Sustainable sourcing and the ingredient supplier

Ingredient sourcing has, rightly, long been an area of focus for many of the food and drink sector’s sustainability trailblazers, particularly in the specialty-ingredients categories such as coffee and cocoa. As companies map and start reporting on their carbon footprint, it becomes clear that most of their emissions come from their supply chain. The challenge, even for leading industry players, is how to positively influence what happens outside of their factory gates and how to collate robust data and insights to inform business decisions, satisfy stakeholders and maintain cost competitiveness, today and tomorrow.

This additional level of transparency in business reporting—along with its associated complex and ever-changing requirements—is daunting. There was a collective sigh of relief when proposed delays in disclosures associated with Europe’s Corporate Sustainability Reporting Directive were announced, giving everyone much-needed breathing space, not to avoid the work but for the time to prepare properly for when they do come into effect. ESG reporting is important, but it can also be a minefield, especially for companies starting from scratch or with fewer resources. That’s why cross-supply chain partnerships and strong relationships with sustainability-minded suppliers— who bake sustainability into their day-to-day operations and core customer offering—are so important.

We believe that the role of ingredient supplier offers a special opportunity to connect different parts of the food supply chain. In part, it’s about helping producers with impact visibility, such as product carbon-footprint data. To drive greater impact, however, it’s also about supporting the cultivation of sustainably grown raw materials for what later become the food products that we see on the shelf.

Understanding individual and shared goals

Expectations that businesses are operating responsibly are high, and most stakeholder groups want to see tangible evidence that they are working towards society’s goal: a net-zero economy. There is clear recognition in the investor community that climate change is a major business risk, with MSCI’s recent survey showing that 84% of financial-market participants now believe that extreme-weather events will negatively impact the economy. Investors especially want to be assured that companies are strengthening resilience to climate change and that it’s part of the planning and risk-assessment process.

Increasingly, it’s also about differentiation and aligning what you do with the values of those in your workforce, communities and customer base. While participants in a supply chain may agree on the direction they want to take, they will each face different pressures and have different resources to draw on, and these differences need to be taken into account when you engage around shared sustainability goals and programmes.

Ultimately, regenerative-agriculture programmes must be about genuine partnership with farmers rather than a top-down approach, and we approach responsible sourcing through our regenerative-agriculture programmes in the United States, Europe and China. 

Why care about sustainable sourcing?

I believe the companies that most value sustainability will be successful, but everyone needs to act with urgency to mitigate the worst effects of climate change.

Consumers increasingly want to see that the brands they are choosing in store reflect their values and I believe this will become more front-of-mind as the effects of climate change become even more visible. Recent consumer research shows that more than two-thirds (67%) of UK consumers actively choose certain food and drinks with sustainability claims over others. But there is scepticism, with disbelief in sustainability claims being one of the main purchase barriers after price concerns and loyalty to familiar favourites.

For food and drink brands, this ability to showcase strong sustainable sourcing credentials is challenging to navigate, with reporting standards and metrics varying greatly. What we need is a unified approach to disclosures. Until that is adopted, certification through respected schemes such as Fairtrade or Rainforest Alliance, and transparent ESG reporting are the best ways for sustainability-minded companies to show consumers what they stand for and what they are doing in this area. 

Everyone has their own take on what counts as “sustainable”. I see this as an opportunity for ingredient suppliers and brands to come together and collectively agree on what responsible sourcing looks like so that food and drink brands can help consumers understand it. If we are going to drive change at the necessary scale and pace, we need to bring consumers along with us.

Views or opinions expressed are those of the author and any individuals cited, and do not necessarily reflect those of Economist Enterprise or any other member of The Economist Group.