How to lead the Food and Beverage Industry towards more Sustainability
What is the environmental impact of my food choice? How and where was my food produced? Was all that plastic really necessary to package my food? - All those questions are becoming increasingly more important for consumers when considering their options for food or beverage choices.
These days, consumers are demanding more transparency about the origin and impact of their food choices - in a report released by FMI and NeilsenIQ, about 64% of consumers stated that they were willing to switch from the brand they usually buy to one that provides more in-depth information about the impact of the product.
And this call has been heard - the offer of plant-based alternative products is skyrocketing, many restaurants are implementing vegetarian and vegan options in their menus, and an increasing number of supermarkets and shops offer sections where people can buy their products unpackaged. Some companies, such as Oatly, Veganz or HelloFresh, have even started to add CO2 labels to their products.
For an industry responsible for approximately one third of global emissions, there is still a long road ahead. But there’s a ray of hope at the end of the tunnel - many companies have already jumped on the opportunities that arise with that change, while others are slowly getting started to help mitigate the effects of climate change.
So, how can we reduce the carbon footprint of the food and beverage (F&B) industry? Let’s have a closer look at possible areas of improvement along the supply chain that companies in the industry can focus on, as well as trends that accelerate this development.
Reduction opportunities for different players in the supply chain
Across the supply chain, the potential for CO2 reductions varies widely. Emissions from land use change account for over 31% of total emissions from the food system, while emissions from farming activities contribute to as much as 39%. And while these two areas account for the majority of emissions in the supply chain, one should not neglect the CO2e emissions generated during the stages of processing, packaging, transport, retail and consumption. An additional focus should be paid to the food waste that is generated throughout the whole product journey - unconsumed food takes up a share of 9% of total food system emissions.
Knowing the overall impact of the food and beverage industry, it should come as no surprise that we quickly need to start decarbonising the way we grow, produce and transport our food if we want to be able to sustain a liveable future for our ever-growing population.
#1 Land Use Change & Farming: exploring (not so) new but better agriculture concepts
As mentioned above, the emissions stemming from land use change, as well as farming activities, make up for the greatest share, totalling to about 70% of all food related emissions. Consequently, players in this part of the supply chain have a huge lever in decarbonizing our food systems.
Deforestation, forest degradation, and an increase in croplands lead to a rise in emissions from land use change. One industry that is often linked to these issues is the chocolate industry. A good example of a company that actively tries to solve problems in the cocoa industry, including the elimination of deforestation, is Tony’s Chocalonely. The chocolate business is driven by a social and environmental purpose, and sells fair-trade chocolate that is 100% free from slavery and child labour. In order to change the chocolate industry and have an impact, Tony’s needs to ensure a high level of transparency in their supply as well as value chain.
In the next step, emissions can be further reduced by the adoption of more environmentally friendly farming methods. One practice that has gained rising attention over the last couple of years is regenerative agriculture. A growing number of companies are already exploring this approach. These also include big players such as Walmart, Unilever, and Nestle. Unilever, for example, is currently developing an investment tool, together with AXA and Tikehau Capital, that will help accelerate the shift towards more regenerative practices. As the WEF describes, this farming type entails many significant advantages, ranging from increased soil fertility and decreased waste generation to higher carbon sequestration. Methods included in regenerative farming are for example cover crops, mulch cultivation, catch crops, flowering strips, new hedges, grain legumes, brown field greenery, silvopasture, intercropping, perennials, and last but not the least agroforestry.
Another innovative and efficient concept is Agrivoltaics, which creates a symbiosis between agriculture and renewable energy by making use of solar greenhouses, elevated photovoltaic panels, or ground-mounted photovoltaic panels. This practice holds several benefits for the environment and the producers as it serves as a protection against extreme weather conditions, improvement of the ecosystem, and an increase in electricity efficiency thanks to the use of solar panels.
Other trends include vertical farming to directly connect urban farms and communities with each other (which reduces water consumption and the need for transport), the use of zero emissions farm equipment, or animal health monitoring.
#2 Lowering your environmental impact as a processing company
As a processing company, you have multiple quick wins that help you move forward on your net-zero journey. The most obvious one might be the implementation of an energy management system or the optimisation of your existing one, followed by the switch to an electricity provider supplying renewable energy. Furthermore, sourcing regionally entails great chances to improve your carbon footprint as it reduces distance and transport times.
Another challenge along the value chain that needs to be tackled is food waste. About one third of our food is wasted each year - that accounts for nearly 1.3 billion tonnes of food, while costing food producers approximately $750 billion each year. 9% of the emissions created by the food industry actually stem from food waste. However, it is important to know that more than half of the food waste is generated by the end consumer, making it difficult for companies to directly influence that behaviour in the short term. Nevertheless, processing companies should not underestimate the positive influence they can have on decreasing food waste happening at the consumption stage, as well as their ability to minimise food loss occurring during their own processes.
Creating use phase oriented product designs, including the optimisation of the product size and the indication that a product can still be perfectly fine to consume even if its “best-before” date has already expired, encourage consumers to throw away less.
A best practice example for a company that puts the reduction of food waste at the heart of their organisation is HelloFresh. Pre-portioned ingredients in their meal kits help to reduce food waste that often occurs in households when people buy more than they actually consume in a meal. Next to production emission reduction targets, HelloFresh also set ambitious targets specifically to reduce food waste: by the end of 2022, reduce the amount of food waste occurring through their operations and sent to landfill or incineration by 50% per euro of revenue compared to 2019. In 2021, the company also donated 68% of total surplus food to charities instead of throwing it away.
Another business that tackles the issue of food waste is Too Good To Go. Since 2015, the company is actively fighting food waste by connecting supermarkets, restaurants, bakeries, and wholesalers with consumers who can use the app to save food from going to waste. It’s a win-win situation - leftover food gets prevented from going to landfill, whereas consumers can buy food that is still good at lower prices from local businesses. In order to prevent additional waste, consumers are always encouraged to bring their own bags or containers to pick up their food. In 2021, Too Good To Go succeeded in saving over 52 million meals from being thrown away - and a total of 135 million meals since its foundation in 2015.
However, processing companies can also impact the amount of food losses occurring throughout the production process by redesigning workflows and machine settings, as well as automating activities. Besides the reduction of food waste, the use of artificial intelligence (AI) can also help the F&B industry accelerate the shift towards a more circular economy. AI can be used in food processing, in particular for sorting and quality control, but also in food production. By helping companies to predict their optimal production capacities, minimise energy consumption of their processes and increase overall efficiency, AI serves as a great tool in the process of moving towards more sustainability.
The Berlin-based Brewery BRLO is also setting a great example here by operating as sustainably as possible with regard to their raw materials, production, gastronomy and their employees. Not only does BRLO focus on constantly improving its procedures and processes to become more efficient, but the company also tries to source and produce as regionally as possible, ensure an efficient use of its raw materials and only work with selected suppliers who share its values and standards. Working to contribute to a circular economy, they make sure to also donate their spent grains to pig farmers, while also collaborating with start-ups to find alternative uses for their production “leftovers”.
#3 Intelligent Packaging
More and more companies are looking to improve their packaging - trends here range from the reduction of packaging to the use of recycled or recyclable materials over to going fully packaging-free. This can also be observed in the growing number of supermarkets that are now increasingly offering package-free sections, where consumers bring their own bags to transport their goods. Smart packaging with embedded sensors to track a variety of parameters of the food (freshness, temperature, humidity etc.) is also a good way to help consumers judge how long their food can still be consumed even after its expiration date, leading to a reduction of helping to reduce food waste.
On the other hand, some brands even look at developing completely new eco-friendly materials to either replace food packaging or to prevent it from spoilage. Lidl, for example, is currently co-developing a new protective coating for fruits and vegetables to protect fresh produce from spoiling. The coating will be made out of “pomace”, which is the pulpy residue that is left after making juice or oil.
#4 Further potential for reductions: transport
When looking at all reduction potentials along the supply chain, one can of course not neglect the transportation of food & beverages. For many products, transport is responsible for about 10% of the total emissions.
Choosing an emission light transport mode can already have a great impact on your transport emissions. Data from the Umweltbundesamt from 2020 show that transporting goods by train or ship is actually more than 3 times less harmful to the climate than transport by truck (Train: 16 g/tkm, Ship: 31 g/tkm, Truck: 113 g/tkm).
Furthermore, you can focus on optimising the organisation of your existing transportation network. A reduction of the weight of the freight already has a big lever on the resulting emissions. Packaging hereby plays an important role in transport, since many companies try to move away from plastic. Yet, given that plastic is more light-weight than other materials, such as glass or carton, and therefore causes less transport emissions, companies are now looking into optimising packaging for transport or reducing the thickness of e.g. glass containers. Companies like EcoSpirits already set a great example here - instead of transporting their liquids in glass bottles around the world, they transport it in bulk to the local destination. There, the liquids are transferred into smaller, reusable containers and sent to restaurants, bars, and hotels, where they are then bottled on site. On average, this approach could lead to a reduction of 60-90 % of the CO2 related to the packaging and distribution of spirits.
Next to that, transportation routes can be optimised by using software solutions. The Swiss retailer Migros, for example, developed the software M Opex Tower, which enables retailers to view and manage their logistics in real time and integrate sustainability KPIs into the transportation organisation. The company also plans to reduce their emissions on the street by 70% by 2030.
#5 Retail: how product offering can lower the carbon footprint
Last but not least, retailers play an important role in the decarbonisation of the food industry.
As described for processing companies, an optimised energy management system and the use of renewable energy, are easy steps to implement. Nowadays, there is also an increasing number of retailers that focus on green buildings. One example is this store in Wiesbaden-Erbenheim of the German supermarket chain REWE - natural light sources decrease the usage of electricity, rain water is being collected, and vertical farming eliminates the need to transport certain products to the store.
As previously mentioned, there has been an increased demand for alternative food options, including vegan, organic, and fair trade foods. Overall, it is expected that the market for plant-based alternatives made from soy, peas or other ingredients could reach a value of over $162 billion by 2030.
And it is not only supermarkets that are stocking up their shelves with those products, but also brands and investors can see a strong increase in demand for them. The German food producer Rügenwalder Mühle could already witness this trend first hand. The company was predominantly known for its meat and sausage products, until they introduced vegetarian and vegan products in 2014 - and now they are the market leader for plant-based alternatives in Germany. In 2020, the number of vegetarian and vegan products sold even surpassed that of meat products, which is setting a clear sign that the demand is there.
By expanding your offering to a greater range of diet-specific and healthy products, you’ll increase your chances to remain attractive as a brand in the long run. Overall, the greatest impact will be achieved through the switch from emission heavy products like beef to emission lighter products like plant based alternatives. Through supplier engagement and the visual presentation and organisation of products in a store, retailers can heavily influence the supply, as well as the demand for certain product groups.
With the growing population size, food demands will continue to rise in the future. Leading the food and beverage industry towards a more sustainable future will thus require a portion of efforts - improvements in agricultural efficiency, a reduction in food waste, an increase of lower impact food options, and an improvement in packaging are just a few examples of the menu.
And while it is often difficult for F&B companies to directly reduce supply chain emissions due to the complexity of it, there are still a number of options that businesses in the industry can already start implementing today. But first and foremost, your company should know its carbon emissions - you cannot manage what you do not measure! Then start defining and implementing a holistic reduction strategy.
Are you unsure how to get started with all of this? Feel free to reach out to us! We will be happy to enable you to measure and reduce your business’ emissions.