Sustainability & the Food Industry, in conversation with Juan Aguiriano of Kerry Group

October 15, 2021
Borderless Leadership - article

Click play for the full discussion with Juan Aguiriano

Andrew Kris  

Juan Aguiriano of The Kerry Group, a special welcome to you. Today, we want to focus on climate impact and how the food industry is going to be able to contribute to the whole discussion on climate change and the special role of the food industry. As an expert, how do you feel about this subject?

Juan Aguiriano  

It’s a very timely topic. You’re right in saying that the food industry has a big role to play. There are a number of studies that have been published, one recently, saying the agriculture and food industry contributes anything from 25-33% of total greenhouse gases. So as an industry we’re definitely making a big impact and have a big responsibility to improve. 

The good thing is that the industry is moving and committing. As an example, two large corporations, McDonald’s and Mars, have announced that they will commit to science-based targets of zero carbon by 2050, and with absolute reductions in their carbon footprints by 2030. So, a lot of companies are committing to what is called “1.5 degrees” science-based targets. There is a coalition of companies that agrees to follow scientifically based goal setting towards limiting the temperature increase to 1.5 degrees as per the Paris agreement. You can calculate this at the company level globally, and it’s externally validated. So, it’s not something that you can just announce, or you can self-declare. You have to be validated by the science-based target alliance, which is organized by several very prestigious NGOs.

It’s good news that more companies are signing up. Kerry has signed up to science-based targets, and that puts our ambitions out there; it’s a great way to mobilize a company. The interesting thing is that your targets are not only your internal targets, called scope one, but it’s also the fuel that you consume to run your factories and the electricity you purchase from the grids to run your electrical equipment, or scope two. It also includes scope three: all the carbon that is embedded in the raw materials that you purchase.

So, automatically when you sign up, you are involving all of your supply chain, all your suppliers, all the way to the farm. This is particularly important, because if you look at where the majority of the climate impact of the food industry happens, it is at the agricultural level. Nowadays, agriculture is particularly intensive and uses a lot of energy and fertilizers. We also have a very large livestock industry that emits methane directly or indirectly, in the case of cows or pigs. So, the source is on the farm.

Corporations are in the middle of the chain, producing fast-moving consumer goods, like Mars, or QSR like McDonald’s, or companies such as Kerry in ingredients. We buy ingredients which we convert in several steps, and then we sell them to retailers who sell them to consumers. It’s a very long chain, and they all have a responsibility examine the difficult questions: how can we transform company goals and commit to reducing 30% or 50% of carbon at the company level? How can we do the same at the value supply chain level? How do you achieve this day-to-day at the product level? And, finally: why is that important?

It’s important for several reasons. First, consumers want to consume more sustainably. Half of the consumers claim they are interested in having an impact on the way they consume. It used to be just nice to have, but today, they proactively search and want to learn what’s in the products they buy. Carbon is one of the elements they are looking at.

An example of that is Oatly, which is oat milk. They have a prominent logo on the pack which talks about the amount of carbon per litre for this beverage. This is a fantastic sales argument for consumers and Oatly has been doing it very, very well since they have shown it on their packaging. A lot of the value in the company is the environmental impact that oats have versus regular milk, and it’s been very interesting to watch the dynamics of the industry and how carbon is becoming the next competitive element in the value proposition. We’re not just talking about price, quality, or taste anymore, we’re also talking environmental impact. In this case, carbon.

Andrew Kris  

I think they’ve done a wonderful marketing job too and no doubt it has helped their valuation. Of course, as you say, it’s one thing to do a great marketing job in announcing what you’re going to do, as so many companies have done, but it’s another thing altogether to actually do it.

Juan Aguiriano  

Exactly. The new consumer will not take greenwashing with labeling or marketing. You need to back this with data. You need to be able to use a number of sophisticated methodologies that will guarantee that what you’re putting on the label is backed by data, lifecycle assessment, and that they’ll be able to track the carbon and be able to convert that using some standards and methodology at the product level. You need to look at all the steps there.

Andrew Kris  

And of course, how you package, and the efficiency of transportation, supply chain, logistics, and so on.

Juan Aguiriano  

All these steps add to the carbon equation, and you have to be able to calculate all that. It gets a little bit technical, but the industry is working fast with a number of external partners to help do LCAs, which are much more precise. The more you do, the more you add to the common knowledge for everybody, and raise the quality of the data and understanding. What’s important here is not to be perfect, but to make progress. It’s very difficult to say what is and what is not sustainable, but what you can say is that a new alternative may well be more sustainable, because relatively speaking, it uses less carbon, less water, has less of an impact on deforestation, has a better usage of land, has a higher nutritional value and so on. 

It’s the integration of nutritional science with environmental science that makes solutions more sustainable, but you have to have the data that proves that you’re improving and have that validated and verified, sometimes by external parties, who will guarantee that you’re using the right methodologies. And you’ll show that on the packaging. Today you can have a QR code to take the consumer to your website, where the consumer can get the whole story about your brand.

So, other leading brands such as Impossible Burgers, which are the plant-based burgers, have done just that. Something that was exceptional three to five years ago, is becoming quite common to the point that packaging now carries this information for many brands. So, we have UK traffic light labels, which indicate sugar, salt, and saturated fat, and Nutri-Score, which measures different values. So, we now see various systems launched by organizations and being readily adopted by retailers to communicate values.

Andrew Kris  

It sounds like what you’re referring to is very similar to the electricity consumption coding that we get on every electrical appliance these days, to show the efficiency and the consumption of electrical devices. Do you think there will be EU standardization?

Juan Aguiriano  

Yes. If you look at the EU, and the farm-to-fork collaboration by the Commission, there are several initiatives around responsible consumption where the declared intent is to set a standard that will help create a level playing field for everybody. 

For the time being, individual organizations are trying to establish an ideal standard, and measure carbon and other types of impact. However, I think it is the consumer that will drive faster adoption because of thedesire to buy products that provide the right type of benefits: nutritional, environmental, and social. Brands will become a lot more ambitious to communicate the impact that they’re having from farm-to-fork, with science-backed data and good methodologies,

Andrew Kris  

It sounds to me that Kerry and other companies in your business will likely become sources of information downstream from the food producers to the retailers. And that your knowledge base will increase dramatically in the understanding of carbon all the way back to the farm.

Juan Aguiriano  

Yes, ultimately it’s about doing good for the planet, as well as an opportunity to differentiate and do well for the company, since managing sustainably can become a source of competitive advantage. I’ll give you a couple of examples of things we’ve done in Kerry. 

We started by analyzing our portfolio according to nutritional profiling methodology, which is inspired by or at least is similar to the UK traffic light system, but adapted for ingredients. The UK traffic light system is one of the best because it’s very stringent. You have to look at the content of sugar, salt, fat, trans fat, and saturated fat. Depending on the threshold of limits that are defined by nutritionists, your product is either red, yellow, or green. But if you do not passa threshold in any one of the five categories, you’re red. So, it’s very tough. It’s not because you’re very good in one category, such as sugar, but very bad in salt, then you can average it out. No. You’ll be penalized and end up in the red even if just one of the categories is bad.

So, we applied this methodology to our ingredients and standard formulations and found that 80% of our portfolio is either green, positive nutrition, or yellow, balanced nutrition.

We also calculated the millions of consumers we ultimately reach through our customers. We touch 1 billion people that benefit from positive and balanced nutrition. Our goal is to reach 2 billion people by 2030. Once we do that and know this works as a methodology, we’ll do the same for carbon. So, more positive nutrition, with less carbon. That’s the real challenge the industry has: providing more, better nutrition, for 6 billion people today and 10 billion tomorrow. You’ll do that by setting and meeting these big corporate goals at the product level.

For carbon, it’s more complicated. We started doing LCAs for critical raw materials and critical ingredients. Once we had that,we put it through a carbon calculator. For example, we have a sugar replacement solution called TasteSense. We replace on average 30% of the sugar in beverages. And for every kilo of sugar you replace, you’re reducing your water usage by 1200 liters, and cutting the CO2 use in half, while also also creating fewer calories. This is an integrated solution for sustainable nutrition to land corporate commitments to reduce carbon and help customers reduce their carbon footprint.

Andrew Kris  

Juan, I’m not asking you to speak for the industry as a whole here, but if I talked to the other major players in your field, would I find them doing similar things?

Juan Aguiriano  

I think it’s starting. We’re one of the leading companies in ingredients, but we’ve seen a couple of competitors coming out with LCAs and carbon calculations. But what I described to you here was a little bit more sophisticated, since we’re not only reducing electricity, or what you do in your own factory, but we also calculate how much you are helping your customer make a difference in carbon use.

For example, we’ve created a brewing calculator with which, by using our technologies in brewing, we can help reduce the costs of the beer. And in doing so brewers can also reduce up to 40% of the CO2 used to make beer. If you can minimize the amount of energy and water in the brewing process, you usually have a “win-win-win” of lower cost, less CO2 and less water. You’ll start applying “reduce and reuse,” which are the principles of circular economy, which again brings us back to carbon. Sometimes, you reduce carbon directly by reducing energy use, and other times by reducing waste.

Interested in discussing the food and beverage industry in-depth? Get in touch with Borderless today.

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