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Food industry named world’s worst

Dangerously low levels of sustainability in the food industry may skyrocket to the top of the to-do and worry-about lists of business executives, government officials, and perhaps even environmentalists and shoppers.

Late last month, KPMG, one of the top professional services companies in the world, released a report called Expect the Unexpected: Building business value in a changing world.

Who would have expected that such an authoritative organization would single out the food industry as both the worst environmental actor in the world and the least prepared to deal with risks inherent in what KPMG calls the ten global “megaforces” that will shape corporations and all living beings over the next generation?

I am not aware of one prominent critic of the food system who has dared to utter, or was well-resourced enough to confirm precisely, such a severe indictment of corporations that control one of the most critical essentials of life and determinants of health and well-being.

In its effort to help giant corporations navigate the world’s complex uncertainties, KPMG’s report identifies ten “sustainability megaforces” that surefooted companies will need to anticipate and respond to.

Nothing unexpected here, just the usual suspects when it comes to lists of things that any reasonably aware person knows about—more climate instability, less fuel, less water, less crucial manufacturing materials, fewer fish and other resources from natural ecosystems, more people, a bigger and more demanding middle class, bigger cities, less stable food production and prices, and smaller forests.

The big surprise is that the food and beverage industry stands to be traumatized by any one of these megaforces—not to mention their combined impact—yet is a rogue actor when it comes to abusing resources, and is incompetent when it comes to managing the driving forces of future food security.

Let’s review each of these three elements of the KPMG assessment.

It shouldn’t take an agronomist to figure out that all these megatrends will impact food and beverage providers. Less stable climate means less ability to predict or plan for yields. Less fuel means higher costs for running farm machinery, and for processing and delivering food. Less water means pop and beer will compete more with other industries that need water, and farmers will have less ability to provide crops with an essential input. Fewer materials spell problems for food packaging. Fewer fish hits the newly popular brain food of the rich world and the basic protein source of the poor world. More people means more mouths to feed. A bigger middle class means more people wanting resource-intensive milk and meat products. More people in cities means more people depending on fewer farmers. Less stable food prices can produce Arab Spring-style revolts among the world’s one billion poor. Smaller forests threaten a billion people who rely on forests for food and other needs.

How does the food industry treat these essential forces responsible for its survival?

KPMG ranks the food sector as the worst of all sectors in two respects. First, it faces the “highest risk from sustainability megaforces,” but is the “least ready” to respond to them. Second, it is the worst actor in terms of care and handling of the environment.

Despite stereotypes of agriculture as a pure activity that’s about as natural as can be, despite prejudices that environmental damage comes mainly at the hands of logging, mining, oil spills, and gas pipelines, food is the unexpected arch-villain.

By KPMG’s calculations, the food industry inflicts more than two dollars of environmental and resource damage for every dollar of profit. On net sales of US$12.8 trillion, it causes US$200 billion worth of environmental problems—the full costs of degraded fisheries and soil that will be imposed on future generations, for example—which is 224 per cent more than its profit earnings (before interest, depreciation, and amortization, or EBIDA).

This record is four times worse than the corporate average, already at 50 cents damage for every dollar in earnings. For example, electricity from coal and nuclear, among other sources, comes second to last at US$195 billion worth of damage to the planet’s future. Oil and gas is further back in the pack at US$150 billion.

Moreover, the food industry has been getting worse with time. It was more “environmentally intensive” in 2010 than it was in 2002—largely due, a KPMG chart shows, because of the huge “footprint” of intensive livestock production in factory farms. Food is the only industry to perform worse in 2010 than in 2002, KPMG says.

The report states that the entire industry is below par on reporting and communicating its sustainability record. Less than one in five food companies identify sustainability as having business value for their company in terms of increased ability to manage resources and obligations. Almost two-thirds of food companies see the “business imperative of sustainability” as “differentiating their brand.”

From my little perch on the world, I’m interested in the doorway this report provides for deeper city engagement with food issues. Our report, the KPMG authors say, sets out ways “competitive advantage can be carved out of emerging risk.” In the political realm, no force has more room for carving out a bracing food mandate and mission than cities, which are responsible for land use planning and infrastructure provision related to most of KPMG’s ten megaforce trends. If food corporations and national governments responsible for not regulating them don’t do anything to increase food security, force of circumstance will lead cities to make the most of such trends as urban agriculture and local and sustainable food purchasing to nourish regional food supplies.

Again from my little perch, what I find most unexpected about this report is what hasn’t been said before by environmental advocates. Few give anything like equal attention to local and sustainable food systems, and even fewer demand that food companies come clean with independent authentication of claims to be selling more local and/or sustainable products.

My wife, Lori Stahlbrand, runs a non-profit called Local Food Plus, which promotes local and sustainable food. “Local and sustainable go together like peanut butter and jam, macaroni and cheese, health and well-being, research and development,” she likes to say

Not so in the minds of many environmentalists or environmental funders, many of whom think a company’s say-so on local is good enough. For the food industry to be called to order by a leading provider of services to global corporations—not government officials, public health figures, political leaders, or environmentalists—says something very unsustainable is going on in the social and political world.

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