How the food industry can evolve sustainable business models
Growing consumer awareness and increased government initiatives around sustainability and climate change are adding pressure on industries to adopt sustainable practices.
Author: Ian Harfield, Managing Director, ENGIE Solutions
This is particularly true of the food and beverages (F&B) sector where food production is responsible for one-quarter of the world’s greenhouse gas emissions. Left unchecked, this figure will only rise due to the combined impact of a rising population and growth of the middle class – wealthier people consume more resource-intensive, animal-based foods. According to the World Economic Forum, by 2050, the demand for food will be 60% greater than it is today.
There is, therefore, an urgent need for the F&B industry to address its carbon footprint. ENGIE Impact, the sustainability consulting arm of the energy giant ENGIE, says only about 15% of F&B firms are on track to meet their sustainability goals.
Ian Harfield, Managing Director, ENGIE Solutions
To address the challenges climate change poses for food systems, various initiatives have been implemented in the region in line with global sustainability goals. The UAE was the first in the region to announce a net-zero pledge ahead of the upcoming UN Climate Change Conference 2021 (COP26). The UAE also partnered with the US to launch the Agriculture Innovation Mission (AIM) for Climate, a global initiative aimed at accelerating investments in R&D for climate-smart agri-tech.
More recently, the Kingdom of Saudi Arabia (KSA) and Bahrain have also pledged to reach net zero emissions by 2060.
Retrofitting improves energy and water consumption. By integrating energy efficiency into plants, warehouses and processing centers, manufacturers can cost-effectively lengthen plant lifecycles while meeting decarbonization goals.
Due to the urgency of the situation, the region is actively adopting sustainable and climate smart agricultural methods and promoting sustainable production and consumption habits. Research shows 49% of global consumers consider sustainability attributes when purchasing food and beverages.
So how can the food industry evolve its sustainable business models?
An excellent place to start is data analysis. Using the data generated by food production companies, data analytic tools can be used to define and track against the metrics that align with an organization’s goals and initiatives. Having access to such information allows for the optimisation of resource productivity.
Organizations will be able to improve budget certainty, evaluate supply-side adjustments, identify demand-side actions, and monitor project performance to track and report progress towards their goals.
Secondly, sustainability is a collaborative effort and engaging partners up and down the supply chain is vital. Apart from optimizing its production processes, the F&B industry should look to decarbonize end-to-end operations by transitioning to green power options. Securing reliable power sources such as solar thermal solutions, on-site generation, and more, will reduce carbon emissions. Research shows companies sourcing renewable electricity outperform their rivals financially, with the difference ranging from 0.3 to more than 7 percentage points.
Additionally, shifting fleets to low-carbon transportation, changing to low-carbon cold chain technology, and optimizing transit routes.
Meeting sustainability goals can overwhelm even well-resourced F&B giants, who would rather focus on their core business. Outsourcing energy management services to specialized firms enables food manufacturers to strengthen their economic performance by leaning on third-party providers for reliable energy supply, management of multi-technical projects and strict control of operating costs.
Most importantly, energy management firms can deploy specialized analytical tools to identify areas for improvement, analyze energy consumption trends, advise on purchasing energy, electricity and gas, and optimize energy performance.
An example of such outsourced services includes tailor-made high-tech financed solutions for CO2 footprint reduction. Here, customers only pay for the energy they use while the energy services company undertakes the CAPEX investment. All risks related to engineering, procurement and construction (EPC) and energy performance are transferred to the energy services provider.
Another sustainable model is on-site energy power generation, particularly solar, which eliminates the need to transport power across great distances, significantly reduces costs and energy losses. These services are delivered in conjunction with traditional offerings, including the optimized production and distribution of hot/cold/iced water, compressed air, compressors for steam, industrial gas, etc., process utilities such as refrigeration, process environment (e.g., HVAC), heat recovery installations and more.
Technology is a crucial driver of sustainability, with many digital opportunities to improve process performance and decrease costs. This has led to greater demand for the availability and efficient use of data, marked by an increase in apps.
With increased scrutiny of food sources, traceability is today a significant trend in the food industry. Traceability is the ability to follow the movement of a food product and its ingredients through all steps in the supply chain, both backward and forward. Blockchain has emerged as a powerful and efficient technology allowing consumers to trace their food from “farm to fork” with a QR code scan.
Demands for reducing food waste has led to apps such as TooGoodToGo, Phenix, Karma, which connect consumers with surplus food from local restaurants, bakeries and grocery stores that sell products at a fraction of the list price.
The discussion around climate change is becoming more intense, increasing demands to reduce energy and water consumption and mitigate CO2 emissions. Even the most prominent players in the food industry would struggle to maintain a coherent decarbonization strategy while delivering their core business objectives. Energy services companies such as ENGIE Solutions can bridge this gap with a proven record of reducing energy consumption for customers at far lower costs.