World Economic Forum
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The food industry needs to innovate faster and collaborate better to effectively tackle environmental, social, and governance (ESG) challenges.
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Digital technologies can be used to address these food sustainability challenges whilst potentially creating new businesses with attractive returns.
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Focusing on areas that have both ESG and financial value improves the likelihood of aligning stakeholders and scaling impact.
This article originally appeared on the World Economic Forum.
Meeting the food needs of a constantly growing global population requires sustainable food production for both the planet and society.
To do this, the food industry needs to address multiple complex issues: greenhouse gas emissions and deforestation; employee safety and fair wages; consumer nutrition and health.
Recent shocks to our interconnected global food system remind us just how small our safety net is. These include climate change, Covid-19, and the conflict in Ukraine, among others.
Faster innovation and cross-value-chain collaboration are key to change. Bain & Company and the World Economic Forum (WEF), while building on earlier research into the impact of digital on food sustainability in nine different industries, researched areas of innovation capable of increasing the pace of change and jump-starting collaboration.
Four “investible themes” emerged. Each addresses important environmental, social and governance (ESG) externalities the food industry faces while also having the potential to earn an attractive return on time, energy, and money invested. All require collective action and a collaborative approach in order to scale.
The Digital Innovations Transforming the Global Food System
New technologies are helping solve urgent sustainability challenges. Explore how your company can be part of the solution.
Why we need to support farmers digitally
Farming needs to be more efficient and lower impact. Today, it is estimated by the Intergovernmental Panel on Climate Change (IPCC) that between 21% and 37% of global greenhouse gas emissions come from our food system, including how we grow our food.
Technology is available today to improve yields and reduce environmental impact, but it is not yet widely used, especially in developing markets. This is often due to a lack of funding or poor digital infrastructure. Investing in infrastructure—especially mobile connectivity networks—would help farmers utilize the digital technologies available.
Those farmers who lack the capital to invest in technologies need access to fair, reliable finance to ensure food sustainability. Financial institutions can, in turn, analyze sensor data and aerial imagery to ensure their investments are viable and reduce their risk by more accurately predicting potential losses. They can even alert farmers to that possibility ahead of time.
Creating farm-to-fork data transparency
Traceability across food system supply chains helps consumer goods companies meet customers’ demand for quality assurance about the products they buy and retailers’ desire to know the upstream inputs of the goods on their shelves.
Some 68% of executives surveyed by Bain said digital traceability is essential. But making the food value chain transparent, with its multiple stakeholders, is complicated. The industry has yet to agree on the fundamental data approach required to build such transparency.
While platforms are beginning to emerge for individual products like salmon and coffee, unified platforms covering many different products are unavailable. Such platforms could provide food authentication through new secure technology, lower the danger of unsafe food, make food recalls faster and more efficient, and foster trust between consumers and retailers, resulting in systems with better food sustainability.
Clearer visibility of upstream inputs would also help retailers and brands make better-informed decisions about what to source and from whom and enable more efficient reporting to stakeholder groups, including customers, suppliers, investors, governments and nongovernmental organizations.
The technology to do this is emerging, with existing technologies like radio frequency identification becoming cheaper and Web 3 technologies like blockchain and non-fungible tokens allowing the authentication of goods and efficient sharing of data between stakeholders in the value chain.
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Reducing food waste and enabling circularity
Approximately one-third of all food produced globally is wasted, according to the United Nations (UN). Upstream food loss and downstream waste amount to roughly $700 billion in industrialized countries and $300 billion in developing countries.
A transparent value chain offers the food sustainability opportunities like reducing food and plastic waste by sharing near real-time data across the supply chain and using forecasting analytics to better match supply and demand.
Digital can also enable a circular model of container reuse. This could eliminate the need for the huge amount of disposable plastic packaging we use today.
The solutions required differ regionally. In developed markets, advanced solutions have emerged that leverage artificial intelligence, computer vision, and the internet of things. But emerging markets could benefit from simpler technology solutions that work with their existing infrastructure while building out the connectivity needed to take advantage of more advanced solutions.
Nudging consumer behavior on food
Helping consumers change their eating habits is important to shift to better food sustainability. Alternative proteins are one way to tackle part of the 14.5% of total greenhouse gas emissions the UN has estimated is generated by the livestock sector. While a range of products are available, they can be expensive, and consumers do not always find the products appealing.
To get to a scale that could help bring those costs down, digital approaches like social media campaigns, personalization, and gamification can nudge consumers to try and adopt products and, in time, scale consumer demand.
Higher demand, in turn, would incentivize consumer products companies and brands to invest more in production and innovation. The same is true for other behavior shifts, such as nudging consumers toward products with more robust sustainable sourcing or lower carbon emission credentials.
Tackle the food sustainability issues in the industry
Investing should begin with selecting the theme most relevant to your organization and then deciding how best to participate, whether by backing an existing innovation or building a new business that could become a second growth engine for your organization.
For most themes, you’ll want to collaborate with the right ecosystem of partners. It’s not easy to form coalitions to tackle the food sustainability issues, but focusing on areas with both ESG benefits and financial value increases the odds of aligning all stakeholders and scaling your impact.
First published in September 2022