Despite the growing demand for sustainable food, many companies hesitate to set ambitious environmental goals, as transparently measuring and reporting environmental performance is time consuming and costly. Environmental traceability, namely the ability to track the environmental impact of a product along the supply chain, can help streamline and improve the process, and we have identified several strategies that can enhance its effectiveness.
The need for better traceability is acute. We recently conducted a survey with 101 firms of various sizes across various subsectors of the food and drink sector in the UK. Our survey found that 79% of food companies in the country have encountered the challenge of measuring and reporting their environmental performance along various parts of the supply chain, all the way from upstream growers and manufacturers to wholesalers and retailers and downstream consumers. For example, firms find it hard to get data on carbon emissions related to purchased materials or the upstream and downstream transportation and distribution or processing of food products. For those who must meet the environmental data requirements of different stakeholders, including customers such as retailers, restaurants, other food manufacturers, and investors, as well as regulators and standards-setters such as the Taskforce on Climate-related Financial Disclosures (TCFD), the resulting data-wrangling involved is extremely labor intensive. British poultry manufacturers told us that they spend between 100 and 345 person days a year entering similar environmental data into different forms via digital platforms or emails for different stakeholders.
Traceability can enhance both the transparency and efficiency of environmental reporting by tracking a food product’s impact throughout production, processing, and distribution, and automating environmental data exchange between companies using digital technologies. This can in turn help food companies reduce their costs while, importantly, increasing the benefits of improving environmental performance.
For instance, the European Commission started a pilot project in 2022 to develop a digital traceability technology for this purpose. This resulted in the creation of the Digital Product Passport (DPP), a document with consolidated data for a product (e.g., product name, origins of raw materials, ownership and repair data) throughout its lifecycle. These DPPs currently focus on the electric and electronics, battery, and textile sectors, but food products have not been included so far. A working example of this approach for consumers comes from Sweden, where consumers can now scan the QR code of Zoegas Coffee to view the journey of their coffee beans from harvest to shelf. By doing so, consumers can see how the coffee brand and their own consumption behavior complies with the Rainforest Alliance certificate, which focuses on protecting nature and the livelihoods of farmers and forest communities.
Based on a comprehensive review of environmental reporting, we recommend four strategies firms can adopt to increase environmental traceability and hence the business value of high environmental performance.
Standardization
Standardizing environmental metrics would enable food companies to measure their performance rigorously. Currently, there are many different environmental standards, such as Science-based Targets (SBTs), Task Force on Climate-Related Financial Disclosures (TCFD), ISO 14001, and ISO 14064. While different companies choose different standards, it is challenging to compare environmental performance across food companies. Two of us — Lili Jia and Steve Evans, from the Centre for Industrial Sustainability, University of Cambridge — have developed standardized environmental metrics with harmonized assumptions, principles, and frameworks to rigorously measure environmental impacts of food companies in terms of greenhouse gas emissions, air pollutants, water use, material efficiency, and waste. UK policymakers are now exploring new strategies to utilize these metrics to provide a trustworthy scheme for food companies to demonstrate high environmental performance, such as those outlined in the United Nations Sustainable Development Goals.
Automation
Automating environmental data exchange across different food companies would also help. Based on standardized environmental metrics, the data can then be represented in a unified data description language, such as Extensible Markup Language (XML). This will allow food companies to enter data just once and share that data automatically through digital platforms. Different from a manual data exchange approach, automating data exchange can help food businesses reduce time and cost in sharing data. When a food company shares their data with standardized XML schema, the data will be translated into a format that can be easily restructured using the same XML schema by its stakeholders. Thus, one set of XML-format data can meet the various data structure needs of different stakeholders. As this way of data sharing does not require a central data platform to host all the data, food companies will also have more control of their data ownership and confidentiality.
Systemic changes
Firms should leverage existing food-systems networks to enable them to help each other harness business value from environmental sustainability. Retailers and large food manufacturers often make independent decisions to request environmental data. This leads to inconsistent forms, which in turn discourages their suppliers from sharing environmental data. If food companies were to take a collaborative approach and adopt a standardized form for environmental reporting, this would increase efficiency and reduce cost while improving data quality.
Doing so could also trigger systemic changes along the supply chain and encourage all suppliers to report their environmental impacts, as laggards would run the risk of losing customers. By linking SBTs Scope 1 emissions (i.e., direct carbon emissions) and Scope 2 carbon emissions (i.e., those from purchased electricity and heat) along the supply chain, the data quality for SBTs Scope 3 carbon emissions (i.e., all indirect carbon emissions not included in Scope 2 emissions) would also be improved. Transparent environmental reporting will set up rigorous industry standards to facilitate the diffusion of good environmental practices.
Integrated human-artificial intelligence
Firms can integrate artificial intelligence (AI) into decision-making processes to realize the business opportunities of environmental sustainability. In their book Prediction Machines: The Simple Economics of Artificial Intelligence, Ajay Agrawal, Joshua Gans, and Avi Goldfarb point out that AI should be used as a prediction tool to support companies to make decisions, rather than make decisions for them. For example, the UK retailer Ocado uses AI to predict customer demand to inform procurement decisions, leading to the reduction of food waste. Farmers can make better crop-protection decisions using AI predictions of growth patterns based on sensor data and real-time visual data with drones. AI is also driving flexible automation: With an increasing farm worker shortage in the UK, the world’s first raspberry-picking robot can now pick over 25,000 raspberries a day — 66% more than an average worker can.
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Through studying and supporting over 600 companies, we have seen that sustainable companies have managed to internalize both the benefit and cost of protecting the environment into their business-value calculations. By implementing these transparency strategies, food companies can increase their environmental traceability and become more sustainable, ultimately benefiting their bottom line while contributing to a healthier planet.