UK Retail Sector can drive The Race to Net Zero Food Production

Slashing agricultural emissions while rising to the challenge of feeding the world’s growing population is just one of the many complexities of the race to net zero.

Now, as more evidence emerges of the impact of conventional farming methods on our ecosystems, there’s renewed hope that regenerative agricultural (RA) practices could form part of the solution.

Governments are supportive, too. In the UK, the Government’s land use strategy is set to provide a framework for farmers to adapt to a changing climate, while the US Department of agriculture has committed $20b to fund farmers switching to sustainable methods. These commitments being reflective of a wider global effort to ramp up action on net zero and biodiversity targets.

But what exactly is regenerative agriculture, and how can it help?

Developed around techniques that improve soil health, regenerative agriculture protects waterways increases biodiversity, and aims to harness the carbon-capturing potential of the earth – dramatically reducing the emissions intensity of food production.

Now, amid growing concern for the environment among climate-conscious consumers, corporations are becoming increasingly vocal about their desire to abandon chemical-based farming systems in favour of these more environmentally friendly techniques.

Last year the Sustainable Markets Initiative (SMI) formed its Agribusiness Task Force, a collaboration of 12 of the biggest businesses from across the global food and drink industry, with the aim of fast tracking the adoption of regenerative agriculture to become the most commonly-applied farming method globally.

With the UN estimating that agriculture is the cause of more than 20% of global annual emissions, it’s undoubtedly an area where improvements should be made - but while increased investment in regenerative agriculture can play a role in accelerating the drive to decarbonise, it’s key that the main focus remains on cutting emissions rather than simply offsetting.

Here, we’ll analyse the potential impact of RA on the race to net zero and examine how the UK retailing industry can support the transition – unlocking long-term value in the process.

How can the UK retailing industry help drive the change and unlock long term value?

With growing pressure to decarbonise, more stringent environmental legislation and increasing energy costs, the sustainability landscape has never been more challenging for UK retailers.

Against that backdrop it’s understandable that grocers are becoming increasingly focused on complying with environmental regulation and reporting – but this is leading to strategic blind spots with many overlooking the opportunities a well-developed RA strategy can provide.

We’ve compiled three ways retailers can thrive in the current uncertain market while making a positive impact on the world.

1. Recognise the new market segments that can unlock sales and profits

Buying behaviour among young consumers is increasingly being driven by environmental considerations, with one recent survey showing 75% of Gen Z respondents want food brands to be more transparent and nearly eight out of ten would like better labelling.

By identifying which age categories are most interested in foods produced through regenerative agriculture, retailers can develop solutions (i.e. placement in stores aisles or dedicated website tags) that alleviate their ‘pains’ (i.e. consumers that do not know how to identify these products) when choosing these products.

Understanding the decision-making drivers of new generations and marrying these with business models in RA enables grocers to shape these new markets as production is scaled up, establishing themselves as early adopters and increasing sales and profits as consumers identify their stores as being the early mover.

Capturing the younger market has long-term benefits too as young people become household decision makers.

2. Reduce costs and increasing supply-chain resilience

Retailers can help scale up the implementation of regenerative agriculture by making it easier and more attractive for farmers to adopt these practices – a key driver of change set out in the Agribusiness Task Force action plan.

Adopting a long-term strategy to RA can help remove the barriers to entry for many farmers and help unlock the opportunity for increasing share of the younger market which hungers for more environmentally-friendly options.

As an example, many farmers are unable to commit to the implementation of five-year system changes while operating on short-term land leases. Added to that are the issues that buyers awarding contracts to on behalf of retailers have, in the past, made those decisions on the basis of price. Adopting policy in which more weighting is attached to the means of production would make the prospect of transitioning to RA less risky for farmers.

It’s widely accepted that climate change is no longer a distant threat, and with RA farming shown to be more resilient to these uncertain shocks. RA can be harnessed to minimise the kind of supply chain disruption that can – and has – hurt retailers’ bottom-lines.

Creating a more resilient business requires companies to adapt to the changing context. They must be proactive and effective in transforming their organisations, sectors, value chains and whole economies to align commercial success with the delivery of the SDGs.

Simply put, there is a need for businesses and leaders, at all levels of their organisations, not only to anticipate the future, but to shape it to be more sustainable.

3. Purpose-led companies and growth

Consumer-facing brands often bear the brunt of public pressure to adapt to address the environmental issues which are affecting the world around us.

By adopting new business models in RA, grocers can put this purpose at the forefront of their decision making, becoming a truly purpose-led company and a leader in their sector. Adapting to the needs and wants of your customers in this way builds brand loyalty.

There are also other benefits.

According to our research, organisations where purpose had become a driver of strategy and decision-making witness increased revenue, higher market share gains and grow on average three times faster than their competitors, all the while achieving higher employee and customer satisfaction. Our 2023 Global Marketing Trends Report highlights how businesses are embedding this practice to expand markets and customer personalisation to help their brands endure these uncertain times.

These agile organisations are also better equipped to comply with future legislation, such as the SBTi upcoming science-based targets for nature.

The need to team up to speed up the transition

Addressing the problem of reducing emissions generated from food production is complex, but small changes at a strategic level can make a big difference in the race to net zero. Our ability to feed the world’s growing population while decarbonising production relies on our ability to work together across the industry’s value chain.

With the backing of government and industry alike, there is a strong sense that significant progress can be made in the years ahead – and a clear opportunity for UK retailers to drive that change, setting themselves apart in the market in the process.

But we need to act quickly – the SMI reports the rate of adoption of RA needs to triple to reach 40% of global cropland by 2030 – the target set to support the world’s need to limit climate change to 1.5 degrees.

Another issue – a common one across all industries and sectors – is the lack of legal or regulatory definitions as to which agricultural practices qualify as being regenerative. These must be resolved to prevent companies engaging in solutions that are not actually environmentally friendly, and to hold the industry to a consistent standard of practice.

Legislation is vital to guide the industry to deploy regenerative farming practices and to track and monitor the progress of their commitments (e.g. if their efforts are storing carbon in soils and improving nature).

But regenerative agriculture is just one part of the picture in redressing food’s impact on the environment. Food waste, plastics, and global commodities will each need solutions of their own.

This drive has been borne out of a recognition that, both individually and collectively, we must act quickly to tackle climate change, with the formation of the Agribusiness Task Force providing further evidence of the role collective action by businesses can play in tackling climate change.