Competitors Agree: GHG Action Along Supply Chains Is Good for Business
Extreme weather events cost the global economy a record $320 billion in 2017. Food systems are experiencing more shocks than ever before, yet they also cause about one quarter of global greenhouse gas emissions. Eager to slow climate change and decrease their own carbon footprints, major food companies are expanding sustainability commitments to reduce greenhouse gas emissions in their supply chains.
In fact, major brands that compete in the same marketplace are transcending rivalries and increasingly committing to climate change mitigation and environmental sustainability by reducing their biggest source of greenhouse gas emissions: Scope 3.
Scope 3 emissions, indirect emissions that occur in a company’s value chain, are challenging to estimate and manage. In the food and beverage sector, most Scope 3 emissions come from agriculture, so companies often achieve Scope 3 emission reductions through improved agricultural practices and efficient management systems.
Here’s how six well-known rivals are committing to reducing supply chain emissions.
Target and Walmart. Two of the most widely recognized brands in the U.S. retail market, Target and Walmart continue to grow as they compete for customers in stores and online. The breadth and volume of their retail food offerings translate into tremendous potential to influence emission reductions along multiple supply chains.
- Through the Science Based Targets initiative, Walmart aims to reduce direct emissions by 18 percent by 2025 (from 2015 levels), reducing emissions by 4 million metric tons of carbon dioxide equivalent per year, which is the roughly the same as taking about 900,000 cars off the road annually. But most importantly, Walmart is working with suppliers to reduce emissions by 1 gigaton (1 billion tons!) from the production and use of the products it sells between 2015 and 2030; that’s the equivalent of taking 214 million cars off the road for a year. One way Walmart intends to achieve this target is by working with farmers to use fertilizer optimization plans and best management practices on 76 million committed acres of U.S. farmland by 2025.
- Last year, Target committed to developing science-based targets for Scopes 1, 2 and 3 emissions to align its corporate goals with the Paris Agreement. As a first step, Target set goals to reduce its absolute Scope 1 and 2 greenhouse gas emissions by 25 percent below 2015 levels by 2025, and to implement projects in its owned brand manufacturing facilities that will result in the avoidance of 2 million metric tons of Scope 3 emissions annually by 2022. Within a year, Target will develop an additional Scope 3 goal covering agriculture (raw materials) as one of its five focus areas for achieving the company’s commitments.
General Mills and Kellogg. U.S. consumers face the rivalry of these two giants each time they buy cereal. Wheaties or Special K? Cheerios or Mini Wheats? Lucky Charms or Fruit Loops? As consumers turn their attention to breakfast products that are healthy and environment-friendly, both General Mills and Kellogg have committed to reduce Scope 3 greenhouse gas emissions in their supply chains.
- In 2015, General Mills set a science-based goal to reduce absolute GHG emissions by 28 percent by 2025 across its full value chain from farm to landfill, with a longer-term goal to achieve sustainable emission levels in line with scientific consensus by 2050. To meet this commitment, General Mills is partnering directly with farmers to measure and reduce the impact of resource-intensive ingredients such as row crops and dairy, working to advance practical conservation practices and investing in promising long-term solutions such as regenerative agriculture and soil health.
- Kellogg set a third-party approved, science-based target to reduce Scope 3 greenhouse emissions by 50 percent by 2050 from a 2015 baseline, by actively promoting climate-smart agriculture initiatives with its farmers. By 2020, Kellogg aims to enable 500,000 farmers to implement more sustainable farming practices using climate-smart agriculture, support 15,000 smallholder farmers to adopt climate smart agriculture, and develop programs to help women farmers and agricultural supply chain workers.
Mars and Nestlé. Mars and Nestlé compete in the confectionery market with well-known chocolate choices – M&Ms, Snickers and Dove (Mars); and KitKat, Crunch and Butterfinger (Nestlé). And their long rivalry goes far beyond chocolate; Nestlé acquired the pet food brand Ralston Purina in 2001 and Mars acquired Royal Canin in 2002. But these food sector rivals are both leaders in reducing Scope 3 emissions.
- Mars has pledged to invest $1 billion over the next few years to fight climate change. It aims to contribute to the 2-degree goal by focusing on its agricultural supply chain, which accounts for 80 percent of its total emissions. With its Sustainable in a Generation plan and initiatives in agriculture focusing on beef, fertilizer use, palm oil and rice, Mars has committed to freeze emissions until 2020, achieve a 27 percent reduction by 2025, and achieve a 67 percent reduction by 2050.
- Nestlé, the largest food company in the world since 2014, has been transparent about how climate change poses risks to its supply chain, particularly agricultural production. Having established emissions baselines in 2014, Nestlé committed to an interim goal to reduce Scope 3 emissions 8 percent from 2014 levels by 2020, and is currently developing a 2050 goal that will be in line with the Paris Agreement to limit climate change to 2°C.
What is changing the competitive dynamics?
Climate change will continue to shift the industry landscape, uniting competitors in establishing emission reduction targets and transcending normal jockeying for competitive advantage.
Competing retail and consumer companies recognize that climate change poses significant risks to their supply chains. Because quantifying and mitigating Scope 3 emissions requires careful analysis, detailed projections and a wide range of strategies that can be implemented by large and small farmers and producers around the globe, rivals can benefit from cooperation.
Rivals’ commitment to reduce Scope 3 emissions is creating a landscape for sharing, learning and cooperation to develop low-emission technologies. Engage the Chain lays out some of these options for decreasing emissions in commodities including beef, dairy, soybeans, corn and palm oil.
Yes, these food companies are competitors; but they all share a commitment to reducing greenhouse gas emissions and an opportunity to benefit from more stable food systems.
At the Ceres 2018 Conference, April 24-26 at the Park Plaza Hotel in Boston, Julie Nash will moderate a panel on Reducing Greenhouse Gas Emissions in the Food Sector. Matthias Beninger of Mars Inc., Katherine Neebe of Walmart and Bill Gill of Smithfield Foods will join the panel to discuss steps they are taking to measure and reduce greenhouse gases in their supply chains.