Food and beverages
Fair trade, agricultural impacts, responsible marketing and the GM debate are some of the most pressing issues that companies in the food and beverages sector are grappling with.
Key challenges and opportunities
The fair-trade movement has brought to public attention problems in the supply chains for foods and beverages – for instance, producers in developing and fragile economies receiving an insufficient share of profits, and the concentration of market power in the hands of a small number of global companies in markets for commodities like chocolate and coffee.
In the face of growing consumer demand, some major supermarkets have committed to building Fairtrade and ‘fairer’ trade lines. Adoption of Fairtrade chocolate and coffee by brands such as Cadbury, Nestlé and Starbucks has significantly increased Fairtrade sales recently in some markets. As a result, food and beverages companies increasingly need to demonstrate that they source their products ethically, and increase the transparency of their activities through their public disclosure.
They are also increasingly being held to account for the environmental impacts of the products they source. In particular, palm oil has been identified as the cause of widespread deforestation . There are concerns over continuing expansion of palm oil cultivation in eco-sensitive areas, particularly as it can only be grown in tropical areas of Asia, Africa and South America. One significant brand has been criticised for promoting Fairtrade chocolate which uses responsibly sourced cocoa, but unsustainable palm oil. There is increasing pressure for companies to use Certified Sustainable Palm Oil.
Against this background, there has been a proliferation of sustainability certification schemes, which risks creating consumer confusion and is attracting close attention from NGOs, which wish to see greater clarity.
Responsible products and responsible marketing
Concerns over obesity and alcohol consumption have shone a spotlight on the commercial practices of the sector. The World Health Organisation projects that, by 2015, approximately 2.3 billion adults will be overweight and more than 700 million will be obese. Meanwhile, alcohol causes about 2.3 million premature deaths per year worldwide. As a result, food and beverages companies are under growing pressure to:
- make responsible decisions over product formulation (such as salt and fat content and the use of additives)
- market responsibly, particularly to children and young people
- label products clearly so consumers can make informed decisions.
The GM debate
The use of genetically modified (GM) ingredients and technologies remains controversial. Although most concerns remain largely unproven, in many countries there is significant consumer opposition as well as legislation restricting or banning the use of GM ingredients. Increasing attention is also being paid to how key players use or abuse their market power to influence legislative processes.
As new GM technologies emerge, pressures will mount to allow their use. This will raise questions about international decision making and oversight. Food and beverages companies must offer customers choice and information and be transparent about their lobbying and support for research trials.
Agricultural lands occupy nearly 40 per cent of the Earth’s land surface and the majority of raw materials for the food and beverage sector ultimately come from farms. Primary production is closely allied with many core sustainability issues such as water scarcity and climate change.
For instance, it is estimated that irrigation accounts for about 70 per cent of worldwide water use. Unilever assessed that around 80% of the water use in its food business’ lifecycle related to the sourcing of agricultural products. Local access to water resources has become a flashpoint for conflict and there is growing NGO and corporate focus on water scarcity as a core issue.
In addition, agriculture accounts for 52 per cent and 84 per cent respectively of emissions of global anthropogenic methane and nitrous oxide , both potent greenhouse gases, as well as for large-scale CO2 emissions.
There is also a growing awareness of the need to protect biodiversity, which is shining a light on issues such as clear felling for agriculture and the ways in which society benefits from, but does not necessarily pay for, ‘ecosystem services’.
Food and beverages companies will increasingly need to account for their indirect contribution to global social and environmental challenges, demonstrating management strategies to mitigate their impact.
- We worked for several years with global brewing giant InBev, providing advice on its approach to corporate citizenship and hands-on support on the writing and production of four successive annual Global Citizenship reports. This included helping the company identify and prioritise its material issues, and report against the GRI G3 guidelines.
- For spirits company Bacardi, we provide advice on CR strategy, report development and responsible sourcing.
- We worked with Danish food ingredients manufacturer Danisco to provide independent assurance of its sustainability report, and to advise on its stakeholder engagement strategy.
- We advised a leading spirits group on a responsible marketing strategy.
- We provide independent report assurance for the Co-operative Group, a pioneer in fair-trade retailing.
- We provide independent report assurance for Morrisons, the first of the four major UK supermarket retailers to seek independent assurance.
- We provided independent report assurance for Finnish retailer Kesko, a leader in responsible retailing in Scandanavia.
- We provided independent report assurance for Traidcraft, the award-winning fair-trade champion.