Decarbonising the Food and Drink industry - some practical steps
Decarbonising the Food and Drink industry - some practical steps
Author: Amy Capra
As the world approaches the critical threshold of 1.5 degrees of warming, the pressure on sustainable food production has reached a pivotal moment. This pressure comes from regulators, end consumers and increasingly from across the supply chain and is set to pose new challenges for manufacturers. Those unprepared to meet stringent emissions requirements risk losing market share and the ability to capitalise on opportunities emerging from the green transition.
Our latest Food and Drink survey revealed that over a third of UK Food and Drink manufacturers have now established net-zero targets. These are not just aspirational benchmarks; a resounding 91% of targets are science-based, with 80% of companies having a plan in place to meet them and 71% on track to meet their objectives. The divide between those proactively addressing sustainability and those lagging continues to widen, underscoring the urgent need for manufacturers who have yet to invest in their transition plans to act now.
Drivers of decarbonisation in the Food and Drink industry
A number of regulatory drivers have sent companies scrambling to accurately measure and disclose their carbon emissions. In 2022, it became mandatory for listed companies in the UK to annually make climate-related financial disclosures consistent with the Task Force on Climate-related Financial Disclosures (TCFD). From 2025, large companies in the EU will be obliged to report the carbon footprint of their entire value chain, and the International Sustainability Standards Board (ISSB) - whose standards are set to be referenced by regulators around the world - includes a clear requirement for GHG disclosures on scope 1-3 emissions. The purpose of such regulation is to increase transparency and enable market participants (e.g. investors) to factor in risk while encouraging firms to adopt cleaner practices and engage with their supply chain.
Against this backdrop, public opinion has now shifted, and global food production must respond accordingly. Consumers are increasingly voting with their feet and shifting to products that reflect their concerns about climate change and the wider sustainability agenda. A recent BDO survey found that for 54% of the Gen Z respondents, the sustainability attributes of a product were either important or highly important to their decision to make a product purchase.
The result has been a race to become the environmentally responsible provider of choice and the announcement of a plethora of net-zero pledges. Many food and drinks companies, such as Innocent, McCain and Tate & Lyle have now published net-zero science-based targets. Major UK supermarkets, including Sainsbury's, M&S, the Co-op and Tesco, have set ambitions in place to reduce emissions from purchased goods. In 2023, Worldwide Fund for Nature (WWF) welcomed Aldi to the Retailers’ Commitment for Nature. This means more than 70% of the UK grocery market is now committed to the Courtauld commitment, which aims to achieve a 50% absolute reduction in emissions associated with UK food and drink by 2030, against a 2015 baseline. Other key customers of food and drink manufacturers with net-zero initiatives include the NHS and leading retailers through the British Retail Consortium.
Risks and Opportunities for manufacturers
As a result, manufacturers and distributors are set to receive stringent emission requirements from companies in their upward value chain. These requirements will cascade down the value chain and work alongside wider compliance requirements to drive a more sustainable food production system.
In March 2023, Waste & Resources Action Programme (WRAP) and WWF joined forces with eight major UK supermarket retailers to standardise the industry approach to measuring and reporting scope 3 emissions. The partnership will offer industry-focused guidance on how to request and use supplier emissions data - an unusual move of collaboration in the highly competitive retail sector. Leading consumer brands, are moving toward a hybrid approach to measuring their emissions from purchased goods and services, blending the spend-based approach, which multiplies financial spend by generic spend-based emissions factors, with supplier-specific data gathered through engagement with their highest-emitting suppliers.
Moving forward, the trajectory indicates that retailers will increasingly demand more granular detail, from a greater pool of suppliers. Manufacturers that cannot meet the requirements may risk losing key contracts. Those who have visibility over their carbon data can use this as a competitive advantage.
How to reduce carbon footprints in the Food and Drink industry
1. Understand your Carbon Footprint:
- Map your historical emissions across the value chain, starting with operational emissions and building an understanding of the supply chain.
2. Articulate where you want to be:
- Decide the speed at which your company will respond to address climate change, considering the required investment and the overall value to be gained through the transition to a net-zero approach.
- Prepare baseline year calculations and set both near and long-term targets.
- Consider verification by The Science Based Targets initiative (SBTi).
3. Develop a carbon reduction plan:
- Identify the key emissions you need to address and set out a high-level roadmap to net-zero.
- Identify external dependencies, risks and opportunities.
- Develop a detailed implementation and data improvement plan iteratively, improving year-on-year.
- Collaborate with suppliers to reduce Scope 3 emissions through value chain transparency, incentives, capability building, and programme governance.
- Build confidence with key stakeholders by clear articulation of plans and transparent reporting.
4. Avoid misleading claims:
- Ambiguity may blur expectations, possibly leading to reputational and legal risks if your brand is perceived as having fallen short.
- The rise in net-zero pledges has brought greater scrutiny to the consumer industry regarding the legitimacy of such claims.
- Consider external verification of your data and calculation methodologies. This promotes higher levels of accuracy and completeness within reported figures and can be an important defence.
5. Review business strategy to ensure it aligns with a net-zero transition.
- Work with trusted advisors to ensure your core commercial strategy is in line with decarbonisation to reduce environmental impact, improve efficiency and save cost.
How we can help
Our Carbon Advisory practice offers services relating to compliance, reporting and net-zero transition strategy. This includes the development of practical and impactful plans, carbon accounting baseline assessments and greenhouse gas assurance.
How we can make a difference:
- Delivering decarbonisation through emissions mapping, monitoring, assurance and verification
- Ensuring compliance within the complex regulatory environment
- Pivoting business models through target-setting and transition planning.
How to get in touch
If you would like to discuss any of the topics raised in this article, please don't hesitate to contact Howard Lungley, Head of Carbon Advisory within the Sustainability & ESG Hub or get in touch here.