The Impact of the Food and Beverage Industry: The Un-Tasty Truth
Did you know that more than half of the world’s habitable land is used for agriculture?
Consumer attitudes are changing: In a world with rising health awareness among consumers and the growing importance of environmental protection and ethics, including the treatment of animals, there is a huge potential for brands to innovate the food and beverage market and become a front-runner as a sustainable food and beverage (F&B) business.
With approximately 17.3 billion metric tonnes of CO2, the F&B industry is responsible for a third of global emissions, which is almost 19 times more than the amount stemming from the aviation industry. Moreover, with global population growth, there is a 60% increase in food demand projected by 2050, which is putting additional pressure on the industry to reduce emissions.
Yet, in a recent Food and Agriculture Benchmark of the 350 world’s most influential food and agriculture companies (contributing to more than half of the industry’s revenue), the World Benchmarking Alliance found that the majority of companies actually performed rather poorly, and were neither contributing to achieving Sustainable Development Goals (SDGs) nor were they addressing their environmental impact or the working conditions of their employees. Out of the 350 companies, only 26 had actually set emission reduction targets that were aligned with the Paris Agreement, whereas 27% of businesses did not even disclose any sustainability strategy.
The increase of climate-related risks, that are already negatively impacting the F&B industry, but also the further tightening of regulations, guidelines and frameworks for target setting such as the upcoming FLAG (Forest, Land, and Agriculture) SBTi guideline or GHG Protocol Agricultural Guidance, are sending clear signals to companies: that it is extremely important to act now!
But where do all the emissions in the industry come from, and why is it so important for F&B to decarbonise? Let’s have a closer look!
The F&B industry - where are the emission hotspots?
The food and beverage industry is one of the biggest industries worldwide, with a total revenue between 10.5 and 11 trillion USD in 2021. In the EU, the F&B industry is the biggest manufacturing sector in terms of jobs and value added. The food market alone amounts to €1,507,166m in 2022 - and the market is expected to grow annually by 1.80%. Responsible for 36% of global emissions, the impact of the F&B industry is significant.
The continuously rising greenhouse gas emissions of an industry, that already accounts for about one third of global emissions, will make it very difficult to limit global warming in line with the 1.5°C target in the Paris Agreement, even if emissions from fossil fuels were to cease immediately. Scientists actually found that food emissions alone could cause the world to exceed the 1.5 degree limit in about 30 to 40 years and that without rapid changes, emissions from the F&B industry could double by 2050.
In terms of emissions, which mainly consist of CO2, N2O, and CH4, meat (beef, pork, lamb/mutton, poultry) accounts for almost 57% of all emissions related to food-production - almost double the amount related to the cultivation of plant-based foods. Beef has the highest carbon footprint, with 1 kg resulting in approximately 60 kg of GHG emissions. Did you know that livestock actually takes up almost three quarters of global farming land, while only producing about 18% of the world’s calories?
With regard to plant-based foods, the products with the largest footprint per tonne that are associated with food are cocoa, coffee, soybeans, rice, maize, palm oil, and wheat. However, it is important to know that a large part of cropland and those commodities (such as soy or wheat) is actually used to feed the livestock. Let’s take the example of soybeans: the increased demand for soy has been a big driver of Brazilian land-use change and deforestation in the Amazon region. Yet, about 95% of soy produced in Brazil is actually used to feed the animals - on a global scale it is about 75% of soy. Accordingly, some of those commodities are often linked to deforestation, increasing the impact they have on the planet if not sourced sustainably.
Overall, the greatest reduction in the food industry can be achieved through the shift from emission heavy products (meat and cheese) to emission light products (most plant-based products), by reducing food waste, and increasing crop yields.
Next to the food in itself, its packaging and distribution also contribute greatly to the F&B industry's emissions. Packaging in particular is directly under the scrutiny of the consumers' eyes with an increasing number of consumers looking at the sustainability of the packaging of their foods and beverages. In this context, it is not only important what happens to the packaging after the item has been consumed, but also how high the impact of the production process is. At current, the food packaging market is valued at USD 301.3 billion (in 2020) and accounts for about 5.4% of food system emissions. However, in terms of the transition towards a more circular economy, a change can already be noticed with an increasing number of regulations and more and more countries banning the use of single-use plastics. F&B companies that want to be frontrunners are therefore encouraged to look into packaging alternatives, including new packaging technologies or package-free options, if possible.
The transport of the items is responsible for approximately 5% of the product’s total footprint. The extent to which food transportation contributes to GHG emissions depends on the mode of transport used. And although the majority of consumables are not transported via air freight, it is often the case for fast perishable foods, such as berries. Nonetheless, consumers often don’t know how their food is transported, which complicates their ability to make conscious purchasing decisions. This opens up a window of opportunities for companies in the F&B sector to win over conscious consumers by helping them make more informed decisions through greater supply chain transparency and disclosure of information.
Failure to address supply chain issues
Supply chains in the F&B industry are very complex and can vary to some extent, but typically they consist of 7 stages: (1) Land Use Change (2) Farm (3) Animal Feed (4) Processing (5) Transport (6) Retail and (7) Packaging.
The majority of emissions in F&B stem from agricultural production, livestock and land-use practices. And despite Scope 3 emissions making up to 90% of the industry’s emissions, many companies in the F&B sector still don’t have a Scope 3 reduction strategy or an overall reduction strategy aligned with the 1.5 degree scenario. According to the Food and Agriculture Organization, the food supply chain in many countries is even on its way to overtaking farming and land use as the largest emitter of greenhouse gases stemming from the agri-food system.
In 2014, Oxfam found that the emissions related to the supply chain and operations of the 10 biggest F&B companies were equal to the annual emissions of all Scandinavian countries combined. Even though changes are happening nowadays, there is still a long road ahead of the industry. With the increasing demand from consumers for more transparency about the origin and impact of products, the importance of transparency over the supply chain footprint is essential for the decision-making process. To help accelerate this process, the European Commission’s “Farm to Fork” strategy foresees the development of an EU sustainable labelling framework by 2024 with the goal to make our food systems more environmentally-friendly, fair and healthy. Therefore, F&B companies should start acting now and support and encourage their agricultural producers to reduce the climate impact of their livestock and crop production to drive a transformation across the sector.
Moreover, sustainability and transparency in the supply chain can also bring a variety of benefits to F&B companies, such as being better prepared for legal compliance and regulatory pressure, better chances for attracting and retaining talents, enhancing customer loyalty and investor interest.
2. Issues surrounding waste & pollution
F&B is a very resource intensive sector, with energy and water being the frontrunners. In fact, the agricultural sector is currently the world’s biggest user of water, accounting for about 70% of water used in the world. As an example, for the production of 1 kg cheese about 5,605 l of freshwater are required - the same amount as 5 years of drinking water for one person. Besides that, due to livestock effluents and the use of pesticides and fertilisers, the sector remains a major contributor to water pollution of groundwater and waterways. About 78% of global eutrophication (the pollution of water with excessive nutrients) is caused by the agricultural sector.
Yet, it is not only the use of energy and water that play a significant role in all of this - food waste is also a major contributor to the industry’s carbon footprint, being responsible for about 6% of global greenhouse gas emissions. If food waste were a country, it would be the third-largest emitter in the world, just behind China and the United States. Worldwide, about one third of all food produced gets wasted. A study found that about 24% of emissions from the food industry actually stem from food that is either lost in supply chains (due to poor storage, spoilage in transport etc.) or wasted by the consumers.
Due to climate-related effects such as droughts, the food industry is facing water risks in the future. For a sector that is so highly dependent on water, finding ways to improve resource efficiency will be essential. In order to ensure the resilience of food systems, the F&B should become a frontrunner in setting holistic corporate climate reduction strategies, primarily addressing Scope 3 emissions.
3. Resource Use and Deforestation
Emissions related to agriculture have increased considerably over the past decades. Given population growth and the associated increase in demand for food, those emissions are expected to rise by another 30% by 2050.
Unfortunately, with the rising demand for agricultural commodities, the rate of deforestation also continues to increase globally. According to estimations, the world has lost about 1.3 million square km of forests since 1990 - an area equal to the size of Peru. In 2019, deforestation was actually found to be the largest source of GHG emissions, followed by livestock manure, food waste, household consumption, and fossil fuels used on farms and the food retail sector. Even though deforestation is not only linked to the F&B industry, but also to a number of other sectors, the food and beverage industry contributes to it with a significant share. Agricultural commodities, such as palm oil, soy, coffee, cocoa, as well as grazing land for cows and other animals are the main drivers for tropical deforestation, resulting in a high carbon footprint of those products.
Moreover, low wages and bad working conditions for the workers often lead the farmers to do more deforestation to have more land available for crops or livestock in order to increase yields, and thus receive more money - a vicious circle that needs to be broken.
How F&B and climate change are intertwined
Climate change and the related increase of unpredictable (extreme) weather occurrences are having a negative effect on agricultural productivity, heavily impacting the supply chains of food companies. The sector has already experienced disruptions in the supply of raw materials due to droughts, floods and other natural catastrophes, resulting in an increase in prices and a decline in crop yields. For example, as a result of the most recent heatwave in India farmers are expecting a drop of up to 25% in wheat crop yields - and this is just one example out of many.
According to the Fifth IPCC Assessment Report from 2014, developing countries are the ones that will be hit the hardest by the effects of climate change. And since so many F&B companies source their raw materials from precisely those countries, it will have serious consequences for them. Let’s take a look at the example of West African countries, where it is projected that by 2050 there will be a 70% decrease in crop yields, and 50% decrease in beans, bananas and maize.
In their top 10 list of global risks over the next 10 years, the World Economic Forum even rates climate action failure and extreme weather to be the most severe ones - this should be even more of a wake-up call for companies to start acting now as they will be heavily impacted in the future in various ways.
All of this is looking pretty grim? Don’t worry, in our next article we will present you a menu of good solutions and how we at Planetly can help your company contribute to more sustainability in the sector.