Climate Change Having a Domino Effect on Food & Beverage Industry

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Climate Change Having a Domino Effect on Food & Beverage Industry

Unpredictable weather and impacts to natural resources are proving to be disruptive for global food supply chains

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Wednesday, June 21, 2017 - 8:30am

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Last year, Sue Walker moved her Queensland, Australia cattle herd 1,200 miles south in search of greener grass.

Australia has seen less rainfall and warmer temperatures each year since 1994, a combination that has led to severe droughts, which continue to affect regions of the country to this day. And Queensland has now become too hot and dry to maintain herds, forcing ranchers like Sue Walker and processing companies to move their operations to survive. 

"We still have our beautiful cows and calves on the ground again, so we're keeping our fingers crossed that this is the right thing to do," Walker told the Australian Broadcast Company

The Australian cattle industry is not alone in its struggles.

Climate change is affecting how the agriculture industry around the world grows crops and raises animals, and executives in the food and beverage industries are taking notice. In the 2016 Global Resource Challenges Report, 66 percent of executives across industries surveyed said climate change has attributed to their resource challenges over the past two years. 

In the following roundtable, Jean-Luc Sornay, vice president of Global Equipment Food Care at Sealed Air, and Terry Grill, director of Sustainability in the Americas at Sealed Air, explain how extreme temperatures and severe weather affect supply chains, and what food and beverage companies can do about it.

How concerned are executives in the food industry about the effects of climate change?

Grill: Climate change can have a domino effect across the industry. As weather becomes more unpredictable, it’s harder to foresee industry needs. That can be particularly disruptive when you look at how complex food supply chains — such as animal protein —are working across continents. For instance, if soybean grown in Brazil is shipped to China to feed livestock, and the meat is then distributed throughout Chinese cities, a drought in Brazil could affect the food supply halfway around the world.

Sornay: Climate change is impacting the operating strategies of food companies, forcing some to move their operations. Over the past 20 years, Brazil's poultry industry has moved from the south to the north due to climate change. And that has opened up new problems. For example, how do you transition the agricultural labor force that supports this work in more rural areas? This can be a costly and time-consuming endeavor.

What risk does climate change present to the profitability of food and beverage companies?

Sornay: Looking forward, if you don’t have the right production strategy in place – how to process your products and how to extend their shelf life – you will not be in a position to grow, which will put your profits at risk. Climate change is one factor making already stressed resources even more so. Companies can’t afford to wait to implement change; they must start now.

Grill: Most concerns about climate change and natural resources are directly related to the cost of goods sold. The more risk involved in acquiring natural resources, and the greater the distance to supply those resources, the greater the risk on profitability. 

What regions are most concerned with climate change?

Sornay: In Africa, the industry is struggling to feed a billion people and a combination of droughts and a lack of infrastructure are making this challenge even more complex. Processing facilities are far from farmland, and road conditions make transportation between the two unreliable. In some cases, it can be more cost effective to import something such as poultry versus producing locally. Overall, they’re struggling to get their animal and agricultural products to market.

Grill: Drought has hurt the cattle industry in Australia and New Zealand. These countries have lost an enormous amount of productivity, similar to what happened in Texas a few years ago when cattle ranchers couldn’t maintain their herds. Climate change has made the earth too hot and dry to raise beef so ranchers produced less, forcing beef processors to close plants and lay off workers. 

Are food and beverage companies doing enough to deal with resource challenges impacted by climate change?

Sornay: Companies are reducing their water use and becoming more vigilant of their supply chains. They are evolving processes as well as the quality of their systems, reevaluating their entire supply chain to reduce waste.

Grill: It isn’t because of a lack of concern. As you start engaging the entire supply chain, you must work with other large companies, so it can take time to respond to things like climate change. It's not something companies can do overnight. 

How can companies better prepare for events such as drought and flooding? 

Sornay: When you think about fresh red meat, there can be losses of more than 10 percent within supply chains. When you consider that you need over 600 gallons of water to produce one pound of beef, those resource losses add up quickly. The industry needs to start by focusing on that waste. 

Grill: Remote monitoring will help combat the unpredictability of climate change. This technology will allow producers to track their products and optimize planning and scheduling. Food and beverage companies are on the forefront of climate change and need to prepare for future disruptions. 

To learn more about how food and beverage companies can better prepared for climate change, read "Why Leading Businesses Are Focusing on Climate Resiliency."

Learn more about how investing in sustainability can increase the bottom line. 

Keywords: Responsible Production & Consumption | Case Study | Corporate Social Responsibility | Environment | Research, Reports & Publications | Responsible Consumption and Production | Responsible Production & Consumption | Sealed Air | Sustainable Development Goals | Water

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