set bold targets around 100% sustainable sourcing, but, as we move forward, meeting consumer expectations should not be judged exclusively in terms of the number of chocolate bars bearing a Fairtrade or Rainforest Alliance logo.
The role of consumers, and the retailers which serve them, in emerging markets and origin countries is also seen as a critical factor in taking sustainable sourcing to scale. As consumer economies develop in emerging markets, demand in those countries for responsibly sourced products will grow, and will grow faster if it is fostered and attention is paid to local supply chains as well as those feeding Europe, the US and other developed markets.
In this context, a frequently made observation is that the challenge of making the global production of agricultural commodities sustainable must not be seen solely in terms of trade between the Southern and Northern Hemispheres. South-south trade will have a key role to play if truly transformational change is to be achieved.
The growing visibility of the push into supply chains could be viewed as a maturing of sustainability missions on the part of food and beverage companies, and perhaps even a growing confidence in their approach to sustainability, almost that they are ready now to take on the really tough challenges. If that is the case, they are looking in the right place, for there are arguably no tougher challenges than those they face in their agricultural supply chains.
