Why large food companies and retailers are starting to embrace regenerative agricultural practices in their supply chains

Some of the largest companies in the food sector such as Nestlé and Pepsi Co. have announced ambitious targets for the implementation of regenerative agricultural practices in their supply chains. The reasons are manifold and range from changing customer preferences, to net zero targets, to mitigating the cross-border impacts of climate change. 

In the following we want to focus on the latter aspect and what this implies in terms of supply chain resilience in the food sector and hence food security as a whole. 

Introducing the concept of cross-border climate change impacts

As it stands, climate risk assessments mostly focus on climate change impacts in one geographical region. Resulting from this, they miss the systemic and hence cross-border dimension of climate risks. More and more studies emerge, however, that exemplify that this dimension is most likely significantly more important than the locally confined dimension. 

Analysing cross-border climate risks usually starts with one climate trigger in one specific region. In a next step, the global downstream impacts are modelled for each geographical region that the selected climate trigger is affecting. 

To get an accurate picture of cross-border impacts, identifying the appropriate climate triggers, categories, their potential scale and dynamic, and the socio-economic context they are embedded in is key. 

Implications for the food sector and long-term food security

The EU is a good example to illustrate cross-border climate risks in the agri-food sector and what this implies for supply chain resilience and hence the blocks’ long-term food security. 

In a recent study on cross-border climate impacts of drought, Dr Ertug Ercin and his team find that more than 44% of EU agricultural imports will become highly vulnerable under a medium-emission scenario of around 2.7°C[1]. Among these imports are meat and dairy, cocoa, coffee, and palm-oil based food and cosmetics. Moreover, the scenario accurately describes the current pathway we are on. 

To assess the impact on individual crops and countries, they model a climate vulnerability score that combines drought severity, rainfall dependency, and a country’s ability to adapt to climate risks over time. In summary, they find that most of the EU’s agricultural imports come from regions with limited adaptation capacity such as cocoa from Ghana and soybean from Brazil. 

Following from this, implementing regenerative agricultural practices, and embracing a cross-border climate risk mindset is critical not only for the food sector to ensure long-term business resilience, but also for policymakers regarding food security. As for the latter, it is recommended to analyse how investments can be unlocked for climate adaptation efforts abroad in the context of international trade. 

[1] https://www.nature.com/articles/s41467-021-23584-0