In today’s complex business landscape, companies globally are having to manage a wide array of sustainability-related risks, opportunities and impacts. To help manage these risks and challenges effectively, companies need to integrate sustainability information into their strategies and decision-making processes. This is especially true for global food companies where the consequences of climate change are already amplifying these challenges.
Historically, global food production has treated the degradation of natural ecosystems as an externality, under pressure to deliver product at the lowest unit cost and with little accounting for longer-term exposure related to habitat, biodiversity or other ecosystem impacts. Companies have had little incentive to pay attention to the natural resource risks embedded in their supply chains, to set more stringent purchasing standards, or to invest in shifting the practices of producers in their supply chains.
Today, while food companies are beginning to recognize that investing in innovation and transitioning to more sustainable production practices can yield a competitive advantage, there remains a gap in concrete action being taken towards this goal. Keeping this growing awareness in mind, the Moore Foundation’s Conservation and Markets Initiative supported the World Business Council on Sustainable Development (WBCSD) to develop this report which seeks to assess interconnected risks in the food retail sector.
To advance this report, WBCSD engaged KPMG to analyze the network of interconnected risks that are impacting food retailers and suppliers as they begin embedding nature into business practices, using their dynamic risk assessment methodology. The assessment engaged 34 experts from 14 companies across multiple continents, representing various roles within food retail and their supply chains, including NGOs. The results of the analysis map out system dynamics and interdependencies, and call attention to clusters of interdependent risks that are hindering the integration of nature into business models, and identify key areas for prioritized action.
Several key risks emerged from the report, however, “business models driving depletion of natural systems,” was identified as the most significant one when it comes to nature and nature-based systems. This indicates that current business models may, in practice, be a threat to the existence of the companies that continue to operate under this model. This risk is the focal point of the overall web of challenges for food retail companies and provides a high potential for eliciting change if addressed. Successfully mitigating this risk will have the greatest impact on mitigating other risks in the network. Conversely, ignoring this risk would likely exacerbate others. (See report page 23).
Other key findings related to the risk network provide actionable insights to support food retail companies on their journey to integrate sustainability into key corporate functions and decision-making:
1. Traditional business models that perpetuate environmental depletion to cut costs pose significant risks to long term food supplies and the viability food value chains. Urgent action is needed to rethink food procurement models and establish long-term supplier partnerships to ensure continuity of food suppliers while protecting nature.
2. The combination of any risk with the consequences of climate change amplifies the magnitude of challenges faced by food systems. As a result, food companies should adopt holistic solutions to address both their climate exposure and nature-based risks.
3. The challenges faced by food systems are too great to be addressed by any one single company.
4. There is an urgent need to develop more nuanced approaches to measuring success of companies within food value chains.