Today, food and beverage companies are under the spotlight to consider sustainable development in their business strategy due to a misconception of costs outweighing the benefits still prevailing in the industry. According to the recent UN report, the world’s population is set to increase by nearly 2 billion and India is expected to become the most populated country in the world with 1.7 billion people by 2050. Keeping pace with the food demands of this population would require raising overall food production by 70%, as per the estimates compiled by FAO. This, in turn, will increase the impact on the environmental ecosystem affecting biodiversity and climate change and spiking food wastage across the food supply chain. Given its significant impacts on social and ecological issues, a considerable gap exists in catering to the food demands of the world’s current and future inhabitants while reducing environmental consequences. Clearly, the future of F&B companies is entwined with addressing the link between sustainability and the firms’ profitability.
Murali Manohar, Senior Director and General Manager, India Subcontinent, Infor
As is so often the case, the answer lies in innovation, with the right technology, applied in the right way, maximising yield, driving down waste and increasing operational efficiencies, ultimately underpinning a sustainable and profitable food and beverage sector.
Sustainability – a pressing priority
While sustainability certainly is not a new topic for the food and beverage industry, the last couple of years in particular have served to propel the issue towards the top of the priority list. Not only do we have the forecasted 70% increase in food production and associated environmental impact to consider, but food waste levels are massive too, with nearly 40% of the food produced in India wasted every year due to fragmented food systems and inefficient supply chains. More consumers are taking sustainability considerations into account when choosing which products to buy, increasingly looking to brands to prove their sustainability credentials.
Regulatory pressure to become sustainable is only set to increase. Thanks to the worldwide nature of the food and beverage supply chain, local, country-specific sustainability requirements can quickly become global, applicable across borders if organisations want to continue to do business in the international marketplace. Rising energy prices too have led more businesses to prioritise energy efficiency, becoming almost sustainable by default as part of wider efforts to cut costs. In short, the pressure to become more sustainable is coming from all directions.
Sustainability as an enabler of growth
When looking at sustainability it is imperative to examine the business benefits to be reaped from embracing sustainability, an approach that helps to build a strong business case for investing in environmental initiatives.
As with other industries, we are increasingly seeing preferential finance options made available to food and beverage businesses who can evidence their environmental credentials. Additionally, non-sustainable sources of raw ingredients are becoming, and will continue to become, more costly. Reducing waste undoubtedly helps the bottom-line and some innovative food businesses are even putting their by-products to good use, turning them into additional revenue streams.
Talent attraction is another major benefit of becoming more sustainable. More employees want to work for ethical businesses, businesses who play their part in achieving a better world for us all. In an industry where the labour shortage is rapidly becoming a major threat to productivity, the ability to take your pick from a dwindling talent pool is not to be sniffed at.
Perhaps most important of all is the increasing consumer demand for sustainable products, meaning that sustainable businesses will continue to win a bigger market-share. And, more brands are choosing to only work with sustainable suppliers, those who can evidence just what they are doing to reduce their environmental impact alongside compliance with sustainability standards.
No longer a choice
It is not if but when for embracing sustainability in the food and beverage sector, not just in terms of satisfying regulatory requirements or reducing costs, but if businesses are to set their sights on long-term business growth. To answer the initial conundrum, we should not think of it as sustainability versus profitability, indeed for the food and beverage sector in particular, it is more a case of sustainability equals profitability.
A sustainable risk assessment
This need for increased sustainability does not change the fact that for some, embracing sustainability can be seen to be somewhat of a herculean task and one that can potentially involve a substantial investment. In reality, this definitely does not have to be the case, with smaller, more targeted environmental initiatives often the key to making a real difference.
Individual businesses need to fully assess the risk of not embracing sustainability before embarking on any sustainability endeavours. To do this requires data, not just data from the business but from right across the supply chain. Access to key data enables organisations to fully assess the risk they face if they are not sustainable, more often than not, providing tangible evidence of why and how sustainability is a key enabler of business growth and profitability. It is this data that will ensure businesses can ascertain their current environmental footprint, providing a starting point to identify which initiatives will have the maximum impact on not only sustainability but profitability too.
Collaboration across the supply chain is the key; collaboration facilitated by technology. So complex and multi-faceted are the supply chains that form the backbone of the food and beverage industry, that spreadsheets and manual processes are no longer fit-for-purpose when it comes to knowing exactly what impact a business is having on the environment and how it can minimise this while still turning a healthy profit.
Turning data into insight
We are all dealing with swathes of data and it is knowing what to do with the available data that can make all the difference. What are needed are solutions with sustainability capabilities built-in, technology that will grow alongside a business and the rapidly-evolving legislative and regulatory landscape in which we are all operating. The application of machine learning technologies to a single, unified source of supply-chain wide information can result in previously undiscovered, actionable insight that will inform which sustainability efforts will have the maximum impact on reducing environmental impact while boosting profits.
For instance, increased forecasting accuracy can reduce waste at all points of the supply chain, as well as saving on the associated costs of over and under production. Yield optimisation is another benefit for both the environment and the bottom-line, again with the right insight enabling a business to optimise operations. Similarly, it is access to supply-chain wide data that underpins innovations such as dynamic best before dates and smart shelves, as well as enabling businesses to supply that all-important provenance information to customers. These all contribute to reducing the environmental impact of the food and beverage industry, while boosting customer satisfaction, meeting and even exceeding customer expectations.
It is this visibility, collaboration and insight-based decision-making that is vital if the industry is to play its part in securing the future of the planet while still remaining a profitable sector. Investing in sustainability initiatives today represents the most cost-effective approach to securing long-term profitability, with the technology available to make full use of huge amounts of data. The right insight lays the foundation for truly informed decision-making, helping organisations to achieve the most sustainable outcomes within the constraints and parameters of their individual businesses, achieving long term security and profitable growth at every step of the way.
This article is written by Murali Manohar, Senior Director and General Manager, India Subcontinent, Infor.