climate impact
When it comes to the climate crisis, the food system has a lot to answer for.
Even if we eliminate fossil fuel emissions entirely, the emissions produced by the current food system alone would stop the world from reaching the 1.5°C target of the Paris Agreement. (9)
This means change is coming. Whether it is concerning change, such as the impact of the climate crisis on the supply chain, or heartening change, such as evolving consumer tastes and speeded-up legislation; our food system is being reshaped in unprecedented ways.
For the grocery retail sector this means getting ready for considerable upheaval in the coming years. Here are the important trends you need to be aware of and what you can do to not get left behind.
1. Climate crisis disrupting supply chains
When it comes to the direct effects of the climate crisis on the supply chain, grocers do need to be concerned. The climate crisis has already been leading to severe disruptions in the agricultural sector, affecting the availability and affordability of certain produce. Extreme weather events, such as droughts, floods, or hurricanes, can damage crops and disrupt transportation routes. And they are becoming much more common. Research has showed that the global frequency of natural disasters has increased almost threefold in recent decades. (6)
For example, in 2022 heat and drought withered vegetables in southwestern China, leading to a near doubling of vegetable prices. Moreover, the adverse conditions hindered the growth of pigs and poultry, further resulting in the increase of meat prices. (5)
On the other side of the world, a multiyear drought in much of the Western United States has negatively impacted American agricultural exports, while West Coast wildfires have jumbled logistics. (5)
This may all seem far away but make no mistake! In a globalized world with an international supply chain, companies in Europe should not deem themselves safe. What is more, the crisis has already arrived on our doorstep.
In August 2022, the exceptionally hot and dry weather conditions in much of Europe substantially reduced yield outlooks for the EU’s summer crops. The crops most affected were grain maize, sunflowers, and soybeans. The yield forecasts for these crops were between 12% (sunflowers) and 16% (grain maize) below the 5-year average at the time. (7)
In the end, the European Union (EU) experienced a 12% decline in soybean production in 2022. This decline in soybean output also has implications for various other sectors, including animal feed, as soybeans are a crucial component in livestock diets. (8)
Considering these developments, it is very likely grocery retailers will experience challenges in maintaining consistent inventory levels in the coming years, as well as having to deal with the fallout of stark price hikes for ingredients. This is why they would be well advised to seek alternative sourcing options or diversify their supply chains to mitigate these risks.
2. Increased demand for sustainable products
Consumers are changing their ways like never before. As consumer awareness about the climate crisis grows, the demand for sustainable and environmentally friendly products will grow at a fast pace.
Europeans in particular are “highly motivated” to buy sustainable food to reduce their climate impact. 58% of consumers consider climate impact important when buying food and almost one third already actively chose sustainable products.(1)
The amount of people opting for sustainably will almost certainly grow exponentially in the coming years, as awareness of the severity of the situation grows. Grocery retailers therefore will need to adapt their product offerings to include more sustainably produced goods. Just as importantly, they will need to check carefully, that they are offering genuinely sustainable brands rather than those engaging in greenwashing. This goes hand in hand with the need to provide clear labeling and transparency about the environmental impact of products to meet consumer expectations.
3. Consumer demand for transparency
Since consumers want to choose sustainable products, they want detailed information about their options. They want to know more than where their food comes from, including how it is produced and the overall impact it has on the environment.
There is still a lot of room to grow in this area for grocery retailers. According to an Ipsos Yara survey, most people feel that it is difficult to identify climate friendly foods. At the same time, 76% of Europeans would like the carbon footprint to be visible on the food label. (1)
Embracing transparency in your supply chain and communicating your sustainable practices and product impact will therefore become more essential than ever if you want to attract and retain customers.
4. Growth of plant-based and low-impact diets
As consumers are trying to reduce their impact on the planet, they are increasingly adopting plant-based diets or reducing their meat consumption.
Between 2016 and 2020, Europe witnessed a significant surge in the vegan community. The number of vegans doubled from 1.3 million to an estimated 2.6 million, according to a survey by plant-based supermarket chain Veganz. Moreover, when considering the broader spectrum of dietary choices, including vegetarians, pescatarians, and flexitarians, nearly one-third of Europeans have transitioned away from identifying themselves as big meat eaters. Among those swearing of animal produce, flexitarians have emerged as the fastest-growing demographic, comprising a significant 22.9% of Europeans. (2)
Grocery retailers and F&B businesses can tap into this shift by expanding their offerings of plant-based and low-impact products.
5. War on packaging
Plastics in the environment are a serious problem that contributes to climate change and loss of biodiversity, and presents serious risks to human health. Plastics make up the largest portion of marine debris, with estimates ranging from 60% to 80%. Marine organisms ingest these plastics, which is how they end up in the food chain. Unfortunately, global plastic production is expected to double in the next 20 years. (3)
However, with growing concerns about resource depletion and waste management, consumers are also becoming increasingly conscious of the issue of packaging waste. In fact, it is fair to say that consumers are on the warpath when it comes to plastic. A 2022 poll showed that three out of four people worldwide are in favor of an immediate ban on single-use plastics. This is a rise of 4% within three years. Additionally, 82% of respondents now prefer products with minimal plastic packaging, up from 75% in 2019. (4)
Increasing numbers of consumers will therefore actively seek out stores that prioritize reducing plastic waste, such as those that offer package-free or bulk options and when they have to opt for packaging, they are likely to favour products with sustainable packaging materials, such as biodegradable or compostable packaging. Grocery stores would therefore be prudent to adjust their product offerings and packaging strategies accordingly.
6. Regulatory and policy changes
Consumers’ wishes are only one side of the coin. It is up to each company to decide whether they want to listen to their customers. When it comes to laws, however, very soon they may not have a choice.
Governments and regulatory bodies worldwide are taking steps to address the climate crisis through legislation and policies. These regulations can impact grocery retailers in various ways, such as imposing restrictions on single-use plastics, incentivizing sustainable practices and demanding due diligence to stamp out greenwashing.
Big change is already underway in Europe. Here are three directives that were recently decided and will be come into practice in the next few years:
Green Claims Directive
In March 2023, the European Commission (EC) announced a proposal called the "Green Claims Directive", which aims to stop companies from falsely advertising their products as environmentally friendly. Read all about it here.
Deforestation Law
The EU is introducing a new law to ensure any products sold in the EU do not originate from deforested land anywhere in the world. One major impact this will have on F&B businesses is that they will have to prove their products do not cause deforestation, for which they will need to have a deep understanding of their supply chain. Read more about this law here.
Corporate Sustainability Due Diligence Directive
This Directive aims to ensure that companies pay attention to human rights and the environment in their entire supply chain. Once it takes effect, companies from all over the world selling their products in Europe will need to implement due diligence processes and take action when abuse is uncovered. Get a more detailed insight with this video.
The next big framework already waiting in the wings is part of the EU's Farm to Fork strategy (F2F) to address food sustainability in both production and consumption. Its main focus is the development of an innovative Framework for a Sustainable Food System (FSFS). The European Commission (EC) is expected to propose a legislative plan for the FSFS by the end of 2023, which aims to integrate sustainability into all food-related policies. However, there is still uncertainty about the specific details, including whether it will set concrete targets. (9)
As you can see, the regulations have been coming in thick and fast. Retailers will need to comply with them in the near future. While there currently is still a grace period of a few years, smart and long-term thinking businesses will start preparations as soon as possible, in order to be ready when the directives actually hit.
Get ready for the future with inoqo
Whether you want to avoid the financial losses resulting from climate-related natural disasters, win over environmentally-conscious customers by communicating your sustainability efforts and product impact or avoid falling foul of new regulations that could see you fined or your product banned from the European market – it all starts with a transparent supply chain. You need to know where exactly your ingredients come from and how you can optimize your supply chain in order to stay ahead of the curve and adapt to our new age of sustainability.
The most efficient way of doing so is with inoqo’s AI powered solution that assesses the impact of all your F&B products in the blink of an eye, so you cannot just understand but optimize your production processes down to the last little grain. To discover how we can help you, simply get in touch with us at hello@inoqo.com.
Sources
(1) https://www.yara.com/corporate-releases/strong-european-consumer-demand-for-sustainable-food/
(3) https://link.springer.com/article/10.1007/s10640-023-00785-3
(5) https://www.nytimes.com/2022/09/08/business/economy/climate-change-supply-chain.html
(8) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2709331
(9) https://www.nature.com/articles/s44168-023-00034-9
Photo by No Revisions on Unsplash
by Laura
from inoqo
