appetite for change

7/31/2019 Appetite for Change

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Appetite or

Change


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Appetite or Change 2

1 Key Findings 5

2 Introduction 7

3 Pressure or Change 9

3.1 Consumer Demand 10

3.2 Supply Security 11

3.3 Political Risk 12

4 Appetite or Change 14

4.1 Vision 15

4.1.1 Fair Shares 16

4.1.2 Closed Loop 17

4.1.3 Simplication 18

4.1.4 Productivity 194.2 Systemic Approaches 20

4.2.1 Networks and Mosaics 21

4.2.2 Inclusive Agriculture 22

4.3 Inormation Technology 24

4.3.1 Macro-level Management 25

4.3.2 Farmer Empowerment 26

4.3.3 Smarter Consumers 27

4.4 Meeting Societal Needs 28

4.4.1 Shiting Societal Needs 29

4.4.2 Re-value ood 31

4.4.3 New politics, realigned incentives 33

5 Final Remarks 35

6 Reerences 38

6.1 Interviewees 38

6.2 Endnotes 39

2011 SustainAbility

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We express sincere thanks toAppetite for Change sponsors Nestl and IBM as well

as launch sponsor Sodexo. Their support made this work possible. We also thank

the experts interviewed duringAppetite for Change. Their candid perspectives on the

ood industry, as well as their innovative ideas about how to bring about sustainable

change, were invaluable.

Finally, we thank our colleagues, particularly Geo Kendall or his many inputs and

sage guidance, and also Chris Guenther, Frances Buckingham and Kyra Choucroun

or their help with launch, and Rupert Bassett or the report design.

Acknowledgements

Primary Sponsors

Launch Sponsor

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We conceivedAppetite for Change or a ood sector at a crossroads. We wanted

to help advance and accelerate debate on the scope and scale o change needed

to produce enough ood, both saely and sustainably. The ood system is under

scrutiny or environmental impacts including habitat degradation, greenhouse gas

emissions and reshwater use. From a social impact perspective, it dismays that hal

the worlds armers go hungry, and there are concerns about how equitably local

and global ood security issues are managed. Demographic curves predict huge

growth in demand and shits in its location. There is mounting evidence that crop

yields are dropping. Change is required.

The operational, reputational and political challenges acing businesses in the sector

are huge. Some ood companies recognize and accept this and have begun to shit

thinking and practice. Yet even leaders acknowledge an uncertain path orward,

and the experts interviewed duringAppetite for Change stated that no platorm

exists today capable o supporting the transition needed. There are tremendousopportunities too. There is clear potential to make unconventional approaches

like inclusive agriculture more commercially viable. Companies stand to nd new

customers by imagining and implementing ways to deliver better, more aordable

and more widespread nutrition. And less resource-intensive production methods

will bring value to the innovators who create them.

Appetite for Change lays out an agenda that we believe capable o positioning the

ood sector and its partners to build a sustainable ood system. Delivery will require

new techniques, unprecedented collaboration among armers, businesses and

government, plus imagination, but change is necessary and possible. We invite

debate on our ndings and recommendations, and we hope many will join us on the

journey.

Mark Lee

Executive Director

Foreword

Jennier Biringer

Director

SustainAbility Inc.

[email protected]

Elvira Thissen

Analyst

SustainAbility Ltd.

[email protected]

Mark Lee

Executive Director

SustainAbility Inc.

[email protected]

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mailto:biringer%40sustainability.com?subject=Appetite%20for%20Changemailto:thissen%40sustainability.com?subject=Appetite%20for%20Changemailto:biringer%40sustainability.com?subject=Appetite%20for%20Changemailto:biringer%40sustainability.com?subject=Appetite%20for%20Changemailto:thissen%40sustainability.com?subject=Appetite%20for%20Changemailto:biringer%40sustainability.com?subject=Appetite%20for%20Change


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Appetite for Change asks: Is the private sector ready to embrace a new vision and

play a central role in transorming the global ood system so that it adequately

addresses the increasingly critical issues o ood security and sustainability?

What role can and should companies play in this transormation or the good o

consumers, producers and their own bottom lines?

SustainAbility denes a sustainable ood system as one that is reliable, resilient

and transparent, which produces ood within ecological limits, empowers ood

producers, and ensures accessible, nutritious ood or all.

Key ndings include:

1 The ood sector is at an inection point, with the macro orces already exerting

tremendous pressure on the ood system set to increase or accelerate. Shiting

demographics, new patterns o supply and demand, over- and under-nutrition,escalating incidence o ood-related illnesses, and resource constraints are

undamentally altering industry dynamics and value drivers.

2 There is growing recognition that ailure to operate within ecological limits and

equitably meet a wider range o societal needs will be unacceptable to a variety

o stakeholders including consumers and governments. Needs include more

widespread availability o adequately nutritious ood, producer empowerment

and more resilient supply chains.

3 A view is emerging, in and outside the industry, that the ood system needs to be

dramatically transormed. Some more systemic approaches are emerging and

being tested by leaders in the ood industry, but energy and innovation equal

to the scale o the challenges are not yet in evidence. While ood companies

are at times at the oreront o new transition methods, they rely heavily on

practices like acquisition that have resulted historically in incremental change

rather than embedding sustainability in mainstream practices. Some o the most

creative approaches to making the ood system more sustainable are appearing

outside the private sector, in multilateral organizations, governments, NGOs and

coalitions.

4 A key question is whether and how companies can make it protable to addresssocietal ood and nutrition needs ully. How should ood sector companies,

investors and entrepreneurs approach investment in value chain resilience and

sustainability, ood saety and traceability, and the universal provision o better

and more aordable nutrition or all? What returns should they expect? While

this will not be simple, signicant parts o the answer lie in how we value ood

in terms o pricing aspects o its production, manuacture and distribution.

Key Findings

1.0

The ood and agriculture

industry is responsible or the

ood we eat and or satisying

consumers. However, as society

changes, so do consumer

needs and expectations or the

industry.

Kavita Prakash-Mani

Head o Food Security,

Syngenta


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1.0Appetite or Change

Key Findings

6

5 Special attention must be paid to how ood-related policy needs to change to

support a sustainable ood uture. The politics surrounding the ood system

are volatile. Food policy and regulation are driven by who is in power and

where, by the moods o citizenry, and through conict or compromise with

other government objectives. Government sets the absolute boundaries on

ood security, determining which commodities and products cross borders.

Companies must contribute to the policy debate more proactively, transparently

and cooperatively so as to balance eorts to reduce business risk and maintain

a predictable operating environment with the necessary steps to make the ood

system as a whole sustainable.

6 Imagining and creating a sustainable ood system will require new kinds o

leadership rom those with appetite or change. Key attributes o the type o

leadership necessary include:

Redened Vision, encompassing sometimes unamiliar or unconventionalconcepts like air shares, closed loops, un-innovating or simplication, and

new notions o productivity.

Application o Systemic Approaches, capable o building networks and

ostering mosaics as well as developing more inclusive approaches to

agriculture.

Use o Information Technology, which will make more robust the web o

interactions and knowledge sharing mechanisms necessary to support a

sustainable ood system.

Better understanding o Societal Needs, in order to re-value ood, and to

understand and then transorm ood-related policy and politics.

7 Food sector leaders are testing readiness to embrace these attributes e.g.

imagining how todays institutions might morph rom ood producers and

providers to health and wellness companies in order to dierently meet demand,

experimenting with new partnerships among market participants traditionally

segregated by size or other attributes, testing the potential o inormation

technology to inorm and empower producers, and exploring ways to meet a

range o societal needs ranging rom accessibility to ood security. While such

eorts are welcome, on the whole the industry has a long way to go. There is an

urgent need to accelerate the ood industrys transition to sustainability, and it is

how this acceleration might take place thatAppetite for Change explores.

All the market dynamism in

ood is in Asia; urther down the

road it will appear in Arica. In

the US and Europe companies

are ghting over the same pie.

Businesses that stay in Europe

are going to be very constrained

in their growth opportunities,

because markets are really

expanding in other parts o the

world.

Jason Clay

Senior Vice President,

Market Transormation,

WWF


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There is growing debate about the uture o the global ood system as questions

about its capacity and limitations become increasingly evident and pressing. The

current industrialized model has been highly successul in delivering vast quantities

o aordable, reliable, sae and varied ood to many. However, the system comes

with signicant social, economic and environmental trade-os. Further, despite its

success in ood delivery, it leaves too many people without access to the quantity

or quality o ood they need to lead healthy, productive lives. Consider: 44 million

people have been pushed into poverty due to rising ood prices since mid-2010,1 and

925 million people are presently undernourished.2 Paradoxically, around another

billion consume too much (the US alone spends $147 billion each year on medical

costs related to obesity3).

Even as the global ood system struggles to meet present needs adequately, it is set

to come under still greater strain as shiting demographics mean it will need to be

able to meet the nutrition needs o two to three billion more people by mid-century.Additionally, it will need to cope with a growing geographic mismatch between ood

supply and demand, the consequences o increased natural resource depletion,

the anticipated impacts o climatic shits on ood production systems, and oten

unpredictable policy interventions.

While a broad range o stakeholders must come together to bring about this

transormation, companies in the ood sector will be especially critical. Indeed,

one o the key ways to drive change will be to answer the question o how to make

it protable to address societal ood and nutrition needs ully rom value chain

resilience, to sustainable production processes, to ood saety and traceability, to

universal provision o better and more aordable nutrition.

There are examples o individual companies, as well as collaborative eorts such

as the World Economic Forums New Vision for Agriculture, working to nd new and

innovative ways to realize the prot potential o better meeting societal needs.

Taken as a whole, however, the ood industry maintains the course that has made

it successul since the Green Revolution and has taken only incremental steps to

address the ood system sustainability challenge. Perhaps the most visible transition

strategy to date has been acquisition o smaller, sustainability-oriented brands

whose oerings help target niche market segments within developed countries,

rather than integration o sustainability principles within mainstream production.Food industry portolios and operations have not changed signicantly the ocus

remains on the cost o inputs, supply security, and consumer and shareholder

loyalty. And even the most orward-thinking companies admit that they have yet to

discover how to meet their sizable and challenging sustainability goals protably.

Today, increased awareness o the looming challenges acing the global ood system

is building some momentum or exploring alternatives. To cite just one example,

the UN Special Rapporteur or the Right to Food recently issued a report calling on

nations to invest in eco-agriculture the application o ecological principles to

agriculture4 as the most eective way o meeting ood security needs. This would

represent a seismic shit away rom the status quo o industrialized agriculture.

Introduction

A Sustainable Food System

I it is to adequately rise to the

challenge, the global ood system

must be transormed rom its present

incarnation into a sustainable system.

SustainAbility denes a sustainable

ood system as one that is reliable,

resilient and transparent, which

produces ood within ecological limits,

empowers ood producers, and ensuresaccessible, nutritious ood or all.

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Introduction

While the private sector is most certainly involved, much present energy and

innovation in addressing systemic ood sustainability challenges stems rom

multilateral organizations, governments, NGOs and other non-corporate bodies.

Business proven ability to adapt to new circumstances and opportunity means it

is unlikely to be let behind when change occurs. However, the private sector is not

adequately engaged in the debate, either to position itsel or market advantage or

to make the ull contribution it is capable o and which is so desperately needed.

In exploring these questions to createAppetite for Change, SustainAbility interviewed

experts rom the private, public and non-prot sectors to gather perspectives on the

current role o the ood industry, and which changes it must embrace. Interviews

were bolstered with research on innovation within the ood sector and the state o

existing leadership among ood companies and their aliates in the nance and

technology industries. Finally, SustainAbility assessed current industry perormance

against the attributes we believe will be instrumental in driving ood systemtransormation: re-dening vision, applying systemic approaches, using inormation

technology and meeting societal needs. This report presents our ndings and

outlines key elements o the change agenda the ood sector is most likely to need to

adopt in order to meet escalating societal needs and demands around accessible,

nutritious and sustainably produced ood or all.

2.0

WhyAppetite for Change?

Appetite for Change asks: Is the

private sector ready to embrace a

new vision and play a central role in

transorming the global ood system

so that it adequately addresses the

increasingly critical issues o ood

security and sustainability? What role

can and should companies play in

this transormation or the good oconsumers, producers and their own

bottom lines?


9/41


The challenges acing the global ood system are myriad and proound, but

thanks to the wealth o recent research that has emerged they are relatively well

proled. Unortunately, visibility o issues has not yet produced adequate action in

the orm o innovative solutions. Section three o this report, Pressure for Change,

will look at which issues have become most prominent and the early responses

emerging. The section looks at the global ood system rom the perspective o

a business leader empathetic to the need or change and wanting both to better

understand the landscape and make good choices about which investments might

help uture-proo his or her organization. When the agenda is seen through this

lens, three issues eclipse all others: consumer demand, supply security and political

risk.

Today its about getting ood

produced according to local

preerences. What can be global

is knowledge and alignment

around key goals.

Jos Lopez

Executive Vice President,

Operations, Nestl

Pressure or

Change

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10Appetite or Change

Pressure or Change

Consumer trust in corporations in developed markets rests increasingly upon

companies ability to satisy not only individual consumer demands but also broader

societal expectations simultaneously. Ater the quality o products and services,

transparent and honest business practices are now the main determinants o a

companys reputation more important than price or nancial returns in some

studies.5 SustainAbility believes an extension o this ocus on transparency and

honesty will be a greater portion o consumer trust and demand built on the specic

ways companies are involved in mitigating ood-related sustainability challenges

such as supply chain sustainability, traceability, and over- and under-nutrition.

While basic needs dominate in emerging economies (where hunger in its most

visceral orms and the ght to eliminate it tops the agenda), it is anticipated that

consumer expectations in developing nations will ollow a similar path as (and

more quickly than) in developed markets. Namely, once basic nutrition needs in

these dynamic and rapidly expanding markets are met, the ocus there also will turnincreasingly to quality and business practices (as it is doing already among emerging

economy consumers in the upper and the rapidly-expanding middle classes).

Recognizing the tremendous existing (mostly underserved or wholly untapped)

consumer base and proportion o demographic growth set to occur over the next

ew decades in the developing world, ood multinationals are rapidly expanding

operations in these regions. But noting where 82% o current global population

lives and where 95% o demographic growth through mid-century will occur9 is

not the same as shiting the operational strategies so successul in the developed

world into approaches suited to emerging economies; importing (or even locally

manuacturing) the same ood portolios into regions where hunger and malnutrition

are widespread will rarely i ever be the complete answer. While companies rush into

these markets based on the tremendous opportunity they present, more must be

done to tailor strategies to local needs and to address challenges.

Consumer

Demand

Market Evolution

Health conditions related to obesity,

such as heart disease and stroke, are

now the leading causes o death globally,

with the incidence o childhood obesity

becoming more marked. This trend

is set to spread urther as a growing

number o people are shiting towards

Western-style diets. At the other end o

the spectrum over 925 million people areundernourished,6 and then there are a

range o issues arising rom malnutrition,

notably micronutrient deciencies

which aect vital unctions o millions

o people worldwide and cripple the

development o entire societies. High

and unpredictable ood prices (reacting

to the combination o increasing demand

and commodity price increases as well

as volatility) have contributed to ination

in recent years and grown by over 144

million the number o undernourished

worldwide since 2008, adding to the

already existing burden o hunger and

other orms o malnutrition.7 8

3.1


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Success in the modern ood industry is premised on continuous access to smoothly

operating markets. Though the ood supply chain is certainly complex, until now

international markets have created a suciently predictable business environment

or major ood MNCs to thrive.

The uture is ar less certain. An array o sustainability challenges threatens the

operating context o the ood system, not least o which is the sudden rush by

investors and governments to acquire armland in developing countries to secure

ood supply in the ace o expected increased demand. These changes are having a

proound eect on both multinational corporations and domestic ood producers.

As competition or resources becomes more erce, what can be done to build that

predictability on which smooth operations depend and that investors preer?

Future markets will be more complex and volatile; the question is how to build

adequate stability in spite o this. As now, companies will have to manage impactsto operations o various individual resource constraints e.g. water prices, water

access rights and disputes with other users relating to water use, both legal and

desired though at a heightened level. Additionally, they will need to become

ar more able to tackle multiple complex challenges aecting supply security

simultaneously as surging populations compete more vigorously or dwindling basic

resources.

As private sector ood companies ollow population growth trends into emerging

markets, supply security will be determined also by the ability to align with

tightening and increasingly intense regulatory environments and expectations

o governments, who will become more ardent advocates o their resources and

citizenry.

Supply Security

Pressure or Change

There is a growing geographical

mismatch in supply and demand.

Demand growth is occurring

predominantly in Asia, whereas

supply growth will be in South

America and possibly Central

and Eastern Europe. More global

trade will be the result.

Carel van der Hamsvoort

Global Head, Food &

Agribusiness Research and

Advisory, Rabobank

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Appetite or Change

Pressure or Change

12

Declining trust in business generally and recent, high-prole ood crises have drawn

greater public attention and concern to the ragility o the global ood system. As

Appetite for Change goes to print, the European Union is ghting (and EU members

are ghting about) an E. coli outbreak centered on Hamburg, Germany. About two

dozen people have died to date, and more than 2000 are ill. Initially blamed on

cucumbers rom Spain, armers there were orced to destroy millions o dollars

worth o crops even though it was not certain they were responsible. As the

crisis continues to unold it appears the outbreak may derive rom a completely

dierent source. Whatever the nal outcome, incidents like this generate public and

consumer anxiety, inghting among political bodies, and trigger increased public

sector scrutiny o the ood industry.

Present and uture government responses and attempts to direct or control the

market sometimes through outright intervention as with banning trans-ats

in some regions, and sometimes indirectly as when regulation is threatened ibehaviors do not change will have a massive impact on ood companies and their

investment decisions. As with supply security, policy interventions can undermine

predictability o operations. What is the most appropriate way or such political risk

to be minimized?

While the ood industry is requently intensely regulated, the private and public

sectors too oten seem to operate in isolation rom one another as relates to ood

system sustainability. SustainAbility believes the private sector ails to take political

risk into account in an adequately structured or consistent way.

Global organizations such as the United Nations Food & Agriculture Organization,

United Nations World Health Organization, United Nations Environment

Program, the International Assessment o Agricultural Science & Technology or

Development and some national governments have recently articulated alternative

views o the ood security challenge and the actions required to address it. For

example, a recent report rom the UN special rapporteur on the Right to Food 10

lays out the rationale or widespread adoption o eco-agricultural methods in both

industrial and developing societies in order to acilitate better outcomes in terms

o ood security, nutrition and sustainable production. This represents a dierent

and more nuanced potential view o the uture o ood than the straightorward

determination o most government and industry to increase agricultural production(with existing methods) by 70% by 2050. How do we make room or debate about

the best way orward?

The UN Right to Food approach can go the eco-agriculture route without

massive increases in production because it recommends reallocating or human

consumption cereals currently used or animal eed. Controversial? Radical, even?

Certainly, but just expressing and exploring the strengths, weaknesses and potential

o ideas like this helps to oster creative thinking.

Political Risk

3.3


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In this case, while wholesale adoption is unlikely, the Right to Food agenda illustrates

the tremendous impact alternate approaches to ood production and consumption

patterns might have, especially in developing countries (which would stand to

benet most rom improved public health and environmental perormance), but also

globally (due to actors such as decreased ood waste and accelerated development

o alternative animal eeds). UNEP estimates that 3.5 billion people could be ed

with the amount o calories today in cereals that go to eeding animals, even ater

the energy value o the meat produced is taken into account. People will continue to

eat meat obviously, consumption o animal protein is spiking now, not decreasing

but whether visions like Right to Foods even partially shape the uture o the ood

system challenges us to consider whether the calories available are put to best use,

and illustrates the enormous impacts, rom corporate prots to consumer choice,

various shits to the system might produce. How does industry adequately plan or

all the potential scenarios and which should it endeavour to have come about?

Pressure or Change

There are two discussions going

on with hardly any overlap. In

policy, people talk about how

we are going to provide ood

to so many billions o people,

while industry is much more

concerned with environmental

sustainability, but there is little

or no cross-ertilization between

the two.

Alex Evans

Non-Resident Fellow,

NYU Center on International

Cooperation

3.3


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The expert interviews conducted duringAppetite for Change, and SustainAbilitys

own research, conrm what is known to industry players and inadequately served

ood system stakeholders alike: the ood sector, in advance o the demographic

wave expected over the next ew decades, is struggling to make sucient, sae,

nutritious ood widely enough available, even in developed markets. In emerging

economies, price is a huge barrier to many even when ood is available. Waste

in the ood system is enormous. And the security and diversity o ood industry

supply chains are under mounting pressure or reasons ranging rom shiting

weather patterns, to land purchases by sovereign wealth unds, to volatile policy

intervention in response to protests over escalating ood prices and concerns about

the environment.

Appetite for Change suggests in Section 3 above that the most immediate pressures

on the ood system as viewed rom the perspective o business relate to consumer

demand, supply security, and political risk. Here in Section 4, we will explore earlyindustry responses to these present and potential disruptions and outline the

manner in which vision, systemic approaches, inormation technology and meeting

societal needs will be critical to delivering the sustainable ood system which

policymakers, consumers and citizens increasingly demand, and which is required i

scarce resources are to be better preserved or uture generations.

Where do we begin the quest or change? The experts surveyed by SustainAbility

duringAppetite for Change were widely diverse, with backgrounds in crop science,

trading, ood processing, manuacturing, retailing, ood service, technology,

nance (including venture capital), government and policy, and new enterprise

development. In terms o preparedness to meet the challenges articulated above,

the group generally views the industry as operating at a below-passing grade

(most commonly expressed as about a our out o ten). No one gave even those

incumbent companies identied as leaders a score higher than a six; rare higher

marks went to newer, generally smaller, entrepreneurial enterprises only. Marks &

Spencer, widely praised or its leadership, said o itsel that it has only done 10% o

what it needs to become sustainable.

But such rough scores mask what these experts think the industry does well and

their universal belie that the industry has the skills and potential to deliver the

more sustainable ood system needed. In terms o present practice, intervieweesoered praise regarding the remarkable degree to which ood is available and sae,

or recent improvements in perormance in meeting basic nutritional needs, and

or sensitivity to public concern. This does not eliminate the challenges e.g. all

interviewees pointed at the persistence o unsustainable environmental and societal

externalities, and suggested the best practice eorts extant are simply too ew and

moving too slowly but the sum oAppetite for Change interviews and research

points to large market opportunities with the potential to be good or business and

ood industry stakeholders alike.

Appetite or

Change

4.0

Improving plant varieties is the

ultimate orm o sustainability,

especially when it improves

yields or armers and delivers

better nutrition.

Howard Shapiro

Global Sta Ocer Plant

Science and External Research,

Mars


15/41


Vision a clearly articulated path and well-dened desired end state will be a

crucial element o the leadership required to develop a better, more sustainable

ood system. Again, SustainAbility denes a sustainable ood system as one that

is reliable, resilient and transparent, which produces ood within ecological limits,

empowers ood producers, and ensures accessible, nutritious ood or all. Given the

challenges already acing todays ood industry, reaching such an ambitious vision

will be a signicant task. Some corporate visions have been adjusted to reect

the ambition (and grasp o ambiguity) such a long-term outlook requires, but the

industry as a whole has not articulated a clear vision or how it will address these

macro, systemic challenges.

Take ood security. For decades, ood security has been interpreted rst and

oremost as a numbers game. When industry talks about its vision or the uture, it

tends to ocus on the necessity o ramping up production and its own role in that.

Appetite or Change interviewees indeed praised industrys ability to churn outmassive quantities o ood that many access with convenience and at relatively

low price. While yield increases are important, more alone will not produce the

results required. We need a ood system that produces enough, or everyone,

within ecological limits, while treating all players airly, not simply the same system

producing more while becoming less and less sustainable itsel.

In a ew cases, particularly in ood manuacturing and retailing, companies have

started to dene ambitious non-growth targets. Some leaders have gone so ar as

to declare their businesses will undamentally transorm into nutrition and wellness

companies. Danone, Marks & Spencer, Nestl, PepsiCo and Unilever are among

the leaders expressing the potential (and need) or their businesses to evolve along

these lines; they are making public developing roadmaps, that include commitments

against which their progress can be measured.

With at least some corporate leaders changing operational strategies and investing

to respond to shiting value drivers and meet new market opportunities and

challenges, the rest o the industry must seize the opportunity to learn and change

similarly or perhaps surrender inuence and prot to others who are braver, more

capable, or both. The most rapid evolution possible o the existing industry will be

critical to the astest development o a sustainable ood uture. Below we present

the key aspects o vision emerging rom Appetite or Change that uture leaders willbe required to balance: air shares, closed loop processes, simplication and new

denitions o or approaches to productivity.

Vision

4.1

There is consensus in terms o

the major challenges how

many people are hungry, where,

why, the impact o agriculture

on the environment, etc. But it

is in the interpretation o the

challenges and the development

o the solutions that the

dierence o opinion arises.

Kavita Prakash-Mani


Syngenta


16/41

Appetite or Change

Vision

16

As population and consumption trends reverberate and reshape markets, a race

to secure land and resources is orcing discussion o a new operating context or

the ood sector that o air shares. Fuelled by cyber-connectivity and improved

access to inormation, citizens and governments are becoming more aware o issues

relating to ood and resource access, price and control. This will lead to companies

being expected to explain and to be judged according to whether they are taking

more than their air share rom any part o the ood value chain.

While air shares thinking is nascent in the ood sector, there are illustrations in

other industries o how this might work. This is true especially in the climate change

arena, where understanding o the atmospheric limits or GHG emissions and the

implications o exceeding certain thresholds is sucient to allow private sector

organizations (as well as governments) to set emissions reductions targets or their

own operations in the context o global (IPCC) goals. Sotware design companies

like AutoDesk (which is working with the Carbon Disclosure Project and the ClintonClimate Initiative) are producing simulation sotware that enables customers to

plan operations and growth ootprints that t their climate air share. Equivalent

tools are being developed and tested to help assess and proportionally (re-) assign

resh water and other resources. As they mature, their application will present

opportunity or ood sector actors to get ahead o expectations and get their shares

right (which will minimize inputs and boost reputation) as well as risk or those who

trail expectations to assess and address sustainability challenges this way.

Fair shares will apply not only to resource use but to issues o ood sourcing,

production and distribution. For example, companies particularly multinationals

will be required to more careully consider and address local ood security and

livelihood needs in the regions where they source and produce. This will entail

tough, complex decisions about levels o return to local communities rom oreign

trade, and careul consideration o what portion o ood produced should be

reserved or local consumers (who are so oten also agricultural producers).

Fair Shares

4.1.1


17/41

Appetite or Change

Vision

17

In order to operate within a air shares context, companies will need to align their

operations with basic ecological principles. Once perceived as a separate realm

belonging to the part o the environmental movement seeking to live o the grid,

mainstream businesses are now setting and pursuing zero waste goals and doing

everything to optimize resource use, trends which will only accelerate.

Zero Waste

According to the ForesightReport on the Future of Food and Farming, halving the

current level o waste throughout the ood value chain can do a tremendous amount

to counter ood security issues. Estimates are that at least 30% and as much as

50% o ood produced globally goes to waste. Waste related to production and

storage (largely in developing countries) and consumption (mostly in developed

countries) is roughly equal. Halving the current level o waste by 2050 is considereda realistic target, and achieving it would decrease projections or 2050 calorie

production requirements by 25%.11

Companies have leapt to the oreront o the zero waste movement. For example,

one o Wal-Marts three overarching sustainability goals is to produce zero waste,

and it is working vigorously with suppliers and civil society partners such as the

Environmental Deense Fund to achieve this. In the UK, Tesco is experimenting with

ways to help reduce ood waste in the home, such as through novel buy one, get

one ree later oers. Finally, new businesses such as RecycleMatch exist to nd

alternate end uses or business waste alternatives that create value and keep

materials out o landlls.

Stacking

As sustainability value drivers are more clearly understood and their eects made

measurable, it becomes possible to optimize activities across multiple dimensions

o benet by stacking (or stacking unctions). Agricultural sequestration eorts

provide some excellent examples, like the way no-till practices simultaneously

sequester carbon dioxide, improve soil ertility and reduce soil erosion all o

which deliver value, directly or indirectly, to the armer, and which are indirectlyenjoyed by society as a whole. For example, Unilever recently commissioned the

University o Aberdeen to develop the key tool being applied in the Sustainable

Food Labs Cool Farming Initiative which is now being piloted with a host o other

companies including PepsiCo, Marks & Spencer, Pulse Canada, Yara and Sysco.

The tool promises to advance analysis o the costs and trade-os associated

with dierent greenhouse gas reduction strategies and help determine which to

implement at eld and arm level.

At a whole other point in the agriculture and ood production spectrum,

entrepreneur Cityscape Farms is building ood systems on urban rootops in an

eort to minimize land use and provide ultra-local, climate-riendly ood. Cityscape

not only turns city rootops into ood production zones, it utilizes aquaponics, where

sh ertilize the greens it sells and eat ood scraps rom production a business

model that reuses waste and literally stacks unctions many times over.

Closed Loop

4.1.2

It starts with emissions but

it ends up with communities

that can eed themselves in the

long-term.

Susan Sweitzer

Program Ocer,

Sustainable Food Lab


18/41

Appetite or Change

Vision

18

Stop innovating, stop needing was the suggestion made by one contributor

to OpenIDEOs recent challenge on better connecting ood production and

consumption.12 Unpacked or a ood sector where innovation trends toward more

highly processed, un and/or convenient oods, the challenge is to ocus on simple

ways to get ood to people that has had less processing done to it (reducing energy

inputs as well as avoiding additives). The rule applies to non-ood experimentation

in the sector too, as with currently popular packaging innovations like those made

out o corn or sugar, which have mostly proved counterproductive so ar rom an

eco-ootprint point o view.

Some o the most benecial transitions possible in the ood sector beg a return to

basics. Whole Foods made waves and sponsored imitators with its less is more

approach to its extensive bulk raw oods selection and more minimally-manipulated

ood product oerings overall. Organics also un-innovate, in part generating value

where less is done to products. While packing, storage and waste challenges canbe increased when less processing is done, the challenge or the ood industry is to

determine when and where a back to basics approach might be successul.

Simplifcation

4.1.3

In a context o ecological,

ood and energy crises, the

most pressing issue regarding

reinvestment [in agriculture] is

not how much, but how. 13

Olivier De Schutter

Right to Food

Report by UN Special

Rapporteur


19/41

Appetite or Change

Vision

19

Since growth is what MNCs thrive upon, it is unsurprising that the ood sector

like others has had an almost wholly production-centric agenda.

Todays ood production methods are vastly more ecient than previous ones. This

is due in large part to the act that environmental impacts and resource constraints

have become better understood and easier to measure. As a result, industry has

responded, especially by reducing water and ertilizer inputs, which produces

environmental benets, limits access conicts and reduces costs. Indeed, most are

managing water ar more eciently than even ve years ago, and there is a positive

competition underway to embed water best practices across the agricultural supply

chain. While such progress is welcome, it has been made with a view to improving

the eciency o existing ood production methods. What i making current

production systems leaner is just hal the story?

Green Revolution techniques have provided tremendous yield increases. Sometimescontroversial think about the debates past, present and uture over the role o

genetic modication this is where the crop science industry ocuses and has

excelled. Today, the industry perceives enormous uture market opportunity in

emerging markets, especially in the provision o seeds, pesticides and ertilizer

to previously underserved smallholder armers, who represent signicant new

customer groups or existing product lines.

Crop science will continue to have signicant inuence and critical roles to play, but

more diversity o approaches has the potential to benet everyone. For example,

purely input-based productivity approaches are starting to be supplemented by

more holistic, ecological views.

An example o new productivity approaches is the orphan crop agenda, where

genome research is allowing classical breeding techniques to improve productivity

across a widening range o crops. Such is the case in Mars cocoa genome

sequencing work, which is expected to lead to vast improvements in the yields o

smallholder cocoa armers and improve the nancial bottom line o both armers

and chocolate producers. A host o other orphan crops is now under study (e.g.

broccoli, strawberries and various potato strains) and might lead to similar, non-

input based productivity gains.

So a (re-)emerging ocus on less intrusive or manipulative means to enhance overall

system productivity seems to be gathering steam. Much o the present energy in

this agenda is ound in academic, non-prot and government circles, but, as the

Mars example above illustrates, corporations are switching on to these approaches

as well. The UN and WorldWatch both have placed bets on eco-agricultural

methods, eschewing the prevailing model o production in avor o gaining greater

longer-term productivity through the recycling o nutrients and energy on arms

and diversiying species and genetic resources.15 The ocus in such alternate

approaches to productivity and resiliency is on enhancing the entire system soil,

plants, agro-biodiversity, etc. instead o merely ocusing on development o

higher-yield or pest-resistant plants.

Productivity

4.1.4

The world now demands that

armers go beyond increasing

yield. It is no longer acceptable

just to grow more ood; it

must now be done in a way

that is intrinsically sustainable.

Thereore, we must not only

help armers enhance the

calories produced per acre but

also enable them to protect

natural resources and ensure

that rural communities are

both vibrant and economically

viable.14

Martin Taylor

Chairman o the Board,

Syngenta


20/41


Once visions the clear pathways towards a well-dened end state or a

sustainable ood uture are articulated, the industry and individual organizations

within it will need a ull array o new tools and methods capable o supporting the

massive transition entailed.

Appetite for Change interviewees described an industrial ood system that is

ractured and narrow in its thinking and practice, and they were strongly supportive

o the need or more systemic approaches. While not labelled specically as such,

the discussion around the ways in which productivity is being re-thought in the

previous section is an example o the kinds o more holistic practices and new

partnerships that will be required. Similarly, systemic approaches will be necessary

to tackle the complexity and interdependence o other challenges up and down ood

sector value chains.

While perhaps adequate previously, the sum oAppetite for Change researchsuggests that the interconnectedness and scale o the global ood system now

renders individual actors and piecemeal solutions less and less likely to have impact.

Instead, the industrys uture success will depend on its ability to address issues in a

holistic manner. This section describes some o the networks, mosaics and inclusive

agriculture practices to watch as indicators o the emergence o a better integrated,

more resilient ood system.

Systemic

Approaches

4.2

For commodity companies to

succeed we have to be global;

we have to build a global asset

network and be everywhere ood

is grown, traded and consumed

in large quantities. For armers

to succeed they have to be

connected to the market and

receive economic incentives to

expand production. Yet today

a lot o armers are not. When

you think o the bottom billion,

getting more small armers

connected to and participating

in the market should be a goal o

industry and others.

Stewart Lindsay

Director Global Corporate

Aairs, Bunge


21/41

Appetite or Change

Systemic Approaches

21

Intermixed patches o habitat orests, meadows, shrub lands, arms, etc. orm

mosaics critical to the diversity and resilience o their ecosystems. Embracing a

greater mix o scale among participants than typical current models usually do can

make ood landscapes more resilient also. An inclination to ewer, larger partners

has ruled the ood industry in the past; complexity was perceived as likely to add

risk and/or cost. Some today have a new point o view, realizing that more complex

networks have greater heterogeneity that can enhance value chain stability and

oer a greater array o products and ingredients, ultimately enhancing consumer

choice. This new perspective has industry leaders experimenting with building

supply bases that are less linear chains and more interwoven mosaics.

Work on supply base networks ollows myriad avenues, but better cooperation

and communication are essential throughout. One new area o collaboration sees

manuacturers, as well as some ood service and retail companies, working in

partnership to rethink their supply base and transportation networks, including abroader range o arm sizes and reducing costs and carbon emissions at the same

time. Another energized space sees major international players working directly

with producers to improve management practices. Examples o such activity

include Unilevers eorts to build more in-house agricultural capacity in order to

better relate to and communicate with suppliers, and Costcos pilot work to source

resh produce rom smallholder armers (like green beans rom Guatemala or

its US stores). Nestl, PepsiCo and other manuacturers are buying rom more

smallholder armers also, while retailers including Carreour, Costco, Shoprite and

Wal-Mart are buying more local produce generally. This is good or local armers,

appeals to customers and brings business benets like reduced ood waste and

lower transportation costs (which balance sometimes higher purchase price) due to

reduced time and distance between eld and plate.

While such moves to work with dierent kinds and sizes o armers and other

partners are encouraging, it is proving challenging to scale such relationships; even

successul pilots oten have proven costly and/or dicult to replicate. Danone,

Nestl, Unilever and others all have had at least as many experiments with inclusive

or sustainable sourcing models stumble over logistical or nancial constraints as

succeed. Further experimentation, plus still more collaboration among a broader

array o actors (adding government in particular to the mix more oten), will be

required to determine which new networks and mosaics might play the biggestroles in the uture ood system.

Networks and Mosaics

4.2.1

There are many barriers to

address and so we need to

think holistically. This requires

partnerships with o all sorts

o stakeholders including other

companies, governments,

NGOs, etc. Everyone has a role

to play.

Kavita Prakash-Mani


Syngenta


22/41

Appetite or Change

Systemic Approaches

22

While new kinds o networks and mosaics represent one path towards a better

integrated and more resilient ood system, large scale, international networks

also need to be improved, leveraged and made more inclusive o a greater variety

o actors, right down to smallholders. Processors and traders are perhaps best

positioned to meet ood security and sustainability challenges in ways attuned to

their business given their role connecting the ood industry value chain upstream

and downstream.

According to the WTO, only 25% o global arm output is traded internationally.

While this means the vast majority o ood is produced and consumed within

national boundaries today, there is already a rapidly growing geographical

discrepancy between supply and demand. As demographic and climatic changes

alter global ood system production and consumption patterns urther and aster

over the next ew decades, global trade in ood commodities and ood products will

increase, oering enormous business opportunities, particularly or companies likeADM and Cargill or Bunge. With that opportunity comes also the chance and

responsibility to inuence or actively help ensure development o a system that is

more resilient and more able to provide adequate nutritional outcomes or all.

Success in processing and trading is presently dened primarily in logistical terms;

reliably and aordably nding, securing and transerring ood commodities (cereals,

oilseeds, coee, sugars and meats) among industry players is paramount. However,

the shiting and new producer and consumer markets now emerging necessitate

new notions o supply security at least in part based on an increase in more diverse

and sustainable crops sourced rom a broader range o armers. Global traders and

processors are uniquely positioned to actively shape the international networks

the new global ood context will demand. The challenge and complexity cannot be

underestimated this is inclusive agriculture at a scale hitherto largely unimagined

but the need and opportunity or this large scale, holistic approach is very real.

Drawing smallholder armers into the supplier base and building the inrastructure

necessary to support them has the potential to create business value through

diversication o supply and reduced dependence on increasingly highly volatile

bulk commodities. At the same time, it would help to lit armers out o poverty

and increase their ability to contribute to national and global ood security. In

addition, enhancements to the sectors macro-level intelligence on geographicand demographic patterns o nutritional supply and demand, plus insight on what

commodities are best produced where in order to minimize resource liabilities (e.g.

water and soil productivity), could prove invaluable to business and policymakers

in narrowing the enormous data-gap that hinders smarter decision-making.

Examples o what this type o inclusive agriculture might look like are already

emerging. Consider the Southern Agriculture Growth Corridor o Tanzania, where

strong support o the government, NGOs and aid in combination with private

partners Yara International, Unilever, Syngenta and SAB Miller are working together

to link smallholder armers into commercial supply chains, provide access to nance

and modern inputs, and to build the necessary inrastructure to get the armers

products to market. Currently operating in Tanzania, it aims to unleash these

regions potential to become agricultural productivity models capable o liting

armers out o poverty and beneting the region and the country.

Inclusive Agriculture

4.2.2

The ood industry in its broadest

sense can have a very signicant

inuence on agricultural

sustainability, particularly i the

consumer end o business can

work together with agricultural

raw material suppliers the

opportunity undoubtedly is

there.

Karen Hamilton

Vice President Sustainability,

Unilever


23/41

Appetite or Change

Systemic Approaches

23

While the expanding geographic mismatch o supply and demand is real and

expanding, and programs like the Agricultural Growth Corridor project are

promising, there is much to learn about what makes large scale, international

inclusive agriculture successul anywhere, and more still to determine about the

most eective means o replication. We do know inclusion not just in terms o

trade and extended economic opportunity, but also in terms o ood security at

the base o the pyramid where so many smallholder armers toil requires new

production models oriented around scaling out (i.e. a greater number and diversity o

partners) versus scaling up (i.e. continued growth o a limited number o centralized

players), as the latter can ail to address regional needs. Global companies will need

to leverage their assets alongside those o local manuacturers, entrepreneurs and

producers as never beore in order to adapt and replicate business models tailored

to local conditions,16 yet capable o participating in and improving the global ood

system as well.

4.2.2

Our strategy is shiting rom

independent business lines to

developing integrated oers

that meet the various needs o

the grower. This is a big shit or

the company and industry. We

recognize that more things have

to come together agronomy

knowledge, crop protection,

seeds, mechanization, water

management, etc. to meet

many needs. We also have to

look at the socio-economic and

environmental impacts o our

solutions. For example, do they

put people out o work?

Kavita Prakash-Mani


Syngenta


24/41


Modern arming has been committed to simplication isolating relatively ew

variables and growing a homogenous system capable o extremely high yields.

In contrast, the better integrated, more resilient and sustainable ood system we

need in the uture requires recognizing, accepting and addressing many and subtle

complexities. This in turn demands better and dierent knowledge, as well as

new knowledge management methodologies and tools. Thankully, the modern

inormation technology (IT) industry is increasingly suited to and interested in

delivering services and tools to meet these challenges and should be a catalyst

in the ood sectors transition rom homogenous agribusiness, to a ood system

capable o embracing the complexity o scaling better and sustainable alternatives

literally building a new ood knowledge economy. While serious IT involvement

in the ood industry is relatively nascent, examples are emerging demonstrating

enormous potential or inormation technology and know-how to improve the ood

system.

Inormation

Technology

4.3

Prolieration o mobile

technology in emerging markets

is exerting a powerul inuence

on ways o working. It will

continue to evolve, acilitating

two-way communications

that allow national and local

governments to get a granular,

real-time view o what is

happening at the arm level and

to make smarter macro-level

decisions.

Guy Blissett

Wholesale Distribution Lead,

IBM


25/41

Appetite or Change

Inormation Technology

25

IBM is one IT company becoming highly visible in the ood arena. Its Smarter Food

platorm applies IBMs expertise to ood saety, traceability and waste reduction,

while applying its computational skills to genome mapping orphan crops like cocoa.

Another example o ITs impact on the ood industry is ound in the system

dynamics model recently released by the Consultative Group on International

Agricultural Research (CGIAR). The model aspires to sort and interpret a host o

extremely complex agricultural, environmental, social and economic variables and

how they relate. CGIARs aim is to be able to model and assess agricultural system

perormance on ood accessibility as well as environmental and livelihoods end

goals. By taking into account human, economic, policy and environmental drivers,

CGIAR will help private and public sector decision-makers better understand our

present state and how ood systems might best evolve.

Yet another illustration is AgroAtlas, a new interactive web platorm sponsored bythe US State Department that maps the shiting geographic distribution o crops,

diseases, and pests as well as wild crop relatives inormation that can inorm and

improve eco-agricultural resilience.17 AgroAtlas and eorts like Smarter Food and

the CGIAR program hint at a ood uture where historically bafing or inaccessible

data might be made clear, allowing previously intractable problems to be solved

near term.

Macro-level Management

4.3.1


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Appetite or Change


26

Technology is a great leveller, allowing armers independent access to critical

inormation on market conditions, weather, topography and crop science, then

helping them to analyze that inormation and apply it in decisions. This makes them

better armers and more sophisticated commercial players. With this inormation

in their hands, armers are able to assess trade-os, better allocate their time and

resources, and understand the consequences o their actions in the larger context.

For example, IT can inorm the timing and amount o irrigation, and the impact o

same on watersheds. This IT-enhanced perspective empowers smallholders in ways

previously unimaginable, knitting together arm- and macro-level inormation in

ways that transorm livelihoods while improving agricultural sustainability.

Mobile technology sits at the vanguard o IT tools empowering armers and

drastically improving their ability to make inormed decisions about how to run

their businesses. Mobile has proved the ultimate leaprog technology, and access

to telecommunications continues to increase and become more aordable; alreadytwo-thirds o the worlds 4.6 billion mobile phone owners live in emerging markets.18

Farmers o all scales, even smallholders, can now access a previously unimaginable

wealth o current, reliable, relevant and actionable inormation like weather

orecasts and commodity prices or very small ees (presently as little as one or

two dollars per month). Nokias Life Tools (which provides real-time commodity

price data) is but one example o mobile technology being applied to meet armers

inormation needs, even at the base o the pyramid; over six million people in India,

China and Indonesia have become subscribers already.19

While ees related to services like Life Tools are oten tiny, the potential scale o the

marketplace in terms o total number o customer transactions is huge, resulting in

more and more experimentation and innovation in this space. And the sponsors or

providers o such tools oten receive benets other than income like improved

supplier relationships and/or enhanced supply chain security. For example, Hershey,

in partnership with the Ghana Cocoa Board and the World Cocoa Foundation,

recently launched CocoaLink, which uses mobile phone technology to provide

armers with inormation on improving arming practices, arm saety, child labor,

health, crop disease prevention, post-harvest production and crop marketing at

zero cost. CocoaLink also enables interactive Q&A by text and voice message.20

Indian conglomerate Tata plays in this space too. Tatas Innovation Lab provides

armers with customized advice on how to protect crops, pulling together GPS andGoogle Earth data on individual armer locales, enabling access to inormation on

soil and weather conditions as well as pests and pest management.21

Mobile and other technology has myriad potential applications well beyond armer

inormation services too. Another activity hotspot right now is ound in the realm

o new online marketplaces that directly connect producers and buyers o dierent

types. Oten geared to bridge the particular distribution and logistics challenges

o small- and mid-sized armers, such platorms can provide more and better

commercial opportunities (or at least alternatives to existing channels). Think o an

Amazon.com-like service or ood consumers, letting them see when local produce

is available within a certain radius, purchase it online, and then either pick it up rom

a armer or have it delivered to them.

Farmer Empowerment

4.3.2

The industry needs to have a

better understanding o the

consequences o [its] decisions

re where we grow ood, how

much energy is used, etc. We

continue to make decisions

about ood with an incomplete

set o inormation.

Guy Blissett


IBM


27/41

Appetite or Change


27

In the ood system as elsewhere, consumer behavior too oten seems to promise to

lead signicant change (in surveys) and then peter out (at point o purchase). While

consumers are not the most signicant driver o ood system change, they are

inuential particularly in certain markets and they are increasingly equipped

with innovative tools that better and more quickly inorm their decisions, even at

the actual point o purchase. GoodGuide is trailblazing in this manner, allowing

consumers to scan product bar codes with a mobile phone and receive guidance

on which are the most healthy, green and socially responsible.22 Given the ood

industrys relatively high sensitivity to consumer demand and concerns, GoodGuide

and tools like it may empower and illustrate purchasing decisions in ways that

incent (or compel) manuacturers and retailers to bring more sustainable products

to market in greater number and at greater speed than otherwise.

Smarter Consumers

4.3.3


28/41


Appetite for Change has now outlined the current consumer, supply and political

pressures orcing change on the ood sector as well as considered how rened and

better vision, more systemic approaches and the application o new technology

will be critical to addressing the pressures and moving towards a sustainable ood

uture. Still, a signicant piece o the puzzle remains. How will markets maintain

adequate protability and growth while changing?

At heart here is a question about how to make it protable to address societal ood

and nutrition needs ully rom value chain resilience and sustainability, to ood

saety and traceability, to universal provision o better and more aordable nutrition

or all. While not pretending this will be simple, signicant parts o the answer lie

in how we value ood in terms o pricing aspects o its production, manuacture

and distribution and in the politics surrounding the ood system, particularly as

related to incentive and subsidy. This section oAppetite for Change examines how

we might re-value ood and some new ways to do the politics, but rst looks at howshiting societal needs are compelling the changes in the rst place.

Meeting Societal

Needs

4.4

We have to realize that the basic

thinking o economies o scale

has to go that the world has

to o course be more ecient

but that it has to develop

solutions that will impact not

only one company but also

consumers and society as a

whole.

Jos Lopez


Operations, Nestl


29/41

Appetite or Change

Meeting Societal Needs

29

Societal needs in relation to ood production and consumption are numerous,

complex and shiting at great speed. The shits stem rom issues including

those touched elsewhere in this report, such as: demographics and the growing

geographic mismatch between ood supply and demand; under-nutrition and over-

consumption aecting billions o people, and; the emerging and anticipated climatic

pressure on ood systems. These and other actors have conspired to create a

global context in which ood security and ood system sustainability are increasingly

paramount. Leaders those with appetite or change must understand the

context o and deliver on the key societal needs now evident and emerging, or the

good o producers, consumers and their own bottom lines.

What are the pressing societal needs not adequately addressed by todays ood

system? Obviously under-nutrition and over-consumption, and certainly total

systemic saety and reliability as the system becomes ever more global. But while

these challenges are massive, they are also obvious and, inasmuch as they are well-recognized (they are the ones most likely to make headlines), they already attract

at least some o the energy needed to address them. It is when we parse the ood

system more closely that multiple dynamic and dicult issues become visible,

making clear the layers o eort that will be required to eect all the change needed.

Consider:

1 Lack o accessibility

As oneAppetite for Change interviewee said We have a biurcated ood system

where some people dont have choices there is no access to less calorie

dense ood that is sustainable at a lower price. Simply put, we lack widespread

aordability o adequately nutritious ood.

2 Misguided or inequitable investment

Population growth and increasing demand in the developing world or animal

protein are oten what make ood and agriculture plays attractive to investors,

but rather than such investment strengthening sector sustainability long term, it

can undermine it. And a risk averse mentality leads investors to neglect resource

constraints and climatic impacts on agriculture when these are precisely the

areas where investment and innovation are needed most.

3 Food security and inequityUntil 2008 investment in armland had been running at about 4 million hectares

per year; beore the end o 2009, it leapt to over 56 million hectares . Seventy

percent o those acquisitions took place in Arica, generally untethered to

commitments to local markets, begging the question whose ood security is

being underwritten, whose is being passed by and who decides.

4 Overcautious product reormulation

Manuacturers and retailers see the opportunity to meet growing demand

or healthier oods and to participate in the wider health and wellness agenda

by adjusting the nutritional content o products, but eorts are reactive and

glacially incremental. In emerging economies, micronutrient ortication has the

potential to deliver immense commercial and societal value. Danone, Unilever

and Nestl are marketing micronutrient ortied products in the developing

world, but these eorts are limited and they are essentially alone in such

ventures.

Shiting Societal Needs

4.4.1


30/41

Appetite or Change


30

5 Misalignment between science and industry on nutritional content change

The UK Department o Health, through its Public Health Responsibility Deal,

recently encouraged manuacturers to reduce the salt levels in their products by

a urther 15% by 2012 . Yet scientists in the US and the UK have called or salt

intake reductions between 30 and 55%, meaning that even i industry reaches

its voluntary target, a gap remains.

6 Unimaginative approaches to agriculture

Crop science companies see the developing world as their greatest growth

opportunity and uture core market. They are intent on extending their current

portolios o seeds, pesticides, herbicides and ertilizers to emerging economies.

This is almost certain to raise yields short term, but vastly dierent than

studying whats unique about needs between and within regions and tailoring

oerings to suit them.

Such issues as outlined above stand between todays status quo and a sustainable

ood uture. Where movement is evident, it is generally where issues align

with businesses traditional approaches there is little radical thinking and

breakthrough innovation. That space must be made to explore ways to develop

the business case or change is oten most problematic or incumbents, whose

very success creates strong inertia resisting new thinking. Ultimately, this will

hurt the industry, which will nd the demographic and other shits pending

unyielding in their insistence on transormation. As reerenced earlier,Appetite for

Change identied two means with particular potential to break this deadlock and

demonstrate how to create business value while meeting long-term societal needs:

re-examining how we value ood and re-casting ood system politics.

4.4.1


31/41

Appetite or Change


31

The business o ood is not oten lucrative. In the corporate sphere, ood industry

executives settle or lower margins than peers in many other sectors, while most

producers literally nd arming a ticket to poverty amazingly, hal o the worlds

malnourished are themselves armers.26 Consumers in the developed world pay

amazingly little or (and have grown accustomed to) plentiul, cheap and highly

caloric ood. US consumers spend just 13% o their income on ood 27 and, yes,

many wonder whether such extreme aordability o calories is the root o modern

ood-related health issues like obesity. Meanwhile, people in developing countries

spend up to 70% o their earnings on ood and dont get enough. Finally, the modern

ood system hampers eorts to account or social and environmental externalities.

Is this situation the result o a mismatch between a natural system arming

and capitalism, as Paul Roberts posits in his End of Food? Perhaps, though a number

o ways to re-value ood and close the gap exist.

The last decade begat a massive surge in the acquisition and/or expansion opremium-priced, more sustainable product oerings, with brands such as Odwalla,

Ben & Jerrys and Stonyeld Farm initially reaching new scale through outlets like

Whole Foods, where good-or-you oods became synonymous with gourmet.

Natural and organic products moved rom the ringe co-op shel to prime locations

in mainstream outlets, allowing entrepreneurs to benet rom growing demand or

healthier, more sustainable ood.

Suddenly organic was big business. That there is monetary value in this part o the

sector it is now a $50 billion market in Europe and the US 28 is one lesson,

but beyond that is the learning that ood products can be dierentiated by having

less done to them, showing industry how to link less processing and packaging to

greater value.29

In addition to re-valuing ood in ways like organics inversion o the processing-

packaging-price relationship, shiting perceptions o oods worth comes about

when the thinking behind ood- and agricultural-related investment changes. A

range o actors ood producers and manuacturers, banks and select venture

capitalists are testing the potential returns that might come rom investment in

more sustainable ood systems.

Among producers and manuacturers, Cargills venture arm, Black River AssetManagement, identies entrepreneurs capable o capturing value in transitional

environments due to macroeconomic actors, regulatory or political change,

and globalization, ocusing on actors in the agriculture, ood, clean energy and

sustainability, and metals and mining spaces.30 Syngentas venture arm, Syngenta

Ventures, seeks to identiy early stage companies with a strong technology base, or

business model, or both in which to invest nancially and via its 26,000 employees

around the world.31 Syngenta established this initiative to accelerate the search or

external innovation, new technologies and new business models in core and close

to core areas. Meanwhile, mainstream investors (in part because o the volatility

o commodity markets) are thinking dierently about their ood and agriculture

portolios too. Rabobank, a sector specialist, considers 7.0% o its total assets under

management sustainability-related, including its investments in water-eciency

technologies and start-ups serving water-stressed agricultural markets.32

Re-value Food

4.4.2

The true cost o ood needs

greater transparency. This

will allow policy makers and

companies to make smarter

decisions about whos growing

what, when, where, and how

it is priced.

Guy Blissett


IBM


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Appetite or Change


32

Indeed, while there is a tremendous amount the private sector can do, and the

trends in terms o how markets think about and (re-) value ood are beginning to

improve, government policy (or example regulation requiring incorporation o

eco-agricultural practices, increased subsidies or sustainable agriculture or other

incentives spurring change) will be critical also. In the nal section oAppetite for

Change, we explore the necessary evolution o ood politics and policy.

4.4.2

The explosion in ood production

and entrepreneurship is getting

the attention o investors.

Traditionally they were

interested in clean tech and how

those technologies applied to

agriculture, but now were seeing

the development o unds that

are actually interested in the

ood space.

Anjali Oberoi

Finance and Operations

Consultant, Sustainable

Food & Agriculture


33/41

Appetite or Change


33

Political and regulatory risks can haunt business. While crop yields and commodity

prices are volatile, they can be modelled and closely predicted, and the variations

are neutral in that productivity does not change with the aim o boosting or

restraining particular aspects o business; it just happens, and the system adjusts.

In contrast, policy and regulation are driven by who is in power and where, by the

moods o citizenry, and through conict or compromise with other government

objectives. It touches everything rom production through manuacturing, and

dictates much o the consumer experience in the retail environment. And only

government sets the absolute boundaries on ood security, determining which

commodities and products rom where (and rom which companies) cross borders

and when to stop such ows. While all business engages government and

navigates regulation, ood politics can be explosive (think o the ood price protests

kicked o by Mexican tortilla riots in 2007, or the role that the price o ood and

other commodities has played in unrest and revolution during 2011s Arab Spring),

demanding special attention be paid to how ood-related policy must change tosupport a sustainable ood uture.

WhileAppetite for Change interviewees discussing the creation o a sustainable ood

uture did not generally begin with issues relating to government, nearly every one

listed new and better policy as prerequisite to progress beore closing. Distressingly,

ew are optimistic that improvements will come without major disruptions to the

ood system occurring rst, sharing a perception that we likely will stretch the

current system to (or beyond) its limit beore acting.

The ood systems need or better inrastructure, dierent incentives, new

regulation and stronger market oversight has been widely debated and well-

documented, but the exact means or getting there remain in contest. Without

question, a sustainable ood uture depends in part on wholly new networks o

producers and manuacturers (and others) o very dierent scales coming to work

together eciently and equitably. Government needs to entice such partners

together and help guarantee the success o all players, and to grease the skids or

private sector investment that will lead to rebuilt inrastructure and distribution

networks able to serve more diverse supplier and consumer bases. Sometimes

mistrusted, there are instances when government is the only actor o scale capable

o both setting an example (through its own investment) and acting as an honest

broker between parties, whether inormally or by setting the ormal rules o tradethrough treaty and regulation.

New Politics, Realigned Incentives

4.4.3


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Appetite or Change


34

I meaningul, rapid and large-scale change depends in good part on government

engagement, communication today between innovators specically, the private

sector generally and policy developers is too thin. Public policy vis--vis ood is

too responsive, oten lagging public awareness and concern on given issues, and

only beginning to recognize the existence and importance o things like local ood

movements. Multilateral organizations have broken some new ground with recent

recommendations on eco-agriculture, but the suggestions have to be owned and

implemented by national and regional governments i anything other than random

voluntary eorts is to be hoped or in response.

For their part, ood industry companies need to determine the most appropriate,

air and eective means to support evolution o better ood policy, then advocate

transparently or the policy changes they believe required. Collective approaches

will be important; while individual corporate policy positions have inuence, the

ood sector might be best served by a model like that o the US Climate ActionPartnership, renowned or how it aligned extremely diverse stakeholders (rom coal

companies to environmental NGOs) around common recommendations or US

climate policy. There exists tremendous knowledge in the private sector essential to

evolving a sustainable ood system. Industry leaders must seize the opportunity and

responsibility to consolidate and promote their best ideas with other stakeholders

to encourage government to set the rameworks necessary to acilitate a successul

industry transition to sustainability.

4.4.3


35/41


SustainAbility embarked onAppetite for Change to explore approaches to creating

a sustainable ood system, dened as one that is reliable, resilient and transparent,

which produces ood within ecological limits, empowers ood producers, and

ensures accessible, nutritious ood or all. The key questions examined in the course

o the project were: Is the private sector ready to embrace a new vision and play a

central role in transorming the global ood system so that it adequately addresses

the increasingly critical issues o ood security and sustainability? What role can

and should companies play in this transormation or the good o consumers,

producers and their own bottom lines?

Appetite for Change identied the key consumer, supply and political pressures

aced by the ood industry. The project then mapped the key leadership attributes

organizations with appetite or change will be required to demonstrate to thrive in

the ace o those pressures, including: redened vision, more systemic approaches,

eective use o inormation technology and meeting societal needs.

In searching or evidence that the attributes are attainable, or even already being

developed and deployed,Appetite for Change ound some more systemic approaches

emerging and being tested by leaders in the ood industry, but also concluded that

energy and innovation equal to the scale o the challenges are not yet in evidence.

While a view is emerging, in and outside the industry, that the ood system needs to

be dramatically transormed, and the early steps some have taken are laudable, on

the whole the industry still has a long way to go.

As catalyst to the urgent need to accelerate the ood industrys transition to

sustainability,Appetite for Change oers these nal remarks, aiming particularly at

the role the private sector might play in creation o a sustainable ood system:

Final Remarks

5.0

The industry as a whole

will have to play a role

retailers, distributors, traders

we all have to help out because,

i not, there will be no business

in the end.

Jos Lopez


Operations, Nestl


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Appetite or Change

Final Remarks

36

1 Demographics and demand patterns are not destiny

Population growth is real and will massively impact demand. More afuent

consumers in developing nations are consuming more animal protein. Diseases

o afuence are becoming more prevalent globally in part as a result o Western

diets being adopted by more and more people. But this does not cannot

mean that the only way to eed the world is via more and more intensive

agriculture. Companies are not passive; they already battle globally to shape

demand or their own products and to inuence policy aecting their business.

The private sector must use its considerable knowledge and inuence to help

shape more sustainable demand among consumers worldwide, as well as more

sustainable policy such as regulation bringing production methods in line with

ecological limits.

2 Production must be judged by more than volume

While yield increases are important, more alone will not produce the resultsrequired. We need a ood system that produces enough, or everyone, within

ecological limi

appetite for change

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