This blog is the second in a series titled ‘The Future of Food Systems’, written by MBA candidate Melissa Benn. It explores the ways our food systems can and should pivot in a world that is being increasingly disrupted by climate change.
Corporate sustainability pledges hold a lot of promise and are an important signal in the global push to address climate change. However, we need more from food system corporations.
There are hundreds of organizations that operate within our food systems: companies that produce and sell chemical inputs to farmers, companies that purchase crops and livestock, companies that process and package for grocery stores, companies that source and prepare foods, and all the companies that transport our food throughout each leg of the journey. Carbon emissions from this ecosystem of actors alone, if left to continue at their current rate, would result in enough extra warming to break the 1.5C goal stated in the Paris climate agreement.
In order to stay competitive with an increasingly concerned consumer base, food system companies must transform virtually every business practice in order to be aligned with climate goals. Many corporations have started this process by publicly declaring their intentions to be better actors through highly-lauded and publicized sustainability pledges. As of March 2021, one-fifth of the world's 2,000 largest public companies (representing sales of nearly $14 trillion), have Net Zero targets.
However, it only takes a few years to start recognizing a pattern. Corporations used to pledge to Go Green and be Carbon Neutral. Now every company and their subsidiary are pledging to go Net Zero. But what happened to the Go Green pledges of the last decade? What about sustainability certifications and reforestation pledges? How do we ensure corporations are held accountable for their climate commitments?
I tackled this wide-ranging subject with the insightful Dr. Derric Pennington, a sustainability scientist, researcher, practitioner, and amateur cartoonist whose work spans conservation, economics, land use, regenerative agriculture, and ESG within private and public sectors. Our conversation covered both the past and the future and compared pledges today with what we should expect of food system companies in the future.
Currently, only 20% of Fortune 500 companies have science-based Net Zero targets, and even fewer report on the methods or specific actions they will take to reach these targets, reeling in cries of greenwashing from critics. These pledges often look too far into the future; i.e. Net Zero by 2040, instead of making more meaningful, short- and medium-term goals. By passing the proverbial buck to a future CEO, there is little pressure for leadership to make bold decisions or concern themselves with the massive transformation required to become Net Zero. Producing science-based targets, being transparent with their methodologies, and disclosing key climate information should be the baseline required by consumers and governments. Truly innovative companies could seize the opportunity to move a step further and creatively reimagine their pledges. There is space for corporations to actively invest in the development of carbon removal technologies, dig into nature-based solutions, and aid their farmers and producers in the transition to regenerative practices. Pledges should be multi-dimensional and include short- and medium-term goals. Positive performance of these short-term goals will give companies the opportunity to genuinely associate their brand with long-term sustainability.
Producing science-based targets, being transparent with their methodologies, and disclosing key climate information should be the baseline required by consumers and governments. Truly innovative companies could seize the opportunity to move a step further and creatively reimagine their pledges. There is space for corporations to actively invest in the development of carbon removal technologies, dig into nature-based solutions, and aid their farmers and producers in the transition to regenerative practices. Pledges should be multi-dimensional and include short- and medium-term goals. The positive performance of these short-term goals will give companies the opportunity to genuinely associate their brand with long-term sustainability.
As pledges are voluntary, there is no requirement for companies to report on or follow-up on progress towards their goals, let alone report when they have failed. Without disclosure requirements and consistency across corporate pledges, benchmarking progress is all but impossible to track.
At COP26, the International Financial Reporting Standards (IFRS) announced prototypes for multiple transparent and auditable global accounting and sustainability disclosure standards boards that companies will be able to report to. 140 countries have worked with IFRS, signaling a large demand for this comprehensive global baseline, and a system of actors eager to engage. This poses an incredibly exciting future: one where we can more easily sort through the noise and truly hold companies accountable to their climate promises.
Food systems corporations have sustainability departments with passionate proponents of climate change mitigation. However, no corporation will deny that sustainability pledges create positive brand associations, and help to hedge against the reputational risk of being perceived as bad actors. Corporations are rewarded by having simple and pithy Net Zero campaigns while continuing business as usual.
True progress will come when climate action is mandated by governments. In the meantime, as consumers demand to see progress from global polluters, organizations must discover, price, publicize, and integrate creative solutions to climate mitigation.
Realistically, your average consumer will not understand the nuances of natural capital valuation, or how regenerative soil practices impact their chocolate bar, let alone be able to demand that corporations fulfill those promises. Nor should we expect them to. Yet companies must adopt many of these practices, choose the solutions most in line with their business and climate goals, be assessed against global baselines, and celebrated if they succeed.
A difficult road ahead
The food industry operates on thin margins and serves consumers who expect low and stable food prices: an increasingly difficult job as unpredictable weather, rising inflation, and an energy and labor crisis have pushed food prices to a 10-year high. We cannot deny that there are large upfront costs required in switching intensive agricultural practices that have been in use for well over a hundred years. However, we must ensure we are paying producers more for more sustainably produced goods. We must ensure farmers receive market premiums for improved stewardship of their land. We must translate the benefit of increasing pollinator habitats into corporate balance sheets. We must seek technologies and methodologies that will fundamentally disrupt our current price structures and ways of working.
These are some of the essential ethical and economic questions that all companies must seek to answer in order to create meaningful, transparent sustainability pledges. One thing is certainly clear: future leaders will need to be intimately familiar with climate strategies in order to lead successful businesses.