THE SHIFT TOWARD SUSTAINABLE
Like never before, consumers and agrifood stakeholders are supporting more sustainable food production and distribution practices. Sustainable products outpaced growth of conventional counterparts in more than 90% of CPG categories from 2013 to 2018, with 50% of CPG growth estimated to have come from sustainability-marketed products.1 Agribusiness, CPGs, retailers, foodservice operators, and others have made bold corporate sustainability commitments in alignment with the interests of a growing base of environmentally-conscious and motivated consumers, customers, and investors. In the process, plant-based and cell-based meat, seafood, and dairy alternatives have rightfully commanded a significant amount of market and media attention.
Perhaps less appreciated is the opportunity to improve sustainability within non-center-of-the plate categories. While beef, lamb, and cheese production are significant contributors to GHG emissions by weight, everyday ingredients such as coffee, cocoa, and palm oil are all in the top ten foods.2
HIGH DEMAND + CHALLENGED SUPPLY
Each of these food products has been, and is increasingly prevalent in our daily consumption patterns. Coffee is the most consumed beverage in the U.S., with an estimated 450 million cups consumed per day.3 The premium chocolate market is growing substantially, with the average American consuming 11 pounds of chocolate per year.4 Palm oil can now be found in more than half of all packaged products purchased by Americans, with annual consumption doubling (to roughly 75 million MT) over the past two decades.5
Shifts to meet growing demand for these products (especially in specialty) have come in conflict with growing consumer and corporate ESG expectations. In palm oil, many growers have increased planting at the expense of biodiversity and rainforest coverage, as oil palm plantations support roughly 20% as many animal species and have less than 20% the above-ground biomass as rainforest trees. Only 20% of production today is sustainably certified by the RSPO and lack of first-mile traceability accentuates the problem, with less than 25% of palm oil companies able to trace supplies from mill to plantation.6 Meanwhile, a significant portion of cocoa production is still dependent upon child labor in Cote d’Ivoire and Ghana (an estimated 2.1 million children as of 2018) and many farmers do not make a livable wage.7
And the pattern of negative environmental outcomes could prove cyclical as farmers face increasing climate challenges. Even today, coffee farmers impacted by drought, temperature fluctuation, loss of biodiversity, and other climate impacts are seeking new growing areas at higher elevations to adjust. Coffee production currently causes deforestation of 250k acres of rainforest a year, and some have estimated that half of coffee plantations will need to be moved over the next 30 years.8 Former Starbucks CEO Howard Schultz stated a few years ago: “Make no mistake. Climate change is going to play a bigger role in affecting the quality and integrity of coffee.”9
EARLY ACTION TOWARD SUSTAINABILITY
Recognizing the need to revisit approaches to responsible and sustainable sourcing, CPG players are making significant commitments to improve their respective supply chains. Mars, Mondelez, Hershey’s, Ferrero, Nestle, P&G, Unilever, and others have proactively introduced working groups, committees, and tech initiatives to increase supply chain traceability and cull unsustainable suppliers.10 Schultz’ successor Kevin Johnson more recently announced Starbucks’ commitment to halve waste, water use, and greenhouse gas emissions by 2030 – a significant target and potential catalyst for further corporate action.11 Still, based on sustainability reports from WFF and otherwise, more work can be done to execute against commitments and lead the way in sustainable practices.
Early-stage innovators are supporting the cause, as well. Crop scouting and supply chain traceability technologies hold promise in improving visibility into unsustainable production practices – from plantation and mill to retailer and consumer. Others – such as C16 Biosciences, which uses fermentation to manufacture an alternative to palm oil12 – are leveraging developments in science, computation, and production methodologies to replicate biology with more sustainable ends.
In this vein, we’d like to announce our investment in Atomo Coffee. Atomo’s team has reverse-engineered coffee bean molecules to create a uniquely smooth and sustainable brew made from upcycled plant materials (pits, seeds, stems, and other waste). As part of this $9 million round of funding, Atomo will be able to launch production of a more sustainable, molecular coffee out of its Seattle roastery. By recreating coffee sustainably, Atomo can reduce deforestation attributable to additional coffee farming in service of growing demand. We also believe Atomo’s approach can be applied to other crops impacted over time, with material benefit to climate and human health.
Recognizing the linkage between agricultural production and overall GHG emissions (roughly 24% of total13), emphasis around sustainable sourcing and end-to-end transparency should only increase. At the same time, the COVID-19 pandemic has required companies large and small to reconsider product sourcing and supply chain construction.
Now is an opportunity to consider how sustainability plays into the next iteration of each product’s supply chain. If supply chains are to become more localized and decentralized, what does this mean for resource use? If consumers are demanding greater personalization and nutrition, how can these attributes be merged with sustainability attributes? What products – if sustainable – drive brand affinity and a larger shift to sustainably-sourced product use? Can we feel less guilty about a guilty pleasure snack if we are preventing or reversing climate change in the process? All are questions to be answered in the next wave of sustainable production, from the meat we eat to the brew we drink.
NYU Stern Center for Sustainable Business,’Sustainable Share Index: Research on IRI Purchasing Data (2013-2018),’ 2019.
Our World in Data, “You want to reduce the carbon footprint of your food? Focus on what you eat, not whether your food is local,” 2020.
HowStuffWorks.com, ‘Coffee Facts.’
Mic.com, “Americans Consume an Astonishing Amount of Candy Every Year,” 2016.
Toptal, “An Investor’s Guide to Palm Oil,” 2017; S2G analysis
Thomas Guillaume, Martyna M. Kotowska, Dietrich Hertel, Alexander Knohl, Valentyna Krashevska, Kukuh Murtilaksono, Stefan Scheu, Yakov Kuzyakov. Carbon costs and benefits of Indonesian rainforest conversion to plantations. Nature Communications, 2018; ScienceDaily “Palm Oil: The Carbon Cost of Deforestation,” 2018.; RSPO; Bloomberg, “Most Palm Oil Companies Can’t Fully Trace Supplies, Survey Shows,” 2019.
Supply Chain Dive, “Sustainable cocoa promises have been empty,” 2018.
Vice, “Half of the World’s Coffee Growing Regions Could be Gone by 2050,” 2016; Inter-American Development Bank; Forbes, “Most Coffee Species at Risk of Extinction Due to Climate Change,” 2019.
Time, “Your Morning Cup of Coffee is in Danger. Can the Industry Adapt in Time?,” 2018.
Food Dive, “Mars will invest $1B to fix ‘broken’ cocoa supply chain”, 2018.; Reuters, “Nestle says cuts deforestation in its cocoa supply chain,” 2020.; WWF, “Palm Oil Buyers Scorecard,” 2019.
Starbucks.com, “A message from Starbucks ceo Kevin Johnson: Starbucks new sustainability commitment,” 2020.
Axios, “Palm oil alternative startup C16 Biosciences raises $20 million,” 2020.
GatesNotes, “We should discuss soil as much as we talk about coal,” 2019.