Population growth, extreme weather events, and increasing water shortages are putting increased pressure on the availability of agricultural commodities. At the same time, consumers increasingly want to know where their food comes from, what’s in it, and how it’s grown. In response, a growing number of consumer facing companies are turning to sustainable sourcing of ingredients to manage the risk of resource scarcity and to meet consumer’s demand for sustainably produced food.
One way companies are committing to sustainable sourcing is by setting — and publishing — sustainable sourcing goals. Unilever has a goal to sustainably source 100 percent of agricultural raw materials, by 2020. Coca-Cola has committed to sustainably sourcing its key agricultural ingredients — fifteen in total — by 2020. General Mills has committed to sourcing 100 percent of its ten priority ingredients sustainably — which represent more than 50 percent of their annual raw material purchases — by 2020. The goals underpin — and help accelerate — sustainable sourcing strategies such as sustainable procurement strategies and working with smallholder farmers to improve productivity and protect resources.
These goals are for 2020 - within five years from now - and we can expect more ambitious goals once these are met. With more companies committing to increasingly ambitious sustainable sourcing goals, all players in the agricultural value chain will be impacted.
Is your company ready?
Sustainable sourcing will likely produce a ripple affect across the industry. We recommend the following four key steps to be prepared for change:
1. Understand your customers’ sustainability aspirations
Sustainable sourcing commitments and strategies will require cooperation across the value chain. Consumer-facing companies will rely on their suppliers to meet their sustainability goals. And they’ll look to partner with suppliers who have sustainability commitments in place — or who are able to develop sustainability solutions — to help them meet their goals.
Do you know your customers’ sustainability goals — or if they are planning new commitments? Can you help them meet their goals?
Helping your customers achieve their sustainability goals may help you retain business. Expanding or developing a competency may help you stand apart and win new business — especially given the rapidly evolving landscape.
2. Increase your visibility to point of origin
Consumers increasingly want to know the story behind the products they are buying, and consumer-facing companies are increasingly requiring this information to meet sustainability goals and consumer demand. If your customers are not asking you for this information now, they likely will soon.
Do you know where your main ingredients are sourced? Who’s between the producer and your direct supplier?
Start by understanding where your ingredients come from - and potential sustainability risks associated with your products. GMOs are under increased scrutiny by consumers, food manufacturers, retailers and regulators, but what will be the next hot issue on these stakeholders’ radars? Anticipating potential issues among different stakeholders can enable proactive strategies to mitigate risks or differentiate by getting out in front of your competition.
3. Focus on procurement
Introducing sustainability criteria in your procurement process can also prepare you to meet your customers’ sustainability requirements and aspirations. And it can help mitigate potential financial and reputational impacts in your supply chain.
Does your procurement process consider social and environmental impacts of what you purchase? Will it meet your customers’ sustainability aspirations - or their future aspirations? Will it address key commodity sustainability risks?
A good place to start is by examining your top purchase categories and the social and environmental risks they pose. Determine the materiality to your company by overlaying risks and spend. Understanding these risks — and which are most important to your company — will help prioritize actions. And starting now will allow you to ramp up efforts at the right time.
4. Embrace technology
Technology is enabling supply chain visibility and traceability in ways not previously possible. Technology is connecting the consumer with where products are from, and allowing players across the value chain to track, manage, and access data pertaining to specific ingredients from farm to fork.
Is your company using the right technology? How can technology help your company achieve its goals — and help your customers achieve theirs?
You may be able to leverage your current technology platform to accommodate your needs. There are also newer technology platforms that specialize in supply chain visibility and mapping.
©2016 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.