Food manufacturers: How to find returns on sustainability investments

Context

To gain a comprehensive understanding of the financial drivers for investing in sustainability strategies across the food and agriculture value chain, Deloitte worked with CSB to utilize its Return on Sustainability Investment (ROSI™) methodology and framework.

The study analyzed 12 ROSI™ strategies and included a 25-question survey completed by 350 executives representing the following value chain segments: processing, manufacturing, food services, restaurants, and retail. We then interviewed leaders in the sector to supplement our research.
The resulting data shows a business case for investing in sustainability strategies for all players across the food and agriculture value chain.

Here are key findings for manufacturers.

Manufacturer value chain overview

Manufacturers convert ingredients into branded goods that are then sold to customers through food service providers, restaurants, or in retail stores. While many operate as business-to-business (B2B) entities, creating branded products also requires an understanding of business-to-consumer (B2C) branding, strategy, and operations.

Top three revenue growth strategies

Those manufacturers that did realize revenue gains from investing in sustainability identified these top strategies:

1. Raise, treat, and/or source animals responsibly: Manufacturers respond to consumers’ concerns about animal welfare by sourcing animals that are raised and treated responsibly. Certifying and verifying on-farm practices of their upstream suppliers helps manufacturers create a differentiated product in the market. The exact certification depends on both geography and product.
   
2. Ensure safe food products: Ensuring that the food they manufacture is safe is key to a manufacturer’s operations and value proposition, so it makes sense that food safety has played such a critical role in achieving revenue growth. Other sustainability initiatives or strategies would be rendered moot if manufacturers aren’t able to meet this baseline.
3. Reduce use of harmful chemicals: Consumers are increasingly concerned about the ingredients in their food. A 2021 consumer survey found that 54% of respondents said it was important that the ingredients in their food don’t have “chemical-sounding names.”  Excluding these kinds of ingredients can result in improved consumer loyalty. As discussed next, it can also be a cost-reducing measure.

Top three cost-saving strategies

What follows are the top strategies that led to cost savings for manufacturers:

1. Sustainable and responsible supply chain sourcing: Sourcing their ingredients from demonstrably sustainable and responsible processors benefits manufacturers, partly because a more stable and resilient supply chain unlocks operational and administrative efficiencies.
2. Buy and/or sell insets and/or offsets: Similar to sustainable sourcing, manufacturers that implement carbon insets and offsets often experience increased resilience, risk mitigation, and improved supplier relationships—and with that, cost reductions.
3. Reduce use of harmful chemicals: As noted earlier, reducing harmful chemicals has the dual benefit of improving revenue gains and reducing costs associated with material, waste disposal fees, and regulatory penalties.

Notably, surveyed processors also identified these strategies as their top three drivers for cost savings.

The path forward

Serving both businesses and consumers can be challenging if these groups have varied demands, but manufacturers can use their vantage point to drive sustainable change both up- and downstream. Although they often lack direct consumer interaction, manufacturers can work closely with downstream value chain partners to gain a better sense of consumer behavior and preferences and adapt accordingly. They can also work with suppliers and vendors to emphasize sustainable product attributes and strengthen their brand image.

¹ International Food Information Council, 2021 Food & Health Survey, 2021.

*All charts are based on data taken from the NYU Stern Center for Sustainable Business (CSB) report published in October 2024