Advancements in the food supply chain indicate it may be the key to creating sustainable agriculture.
The rising global population and its relationship with the ever decreasing amount of arable land has increasingly become an issue at the forefront of society’s mind.
Okja, a film released early this year, highlights society’s heightened awareness of such issues. The movie begins with Lucy Mirando, CEO of the fictional Mirando Corporation holding a press conference in which she introduces the company’s new focus: addressing both the world’s increasing population and its need for sustainably sourced food, “with new core values: environment and life.”
The movie addresses—while satirizing—the debate over meat production and its cost to the environment, and finds its solution in the creation of “super pigs” that “will leave a minimal footprint on the environment, consume less feed, and produce less excretions.”
Okja highlights agriculture’s urgent need and struggle to address those same issues. With the world’s population expected to be closer to 10 billion by 2050, food production will need to be increased by 70 percent. Unsurprisingly, these statistics are also causing the value of water and fertile farmland to increase.
In our world, there is a growing trend where smallholder farmers are attempting to address deficiencies by improving their agricultural practices, which has, in turn, enabled them to increase their yields significantly.
However, this alone is not enough to address agriculture’s current deficiencies at large. According to recent studies, the key to agriculture becoming more sustainable while remaining profitable can be found through its food supply chain.
Transparency Through Digitization
During a time when increased food recalls is concerning consumers, demand for food supply chain transparency is on the rise. LocalHarvest, GrubMarket, and Farmigo are among the companies working toward a more transparent food supply chain by giving smallholder farmers a platform to directly market to their end consumer.
LocalHarvest “provides online tools that help small farmers thrive,” with their online directory that lists over 30,000 farmer’s markets, family farms, grocery stores, and even restaurants that carry local food across the U.S.
GrubMarket is a startup delivery service whose mission is “to make fresh and healthy food accessible to everyone.” Clients are offered multiple delivery and pickup options, including meeting directly with the farmer.
Farmigo, another startup delivery service, considers itself an online farmer’s market. Through their direct connection with the farmer, consumers are given food directly from harvest with full accountability of the food source. These companies provide both the farmer and end consumer the channel to develop a personal relationship with each other that is necessary to achieve a transparent food supply chain.
Additionally, concepts like Community Supported Agriculture (CSA), Roadside Markets, and the Pick Your Own model support the growing trend of direct marketing by farmers. With CSA, the customer pays for their share of produce ahead of time. The share usually consists of a weekly box of vegetables and other farm products.
Roadside Markets allow farmers to stay on or near their farm for easier transportation of their crops. Additionally, the consumer can more easily get a sense of where their food is coming from.
Hyperconnectivity: John Deere
While this addresses the need for local farmers to have a higher level of transparency, it is not a solution for the global food supply chain industry.
The food supply chain can achieve optimal transparency through hyperconnectivity, which efficiently streamlines information from the farm to the end consumer. In this way, consumers receive detailed information such as the types of seeds used and the processes performed to cultivate them.
Industry giants like John Deere and Cargill are proving that digital business transformation can lead to success. For John Deere, the launch of their integrated website in 2012 solidified their presence in the agricultural tech industry. The open platform is “an information system to help agricultural producers optimize management of production data, equipment information, and farm operations.”
The website is free for consumers who purchase John Deere equipment. Making it free for developers also points to John Deere’s ultimate goal to remain a central platform for farm equipment, software, and hardware.
According to Dr. Thomas Engel, Manager of Technology Innovation Strategy at John Deere, this platform is what has enabled the company to continue producing smarter machines. “Our core competence is machine optimization—making machines smarter, more effective, and productive,” said Engel.
Similarly, Cargill recently launched a platform that will change the way customers manage their farms. Dairy Enteligen facilitates insight and data accessibility to help farmers optimize their operations.
The platform connects farmers with dairy consultants to track key information such as milk productivity, animal health and comfort, and feed formulation. It serves as a comprehensive system for farmers to file and manage all important information.
“Dairy Enteligen is just one example of the ways Cargill is looking to technology to unlock insights that will help our customers grow, and more efficiently and sustainably manage their farm business,” added Ricardo Daura, Global Product Line Director at Cargill Animal Nutrition.
Increased transparency through digitization also allows for the improvement and increased efficiency of the food supply chain by reducing waste.
Additionally, as more companies embrace the digital transformation and increase their use of mobile apps and QR codes, the investment cost of transparency in the food supply chain decreases. This subsequently reduces the cost for the end consumer as well.
Sustainability & Technology Meet
Digitizing the food supply chain industry provides more opportunities for precision farming, which is a way of ensuring resources are only used where they are needed: reducing fuel, water, and fertilizer use.
Companies that choose to embrace precision farming, “are seeing an average 9 percent increase in revenue, 26 percent increase in profitability, and a 12 percent increase in market value,” according to Digitalist Magazine.
Precision farming methods have become so popular that the market for it has become increasingly crowded. Smart Farm Systems is a new software entity which recently announced the launch of their precision farming monitoring and control system after five years in development.
“This new offering includes diesel and electric well pump controls, soil, flow, and water-level moisture monitoring sensors and weather stations that can be installed at any location on the farm,” added Bob Farinelli, President and CTO of Smart Farm Systems. “The system can scale up from just a few control stations to hundreds to accommodate every farmer’s needs”.
According to Brandon Finch, Vice President of Sales and Marketing for Smart Farm, case studies have indicated that precision farming can both reduce input cost and increase production by 5 percent to 8 percent.
“I eliminated at least one entire watering schedule this past growing season, and on some farms, eliminated two,” said Cameron Boyd, a farm manager for White-Flye Farms in Northeast Arkansas.
Blue River Flows Green and Yellow
Blue River Technology has become an innovative leader in precision farming by successfully applying machine learning to agricultural spraying equipment. It’s because of such achievements that John Deere acquired the company.
“As a leader in precision agriculture, John Deere recognizes the importance of technology to our customers. Machine learning is an important capability for Deere’s future,” said John May, Agricultural Solutions and Chief Information Officer at John Deere.
Blue River has made advancements in precision farming through its ability to integrate technology and customize it to meet the needs of each individual crop.
“We are using computer vision, robotics, and machine learning to help smart machines detect, identify, and make management decisions about every single plant in the field,” said Jorge Heraud, CEO of Blue River Technology.
Because of the world’s current limited clean water supply—with 80 percent of the world’s fertile farmland being watered exclusively by rainfall, and the remaining 20 percent sourcing from irrigation—precision farming can better match appropriate crops to soil and climate conditions.
Overall, precision farming encourages sustainability and transparency, and statistics indicate that it is also likely to bring success, with 90 percent of executives recognizing the impact that digitization has on their business.
Data Collection: An Essential Factor
According to Green Biz, agriculture “employs over one billion people, many of whom are food insecure; consumes 70 percent of our freshwater; and is estimated to contribute nearly a fifth of total global gas emissions.”
This explains why consumers and investors alike are interested now more than ever in companies that are willing to prioritize sustainability.
For investors, an increased level of data collection and disclosure by companies has become essential so that their investment decisions may be as informed as possible. Because each company and commodity face its own set of complications and effects, there is a need for data collected to be further examined by experts so that investors may better understand them.
The Sustainability Issues
“Engage the Chain: An Investor Guide to Agricultural Supply Chain Risk” by The Ceres Coalition affords investors the information they seek about the environmental and social impacts driving material business risks. The commodities they focus on—such as dairy, beef, corn, and soybean—are some of the biggest contributors to greenhouse gas emissions, water depletion, deforestation, and pollution.
For instance, dairy cows account for 20 percent of global greenhouse gas emissions, while livestock related to beef production is responsible for 41 percent. Meanwhile, agriculture has caused a staggering 80 percent of global deforestation, and its production consumes about 70 percent of the world’s freshwater.
Globally, 26 percent of crop production is irrigated; in the U.S. only 21 percent is, and corn uses the most water for irrigation in the U.S. than any other crop. Additionally, nearly 20 percent of global soybean production is harvested in areas where water supply faces intense competition.
Moreover, Ceres’ 2015 Feeding Ourselves Thirsty analysis reflects the importance of identifying and addressing water risks. In the report, 37 of the largest companies in the food, meat, agricultural, and beverage industries were evaluated based on their water use, policies, and stewardship.
The report examined how water risks impact each company’s competitive positioning and profitability. Through this evaluation, Ceres aimed to guide companies on how to improve water quality and efficiency, reduce risks, and protect water resources.
This year, Ceres released an update, Feeding Ourselves Thirsty: Tracking Food Companies Progress Toward a Water-Smart Future, in which over 40 companies were ranked based on how they are responding to water risks and how their performance has changed since the first study in 2015. The results reflect big changes for those companies wanting to create a more sustainable food supply chain.
GE’s Water Preservation
General Mills has taken huge steps to address water risks. In 2016, they updated a risk assessment of its critical watersheds, which assessed 15 key ingredients in 36 sourcing regions and 66 facilities—including 17 supplier partners, covering 41 watersheds around the world.
The company pulled data from the World Business Council for Sustainable Development Global Water Tool and the World Wildlife Fund Water Risk Filter. Additionally, they utilized facility water consumption data and irrigation intensity data from the University of Minnesota.
The assessment also took into consideration factors such as water quantity and baseline water stress. The risk assessment helped the company identify and adequately address the most at-risk watersheds in its supply chain.
“General Mills clearly defines what sustainable sourcing means for each of its 10 sustainable sourcing goals,” noted the analysis in its key findings.
“In addition to providing detailed descriptions of progress for each goal, the company uses a dashboard on its website to track overall progress, with an estimated 69 percent of its 10 major commodities sustainably sourced as of spring 2016.”
The Ceres Coalition ultimately aims to build sustainability, leadership, and collectively drive change. The release of its guide, and reports, help push manufacturers to increase their visibility—much like General Mills has done—and shows how vital transparency is in the fight for a more sustainable food supply chain.
According to Sustainability Consortium’s 2016 Impact Report, “only 20 percent of survey respondents collected data on fertilizer usage, greenhouse gas emissions, and soil erosion.” The clear need to improve data collection has led to various efforts arising through the food supply chain.
For Skip Miller, Vice President of Customer Service and Solutions at CHEP USA, the answer is supply chain mapping. Through this process, trading partners can best identify gaps, overlaps, and inefficiencies, facilitating experts to develop better solutions to address sustainability, increase efficiency, and develop cost-effective solutions.
CHEP USA’s supply chain mapping has already improved a wholesale company’s dock space and transportation, saved a beverage manufacturer $500,000 annually, and saved a Canadian retailer $75,000 annually.
Cultivating Sustainability in Food Supply Chain
“Failure to address the environmental impacts would hamper food production in coming decades—through land degradation, water shortages, and adverse effects from climate change,” shared the World Resources Institute’s Creating a Sustainable Food Future: Interim Findings. The interim offers a menu of detailed solutions to better achieve sustainability through two key factors: holding down consumption and boosting food production without land expansion.
One of the strongest methods to holding down consumption is through the reduction of food loss and waste, and it has begun to rise in prominence across industries.
ConAgra Foods Inc., for example, has focused on creating blended pudding flavors rather than wasting product by flushing the manufacturing line when switching from the production of one flavor to the next. The blended flavors are donated to hunger organizations, contributing to the fight against food scarcity.
As for the prevention of land expansion, The Gordon and Betty Moore Foundation is doing its part by offering a more than $90 million in grants focused on advancing conservation.
“Now more than ever, the need to produce food without causing severe environmental degradation is essential to maintaining the productive capacity and integrity of the earth’s ecosystem,” said Aileen Lee, Chief Program Officer of Environmental Conservation at The Gordon and Betty Moore Foundation.
Continued Efforts and Shifting Focus
Okja’s Mirando Corporation heavily entwined “environment and life” in its business model largely because food insecurity and resource depletion were some of the most pressing global challenges in their world.
Similarly, real-world companies must design business models that are entwined with transparency and sustainability to better address food insecurity, water and resource depletion, and poverty while achieving profitability.
For example, Kellogg set goals to responsibly source: corn, wheat, potatoes, sugar beets, sugar cane, rice, cocoa, fruits, palm oil, and vanilla by 2020—which represent 70 percent of the company’s key agricultural inputs.
Nature’s Path, which reported in their Sustainability Report 2012 that they diverted 92 percent of their waste from landfills, and reduced the use of electricity, paperboard, and CO2 per pound of product shipped. The report also talks about their support of organic farming, which also helps their promotion of watershed protection, and the reduction of water needed for crop growth.
Mars is also now working to achieve sustainability by reducing their supply-chain related greenhouse gas emissions. Their overall goal is to reduce emissions by 67 percent by 2050. Mars’ goals align with their belief that achieving a sustainable food supply chain is vital to improving the quality of life while succeeding as a business.
When elaborating on why businesses need to lead transformational change to effectively address urgent environmental threats, Grant Reid, CEO of Mars, added that we need to change strategy “to ensure that the planet is healthy and all people in our extended supply chains have the opportunity to thrive,” he said.
It is clear that in order to achieve a sustainable supply chain, it will require all parts to work together. Consumers, investors, and companies alike have much to gain from a sustainable food supply chain. Stakeholders must continue to collaborate in such a way that encourages transparency while holding each other accountable to making bold moves to create a globally sustainable food supply chain.
The future of our food desperately needs an ongoing flow of innovative solutions to better meet the ever-growing demand for food, and most importantly, one that will be less aggressive to our environment.
“We must work together, because the engine of global business—its supply chain—is broken, and requires a transformational, cross country-industry collaboration to fix it,” added Reid.