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Production, distribution and consumption within the food and beverage sector are experiencing major shifts. New stringent environmental, social and governance (ESG) regulations, and changes in both consumer behaviour and preferences are two of the main drivers for this. DNV’s newest report on sustainable food systems looks at these evolutions and describes the benefits and opportunities for companies to start thinking of the ESG dimensions as interconnected entities rather than separate aspects of sustainability.
About half of all habitable land is devoted to food production and the economies generated by the food and beverage sector are of high global magnitude. It is an industry that we rely on to feed us, and which heavily impacts both the climate and biodiversity. In recent years, food security and long-term sustainability have moved up on the agenda of governments, companies, investors, and consumers. Examples of these shifts are increased consumer attention on healthier food options and awareness of the environmental and social impact of what we eat. In parallel, investors are adding sustainability criteria to their investment analysis and increasing the need for companies to provide clear and relevant ESG metrics.
The food and beverage sector therefore requires a new approach to how we can trace sustainability pledges back to transparent and measurable objectives and criteria.
An Integrated approach to ESG
While the trends described above are decisively pushing corporate strategy to define and implement ESG principles on a global scale, the lack of recognizable, standardized, and comprehensive policies represents a significant barrier to sustainable development. Moreover, many companies still tend to see the ESG principles as separate dimensions. For instance, it is common for companies to focus a lot of their attention and efforts into mapping and reporting on their carbon footprint rather than truly considering the social and governance dimensions of their business and strategies.
DNV’s report describes the advantages of adopting an approach thar considers the E, S and G dimensions and their interconnections through an integrated ESG approach. This is particularly beneficial within the food and beverage sector which is an excellent case study because of its scale and impact. The report argues that companies that are willing to implement the Integrated ESG Approach in their operations and activities are one step ahead in pursuing internal strategies and gain competitive advantages when it comes to tackling forthcoming regulations, enabling transparency in sustainability reporting and disclosure, meeting stakeholders’ expectations, and attracting public and private investments.
The Integrated ESG approach takes a holistic approach to the three E, S and G dimensions while also taking into account how these dimensions work together symbiotically. This also matches the multidimensional approach of benchmark EU policies for the food and beverage industry.
An integrated ESG approach considers:
- An assessment of distinct indicators: Companies must identify, evaluate, and optimize relevant indicators. These can be so-called minimum indicators which are pivotal to sustainability regardless of sector (ie. carbon footprint, human rights and risk management). Additional indicators to consider are the ones that are sector specific. Relevant indicators within the food and beverage sector could be biodiversity loss, food safety and geopolitical instability. Finally, companies should consider recommended indicators related to specific commodity categories. This could be indicators such as responsible water and land use, health and safety and rural entrepreneurship in fruit and vegetable production.
- A consideration of dependencies between issues within a single dimension: Indeed, dependencies can exist between issues within a single dimension (E, S or G). For instance, child labour deprives children of an education, which again impacts social sustainability. In addition, child labour causes severe physical and mental harm and can lead to sexual or economic exploitation.
- An acknowledgement that solutions cannot be limited to one issue alone: In the case of abolishing child labour, solving this issue will not necessarily end sexual and economic exploitation, nor will it prevent all physical and mental harm inflicted on children.