Short Essay - the business case for sustainability for food companies

A short essay from Cambridge Institute for Sustainability Leadership's course "Business Sustainability Management", working to a case study of a meat production company.

 

Argue the business case for incorporating sustainability into the organisation’s strategy. Your senior management team wants to know how the pursuit of sustainability could lead to operational and strategic benefits for the business.

 

We can become a market leader through sustainability as a reaction to a shifting world - improving our stakeholder relations, reducing risks, realising cost savings and tapping into significant market opportunities.

Sustainable companies have shown 46% better share price performance [1] and 112.5% better return on assets [2] than non-sustainable companies; Unilever’s Sustainable Living brands grew 50% faster than the rest of the business, delivering over 60% of growth in 2016 [3].

 

As a food producer, sustaining our position relies on preservation of natural ecosystems, stability of the interdependent global value chain and wellbeing of people from both a consumption and production perspective. We are operating in the highest value sector as part of a total $12tn opportunity around the SDGs, with clear opportunities that sit within our remit: food waste, low-income food markets, farming technology and dietary switch [4].

 

Reputation with our stakeholders is key. Of our customers, Marks & Spencer have led on sustainability with Plan A - which realised a £105m net benefit by its fifth year [5]; while supplier standards have been presented to us by Tesco, Sainsbury’s and Waitrose. Rising to their challenge is vital to maintaining this source of 74% of our revenue. More broadly, government, consumers, suppliers, colleagues and local community all secure our licence to operate [6], managing this can result in a potential impact of 70% on EBITDA [7].

 

Sustainability opens up significant efficiency gains across our operations and supply chain [8] - since 2008 Unilever have saved over €700m through eco-efficiency [9]. Smart farming technology will drive sustainability performance, productivity and yield [10] - 80% of agriculture companies foresee a competitive advantage from it [11]. Olam have leveraged this to great effect - Mitsubishi investing at a price of approximately 16 times’ forward earnings, citing sustainable practices as a key driver [12], [13].

 

Beyond general cost drivers around waste, packaging, fertilizer and feed are key areas for us. Food waste will be most significant; food currently wasted in Europe could feed 200m people, presenting a market opportunity of $685bn [14]; using smart sensors could reduce food waste by 25-40% [15].

 

Sustainability will define what the business models and opportunities of the future look like [16], driving changing consumer habits: a shift to plant-based products - which saw year-on-year market growth in Western Europe of around 15% [18] with an expected global revenue of $5.2bn by 2020 [19] - local and online purchasing, and increased demand for transparency on sustainability performance [17], all of which we will need to react to, to remain competitive.

 

References

1 - Bonini, Sheila and Swartz, Steven (2014) - “Profits with Purpose” Retrieved from (12 March 2018) :https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Sustainability%20and%20Resource%20Productivity/Our%20Insights/Profits%20with%20purpose/Profits%20with%20Purpose.ashx, McKinsey

2 – Whelan, Tensie and Fink, Carly “The Comprehensive Business Case for Sustainability” Retrieved from (12 March 2018): https://hbr.org/2016/10/the-comprehensive-business-case-for-sustainability, Harvard Business Review

3 - Unilever (2018) “Sustainable Living Strategy” – Retrieved from (13 March 2018) https://www.unilever.com/sustainable-living/our-strategy/about-our-strategy/

4 – Business & Sustainable Development Commission (2017), “Better Business, Better World”, Creative Commons License

5 - Marks & Spencer (2012) “Key Lessons from a Plan A Business Case”, Retrieved from (13 March 2018): https://corporate.marksandspencer.com/documents/plan-a-our-approach/key-lessons-from-the-plana-business-case-september2012.pdf

6 – Business & Sustainable Development Commission (2017), “Better Business, Better World”, Creative Commons License

7  - Bonini, Sheila and Swartz, Steven (2014) - “Profits with Purpose” Retrieved from (12 March 2018) :https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Sustainability%20and%20Resource%20Productivity/Our%20Insights/Profits%20with%20purpose/Profits%20with%20Purpose.ashx, McKinsey

8 – Business & Sustainable Development Commission (2017), “Better Business, Better World”, Creative Commons License

9 - Unilever (2018) “Sustainable Living Strategy” – Retrieved from (13 March 2018) https://www.unilever.com/sustainable-living/our-strategy/about-our-strategy/

10 - Generation Investment Management (2017), “Sustainability Trends Report”, Generation Investment Management LLP

11 - United Nations Global Compact (2017) “Project Breakthrough – Disruptive Technologies Executive Briefs – Digital Agriculture”, PA Knowledge Ltd

12 - Terazono, E. (28 October 2015). Mitsubishi seeks Olam’s sustainable approach. Retrieved from (12 March 2018) https://www.ft.com/content/e9d0ea06-7ca5-11e5-a1fe-567b37f80b6, Financial Times

13 - Mistubushi (2015) – “Mitsubishi Corporation Acquires Stake in Olam International “ Retrieved from (13 March 2018): https://www.mitsubishicorp.com/jp/en/pr/archive/2015/html/0000028412.html

14 – FAO (2016) - “Key facts on food loss and waste you should know” Retrieved from (12 March 2018) http://www.fao.org/save-food/resources/keyfindings/en, Food and Agricultural Organisation of the United Nations

15 - Global Goals Technology Forum (2017), “2030 Vision - Uniting to deliver technology for the global goals”, Sustainability

16 - Mike Barry (2016), “Episode 3: Mike Barry | The path to become the world’s most sustainable retailer”, Retrieved from https://itunes.apple.com/gb/podcast/the-sustainability-agenda/id1147166189?mt=2, The Sustainability Agenda podcast

17 - Generation Investment Management (2017), “Sustainability Trends Report”,  Generation Investment Management LLP

18 - Generation Investment Management (2017), “Sustainability Trends Report”,  Generation Investment Management LLP

19 - Upadhyay , Sheetanshu (2016), Meat Substitute Market” Retrieved from (12 March 2018) https://www.alliedmarketresearch.com/meat-substitute-market, Allied Market Research