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SCRC Article Library: Food and Beverages Sustainability Industry Report

Food and Beverages Sustainability Industry Report

Published on: Jun, 18, 2012

by: Ravi Akkinepalli

Introduction

Today Food and Beverages industry is more competitive than ever. As the companies in the various sectors compete and grow sustainability becomes a very important concern. Sustainability issues in food industry can cover a range of topics concerning environmental, social and economic backgrounds.

The entire industry of food and beverages was classified into different categories listed below:

  • Food Retail stores
  • Food Producers/Manufacturers
  • Food Distributors
  • Beverages producers

We analyzed various different companies in these industries to identify the sustainability related issues in each industry. The entire analysis was performed in two different stages

  • Gathering Information
  • Rating

Gathering Information

We gathered and verified information about 3 different aspects of the industry.

  • SRM Evaluation
  • LHR Evaluation
  • Environmental Sustainability evaluation

Gathering all this information was together termed as secondary research. Secondary research was most critical part of the exercise as all the conclusions were drawn based on the secondary research.

Rating

Based on the information gathered, ratings were assigned to each company in each industry. Each company was rated on the following different criteria.

  • Spend Management
  • Strategic Sourcing
  • Category Management
  • SRM
  • Weighted SCM
  • LHR
  • Sustainability

Most of the companies in the list have been rated since 2007. The rating exercise in their case was verification and change of ratings. A set of companies was rated for the first time they are:

  • C&S Whole Grocers
  • Heineken N.v
  • Imperial Tobacco Group
  • Mars Incorporated
  • Sodexo Inc

Key Sustainability Issues in the Food and Beverages Industry

Ethical Sourcing

Producers from under developed countries need to be well compensated for their products. In this globalized economy, any unethical dealings in third world country will become a major PR disaster for the company here in the US.

Food Safety & Tracing

In view of E.coli and other deadly outbreaks, safety is paramount. If a company has repeatedly erred by supplying infected products, they will have a tough time patching up their reputation. Once the outbreak is underway, it is important to track the source of the outbreak. Companies with accurate tracking processes will come out much better from such scenarios.

Transparent Marketing

Due to increased obesity rates in states, there is great pressure on companies to share the true nutritional values. Although calorie count is displayed on food items, there is increased pressure to share true nutritional cost to the consumer. For eg: Fast food chains advertising on cartoon network is frowned upon in the past few years.

Ecological Impact

In the modern food production system it takes around 10cal of energy to bring 1cal of food to the consumer. There is tremendous energy expensed in growing, transporting, storing and retailing the produce. Many foods are having tremendous negative effects on ecology. For example, 20% of Amazonian rain forests have been cut down in the last two decades to make way for cattle ranching(Beef production). Similarly, beverage production process uses billions of liters of fresh portable water. Local communities are increasingly wary of permitting these companies operate around them.

In our research, only some of the bigger companies which are more noticed are trying to keep up with sustainability effort. It is important for everyone to realize their duties towards sustainability initiatives and LHR activities and start acting in the direction before its too late. Public pressure is one of the main drivers of speedy action from companies.

List of Company Rating

Companies were rated based on the research. Various different resources were used for research. Some of the most common ones are:

  • Company websites
  • Company vendor portals
  • Company Annual report
  • Dow Jones Sustainability Index
  • Newsweek green score

Best Practices

Best practices were clearly observed with companies like “C&S Whole Grocers” and “Heineken N.v”. They are tracking suppliers and evaluating, most other companies are not even involved in the process. On the positive side many companies had a very strong and defined procurement process. It will not be difficult for these companies to improve their operational practices to include practices related to LHR and Sustainability.

Companies in this industry are conscious of corporate social responsibility issues. Many of them are involved in food donation programs. There is tremendous focus to cut down on food wastage in the industry and utilizing agencies to distribute food.

“C&S whole grocers” has a well-defined code of conduct for Labor Human rights, were tracking their suppliers for improvements and making them accountable. They also were involved with community development all over the world. Sustainability was a huge concern for them, they were involved with initiatives related to sustainability, tracking their suppliers and had established a benchmark for their sustainability practices.

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