Author: Allon Zeitoun

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The food and beverage industry could lose about $150 billion, 7% of its value, as soon as 2030 if environmental sustainability isn’t given top priority. While most organizations have set sustainability targets and goals, few have made meaningful progress in mitigating and adapting to the myriad risks – financial and otherwise – the environmental crisis represents.

Recent years have highlighted the fragility of the supply chain, with heatwaves affecting wheat and reducing yields in India, droughts leading to a $2B value-added loss since 2021 in the Sacramento Valley, and floods reducing the cocoa supply in West Africa, causing costs to increase by 65%.

Making operations sustainable in this sector is not a new goal, but companies are still not on track to achieve the extent of transformation needed to mitigate both the impacts and the business risks of the climate crisis and ensure long-term business resilience.

With environmental events increasingly disrupting our food systems, countering this on a corporate level requires executive buy-in, action and collaboration throughout the entire organization. Instead of treating sustainability as a side project, companies need to view it as central to their ability to adapt to unfolding environmental crises, but also a way to weave agility into the DNA of their business more broadly. Adopting this mindset shift and uniting departments across the company around a shared sustainability ambition is the food and beverage industry’s key to a resilient future.

The Role of CSOs and Increasing Need for Collaboration

Leaders across the globe are struggling to prioritize and implement sustainable change successfully.

A 2023 study by Boyden found that only 17% of organizations had a Chief Sustainability Officer (CSO) on staff. The role continues to grow in prominence, but not quickly enough. According to Quantis’ 2024 Recipe for Transformation report, company commitment and culture set by leadership is the largest driver of sustainable practices across departments.

Putting sustainability on the table within C-suites and boardrooms is essential to building a more agile and resilient organization. But, importantly, the role of a good CSO includes ensuring alignment and action across all business units while remaining flexible to navigate evolving regulations and market expectations.

36% of food and beverage executives surveyed for the Quantis  report named collaboration across departments as a key success factor – and it’s true. Reducing environmental impacts and adapting to the changing climate won’t happen in a silo. To finally push towards meaningful impact and avoid system collapse, collective prioritization and collaboration is of the utmost importance.

A Department-driven Shift from Reactive to Adaptive

Pivoting business processes is often put on the backburner, and it’s evident why – the process seems daunting and not as pressing as other revenue-driving activities. But with manageable tweaks and  organizational collaboration, each department can contribute to the sustainability transformation of the business, pivoting from reactive to adaptive. There are four core departments that can have a large impact: finance, product, procurement and marketing.

Finance departments are critical stakeholders, particularly as regulations increase in scope and complexity, physical risks become prominent and the budgetary needs to address sustainability grow. Finance teams should:

• Truly incorporate both physical and transitional environmental risks into financial decision-making and remain vigilant about climate-related vulnerabilities – ensure the CSO is a close ally throughout the entire process.
• Leverage scenario planning to envision future environmental risks and shape mitigation and adaptation strategies.
• Utilize shadow pricing to associate a cost with carbon emissions, natural resource use and ecosystem changes and inform investment decision making.
• Collaborate early and often with procurement and product teams to allocate resources appropriately and effectively

To truly transform, we need to change what we eat. To accomplish that, food and beverage companies need to change how the food we eat gets produced. Product teams are on the frontlines of this change. Their decisions influence procurement and marketing. They need to:

• Obtain up to date consumer trends from the marketing department to strategically set financial thresholds for R&D, keeping in mind the need to innovate and report.
• Follow eco-design principlesand explore novel ingredients in recipe design and packaging materials, and align early with procurement.

The procurement department is the link between your organization and the supply chain. It is arguably one of the most impactful levers in hitting sustainability goals. If done properly, the team will:

• Work with finance and the sustainability team to manage risks by making overarching supply decisions i.e. addressing vulnerable raw materials or over-reliance on specific regions.
• Improve traceability of goods to map risks by working with the sustainability team to determine effective KPIs and assess impact of suppliers.
• Invest in landscape-level initiatives and challenging regions to improve agricultural practices.
• Engage with suppliers for longer contracts and improved production practices.
• Create a plan to adapt sourcing strategies for supply chain disruptions.

The behind-the-scenes work is done. Now it’s the marketing function’s time to shine. They have a very difficult job: effectively communicating the organization’s commitment to combatting climate change, maintaining transparency on efforts and bolstering consumer perception. Marketers can:

• Learn from finance, product, procurement and executive-level stakeholders – ingrain the team into each step of the process to eliminate the risk of misunderstanding, which can lead to greenwashing.
• Share consumer behavior insights to inform future R&D.
• Leverage portfolio assessments to discern product marketing needs.
• Shape a credible narrative to engage consumers.

While CSOs play a pivotal role in ensuring environmental, social and governance goals are integrated into corporate strategy, they can’t do it alone. The need for collaboration among various departments and stakeholders has never been greater. CSOs must prioritize fostering a culture of cross-functional collaboration to enact truly holistic and impactful sustainability programs. 

Ensuring Meaningful, Sustainable Change for the Future

For years we have watched the acceleration of climate events disrupt our planet and threaten our food systems. Sustainability teams are facing mounting scrutiny, both from regulators and consumers – as well as within their own organizations – and the pressure can be immobilizing.

Adapting requires a unified and collective approach. The role of the CSO is pivotal in connecting the dots across the business to ensure environmental risks are accounted for in the broader corporate strategy, preparing the organization to adapt to the changing climate. They must act as catalysts, fostering cross-departmental collaboration. From finance and product development to procurement and marketing, each department has a crucial role in embedding sustainability into the core operations.

Now is the time to accelerate action. Simply setting corporate-level climate targets has not proven to be enough. But by implementing clear internal direction and robust KPIs while promoting a culture of collaboration, companies mitigate risks and set a clear path to reach overarching reducing footprints. The journey towards a sustainable future is complex, but not impossible. The food and beverage industry has all the ingredients required to pave the way for a resilient and prosperous tomorrow.