The latest news, trends, analysis, interviews and podcasts from the global food and beverage industry

Alex Andreoli, an associate with the Food and Land Use Coalition and Systemiq, calls for the food and agriculture sector to invest $205 billion annually to cut global food system emissions. With 75% of these emissions coming from agricultural production, new EU regulations will require companies to adopt stringent sustainability measures. Andreoli’s work on the Future Fit Food and Agriculture report series emphasises the need for businesses to integrate voluntary standards and collaborate across value chains to meet these targets.

75% of food systems emissions, projected to be 21 GtCO2e1 per year by 2030, sit within the value chains of food and agriculture companies and come mostly (10 GtCO2e) from agricultural production and associated land use change. Increasingly, governments are proposing new climate legislation to accelerate the sector’s transition to net zero and to force companies to act.

While a lot of this is draft and under discussion, the direction of travel is clear: policy-makers are using existing voluntary standards as the basis for legislation. Taking the EU as an example, within the next two years companies should expect to have to comply with the Corporate Sustainability Due Diligence Directive (CSDDD), the Corporate Sustainability Reporting Directive (CSRD) and the Deforestation Regulation on deforestation-free products (EUDR).

These laws will force in-scope companies to integrate due diligence requirements into their operations, mitigate negative impacts across their value chains, ensure that their business models are 1.5°C-aligned and report on sustainability-related issues. Non-compliant companies could face penalties of up to 5% of their global revenues.

While the EU is leading the way in much of this, many other countries and jurisdictions have also drafted or implemented legislation along the same lines. For more detail, report 1 of the Future Fit Food and Agriculture series outlines the voluntary standards that are the priority for the food and agriculture sector (eg. SBTi, TCFD, SBTN, TNFD) and provides an overview of key sustainability legislation that companies must be aware of and react to in the next few years.

To stay ahead of legislation and protect their license to operate, companies need to use existing and emerging voluntary standards to set and deliver against ambitious climate and nature strategies.

In the face of this, how should companies act?

Decarbonising food systems is possible. Report 2 of the Future Fit Food and Agriculture series estimates that the food sector could mitigate 9 GtCO2e per year by 2030. To do so, the sector should be prepared to pay an annual $205 billion between 2025 and 2030. While this cost is significant, it represents less than 2% of the sector’s projected average annual revenues for the same period, and one-fifth of this represents investments in new and growing markets.

These new markets could lead to additional returns of $190 billion per year by 2030. On top of this, there are a range of solutions that provide efficiency savings and/or increased yields worth up to $30 billion per year.

One critical challenge preventing the uptake of these solutions at scale is the inequitable distribution of costs and benefits along the value chain. The same report compares how the costs associated with mitigating 30% of their agricultural emissions impact three businesses at different stages of the value chain. For a trader and multinational food company, these costs amount to approximately 3% and 1% of their revenues respectively, but for a farmer, they could be as high as 17% of revenues.

For farmers, such costs could trigger insolvency and they cannot be expected to shoulder this burden alone. There are already examples of food companies making significant investments in their operations and supply chains (eg. Mars and Nestle) to capture new business opportunities and meet environmental targets, but this approach needs to be more widespread with companies working across their supply chains to create the right mechanisms, financing arrangements and support that enables the change we need.

Along with the distribution of costs and benefits depending on where in the value chain businesses sit, they will also differ by the commodity being produced. Typically, livestock emissions will remain harder to abate than plant-based commodities, and mitigating these will cost more per tonne of carbon. Therefore, companies should build specific decarbonisation pathways that identify where they can achieve mitigation and what the associated costs of actions will be.

For some producers, this may even be an opportunity to achieve negative emissions (ie. sequester more carbon than they emit in production) and be paid a premium to do so.

There are several asks businesses should be making of policymakers to help support this transition. These range from continuing to use existing voluntary frameworks as the basis of national legislation, to subsidy reform, carbon pricing mechanisms and aligning public procurement policies with sustainable, healthy foods.

Compared to other sectors (eg. energy) the transition is not capital intensive and the need for permits is unlikely to be a cause for delay. For comparison, the power sector needs an average of $2.4 trillion invested each year between now and 2050 to decarbonise and while permitting restrictions can make constructing wind and solar farms difficult, few such limits exist to impede food system transformation.

By mitigating a significant share of the emissions from their value chains, food and agriculture companies will make their supply chains more resilient while also meeting other environmental needs. From a commercial perspective, taking action now will enable companies to recoup investments through new market entry and make use of the increasingly available subsidies.

#opinion #foodsystem #decarbonisation