The recent COP 26 conference put decarbonization in the food system firmly back at the top of the agenda. Governments and the general public are demanding change. Carbon dioxide and other emissions, such as methane and nitrogen, must be reduced to achieve the sustainability targets that governments have agreed to. The food system forms a large part of this and must be transformed to ensure a sustainable future. If we want to realize net zero (or even carbon negative) emissions, that means we need to rethink how we produce, process and consume food.
The food system is one of the main drivers for global GHG emissions and accounts for roughly 27% of total emissions from all sectors. About two-thirds of all food-related GHG emissions are accounted for in the agriculture, forestry and land use sector, while the remaining third comes from processing, transport and packaging. Livestock production emits 45% of all methane emissions in the world, and fertilizers and crop protection products are responsible for 80% of all nitrous oxide emissions.This makes it clear that realizing the sustainability targets as discussed at the COP26 will strongly depend on the transformation of the Food sector. The aim is to move agriculture from a carbon source to a carbon sink and reduce GHG emissions.
However, the largest share of the carbon and sustainability impacts occur in the early stages of the food supply chain. Consumers, brands, and retailers often have little direct visibility or control over this.
While some retailers and brands are able and active to exert control, it is challenging to have farmers and other suppliers make the necessary investments to reduce their carbon footprint. Typically, farmers have limited financial incentives to do so as it would harm their already very slim operating margins.
With healthy soil we can sequester more carbon from the air, which in turn has an impact on climate change by lowering the emissions from agricultural land. It is not easy for farmers to transition to a new system and that is why we have developed a program to help them.
Strategy & Innovation Manager at Deloitte
It should come as no surprise that our existing way of producing food is neither sustainable nor healthy. We need to move away from our conventional farming system – a system that is traditional, linear, degenerating, and has a negative impact on the environment. Instead we need to move towards a regenerative farming system. A system that will have a net-positive impact on the ecosystem.
Deloitte recently set-up a program, together with one of our agri clients, that helps farmers transition to such a regenerative system. A sustainable system, focused on increasing and restoring soil health, soil resilience and biodiversity by applying various regenerative practices, such as diversifying crop rotations, applying permanent groundcover, minimizing tillage, reducing artificial fertilizers, improving water and irrigation management and using integrated livestock and grazing systems. One of the great benefits of this effort is that with healthy soil we can sequester more carbon from the air, which in return has an impact on climate change by lowering the emissions from agricultural land. Our program entails several products and solutions to help farmers with the transition towards improved sustainability by providing them with solutions that will restore soil health and biodiversity, maintain crop productivity, reduce costs and enhance profits. It also leads to many opportunities for developing new revenue models for all players within the food value chain; from farmers to retailers.
We need to feed a growing population but we can't afford to do so by expanding agricultural land through deforestation
Supply Chain Manager at Deloitte
Carbon build-up in the atmosphere is the net result of carbon emissions and carbon capture. This process is exacerbated through continued global deforestation to expand agricultural land because forests are important carbon sinks. Clearing them to convert into agricultural land has a triple effect, as the forest no longer sequesters carbon, carbon is often released through burning to clear forests and the subsequent farming practices add further GHG emissions. We need to feed a growing population but we can’t afford to do so by expanding agricultural land through deforestation. It is crucial that we efficiently make use of our land today, so we can supply future food demands on the same – or less – land in the future. That’s why, together with WWF, we developed an AI-based early warning system to predict future deforestation risk using a vast range of geospatial data and satellite imagery. It enables timely action being taken to stop the clearing of forests at the expense of biodiversity losses in habitats.
It’s not just down to the farmers in the chain to make the difference. Recent Deloitte research shows that consumers are keen to take action and more than 70% of consumers are willing to pay at least 5% more for organic food, foods that are sustainably and locally sourced and fair trade.
Partner & Future of Food Lead, Deloitte
We all need to start living within the boundaries of our carbon budget for food. But this carbon transition needs to be attractive and affordable for the average consumer, rather than cater to high-end consumer segments as is often the case. Together with our client, we developed a portfolio of food products that have a 25% lower footprint compared to the benchmark in the market. By bringing these products to market, the company is moving several steps up the value chain, compared to its traditional position and orchestrating all the partners along the chain to make changes. Initially, we thought these products might increase costs for farmers and consumers significantly but we found that this did not have to be the case. Consumer prices for these products would have to increase by less than 5% to compensate farmers for adopting more sustainable practices. And all this without harming the margins of any of the other value chain players.
It might sound a bit cliché but the only way to really enact end-to-end actual decarbonization is by working with all the value chain partners, including farmers, to reduce carbon footprints and by providing appropriate business models for the various players to do so.
Supply Chain Manager at Deloitte
It’s crucial to enable vertical integration and collaboration in the supply chain
The key takeaway here is that there are many decarbonization opportunities for food producers, processors and consumers that can be considered as fairly ‘low hanging fruit’ which do not have to drive costs for consumers up, or drastically reduce margins for companies. But it does require intense collaboration in the supply chain and a fair distribution of benefits and burdens among value chain players. In the next couple of years, we expect to see rapidly increasing levels of vertical integration in the food value chain, specifically driven by sustainability. Vertical integration could take many different forms and does not only have to be about retailers and food brands taking more control of the upstream value chain. It could also be about farmers organizing to move further down the supply chain by bringing their own brands and sustainable food concepts to market while ensuring appropriate compensation.
We've seen that realizing change requires an ecosystem approach in which the whole value chain, from farmers to food retailers, works together with startups, regulators, financial sector and others across the food ecosystem. We have an important role to play in this.
Partner & Future of Food Lead, Deloitte