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Building resilience to emerging ESG risks in food, beverage and agriculture industries

Food and beverage futures

By Simon Lusher | June 18, 2024

Food, beverage and agriculture industries face significant exposure to climate-related changes, including rising temperatures and extreme weather events. In this blog, we delve into the emerging ESG risks and challenges confronting these sectors, and explore strategies for managing and mitigating them.
ESG and Sustainability|Climate|Corporate Risk Tools and Technology
ESG In Sight|Climate Risk and Resilience

The sector needs to manage its impact on areas such as water stress, land use, biodiversity and carbon emissions.

Meanwhile, firms face increasing scrutiny on social issues, such as labor standards in the food supply chain, and higher regulatory and investor requirements for transparency and good governance.

In this blog, we examine these emerging environmental, social and governance (ESG) risks and challenges and what the sector can do manage and mitigate them.

How is the risk landscape changing?

As climate change accelerates, it will create deeper long-term impacts, affecting crop yields, production costs and how and where the industry sources raw materials.

50% reduction in prime coffee growing areas by 2050 estimated, caused by rising temperatures.

For example, long-term changes in weather may reduce the land suitable for growing major crops. One study showed rising temperatures would reduce prime coffee growing areas by 50% by 2050.[1]

Water stress, in particular, has risen in importance. It’s no longer just an operational risk to food and beverage production, but also an environmental and climate risk, which companies may exacerbate through their use and extraction.

Long term success will depend on finding ways to address both the operational and societal aspects of these challenges.

This ‘double materiality’ view – taking account of both the financial risks to the company and the company’s impact on the environment, as well as all risks embedded in the supply chain – is becoming the standard approach to sustainability reporting.

In the EU, this is being mandated by the new Corporate Sustainability Reporting Directive (CSRD)[2], which requires detailed disclosures, including financial impacts, on a wide range of topics including climate change, biodiversity, affected communities and business conduct.

In the U.S. the Securities and Exchange Commission (SEC) has introduced a rule for climate-related disclosures.

What can you do to get ahead of emerging challenges?

Make it measurable: You can’t manage what you don’t measure. In WTW’s Global ESG Risk Manager Survey (2022) we found that, although 67% of risk managers said their organization had ESG goals and targets, only 17% had documented targets with clear milestones for ESG risks. The first step is to make all goals and targets measurable and specific.

Don’t treat it as a single issue: ESG covers a broad spectrum and needs to be broken down into manageable and measurable chunks. Morgan Stanley Capital International (MSCI), the supplier of research, data and technology tools, has a useful framework that breaks down ESG risks into specific issues. It’s a good idea to align these with the topics and sub-topics used in the CSRD.

Secure your supply chain: Because food and beverage businesses are highly resource-dependent, a large part of the ESG risk profile lies with suppliers. Companies should consider:

  • Do you understand your suppliers’ risks and how they are being managed?
  • Do you have enough data to be able to assess and report on the environmental and social impact of your supply chain?
  • Do you have the right procurement and supplier approval processes to maintain a sustainable supply chain in a changing climate?

Make sure you have systems in place to gather the required data at all your key locations and to collect verifiable data from suppliers. ”

Randi Harwood | Global Client Advocate

Gather and report the data: Regulators want to see much greater transparency in how ESG data is disclosed and reported. Make sure you have systems in place to gather the required data at all your key locations and to collect verifiable data from suppliers. CSRD requires reporting on the whole value chain, including upstream and downstream suppliers, so companies operating in Europe will need to gather data from both perspectives.

Be strategic and future focused: go beyond the strict requirements of compliance and disclosure to make sure you are protected now and in the future. As well as mitigating acute physical risks in the short run, you should consider green transition adaptations that might improve your future physical risk profile and assess all other potential transition-related impacts on your business.

How WTW can help

WTW offers a range of tools and services to help companies understand and quantify their ESG risks and challenges. Our analytics can help you assess the physical risk landscape, anticipate transition risks and opportunities, meet regulator and investor expectations and prioritize areas for improvement.

Double materiality assessment

WTW’s risk consultants can support you in carrying out a double materiality assessment, which is mandatory under the CSRD and a critical step to identify which ESG standards apply to your business and what you need to report on. Our approach is aligned with CSRD requirements and best practice, based on:

  • Extensive stakeholder engagement through surveys, interviews and validation workshops
  • Tools and databases, such as WTW’s ESG Clarified, which combines WTW proprietary data with financial metrics and governance ratings from Morgan Stanley Capital International (MSCI), employee views from Aniline and reputational risk information from Polecat. This data provides up to 115 metrics for each of the three pillars of environment, social and governance.

Climate analytics

Climate Quantified: enhances your response to climate risks, while meeting disclosure requirements, by quantifying the physical and transition climate risks across your assets and commodities. Build your own business scenarios with tailored climate risk analytics and reports to understand where to take strategic action.

Climate Diagnostic: can help companies to plot likely climate impacts on their operations and locations, assessing for rainfall, drought, heat stress and sea level rise. By entering complete and accurate address information, you can produce a hazard map and a hazard score, which can help with future risk management and planning.

Global Peril Diagnostic: offers predictive modelling to help companies respond to perils, such as natural catastrophe, climate, terrorism and pandemic threats. A geographical overlay of your global footprint to an interactive map allows for real-time insight, as the peril unfolds.

Climate Dashboard: a web-based dashboard that builds on information from Climate Diagnostic to provide additional perspectives. For example, it can show how much revenue is exposed to climate conditions and how this will change by 2030 or 2050.

Crop Risks and Opportunities Platform (CROP) : a global, geospatial dataset that models market suitability for growing major crops now and in the future under a range of climate scenarios, based on layers of geodata, such as soil pH, salinity and temperature.

Connected Risk Intelligence

Connected Risk Intelligence enables optimized risk finance decisions by evaluating risk in a portfolio view. The platform gives organizations the risk analytics to support decisions on where to prioritize mitigation spend, while increasing resilience to a wide range of risks.

It can help you to:

  • Identify the major risks to your business
  • Quantify and analyze exposures
  • Uncover investment options to mitigate risks
  • Assess the value from your current risk financing

Through this process you can find the ‘efficient frontier’ where investment in risk reduction and risk financing is optimized to deliver better capital efficiency and value for your business.


With rapid changes in climate, scrutiny of the food supply chain and demands for non-financial impact reporting, food, beverage and agriculture businesses face a growing range of ESG challenges.

By breaking these down into specific issues relevant to your business, you can start to quantify and address your risks. WTW can help you benchmark your progress against industry peers and find the most efficient ways to mitigate and manage your exposures.

For smarter way to managing your ESG exposures, please reach out to our specialists today.


  1. Bunn et al A bitter cup: climate change profile of global production of Arabica and Robusta coffee Return to article
  2. Corporate sustainability reporting Return to article

Randi Harwood
Global Client Advocate

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