The challenge of sustainability for the food and drink industry

26th February 2020

A key theme for 2020 and beyond will be sustainability.  It is estimated that the world’s population will increase by one billion people over the next ten years and ensuring a sustainable supply of food is a major challenge.  Back in 2011, the Government Office for Science defined sustainable food production as “a method of production using processes…that are non-polluting, conserve non-renewable energy and natural resources, are economically efficient…and do not compromise the needs of future generations”.  There is no doubt that, as an industry, food manufacturers will come under increasing pressure to improve the sustainability of their food production.  This pressure will come from consumers (who increasingly hold the view that global food production methods must change to minimise the impact that it has on the environment) and legislators (with both the UK Government and the European Commission currently assessing how the environmental impact of food production can be lowered and how best to limit waste throughout the supply chain).

Legislation

The UK has been promised a new Environment Bill in the Queen’s Speech which will: transform domestic environmental governance by enshrining environmental principles in law; establish the Office for Environmental Protection which will scrutinise policy, investigate complaints and take enforcement action; improve air quality, by setting a new legally-binding emission target; and introduce measures to tackle plastic pollution by introducing charges for specified single use plastic items, similar to the 5p plastic bag scheme.  The legislation also intends to extend producer responsibility, ensure a consistent approach to recycling and introduce deposit return schemes as part of the move towards a circular economy.

Governance

On top of new legislation there is already an increasing amount of corporate governance and corporate reporting that is focussed on sustainability and how it links with climate change.  ESG is an umbrella term for a broad range of environmental, social and governance factors against which investors can assess the behaviour of the companies they are considering for investment.  Sustainability is one of several environmental factors within the concept of ESG.  Recent years have seen an unprecedented focus on the risk that various ESG factors have across the economy.  Companies and boards are under increasing pressure from many sources, including:

• The prospect of tightening regulation, including more onerous ESG reporting and other requirements from regulatory bodies.
• Requirements by investors and investor bodies for companies to report on their financial risk linked to sustainability and on how they address it.
• Stakeholder expectations, including from customers, consumers, activist groups and employees.
• Physical risks (including to assets and operations) and associated impacts, for example, on insurance and supply chains.

All of these issues will have a significant impact on the food and drink industry, with those businesses that respond proactively to the challenge of sustainability (and the environment more widely) likely being the ones to gain a competitive advantage.  A thorough understanding and appreciation of the evolving legal landscape will assist greatly in planning ahead of these, and other, changes.