COP27 - Impact on the food and beverage industry

With the COP 27 2022 United Nations Climate Change Conference taking place in Egypt what is the impact of the food and beverage industry on the environment?

In summary there are three key impacts:

• emissions
• waste and pollution
• deforestation and the use of resources.

Emissions

According to a recent article in the guardian, the combined methane emissions of 15 of the world’s largest meat and dairy companies are higher than those of several of the world’s largest countries, including Russia, Canada and Australia, according to a new study.

Meat has been quoted as accounting for nearly 60% of all food-production emissions, almost double that of plant-based foods. 1 kg of beef emits 60 kg of greenhouse gases. Furthermore, livestock occupies almost three quarters of global farming land but only produces 18% of the world's calories.

Waste and pollution

The use of local products can help to reduce food miles and there is a drive by the sector to promote local produce and indeed demand from consumers. This became important during the pandemic with many people switching to farm shops and similar.

The use of energy to grow crops, produce fertilisers and to manufacture products all impact on the amount of waste and pollution the sector generates along with the use of packaging materials.

Food waste at the end of the cycle also generates a lot of pollution such as methane with food waste contributing about 6% of global greenhouse gas emissions to the industry's carbon footprint.

Deforestation and use of resources

According to the Rainforest Alliance, agriculture accounts for 80% of deforestation. "While fruit production plays a minor role compared to livestock and soya, a large portion of cropland and commodities (like soy or wheat) are used to feed livestock."

Agriculture uses 70% of the world's water. Producing companies are starting to look at how they can better irrigate the crops, whether to use water well systems or whether to switch to more drought tolerant strains or crops.

The impact of climate change on the sector

The sector is being adversely impacted by climate change and the rise in unusual weather patterns, which have a detrimental effect on agriculture which leads to shortages and increased prices. Droughts, floods, and other natural disasters have already disrupted production and supply.

The food and beverage industry is coming under pressure from consumers to be more environmentally friendly and the sector is responding positively by looking for new innovation and products and incorporating its green credentials into its marketing and branding strategy.

The food industry can reduce emissions by shifting from heavy (meat and cheese) to light products (plant-based), reducing food waste, and increasing crop yields, but not everyone will want to become a vegetarian so more innovative measures are being explored by the sector including meat free alternatives and meat grown in labs.

How the sector is responding

Big brands are taking the problems seriously, for example Carlsberg, is aiming for a zero-carbon footprint by 2030. PepsiCo has committed to using aluminium containers for water rather than plastic bottles, and as the Food and Drink Federation states on its website:

“The FDF and our members are fully committed to cutting CO² emissions, promoting efficient water use, building a more circular economy for packaging, embedding environmental standards in transport practices and reducing food waste. We also want to increase understanding of sustainable supply chains and natural capital.”

How can Crowe help?

The changing views of consumers will result in businesses having to adapt. This will lead to new opportunities for businesses to start up and spin off from existing businesses and universities, where they can then be nurtured and access specific funding. Although this brings challenges for cashflow and business planning, there are some good advisors out there along with experts in the sector and forums that can help you on this path. Crowe can help with forecasting, business planning and outsourcing initially to get your business up and running, and can also help with ensuring your systems and controls are fit for purpose from the start. Our corporate finance teams continue to be busy with the sale and reconstruction of the businesses along with helping our client’s source appropriate financing.

All of the potential solutions will require continued Research and Development (R&D) into new products and processes. R&D tax credits could help with cashflow and all projects should be discussed with your advisor to see if they qualify. R&D does not mean men in white coats mixing chemicals, it is much broader and we have helped many businesses in the sector to maximise their R&D tax credit claims on a broad range of projects.

Our team have been supporting businesses in the food and beverage sector for many years. If you would like to talk about how Crowe can support your business with its ambitions, then please contact Darren Rigden.