The Reduced-Emissions Raw Materials Market
A crucial way to reduce emissions is along a company’s supply chain. If raw materials can be produced with reduced greenhouse gas emissions, then Scope 3 emissions can be significantly lowered. That’s why there is growing demand for raw materials that have been produced in ways that emit fewer greenhouse gas emissions.
Key messages:
- Amid increasing pressure from financial markets and government regulations, reducing emissions within a company is of ever-greater importance.
- The secret to wide-scale emission reduction lies in companies' supply chains where great potential for reducing raw material emissions can be seen.
- Food companies are increasingly prioritising regenerative agriculture as a means to secure raw materials with a lower greenhouse gas footprint. Collaborative efforts within the supply chain can effectively address challenges related to its transformation.
Why your company should take action towards reducing raw material emissions
The reduced-emission raw material market refers to the growing demand for resources that have been produced using methods that emit fewer greenhouse gases. Even without taking into account the energy and agriculture sectors, raw material production accounts for around 18% of the EU’s total emissions. (1) By procuring raw materials with a reduced greenhouse gas footprint, companies can reduce their emissions along their supply chain - often making a substantial impact on the overall emissions of their business.
It also reflects a shift away from general terms such as sustainability or green, and towards more concrete action. Sustainability is a buzz-word in business: used far too much and understood far too little. With increased pressure for climate action coming from stakeholders, primarily from investors, mounting crop failure and supply insecurity due to climate change, as well as growing awareness and scepticism towards greenwashing, companies are realising that more tangible, measurable action is needed. This is why emission reduction is so valuable: you can measure and prove it.
Finally, regulation is also part of the reason why demand for reduced-emission raw materials is growing. Already, governments are placing a price on greenhouse gas emissions - in fact, carbon emissions have a price in 40 countries and more than 20 cities, states and provinces. (2) This price is likely to grow, (3) so having and securing access to low-emission raw materials will be the cheaper option in the mid- to long-run.
Food companies are urged to join the reduced emission raw materials market
The food industry holds a critical position in addressing the challenges posed by the climate crisis. Agriculture, being one of the primary sectors affected by the climate crisis, experiences the adverse effects of droughts, heavy rains, and storms, jeopardising harvests and creating supply chain uncertainties. The sector recognises the urgency of prioritising mitigation and adaptation measures due to the direct threat that the climate crisis poses to their business.
In addition, the financial sector is putting pressure on companies as market participants increasingly demand climate-related information to improve their decision-making processes. Both lenders and investors are actively looking for reliable, comparable and clear information on potential risks. (4) This need for information is particularly increasing in the food sector, which is extremely vulnerable to weather-related risks.
At the same time, new regulations are forcing companies in the food industry to implement them. One example of this is the EU directive on corporate due diligence in the area of sustainability, which was adopted by the European Parliament at the beginning of June. Tripartite negotiations are underway to finalize the adoption of the directive by the end of 2023. This directive classifies the agricultural sector as "high-impact", which means that companies with more than 250 employees and a net turnover of over 40 million euros worldwide are obliged to comply with the directive. (5) Compliance requires a systematic review of the supply chain to address human rights and environmental concerns. This is just one example of several forthcoming regulations.
Taking advantage of the momentum, food companies are testing various initiatives to reduce emissions and meet consumer demand. This year, German supermarket Rewe launched a lighthouse project promoting the 'saving' of greenhouse gas emissions on vegan products and highlighting their lower carbon footprint compared to non-vegan alternatives. (6) Similarly, the Oatly brand has been labeling the carbon emissions of its products on the packaging and using the comparatively low emissions as a selling point. In a high-profile campaign, Oatly even challenged the dairy industry to be transparent about its emissions by booking two adjacent billboards and giving one of them to the dairy industry to publish its emissions data. (7)
These examples show that many food companies have already recognized the importance of reducing emissions. However, efforts go beyond individual projects that only address consumer demand and include the transformation of supply chains. Many major food companies, including Nestlé, PepsiCo and Unilever, are engaging in regenerative agriculture as a means of securing low-footprint raw materials, indicating a shift towards wide-ranging efforts to reduce emissions. (8), (9), (10)
Food companies should use their chance to reduce their biggest source of emissions
No less than 82 % of emissions from food companies come from agricultural production (11). It follows that agriculture is the optimal area for food companies to reduce their emissions. If food companies source low-emission raw materials that are produced in an efficient, climate-friendly way, they can drastically reduce their largest source of emissions.
Things to consider in the reduced-emissions raw material market:
- Imbalance of supply and demand: to reduce the emissions of agricultural production, companies are dependent on soil, which is the second largest carbon sink in the world. (13) However, access to high quality soil is becoming scarce. 33% of the world’s soil is degraded and over 90% could become degraded by 2050. (14) Therefore it is likely that there will be increasing competition for high-quality soil, as food companies seek to reduce supply-chain emissions.
- Complexity of supply chains: the complex supply chains for food companies make it hard for food companies to implement change and collect data - therefore making it a challenge to reliably transform the supply chain.
Klim offers food companies a chance to reduce the emissions of their ingredient production - while offering practical solutions to both these challenges. We work directly with farmers a company's supply chain. With our digital platform for regenerative agriculture we help farmers transition to regenerative practices in a way that is flexible, efficient, and fair. Our approach is farmer-first, through individual onboardings, a usable platform, and a dedicated farmer team with decades of collective experience in farming. This ensures that farmers can successfully produce ingredients while producing fewer emissions.
Collaboration with Klim is therefore one way to secure a place in the low-emissions ingredients market.
Sources:(1),(2),(3),(4),(5),(6),(7),(8),(9),(10),(11),(12),(13)
Get more information on how to use the potential of regenerative agriculture in your business.
More resources
Biodiversity and climate protection: co-benefits in climate protection projects
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The Reduced-Emissions Raw Materials Market
A crucial way to reduce emissions is along a company’s supply chain. If raw materials can be produced with reduced greenhouse gas emissions, then Scope 3 emissions can be significantly lowered. That’s why there is growing demand for raw materials that have been produced in ways that emit fewer greenhouse gas emissions.
Key messages:
- Amid increasing pressure from financial markets and government regulations, reducing emissions within a company is of ever-greater importance.
- The secret to wide-scale emission reduction lies in companies' supply chains where great potential for reducing raw material emissions can be seen.
- Food companies are increasingly prioritising regenerative agriculture as a means to secure raw materials with a lower greenhouse gas footprint. Collaborative efforts within the supply chain can effectively address challenges related to its transformation.
Why your company should take action towards reducing raw material emissions
The reduced-emission raw material market refers to the growing demand for resources that have been produced using methods that emit fewer greenhouse gases. Even without taking into account the energy and agriculture sectors, raw material production accounts for around 18% of the EU’s total emissions. (1) By procuring raw materials with a reduced greenhouse gas footprint, companies can reduce their emissions along their supply chain - often making a substantial impact on the overall emissions of their business.
It also reflects a shift away from general terms such as sustainability or green, and towards more concrete action. Sustainability is a buzz-word in business: used far too much and understood far too little. With increased pressure for climate action coming from stakeholders, primarily from investors, mounting crop failure and supply insecurity due to climate change, as well as growing awareness and scepticism towards greenwashing, companies are realising that more tangible, measurable action is needed. This is why emission reduction is so valuable: you can measure and prove it.
Finally, regulation is also part of the reason why demand for reduced-emission raw materials is growing. Already, governments are placing a price on greenhouse gas emissions - in fact, carbon emissions have a price in 40 countries and more than 20 cities, states and provinces. (2) This price is likely to grow, (3) so having and securing access to low-emission raw materials will be the cheaper option in the mid- to long-run.
Food companies are urged to join the reduced emission raw materials market
The food industry holds a critical position in addressing the challenges posed by the climate crisis. Agriculture, being one of the primary sectors affected by the climate crisis, experiences the adverse effects of droughts, heavy rains, and storms, jeopardising harvests and creating supply chain uncertainties. The sector recognises the urgency of prioritising mitigation and adaptation measures due to the direct threat that the climate crisis poses to their business.
In addition, the financial sector is putting pressure on companies as market participants increasingly demand climate-related information to improve their decision-making processes. Both lenders and investors are actively looking for reliable, comparable and clear information on potential risks. (4) This need for information is particularly increasing in the food sector, which is extremely vulnerable to weather-related risks.
At the same time, new regulations are forcing companies in the food industry to implement them. One example of this is the EU directive on corporate due diligence in the area of sustainability, which was adopted by the European Parliament at the beginning of June. Tripartite negotiations are underway to finalize the adoption of the directive by the end of 2023. This directive classifies the agricultural sector as "high-impact", which means that companies with more than 250 employees and a net turnover of over 40 million euros worldwide are obliged to comply with the directive. (5) Compliance requires a systematic review of the supply chain to address human rights and environmental concerns. This is just one example of several forthcoming regulations.
Taking advantage of the momentum, food companies are testing various initiatives to reduce emissions and meet consumer demand. This year, German supermarket Rewe launched a lighthouse project promoting the 'saving' of greenhouse gas emissions on vegan products and highlighting their lower carbon footprint compared to non-vegan alternatives. (6) Similarly, the Oatly brand has been labeling the carbon emissions of its products on the packaging and using the comparatively low emissions as a selling point. In a high-profile campaign, Oatly even challenged the dairy industry to be transparent about its emissions by booking two adjacent billboards and giving one of them to the dairy industry to publish its emissions data. (7)
These examples show that many food companies have already recognized the importance of reducing emissions. However, efforts go beyond individual projects that only address consumer demand and include the transformation of supply chains. Many major food companies, including Nestlé, PepsiCo and Unilever, are engaging in regenerative agriculture as a means of securing low-footprint raw materials, indicating a shift towards wide-ranging efforts to reduce emissions. (8), (9), (10)
Food companies should use their chance to reduce their biggest source of emissions
No less than 82 % of emissions from food companies come from agricultural production (11). It follows that agriculture is the optimal area for food companies to reduce their emissions. If food companies source low-emission raw materials that are produced in an efficient, climate-friendly way, they can drastically reduce their largest source of emissions.
Things to consider in the reduced-emissions raw material market:
- Imbalance of supply and demand: to reduce the emissions of agricultural production, companies are dependent on soil, which is the second largest carbon sink in the world. (13) However, access to high quality soil is becoming scarce. 33% of the world’s soil is degraded and over 90% could become degraded by 2050. (14) Therefore it is likely that there will be increasing competition for high-quality soil, as food companies seek to reduce supply-chain emissions.
- Complexity of supply chains: the complex supply chains for food companies make it hard for food companies to implement change and collect data - therefore making it a challenge to reliably transform the supply chain.
Klim offers food companies a chance to reduce the emissions of their ingredient production - while offering practical solutions to both these challenges. We work directly with farmers a company's supply chain. With our digital platform for regenerative agriculture we help farmers transition to regenerative practices in a way that is flexible, efficient, and fair. Our approach is farmer-first, through individual onboardings, a usable platform, and a dedicated farmer team with decades of collective experience in farming. This ensures that farmers can successfully produce ingredients while producing fewer emissions.
Collaboration with Klim is therefore one way to secure a place in the low-emissions ingredients market.
Sources:(1),(2),(3),(4),(5),(6),(7),(8),(9),(10),(11),(12),(13)
More resources
Biodiversity and climate protection: co-benefits in climate protection projects
More resources
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Biodiversity and climate protection: co-benefits in climate protection projects
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