“Creating sustainable value chains” is key, says Orkla report

20 Mar 2019 --- Norwegian branded consumer goods giant Orkla ASA has published its annual report for 2018, including the group’s sustainability report, which focuses on how the company creates sustainable economic growth by developing products and solutions that are good for people and the environment. The report explains how Orkla is seeking to create sustainable value chains and inspiring consumers to adopt a healthy diet and examines the company’s switch to sustainable production and generally making sustainability an integral part of company business. The publication of the sustainability report comes at the same time as CEO of the Norwegian food company, Peter Ruzicka, announces that he will step down from his role this May.

“All the Orkla companies across the 30 countries where we are present are mobilizing to reach the common sustainability targets which we have set for the group towards 2025,” Ellen Behrens, Orkla’s Vice President Corporate Social Responsibility, tells FoodIngredientsFirst.

“Several of our targets are challenging but we are making steady progress and believe that the targets will be possible to reach. Our engagement for sustainable raw materials, sustainable packaging, climate gas reduction and nutrition and wellness makes our products more sustainable and is important for long-term market success,” she adds.

According to the report, even small improvements in products can have positive effects and by developing products and services for a healthy lifestyle, Orkla aims to make important contributions to public health.

Orkla estimates that the product improvements it has carried out across its food business in the past five years have resulted in a reduction of around 8 percent in terms of salt content and 7 percent sugar content from its products. 

The company’s food production makes it one of the biggest purchasers of agricultural and fish raw materials in the Nordic region which means Orkla impacts on the environment by using energy and water and purchasing packaging and transport services. 

Orkla notes that it is involved in certain global raw material chains that present complex economic, social and environmental challenges. However, by switching to renewable energy, using resources efficiently, reducing food waste and making targeted efforts to achieve sustainable raw material production, Orkla says it can contribute to a sustainable value chain for food and grocery products. 

Creating sustainable products
Demands for healthy food based on good agricultural raw materials, plant-based products and grocery products with environmentally-friendly packaging are clear consumer trends, according to Orkla. The company is responding by “maintaining a long-term focus on developing products with beneficial health effects, sustainable raw material production and renewable, recycled and recyclable packaging.”

Drought and bad weather have impacted the production of certain agricultural raw materials purchased by the group, and have, at times, affected the price and supply of these commodities. Changing weather patterns have also pushed the price of energy and water up in some of the countries where Orkla has production facilities. 

“We anticipate continued volatility in the price of raw materials, energy and water in the years ahead, but expect the consequences of extreme weather to be moderate for Orkla in the short and medium term,” the report notes. This is because most of Orkla’s manufacturing and sourcing is carried out in the Nordics, the Baltics and Eastern Europe, where the likelihood of water shortages and drought is lower than in areas with a hotter climate.

Although the risk of Orkla’s own production operations being affected by flooding or extreme weather is low, the company is countering the risk of cost increases and shortages of raw materials by optimizing its use of resources, using alternative raw materials and partnering with its suppliers to promote the long-term sustainable production of raw materials.

Sustainability criteria
The report also notes that Orkla has drawn up criteria for defining sustainable products. To be classified as sustainable, the product must satisfy the criteria in at least two of the following three categories: sustainable raw materials, sustainable packaging and products that promote a healthy lifestyle. 

The company will start measuring sales of products that fall into the three aforementioned categories in order to highlight the commercial effect of its sustainability efforts.

Meanwhile, CEO of the Norwegian food company, Peter Ruzicka, will step down from his role this May –when the company presents its first-quarter 2019 results – after more than five years in charge and delivering top-line growth throughout his term at the helm. 

“We are focusing even more visibly on sustainability, and are continuing to launch products in response to prominent consumer trends,” he says. “We are committed to helping solve global health and sustainability challenges and support the UN’s global goals. Sustainability has become a natural part of our business model and we have developed criteria for how we define sustainable products.”

“A growing number of our launches are meeting consumer demand for more environmentally-friendly grocery products, healthier food products and vegetarian food.”

By Gaynor Selby