Food companies and retailers will need closer, more trusting relationships with their suppliers to comply with growing requirements to report their sustainability performance.
Regulators such as the European Union require companies to report progress on reducing greenhouse gas emissions and the environmental impact from within their supply chains, but companies also have their own sustainability targets.
Lee Ann Jackson, the head of the agro-food trade and markets division in the OECD’s Trade and Agriculture Directorate, said many companies have public targets against which customers and consumers can measure their performance.
Complying with those reporting requirements will require more intimate relationships between supplier, processor and retailer than a purely traditional commercial arrangement.
“It feels like more of a partnership is being created rather than a pure commercial relationship,” Jackson said.
That form of information sharing requires trust, regular interaction and an understanding about how data is collated and progress reported against sustainability goals and expectations.
Jackson said this raises the challenge of creating consistent measuring and reporting systems for the various metrics.
This is happening as government support for farmers shifts from producing food at all costs to policies that encourage environmental sustainability and ethical production.
Increasingly food systems and world trade will reflect what she called public-good public policy, policies that incorporate issues such as greenhouse gas emissions, biodiversity, deforestation and animal welfare.
“There are a lot of things related to production that businesses are being asked to or are voluntarily moving in a certain direction.
“They are finding ways in the supply chain to keep an eye on those things the market has not priced in.”
Jackson said food producers have multiple objectives and she believes they can achieve what is being asked of them, but it will require policy makers to co-operate and to stop working in silos.
This is happening, evident by the tone at recent climate change events.
“The priority maybe net zero [carbon emissions] but now the conversation is trying to bring farming in more.”
After 10 to 20 years of sustained growth, trade in agriculture has started to slow.
“It’s still growing but it is slowing down, partly driven by fundamentals such a population growth and where that increase is occurring, but also it could be a policy decision to do with the supply chain and companies seeking trusted trading partners.”
An example of the change is the shift in the language being used in public forums, with reference to resilient supply chains instead of resilient agricultural production, especially since the covid pandemic and the Russian-Ukraine war.
Jackson said the OECD considers private enterprise the best vehicle to manage supply chain risk instead of government intervention.
“We believe the private sector is the best way to manage risk, especially in agriculture and its variables, because that is a big part their game and the private sector is able to hedge bets and establish the relationships needed.”
New Zealand is a world leader in trade policy.
Prior to working with the OECD, Jackson spent 15 years with the World Trade Organisation and for 10 of those years a New Zealander headed the agricultural trade negotiations.
“NZ has credibility, you think about how trade would work.”
More: Wallace is visiting seven countries in six weeks to report on market sentiment, a trip made possible with grants from Fonterra, Silver Fern Farms, Alliance, Beef + Lamb NZ, NZ Meat Industry Association and Rabobank. Read more about his findings here.
