Sustainable Leadership In The F&B Sector
A glimpse into the greening of business practice in the food and beverage industry
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According to a study done by The World Bank, one of the most worrying predictions about the future is the fact that agricultural production will reduce by 15% to 30% by 2080 due to climate change.
This is worrying, because even the current production rates cannot feed the entire world. A substantial percentage of people still suffer from acute famine. This is perhaps why human beings have become very conscious about sustainability efforts. Sustainability refers to the strategic efforts that are made towards meeting the needs of the present generation, without compromising the ability of the future generation from meeting their own needs.
In the last two decades, consumer demand for sustainability in any industry has increased- a 2015 world-wide study found that 55% of consumers from 60 countries said they were willing to pay more for products and services from companies committed to social and environmental improvements. At the center of these efforts is the food and beverage industry, which directly affects the agricultural sector.
According to research, consumers are now more than ever aligning their personal values with the brands they buy, making this one of the reasons why sustainable leadership is important to stay relevant in the food and beverage industry. This has raised the bar higher for companies to articulately define their values and what they stand for. From F&B manufacturers who adopt sustainable means of production, to restaurants and cafes that minimize their impact on the environment through clever use of leftovers, the F&B industry worldwide has embraced the greening of business practice. But how do you achieve the sustainability leadership scorecard in the industry? Sustainability is a responsibility that should be shared by the industry as a whole and alike.
The F&B industry is extremely complex, involving many decision makers, right from the food producers to retailers to the restaurateurs. In order to maximize the performance and growth of a sustainable food model, it is important that stakeholders involved at different levels come together to transform the food system with one common goal: beginning from manufacturers producing environment- friendly healthy food products, to retailers and other distributing junctions supporting and backing the efforts of the manufacturer, and vice-versa.
One of the principles of sustainable leadership in the industry is customer engagement. Most consumers are attracted to companies because of their sustainability efforts. Communication with customers transparently on the business process, and visualizing the supply chain via social media, not only creates talking point on the business processes, but brings the consumers closer to growers. This generates far greater confidence in the product/brand than any marketing or promotion can do. It is estimated that more than 40% of shoppers are interested in purchasing environment-friendly foods and beverages. Moreover, consumers are now willing to pay up to a 25% premium for foods and beverages that are certified as either organic or environment-friendly. In the West, the retail chain Wholefoods espouses that the consumer demands the best. The products retailers stock are also important when it comes to principles of sustainability leadership. More than half the population indicate that they prefer shopping at stores that carry food grown on sustainable farms. Consumers these days are not only interested in a healthy body, but also in a healthy environment. Since retailers are at the end of the supply chain and capture the bulk of the value of the product, they need to learn to share value across the value chain, in order to keep the chain healthy. Capturing bulk of the value, without redeployment backwards, will either kill the chain in the long term, or leave it with little possibility of rejuvenation via innovation, efficiency, etc. Moreover, such chains eventually become transactional agents, rather than relationshipbased value agents.
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Companies have been the first to take the sustainability agenda head on, and eventually many governments joined the initiative. Most companies started out of a business need seeing input resourcing difficult and non-perennial. However, these same companies were quick to realize how it converted into better products, better brands, and eventually, better bottom line. Soon, sustainability became a buzzword, and lost its true meaning. True sustainability requires long term vision, purpose-based existence, rather than profit-based existence and patient capital. Some projects may not generate the requisite ROI, but still need to be undertaken- because they make sustainable sense. Presently, the profitbased, EBITDA valuation may not be the best model for our current and future needs.
A different model that is based on sustainable efforts, climate impact, and sociological impact will create more "shared value" companies. Consumers have already started rewarding such companies by propagating their use online. The most important contributor in the present and future scenario to the sustainability efforts will be governments. The benefits of globalization in the last 30 years has brought the world closer together via open market access to each other's markets, the learnings of one have been applied in other countries in order to be globally competitive. This has led to mass innovation on both a micro and macro scale in agriculture and other industries. WTO pressures have brought a lot of homogeneity and improvement in global lives on many economic and sociological fronts, such as treatment of labor, standards, etc. However, in the name of consumer protection, the same standards are now being used as protectionist barriers to prevent free trade of goods risking the entire sustainability movement.
Sustainable supply chains are now struggling to find markets for their products due to adoption of various forced standards. Therefore, governments globally will have to lead a movement in the support of ethical value chains allowing sustainable chains to flourish. The sustainable movement needs more cradling, rather than strangling, to cater to the future generations and growing populations' needs. To facilitate this, governments need to incentivize sustainable practices by rewarding and promoting sustainable vendors such that the ecosystem flourishes, rather than buying from the lowest bidder. They need to encourage companies with an ethos, not just product supply chains, but those who practice sustainability in its dealings with employees, marketing communications, and ultimate business purpose. Organizations that meet this criterion would have a devised logo as a reward mechanism, which could only be displayed by select brands on packaging to make it easily identifiable to consumers. On the global stage, governments should also be collaborating worldwide to end the domestic market protectionism that masks non-tariff barriers hampering sustainability efforts.
However, the promotion of sustainability should not be limited to organizations, instead the government should educate through a separate ministry to schools, colleges, and universities to increase awareness of the sustainability movement. At an industry level, supply chains should reward and promote sustainable vendors such that the ecosystem flourishes, rather than simply buying from the lowest bidder. This applies to not just the supply chain but the ethos of companies as well– it's about dealing with employees, and ensuring marketing communication is purpose-led, thereby creating a social multiplier. Moreover, industry associations, and local chambers of commerce should also use "sustainability successes," and relate stories of previous vendors and experiences to empower others to convert to the same approach through regular meetings.
Consumers have a role to play too. A willingness to pay more for sustainable brands helps directly drive the change of organizations who will be reinvesting their dollars back. Investment from consumers means changing their own habits by disposing of waste and packaging responsibly, and recycling according to guidelines. Consuming products isn't enough however, citizens need to invest time in the community, country, and global development of the movement, and live "in the moment" to make actionable change for the future. Finally, consumers can facilitate governmental education initiatives by teaching children and family members the importance of this movement through gamification and open conversations on sustainability and individual impact.
The key takeaway is that in order for the sustainability movement to be successful, it relies on the wider, macro, and micro environments together- because everyone, from the government, to the consumer, has a role to play.
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