Decarbonizing the food system: Time is running out! has been saved
Decarbonizing the food system: Time is running out!
Realizing a net zero, or carbon negative food system
The recent COP 26 conference put decarbonization in the food system firmly back at the top of the agenda. Governments and the general public are demanding change. Carbon dioxide and other emissions, such as methane and nitrogen, must be reduced to achieve the sustainability targets that governments have agreed to. The food system forms a large part of this and must be transformed to ensure a sustainable future. If we want to realize net zero (or even carbon negative) emissions, that means we need to rethink how we produce, process and consume food.
Food production is responsible for one-quarter of the worlds’ greenhouse gas emissions
The food system is one of the main drivers for global GHG emissions and accounts for roughly 27% of total emissions from all sectors. About two-thirds of all food-related GHG emissions are accounted for in the agriculture, forestry and land use sector, while the remaining third comes from processing, transport and packaging. Livestock production emits 45% of all methane emissions in the world, and fertilizers and crop protection products are responsible for 80% of all nitrous oxide emissions. This makes it clear that realizing the sustainability targets as discussed at the COP26 will strongly depend on the transformation of the Food sector. The aim is to move agriculture from a carbon source to a carbon sink and reduce GHG emissions.
However, the largest share of the carbon and sustainability impacts occur in the early stages of the food supply chain. Consumers, brands, and retailers often have little direct visibility or control over this.
While some retailers and brands are able and active to exert control, it is challenging to have farmers and other suppliers make the necessary investments to reduce their carbon footprint. Typically, farmers have limited financial incentives to do so as it would harm their already very slim operating margins.
Moving agriculture from a carbon source to a carbon sink
It should come as no surprise that our existing way of producing food is neither sustainable nor healthy. We need to move away from our conventional farming system – a system that is traditional, linear, degenerating, and has a negative impact on the environment. Instead we need to move towards a regenerative farming system. A system that will have a net-positive impact on the ecosystem.
Deloitte recently set-up a program, together with one of our agri clients, that helps farmers transition to such a regenerative system. A sustainable system, focused on increasing and restoring soil health, soil resilience and biodiversity by applying various regenerative practices, such as diversifying crop rotations, applying permanent groundcover, minimizing tillage, reducing artificial fertilizers, improving water and irrigation management and using integrated livestock and grazing systems. One of the great benefits of this effort is that with healthy soil we can sequester more carbon from the air, which in return has an impact on climate change by lowering the emissions from agricultural land. Our program entails several products and solutions to help farmers with the transition towards improved sustainability by providing them with solutions that will restore soil health and biodiversity, maintain crop productivity, reduce costs and enhance profits. It also leads to many opportunities for developing new revenue models for all players within the food value chain; from farmers to retailers.
Supplying future food demand without expansion of agricultural land
Carbon build-up in the atmosphere is the net result of carbon emissions and carbon capture. This process is exacerbated through continued global deforestation to expand agricultural land because forests are important carbon sinks. Clearing them to convert into agricultural land has a triple effect, as the forest no longer sequesters carbon, carbon is often released through burning to clear forests and the subsequent farming practices add further GHG emissions. We need to feed a growing population but we can’t afford to do so by expanding agricultural land through deforestation. It is crucial that we efficiently make use of our land today, so we can supply future food demands on the same – or less – land in the future. That’s why, together with WWF, we developed an AI-based early warning system to predict future deforestation risk using a vast range of geospatial data and satellite imagery. It enables timely action being taken to stop the clearing of forests at the expense of biodiversity losses in habitats.
Launching consumer products that are within the boundaries of our carbon budget
We all need to start living within the boundaries of our carbon budget for food. But this carbon transition needs to be attractive and affordable for the average consumer, rather than cater to high-end consumer segments as is often the case. Together with our client, we developed a portfolio of food products that have a 25% lower footprint compared to the benchmark in the market. By bringing these products to market, the company is moving several steps up the value chain, compared to its traditional position and orchestrating all the partners along the chain to make changes. Initially, we thought these products might increase costs for farmers and consumers significantly but we found that this did not have to be the case. Consumer prices for these products would have to increase by less than 5% to compensate farmers for adopting more sustainable practices. And all this without harming the margins of any of the other value chain players.
It’s crucial to enable vertical integration and collaboration in the supply chain
The key takeaway here is that there are many decarbonization opportunities for food producers, processors and consumers that can be considered as fairly ‘low hanging fruit’ which do not have to drive costs for consumers up, or drastically reduce margins for companies. But it does require intense collaboration in the supply chain and a fair distribution of benefits and burdens among value chain players. In the next couple of years, we expect to see rapidly increasing levels of vertical integration in the food value chain, specifically driven by sustainability. Vertical integration could take many different forms and does not only have to be about retailers and food brands taking more control of the upstream value chain. It could also be about farmers organizing to move further down the supply chain by bringing their own brands and sustainable food concepts to market while ensuring appropriate compensation.
Decarbonization is an important topic on our agenda
Deloitte has a Future of Food platform with over 1500 participants motivated to contribute and support the transition to a more sustainable food system for the future. This transition includes decarbonization, and to that end we are committed to realize the journey to a net positive food system. For this we are establishing an ecosystem with leading food companies and our global alliance partners and identify opportunities to innovate, accelerate and scale solutions to a net positive food system.
Are you ready for our food system decarbonization challenge?
It may sound like a massive task but transforming the food system offers the opportunity to contribute to a better, healthier, and more sustainable world; to tap into new markets and profit opportunities; and to connect for impact. It is time to be bold, brave, commercial, and take up the challenge together – because we can only take major steps together.
It is time to act now!
Are you ready for our food system decarbonization challenge? We have organized a webinar focusing on decarbonizing the food supply chain that took place in January 2022. In this webinar, keynote speakers from Agrifirm and Kerry described how they are moving from commitment to successful execution in the decarbonization journey.
You can download the slides here of the first webinar.
In February 2022 we organized a second webinar where we brought this discussion to the next level. Participants had the opportunity to raise any challenges they are experiencing with decarbonizing the food system. We had a panel of food executives from Agrifirm, Kerry and Deloitte who shared their experiences and perspectives to overcome these challenges and together realize a decarbonized food system.
You can download the slides here of our most recent webinar and rewatch both of the webinars below.
Decarbonizing food system webinar recordings
More information? Contact us!
Do you need support to start your decarbonization journey or do you need to accelerate your current decarbonization transformations to maximize impact? Or do you have any questions, please contact us.
Get your emission reduction targets realized, create revenue from it, protect margins and reduce risks
Voices from the Market: Goal 13 Impact Platform