The global food sector is greatly exposed to the risks of the climate change. As such, several market risks caused by climate change will need to be navigated by companies operating in this sector.

Supply chain disruptions will become a more regular occurrence due to more frequent and unpredictable weather extremes – think severe droughts, intensified floods, hurricanes and even extreme coldness. At the same time, food companies can expect increasing consumer demands for low carbon, ethical and plant-based food production.

On top of this, the global food sector – from farmers to retailers – are to an increasing extent being met by new regulation and tariffs pushing for a more sustainable production system. And there are good reasons for this.

The food sector is accountable for 25-33% of global greenhouse gas emissions, when considering the sector’s whole value chain from farm to fork.

Navigating risky fields

If the food sector continues down its current path, the world’s ecological and biological systems will be compromised. Between 2010- 50, as a result of expected changes in population and income levels, the environmental effects of the food system could increase by as much as 50-90% in a business-as-usual scenario, which is highly feasible.

One great challenge is food loss and waste – both with regards to the fact that food waste is accounting for 8% of all greenhouse gas emissions and also due to the fact that one in nine people go hungry while a third of all food is lost or wasted. In addition, food loss and waste accounts for about $1.2 trillion in financial losses each year.

This calls for new and ambitious targets to take control of food waste. Today, about 20% of the world’s largest food companies have started to measure and report on food waste. This pushes the rest of the sector to take action in reducing food waste. Usage of by-products of food production is also a challenge.

A key example is that we only utilise 0.2% of the nutrition contained in a coffee bean.

There is also growing political pressure on the food sector, with more regulations and tariffs in response to demands for more sustainable production methods, reductions in food loss and waste, and transparency in supply chains. This is also supported by growing consumer demand for ethically-produced food. This forces food companies to be able to deliver supply chain sourcing data from agribusinesses and traders to augment transparency.

Growing consumer demands for plant-based, low-carbon, organic, and locally produced food also challenges the entire food supply chain. This trend can only be expected to accelerate – either by demand or new regulation – because the consumption of beef, lamb and pork in most Western countries will have to be reduced by 93%, eggs by 71%, milk by 60%, sugar by 64%, and chicken by 45% in order to live up to the obligations of the Paris Agreement and the UN Sustainable Development Goals.

Opportunities are up for grabs

The new market reality unlocks a number of opportunities for first-movers in the food sector. According to the Better Business, Better World 2017 Report, developing sustainable food business models could be worth up to $2.3 trillion a year and generate over 70 million jobs by 2030.

Reducing food waste is not only the right thing to do, but it also carries a major economic prize.

The business initiative Champions 12.3 has shown that there is a 1:14 ratio in positive returns on investment in reducing food loss and waste.

Add to this that just one-quarter of the food currently lost or wasted could feed 870 million people annually. To tap into this opportunity, the food sector needs to proactively invest in new production chains, new products, new technological solutions, and reinvented business models – and it needs to be based on a strategic understanding of how the food sector, the climate and the pressures for transformation are creating a new market reality.

Many companies are already trying to do so. For instance, Forbes found in 2018 that the number of food and beverage brands claiming to be ethical on their packaging has increased seven-fold since 2010. Looking to digital solutions, several food companies are also responding to the need for enhanced transparency, traceability and legality, enabled by satellite imagery and other technologies.

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