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Dos and don’ts of decarbonisation for the food and beverage sector

By Lukas Brochard | July 18, 2023

How can you harness decarbonisation for competitive advantage and where might your efforts be less well rewarded?
Corporate Risk Tools and Technology|Risk Management Consulting
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Decarbonisation is a priority area for food and beverage companies. Effective decarbonisation means preparing your business for long-term viability in a low-carbon economy, making it more attractive to customers, investors and future generations of talent. Not meeting your carbon reduction targets and stakeholder expectations, meanwhile, could mean missing out on revenue, investment and recruitment and retention advantages.

While decarbonisation is not an issue specific to food and beverage, this sector is carbon-intensive. The World Economic Forum (WEF) says food and fast-moving consumer goods (FMCG) industries together produce more than one-third of global emissions.

WEF analysis shows more than 70% of the food industry’s emission sources come from land use, more specifically from agriculture and deforestation. 

The Paris Agreement – the global consensus to limit global warming to 1.5°C meaning greenhouse gas emissions (GHG) must peak before 2025 at the latest and decline 43% by 2030, achieving net zero by 2050 – gave rise to legal imperatives for governments to act on decarbonisation. Businesses are required to participate through drivers such as climate risk reporting including the Taskforce on Climate-related Financial Disclosures (TCFD), which is mandatory for some larger companies in the U.K. and widely seen as the current gold standard on climate risk disclosure globally. Decarbonisation is also being driven by consumer demand for goods that don’t contribute to climate change.

Decarbonisation can be complicated. There are a variety of decarbonisation strategies available to your food and beverage business and not all of them will be efficient or suited to your organisation.

In this insight, we provide some practical dos and don’ts of decarbonisation to help your food and beverage business avoid the potential red herrings and discover the moves more likely to meet, not only your carbon reduction targets, but the core financial objectives of the business.

DO review your carbon reduction targets and plans

Historically, choosing emissions targets may have been less then scientific, with some organisations settling on figures based on what they thought might appeal to stakeholders or that felt broadly plausible. Alternatively, your organisation may have opted for ambitious targets on carbon reduction but lack clarity on how it will meet them.

The Science Based Targets initiative (SBTi) provides companies with clearly-defined paths to reduce emissions in line with the Paris Agreement goals, with the SBTi’s Forest Land and Agriculture (FLAG) Guidance offering a standard method for companies in land-intensive sectors to set science-based targets.

Understanding your carbon budget in line with SBTi – which is also a component of metrics on emissions within TCFD – is a widely-recognised way of setting internationally recognised, credible targets. However, understanding your carbon budget, setting targets and devising a plan to get there isn’t always straightforward and you may need specialist support along the way.

With or without specialist support, a good first step in any review is to check your understanding of your current emissions profile. Ideally, this exercise should identify hot spots and also quick wins on cutting emissions. Early triumphs can be effective in showing leaders what is achievable, giving momentum to emissions-cutting moves with longer horizons and that demand investments.

DO proceed with caution on food and beverage certification schemes

Third-party assessments of your products with a view to being certified as being environmentally friendly are designed to give consumers confidence on their food and beverage choices. But before subscribing to any food and beverage certification schemes, you should interrogate the bigger picture and consider the potential risks.

There are many different labels designed to offer consumer confidence on different environmental topics, each delivering different headline benefits, for example, carbon neutrality or protection of rainforests specifically. A lack of clarity can muddle consumer expectations and make it harder to deliver on these, potentially opening up reputational risks if your brand is perceived to have fallen short. So, while certification schemes can showcase some environmental credentials, it’s essential you understand precisely which credentials a scheme proves and can also be confident these match your customers’ expectations.

DO consider a diversified decarbonisation approach

The fundamentals of decarbonisation are ‘reduce’, ‘replace’, ‘remove’.

Analysing your emissions profile will reveal those quick wins, particularly around reduction. This could include areas such as reducing wastage in production, or other moves around carbon efficiency in your existing operations.

The ‘replacing’ element of your strategy may have a longer time horizon and involve assessing those capital investments most likely to deliver efficient reductions in your emissions, such as replacing existing fleets with electric vehicles, or replacing a boiler with an energy-efficient asset. This may also include replacing key ingredients and recipes with more plant-based elements to reduce carbon emissions.

The final ‘remove’ element concerns carbon capture and offset, more on which below.

The reality for many food and beverage businesses is that some of your decarbonisation moves will be successful and some will not. Perhaps you’ll invest in technology that won’t ultimately deliver all the cuts in emissions you were hoping for. Diversifying your approach and not relying on a single strategy will reduce the risk of not hitting your targets.

DON’T rely on carbon offsetting

It’s worth remembering that to be aligned to the SBTi you can only offset up to 10% of your emissions to meet your reduction targets. While there are highly credible carbon offset and removal options, such as planting trees and some carbon capture technologies, you should view ‘removal’ elements of your decarbonisation strategy as representing only a supporting role and/or being a measure of last resort.

When it comes to offset, you should also consider the potential risks and the lifetime of these strategies. For example, how might it impact your overall target if the trees you used for offset purposes were destroyed in a forest fire?

DON’T ignore the threat of greenwashing claims

There have already been some high-profile examples of food and beverage companies being called-out in the public domain for so-called ‘greenwashing’, where the stated environmental credentials of a company did not appear to match the realities.

If your public statements on emissions, targets and transition plans are not backed up, there is not only the immediate reputational risk to consider and the impact of this on revenues, there is also a growing risk of climate liability claims around greenwashing.

Global Trends in Climate Change Litigation: 2022 Snapshot – a report by The Centre for Climate Change Economics and Policy (CCCEP) and The Grantham Research Institute on Climate Change – looks at some of the strategies used by climate litigation claimants. It shows 117 claims sought to ‘enforce climate standards’ and a small but notable number of cases (16) related to climate-washing. We may expect this trend to continue as groups such as shareholder activists and others look to maintain pressure on food and beverage companies to deliver on their pledges, and have the evidence to prove they are doing so.

DO focus on decarbonisation supply chain advantages

Most food and beverage organisations’ carbon is generated less from their direct emissions, and more across their supply chain. Increasingly, your partners will be interrogating your emission profile, your targets and your plans to meet them.

Those food and beverage companies with robust and well-articulated plans will be well-placed to maintain their relationships with suppliers and customers as we get closer to 2030 and more organisations face greater investor, customer, regulatory and employee scrutiny on their carbon emissions.

In its Roadmap to Net Zero guidance, the Food and Drink Federation (FDF) highlights the need for rapid decarbonisation in the food and beverage sector. FDF states that a business-as-usual approach to global food production will cause the sector’s emissions to increase by 30%-40% by 2050 and to have any hope of meeting the goals of the Paris Agreement, the industry needs major changes and collaboration across the full supply chain.

For expert support enhancing your food and beverage business’ transition to a low-carbon economy, get in touch with our industry and climate specialists.

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Director of Climate, Decarbonization and ESG
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GB Food and Beverage Leader

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