Industry on track to miss carbon-cutting targets, flags study
21 Jun 2022 --- Food and beverage businesses will fall short and miss the 38% by 2030 emissions goal set at the UN 2015 Paris Accords. Food companies are currently on the path to only reaching a 29% reduction by the decade’s end, according to a report by AlixPartners.
AlixPartners warns about companies missing its targets after looking at the carbon commitments and financial indicators of 235 of the largest companies in North America and EMEA.
“Based on our research and the growth of F&B emissions as measured by the Food & Agriculture Organization of the United Nations, we don’t believe the industry is on track to meet its Paris Agreement goals,” says the company report.
This nine percentual point miss is quite significant considering that food system emissions represent a third of all the global emissions, explains AlixPartners, although down from the 44% share of the sector’s emissions in 1990.
Larger companies’ emissions will be significantly off-target, reaching a 25% reduction compared to the 38% target by 2030.Companies not confident in meeting targets
With the prediction of missing the emissions target by 9 percentual points or 23%, it is not surprising that the study finds a lack of confidence, from the industry, in meeting its greenhouse commitments.
“Only 49% of suppliers, 36% of manufacturers and 31% of retailers from across the food and beverage industry claim to be very confident that they will meet their carbon-reduction goals related to their own carbon emissions,” reads the report.
The largest companies will be even more off-target, expecting to cut-down emissions by 25% by the end of the decade compared to 2019.
Metrics, metrics, metrics
To be able to solve the greenhouse problem, there is an imperative need to understand it and be able to measure it so one can see improvement, the report underscores.
“Map emissions down to a level of detail that will help teams and partners make a difference,” recommends the report.
The study also suggests that higher polluters should be the ones that map in more detail the scope of their emissions, from getting products from suppliers until the buyer consumes the product.
“Manufacturers, suppliers and retailers alike need to look across their entire value chains to understand and exert influence all the way back to the start of those chains, as well as downstream toward the end-consumer, if they are to make truly exceptional progress on this front,” says Randy Burt, partner in the consumer products practice at Alix Partners.
Scope 3 emissions – emissions produced in the entire value chain – are of particular importance, according to the report. This is in line with the Global Investor engagement on Meat Sourcing Progress Update 2022, which found that 90% of the biggest fast-food chains’ emissions came from scope 3 emissions. Scope 3 emissions are flagged as being largely underreported.
Currently, only 34% of the executives surveyed feel they are successful at measuring their downstream carbon footprint –emissions made by manufacturers and retailers. Meanwhile, the uncertainty is even larger for their upstream carbon footprints, the one coming from manufacturers and suppliers, with only 19% of executives saying they are successful at its measuring.
Education to reduce emissions
The food sector’s greenhouse emissions amount to one-third of global emissions, down from 44% in 1990.
The report explains that companies need to further educate their workers in data management, analytics and performance-reporting capabilities.
Not all companies are as concerned with greenhouse emissions or use the same tools, so businesses must “recognize differing levels of supplier maturity and tailor plans to these,” explains the report.
AlixPartners flags carbon management as an essential tool that can be embedded “into category strategy, supplier selection, negotiation and contracting methods” with further uses in “training into supplier communications and performance, development, and incentive frameworks.”
“Provide access to subject matter experts for specialist solutions such as carbon economic product modeling, regenerative agriculture, and electrification,” suggest the study.
Challenging road ahead
AlixPartners admits that the “road to decarbonization is challenging and involves detailed operational thinking and commitment to new ways of working.”
Thus, it stresses that the workers in different stages of the production process must work together when evaluating carbon-reduction levers, with teams being accountable to each other as they translate decisions into actions.
“Prepare teams to deal with potential roadblocks and challenges such as compliance changes, supply-demand issues and supplier failure. Set up regular reviews and a robust governance structure.”
As consumers become increasingly focused on the sustainable credentials of brands, front-of-pack carbon labeling trials were spearheaded last August with aims to help companies calculate, reduce and label the environmental impact of their food.
By Marc Cervera
