Welcome to our ESG deep dive, the first in a series of articles highlighting the key impacts and risks of major business sectors on people and the environment.
If you would like to know more about the specific ESG impacts and risks in your sector and the important upcoming legislation that will affect organisations in this area, please contact us. We can develop an overview analysis and discuss the key ESG areas your business should focus on.
What’s on the menu for the food and beverage industry?
In the EU alone, the food and drink industry employs around 4.5 million people, generating a turnover of €1.1 trillion. This makes it one of the largest manufacturing industries in the EU. Unsurprisingly, the sector significantly impacts people and the environment, especially through its Scope 3 - its value chain.
Food and beverage companies play a key role in ensuring fair trade between nations and future food security against the impacts of climate change. With the population growth will come higher global demand and increasing pressure on limited resources. In a world where 828 million people go hungry, and one-third of the food for consumption is wasted, the preservation of ecosystems and the future well-being of the human population will depend primarily on the structural transformation of the food system towards a sustainable and resilient state.
Over the past few years, the sector has also seen a shift in consumer demand towards healthier options, vegan diets and the rise of the 'wellness' market. With the shift in consumer demand towards healthier options, the increasing emphasis on food safety and changing consumer behaviour, manufacturers need to offer healthier products, use more locally sourced natural ingredients and find a new approach to packaging.
The main areas of concern for the food and drinks industry are:
Greenhouse gas emissions
Greenhouse gas emissions come particularly from livestock production, the use of synthetic fertilizer and the supply chain. According to the United Nations Food and Agriculture Organization (FAO), the food and agriculture sector is responsible for around 25% of global greenhouse gas emissions. For the drinks industry, sugar itself has a colossal carbon footprint.
Land-use changes and biodiversity loss
Land-use changes such as deforestation for agriculture and overfishing can lead to loss of biodiversity, habitat destruction and soil degradation. The World Wildlife Fund (WWF) estimates that around 30% of the world's land area is used for livestock production, which is a major driver of deforestation and habitat loss. This impacts and often displaces communities that live in these areas.
The industry heavily depends on water to produce and process food and beverages. According to the UN, from growing the necessary ingredients to packaging, it takes 350 litres of water to produce one litre of soda. In comparison, one litre of beer requires 155 litres of freshwater. Over 70% of the world’s freshwater is used for agriculture.
It is estimated that globally, around 500 billion plastic bottles are used yearly, and less than 50% of these are recycled. Food & drink industry brands are the top plastic polluters according to the annual Break Free from Plastic audit. Overall, the use of virgin plastic packaging is increasing while the share of reusable plastic packaging remains the same in the beverage and food industries.
Impact on public health
The sector has a major impact on public health through the promotion and production of unhealthy foods, drinks and the use of artificial ingredients. A study published in the journal Lancet found that unhealthy diets are responsible for more deaths worldwide than tobacco use. Linked to that is food safety, such as contamination, use of harmful chemicals and additives, and lack of traceability.
The industry has been criticized for exploiting workers, child labour and poor working conditions (low wages, no oversight, human rights abuses), particularly in developing countries. Seventy percent of child labour is concentrated in the agriculture sector.
unfair trade practices, such as price fixing, monopolies, and dumping, can harm small farmers and producers in the supply chain.
The FAO estimates that around one-third of food produced for human consumption is lost or wasted globally, significantly impacting the environment, food security and health. The United Nations estimates that by 2050, the world population will reach 9.7 billion, and food production will need to increase by 60% to feed this growing population. This will put significant pressure on land, water, and other resources.
Greenwashing is making false or misleading claims about the environmental benefits of a product. This can include claiming that a product is organic / bio / biodegradable / 100% recyclable / natural / sustainable / eco, etc., when it may not meet strict standards or regulations for those terms.