This interview with Robert Gerlach from Klim addresses our current climate predicament and the urgent steps that food companies must take to meet their climate targets and participate in creating change.
Regenerative agriculture is a hot topic in the food industry right now. What drives this interest, and what is the “regenerative transition”?
Food companies face a multitude of challenges right now. They need to meet rising stakeholder expectations of suppliers, investors, consumers and secure their supply chains, reduce emissions and cope with drastic price increases. A “regenerative” supply chain, i.e. a supply chain incorporating regenerative agricultural practices, enables food companies to address many of the challenges. The “regenerative transition” simply refers to the gradual transformation of a supply chain towards one incorporating more and more regenerative agricultural practices.
When you think about a company pursuing a regenerative transition, do you see it as a sustainability initiative, or as a larger transformation of the company’s business model?
It is often seen as, and starts as, a sustainability initiative. But it is in fact a transformation with much broader implications and far-reaching benefits. It is not just about achieving sustainability goals and SBTi pledges through the reduction of scope 3 emissions or the improvement of biodiversity in the supply chain, although these are the most widely known benefits of regenerative agriculture. It's about enabling food companies to remain competitive and secure their ability to operate profitably in 5, 10, 30 years time. Because there is no way we can keep up the yields we need to feed a soon-8-billion population on our planet without regenerative agriculture. Just look at the 2022 drought all across Europe, which has once again shown the advantages of regenerative farming practices. Those companies who do not start their regenerative transition now, will not be competitive any more soon.
So, similar to the “digital transformation” journey which almost all companies embarked on in 15 years ago to secure their competitiveness, the food companies of today need to initiate their regenerative transformation now. Those who start earlier, will secure vital competitive advantages.
Do you see regenerative agriculture as aligned with the core goals of a food company?
The highest priorities for any food company are securing its supply chain and changing demand whilst maintaining a profitable core business. The benefits that they can generate via the regenerative transition tackle all three dimensions, and are therefore directly aligned with the core goals of a food company.
What would be an example of these benefits?
On the supply chain security side, for example, the introduction of regenerative practices helps to reduce the risk of yield loss in times of drought due to improved water retention in the soils and enables farmers to maintain their yields in times of climate change. This is crucially important in time of volatile supply chains and increasing demand.
Or think about access to capital. If we look at what institutional investors are looking for, they're increasingly looking at the sustainability performance of the companies they loan money to, or they invest in.
Or think about the ever-increasing importance of making a convincing case that your business is actually a force for good if you want to attract and retain the best talent.
Or think about the many studies that have shown that companies who take sustainability initiatives seriously and implement them early on are much more innovative than those who lag behind, not due to mere correlation, but causation, interestingly.
And this innovative spirit also comes to the fore in the regenerative transformation of the supply chain?
Definitely. If you take the initiative to transition your supply chain to regenerative and verify it with a digital tool, you will have a much better overview of what's actually happening on the farm level in your supply chain. You'll be able to analyze much better what's going on. You'll also be able to have a communication channel to your farmers and a scalable solution to educate farmers.
So would you say, for economic reasons alone, a food company should support sustainable agriculture?
A clear yes. The rational appeal to participating in the regenerative transition makes sense if you are purely looking at the business bottom line. But there's also another appeal. The basic principle of every food company is to feed the population and to be able to guarantee this food security in the future. Consequently, they usually represent the values of managing resources as sustainably as possible and they now have to make a choice. Do they actually operate in accordance with these values, congruent with these values, or do they not? It's a very simple decision, and there's nothing more important than to be aligned with your core values because your employees and customers will notice the difference. And it is impossible in the future to run a successful company where your employees and consumers aren't really convinced that you're on the right mission.
Klim's mission is to make the food industry regenerative as quickly as possible. Why is time pressing?
We are currently on a pathway towards a climate catastrophe. Our remaining carbon budget is now less than 7 years, our soil carbon is further depleting every year and if we do not act rapidly, we will have no chance to achieve the 1.5°C target. All industrial sectors need to reduce emissions now, rapidly, to achieve this goal.
The food industry is responsible for 25% of our global emissions, and around 80% of these emissions come from the supply chain. That's a huge lever and opportunity to contribute. With regenerative agriculture, these emissions can be reduces significantly.
For one, food companies have a responsibility towards the planet and the people to act and join the fight against climate change now. Secondly, they have a responsibility towards their companies and their shareholders to secure the companies long term future by starting the regenerative transition now.
What about political requirements? Are they heading in that direction as well?
That's a very important point! If you act now, you'll also be able to pre-empt harsh regulation in the future. And there's a competitive advantage in it — in the future, you might be able to say that you have already implemented what regulators want and competitors haven't. And there is a clear direction visible already to give food companies an idea of what’s to come.
So what advice would you give to companies who do want to make the change regenerative, but feel overwhelmed by the task or worried about making the transition smooth?
The beauty about regenerative agriculture is that you can start at whatever pace you choose to, it is a scalable solution, and it is - with the right support - possible to implement it effectively in your supply chain. So there's no excuse for anyone to not start— even a small budget is enough. And the good thing is that once you started, and see, smell and taste the first examples of success, you will want to do more.
The dimensions along which you can design your transition are, first, how many categories in your supply do you want to transition? For example, dairy, wheat, vegetables, fruit— you can actually choose which individual supply chains to transition. You can also use the dimension of what transition percentage in a particular supply chain you want to achieve. Maybe you want to transition 5% in the first year, or 10% in the first year, or 80% in the second year. You can also design along the dimension of what kind of regenerative methods you want to use. Do you want to use methods which are relatively lower risk and lower soil carbon sequestration potential, or do you want to go for more advanced methods such as agroforestry systems?
So my advice is simply: start now, whether you start small or set yourself a really ambitious goal: start now. You will be amazed at the results, be it enthusiasm shown by your farmers and consumers, or the reductions in scope 3 emissions you’ll be able to achieve.