Sustainable Food: The Supply Chain Holds the Key to Success

As more companies commit to sustainability initiatives, supply chain visibility emerges as a key challenge.

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Every year, the food supply chain becomes more sustainable, based on the numerous reports that track such initiatives. Food manufacturers, distributors and retailers tout their achievements in annual sustainability reports. While all the various players hone their efforts, the companies that facilitate product movement–logistics service providers– play a more important support role, particularly in the area of visibility.

But are these various initiatives sufficient to meeting the challenges of growing population, climate change and declining agriculture? Is there a uniform measure by which companies, governments and organizations can monitor progress in improving sustainability? What is the supply chain’s role in addressing these challenges?

Many of the sustainability challenges – such as water use, deforestation, genetically modified organisms, treatment of workers, declining farm space, investment in agriculture – fall more on agriculture and processing than on the movement of food. Several observers argue, however that the supply chain plays an increasingly important role as companies recognize the importance of supply chain visibility in improving their sustainability efforts.

“Sourcing raw materials is a huge part of the supply chain function,” says Pan Chen, vice president of analytics and supply chain services at HAVI Global Solutions, the supply chain consultancy. “While the actions may take place at farms and in manufacturing facilities, it is up to supply chain professionals to determine where and how much to source raw materials.”

To this end, HAVI explores opportunities to reduce waste through more dynamic supply chain optimization, Chen says. “This includes determining the most favorable geographic layout of supplier locations, manufacturing facilities, forward warehouses and distribution centers to maximize efficiencies. And when market conditions change and there are fluctuations in demand and availability of supply, we adapt the supply chain accordingly and make adjustments in real time. Getting the underlying infrastructure right to provide the type of transparency that consumers need should be a priority.”

Skip Miller, vice president of customer service and solutions at CHEP USA, global provider of container and pallet pooling services, told a group of consumer goods industry executives earlier this year that the best way to identify small changes that can power savings and growth is for trading partners – manufacturers, retailers, growers and suppliers – to evaluate their supply chain to identify gaps, overlaps and inefficiencies. Once those inadequacies are identified through supply chain mapping, experts can develop solutions that help save money, be more efficient and sustainable.

CHEP USA, for its part, has collaborated with customer supply chain experts to identify inefficiencies in its supply chain and to develop cost-effective solutions. These efforts include the following use cases:

  • A wholesale company improved dock space and transportation efficiency by eliminating multiple platforms and vendors.
  • A beverage manufacturer saved $500,000 annually by changing its primary and secondary packaging.
  • A Canadian retailer saved $75,000 annually by streamlining the handling and transportation of fresh produce from the U.S., Mexico and South America.

Key Challenge: Visibility

A key sustainability challenge is improving visibility throughout the supply chain.

The Sustainability Consortium’s 2016 Impact Report found that the majority of consumer goods manufacturers lack visibility into the sustainability performance of their supply chains. This lack of visibility is a key barrier to improving sustainability. The consortium is administered by Arizona State University and the University of Arkansas, with support from Wageningen University in the Netherlands.

Food and agriculture products have the highest share of impacts upstream (typically on-farm) where visibility is extremely low, the consortium noted. Only 20 percent of survey respondents collected data on fertilizer usage, greenhouse gas emissions and soil erosion. This represents a significant potential risk, but also an opportunity to improve both cost and sustainability.

Consortium data also indicated that in the berry, apple and grape categories, nearly two-thirds of survey respondents could determine whether their suppliers had sourced crops from farms with zero conversion of high conservation value or high carbon stock lands in the past five years.

Conversely, less than one quarter of pork, chicken, beef, dairy and egg suppliers could make that same determination for their feed supply.

Less than half of the companies purchasing palm oil could report what percentage of their supply was certified by the Malaysia-based roundtable on Sustainable Palm Oil (RSPO) or an equivalent organization; and even among those that could, less than half purchase 100 percent certified palm oil.

The need to improve supply chain visibility has resulted in a variety of initiatives. Growers, processors and packagers have adopted various metrics for improving sustainability. The regulatory community, responding to consumer concerns about the environment, nutrition, safety and social justice, has created even more challenges.

New Challenge: GMOs

This past year, genetically modified organisms (GMOs) emerged as one of the most contentious food industry issues as a slew of retailers and manufacturers decided to label products as non-GMO in response to consumer concerns about the safety of GMOs. The voluntary labeling in itself created controversy within the food industry as some companies viewed this as an appeasement to bad science, while others saw it as addressing consumer concerns. Still others viewed the actions as responding to both existing and pending regulations.

Pamela Bailey, president and CEO of the Washington, D.C.-based Grocery Manufacturers Association (GMA), told the GMA Science Forum in April that the GMO label rule in Vermont is the impact of non-science-based policies.. Bailey told the forum studies show genetically engineered products are safe, and consumers have more confidence in the science of food safety than in the science of food nutrition.

In response to these and other concerns, the GMA’s “SmartLabel” enables consumers to get information about products by scanning a bar code or doing an online search to get information on ingredients. The SmartLabel grew out of recognition that the product information today's consumers are looking for exceeds what can fit on a package label.

Other Sustainability Issues

Other sustainability issues are making headlines, such as slavery in the supply chain and the use of antibiotics. Regulations and/or lawsuits could motivate or require food packagers to include labels that address these issues.

In March a judge found no support for a claim that The Hershey Company and Nestlé USA made actionable misrepresentations about supply chain slavery.

Companies in the United Kingdom, however, are required to publish a slavery and human trafficking statement on their websites.

As for antibiotics, the American Association of Avian Pathologists published a statement saying antibiotics should remain “a viable option when appropriate and necessary for the health and well-being of the animal, even when marketing and consumer preference dictate otherwise.” The association claims removing antibiotics could result in situations where farmers are reluctant to allow treatment of flocks in order to maintain their antibiotic-free status.

On the path to progress, controversy should be expected and not something that necessarily undermines progress.

Food Sustainability Progresses

Oxfam International, a global workers rights’ organization that evaluates food and agriculture companies’ actions, has criticized many companies’ practices. But in doing so, it has also provided a yardstick, however unwelcome, by which to measure sustainability progress.

The Oxfam Behind the Brands campaign analyzes and compares the various sustainability commitments of the Big 10 food companies. The campaign addresses seven specific policy issues–land, women, farmers, workers, climate, transparency and water.

Unilever recently grabbed the No. 1 Oxfam sustainability ranking from Nestlé, with Coca-Cola Co. occupying third spot. Kellogg Company has made the most progress across all sustainability areas–up 30 percent from its rating three years ago.

"The company [Unilever] has strong policies on deforestation and palm oil, guidelines for its suppliers, and is engaging governments to take action," the report reads. "We hope they will continue to show leadership and go even further."

Nine of the Big 10 industry giants have improved their rating by at least 10 percentage points since the Behind the Brand's campaign’s launch three years ago. Danone–the only company not to surpass the 10-point barrier–still increased its score by seven points, thanks to commitments on climate.

Market Demands Shift

Market demands for more organic, fresh and unprocessed food places further pressure on sustainable food and agriculture. Hebert Research Inc. found that more than 29 percent of consumers are selecting and consuming organic, fresh and unprocessed foods.

The trade-offs of more organic food production and increased demand raises the concern of sustainability. It is not just meeting organic standards of soil, but the supply of ground and surface water.

Recycling and Reuse Continue

Recycling and waste management are areas that the food industry continues to invest in.

This year, GMA has partnered with the Food Marketing Institute (FMI) to standardize food waste practices and communicate them to consumers.

The Food Waste Reduction Alliance (FWRA), a cross-sector industry initiative led by the GMA, the FMI and the National Restaurant Association (NRA), recently released an updated guide with practical steps and examples to help manufacturers, retailers and restaurants cut food waste.

The Campbell Soup Company’s partnership with the Food Bank of South Jersey and the New Jersey agricultural community gave undersized peaches headed for the landfill new life as shelf-stable peach salsa. Proceeds from the sales of the salsa, “Just Peachy,” benefits the Food Bank of South Jersey.

ConAgra Foods Inc. has changed the way it transitions from one pudding flavor to another in a manufacturing facility. The company now creates blended flavors rather than waste product while flushing the manufacturing line from one flavor to another. The company now donates the mixed-flavor pudding to hunger organizations, reducing manufacturing loss and getting food to those in need.

Large foodservice operators such as Aramark Corporation and Sodexo have reduced food waste by eliminating trays in cafeterias.

Darden Restaurants and Yum! Brands have partnered with the Food Donation Connection to coordinate food donations to food banks and other organizations as an alternative to discarding prepared foods.

Sustainability Continues on Different Fronts

Wal-Mart recently released its ninth annual Global Responsibility Report, outlining its environmental and social activities for the past year. For the first time, this report includes information about the progress made on implementing the company’s sustainable chemistry policy.  

According to Wal-Mart, it has reduced the usage by weight of its designated high priority chemicals by 95 percent. Information about how this progress was made will be posted on Wal-Mart’s Sustainability Hub, along with chemicals the company has targeted for reduction or elimination.

Wal-Mart’s 10-year partnership with the Environmental Defense Fund identifies three sustainability goals: 1) Be supplied by 100 percent renewable energy, 2) Create zero waste, and 3) Sell products that sustain the world’s resources and environment.

Roundy’s Inc., joined the U.S. Environmental Protection Agency (EPA) GreenChill Partnership program, which is a partnership between the EPA and food retailers to reduce emissions and decrease their impact on the ozone layer and climate change.

In 2014, Roundy’s became the first grocery store in Wisconsin, and only the third store in the United States, to utilize a Transcritical CO2 refrigeration system in their Menomonee Falls, Wisconsin Pick ’n Save location. The Transcritical CO2system eliminates the use of ozone-depleting hydrofluorocarbons (HFCs). One pound of leaked HFC refrigerant has more global warming potential than 4,000 pounds of carbon dioxide. The Menomonee Falls store is regarded as one of the “greenest” supermarkets in the nation and was awarded a Platinum level certification by the EPA’s GreenChill Partnership program.

Using the EPA’s Greenhouse Gas Equivalencies Calculator, the yearly reduction of greenhouse gases are approximately 33.6 metric tons and 36,047 pounds of coal being burned. 

Roundy’s has pledged to install the Transcritical CO2 refrigeration system or whatever improved non-HFC technology becomes available in new stores and stores where the refrigeration system is scheduled for replacement.

Fetzer Vineyards became the first winery in California to operate on 100 percent clean energy in 1999. By 2006, the company covered 75,000 square feet of rooftop with solar panels, creating 80 percent of the energy needed to run its bottling facility.

In 2012, Fetzer Vineyards adopted a  new cleaning product called peracetic acid, which requires less rinsing, for the wine tanks.. This change enabled the company to reduce its water consumption by more than 200,000 gallons annually, and reduce the energy used to pump the water.

Sustainability has clearly become a driving force in meeting consumer demands, government regulations and more efficient business practices for the food industry. While all players in the food supply chain have addressed sustainability, logistics service providers play a critical support role in many of these efforts.

Material Handling Institute Outlines Sustainability Tools

By 2025, the material handling and logistics industry should have standard methods of incorporating sustainable development into business plans and operating strategies, according to the Material Handling Institute (MHI) “U.S. Roadmap.” Such methods should adhere to the goals of sustainability, while maintaining and advancing the commercial interests of the industry.

Any attempt to reduce the environmental impact of the material handling and logistics industry requires an accurate assessment of environmental impact itself, the Roadmap notes. To this end, there is a need: 1) to specify in some unit of measure the relevant emissions released; and 2) to identify an environmental impact factor that might be expressed in monetary terms.

Consideration of environmental impact could include effects such as deterioration of human health, loss of wildlife, agricultural effects and global warming. Any assessment of impact requires substantial care, because impact depends on the context with respect to the surrounding society and culture.

Life cycle assessment (LCA) tools already exist to help companies assess the impact of their operations on the environment. These tools should address the details of material handling and logistics. The greater challenge, MHI notes, is to spread the word within the industry that such tools already exist.

One of the factors that contribute to emissions generated by the material handling and logistics industry is the long distances traveled by trucks and other vehicles. As the industry continues to reduce the cost of transportation by reducing miles driven, the environment will benefit.

A natural tension exists between shippers, who seek to consolidate shipments for transportation efficiencies (and perhaps unintentionally for environmental benefit), and customers who want what they want, when they want it. Through increased awareness or carefully designed pricing strategies, changes in customer behavior could lead to reduced impact on the environment.

A significant amount of solid waste generated by the food industry comes in the form of packaging. There is a need for new approaches to reduce the amount of packaging required and for new packaging materials and approaches that support future material handling and logistics requirements.

Packaging must be capable of preventing product degradation due to environmental factors, preventing physical damage, supporting new material handling equipment, and improving space utilization within unit load containers.

After the energy sector, transportation and logistics is the most visible industry in the global effort to reduce carbon emissions. To reduce environmental impact, there is a need to adopt more alternative energy and hybrid vehicles for over-the-road transportation and for material handling equipment inside facilities.

By 2025, the transportation industry should have new vehicles that are lighter, use less energy and run on alternative forms of energy.

Buildings certified by the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) program should be built and renovated for manufacturing and distribution. LEED certification should include scoring for equipment choices based on the types of services they provide (specific factors for distribution centers rather than, for example, hospitals).

If the food logistics industry can do its role in achieving these goals, it will contribute to the food industry’s efforts to accomplish the same goals on a much larger scale.

Annie’s Homegrown Inc. Embraces Sustainability on Multiple Fronts

Annie’s Homegrown Inc., a natural food company, partners with more than 15 organizations dedicated to improving the lives of others and the earth’s natural resources. The company’s sustainability initiatives include:

  • Advocating for more sustainable food policies. Annie’s belongs to the Organic Trade Association (OTA), an organization committed to promoting and protecting the growth of organic to benefit farmers, the environment, the public and the economy.
  • Expanding organic grains production. Through the Organic Grain Collaboration, the company partners with like-minded companies like Organic Valley, Stonyfield, Clif Bar, and others to address supply challenges facing the organic grain industry.
  • Actively engaging in industry groups. Bob Kaake, Annie’s executive vice president and chief innovation and quality officer, serves on the board of The Organic Center, while  Shauna Sadowski, the vice president of sustainability and industry relations, is on the board of the  Sustainable Food Trade Association.

Foundation Announces $90 Million in Grants for Sustainable Supply Chains

The Gordon and Betty Moore Foundation announced more than $90 million in grants designed to advance conservation by decoupling food production from negative environmental impacts.

“The anticipated global population growth and related demand for richer diets, including more protein, sugars and oils, will place unprecedented pressures on our natural resources,” says Aileen Lee, program director for the conservation and markets strategies and incoming chief program officer for environmental conservation at the Foundation. “Now more than ever, the need to produce food without causing severe environmental degradation is essential to maintaining the productive capacity and integrity of the earth’s ecosystems.”

The Foundation cited the following concerns:

  • Agriculture currently covers nearly 40 percent of the world’s ice-free land, uses 70 to 90 percent of all extracted freshwater and comprises nearly 30 percent of global greenhouse gas emissions.
  • Commercial agriculture causes half of all global forest loss.
  • Despite concerted efforts to allow target fish stocks to rebound, overexploitation remains common in global fisheries.
  • Global aquaculture has more than doubled since the mid-1990s, bringing ecological consequences including the physical conversion of coastal ecosystems (e.g., salt marshes and mangroves), pollution of coastal waters with nutrients and antibiotics, and reliance on wild capture fish for feeds.

Expanding Population Challenges Sustainability Efforts

The challenge facing the food industry increases every year on account of expanding global trade, increasing limitations on agriculture, climate change and a growing population.

The World Resources Institute refers to the global challenge of creating a sustainable future as “The Great Balancing Act.” Its 2013 World Resources Report identified three environmental impacts: ecosystems, climate and water.

For the world’s agricultural system to achieve the “great balancing act,” the next four decades must match previous achievements in food production growth without converting ecosystems and increasing water use.

Several other factors, from climate change to urbanization to a lack of investment, will also make it hard to produce enough food. There is strong academic consensus that climate change–driven water scarcity, rising global temperatures, and extreme weather will have severe long-term effects on crop yields.