The Market for Low-Emission Raw Materials
One of the most important ways to reduce emissions is through a company's supply chains. If raw materials with low greenhouse gas emissions are produced, Scope 3 emissions can be significantly reduced. As a result, there is an increasing demand for raw materials that have been produced in a low-emission manner and produce fewer greenhouse gas emissions.
Key messages:
- In view of the increasing financial market pressure and government regulations, reducing emissions within a company is becoming increasingly important.
- The secret of far-reaching emissions reductions lies in supply chains of companies through the reduction of raw material emissions.
- Food companies are increasingly relying on regenerative agriculture to source raw materials with a lower greenhouse gas footprint. Through collaborative efforts within the supply chain, the challenges of this transition can be effectively addressed.
Why companies should take measures to reduce raw material emissions
The market for low-emission raw materials relates to the growing demand for raw materials produced using methods that emit fewer greenhouse gases. Even excluding the energy and agriculture sectors, raw material production accounts for around 18% of the EU's total emissions. (1) By sourcing raw materials with a lower greenhouse gas footprint, companies can reduce their emissions along the entire supply chain — which has a significant impact on the company's overall emissions.
The reduction in raw material emissions also reflects a shift away from general concepts such as “sustainability” or “green” towards concrete measures. Sustainability is a buzzword in business that is used far too often and understood far too little. As a result of increasing pressure from stakeholders, particularly investors, on climate protection measures, the consequences of increasing crop failures, supply uncertainties due to climate change and growing skepticism about greenwashing, companies recognize that concrete, measurable measures are needed. This is why emissions reductions are so valuable: They can be measured and proven.
Regulations are also one reason why demand for low-emission raw materials is increasing. Governments are already charging a price for greenhouse gas emissions — carbon emissions have a price in 40 countries and more than 20 cities, states and provinces. (2) This price is likely to continue to rise (3), making access to low-emission raw materials the cheaper option in the medium to long term.
Food companies are urged to join the market for low-emission raw materials
The food industry is playing a crucial role in addressing the challenges of the climate crisis. Agriculture is among the sectors hardest hit by the crisis, suffering from the adverse effects of droughts, heavy rains, and storms, which jeopardise crops and create uncertainties across the supply chain. The industry recognises the urgent need for action to mitigate and adapt to climate change, as the climate crisis poses an immediate threat to its operations.
Additionally, the financial sector is putting pressure on companies, as market participants increasingly demand climate-related information to enhance their decision-making processes. Both lenders and investors are actively seeking reliable, comparable, and transparent information on potential risks (4). This need for information is increasing particularly in the food sector, as it is extremely vulnerable to weather-related risks.
At the same time, new regulations are pushing companies in the food sector towards compliance. One example is the EU Directive on corporate due diligence in sustainability, adopted by the European Parliament in early June. Tripartite negotiations are ongoing to finalise the Directive’s adoption by the end of 2023. This Directive classifies the agricultural sector as 'high-impact,' requiring companies with more than 250 employees and net sales exceeding 40 million euros globally to comply (5). Compliance requires a systematic review of the supply chain to address human rights and environmental concerns. This is just one example of several upcoming regulations.
Food companies are using the momentum and testing various initiatives to reduce emissions and meet consumer demand. This year, the 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 stated the carbon emissions of its products on the packaging and used the comparatively low emissions as a selling point. In a sensational campaign, Oatly even asked the dairy industry to report its emissions transparently by booking two billboards lying next to each other and leaving one of them to the dairy industry to publish its emissions data. (7)
These examples show that many food companies have already recognised the importance of reducing emissions. However, efforts go beyond individual projects that only address consumer demand and include restructuring supply chains. Many major food companies, including Nestlé, PepsiCo, and Unilever, are committed to regenerative agriculture as a means of securing low-footprint raw materials, which points to a shift to far-reaching efforts to reduce emissions. (8), (9), (10)
Food companies should seize their opportunity 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 ideal area for food companies to reduce their emissions. When food companies purchase low-emission raw materials that are produced in an efficient, climate-friendly way, they can drastically reduce their biggest source of emissions.
What needs to be considered on the market for low-emission raw materials?
- Supply and demand imbalance: To reduce emissions from agricultural production, companies depend on soil, which is the world's second-largest carbon sink. (13) Access to high-quality soil is becoming increasingly scarce. 33% of the world's soils are degraded and over 90% could be degraded by 2050. (14) Competition for high-quality soil is therefore likely to increase as many food companies try to reduce emissions in the supply chain.
- Complexity of supply chains: The complex supply chains of food companies make it difficult to implement changes and collect data, making it a challenge to optimise the supply chain.
Klim gives food companies the opportunity to reduce the emissions of their raw materials and offers practical solutions to the two challenges mentioned above. We work directly with farmers in companies' supply chains. With our digital platform for regenerative agriculture, we help farmers switch to regenerative practices in a flexible, efficient and fair way. We focus on farmers — through individual onboarding, a user-friendly platform and a dedicated team of farmers with decades of joint experience in agriculture. This ensures that farmers are guaranteed to produce raw materials for food production and at the same time produce fewer emissions.
Cooperation with Klim is therefore an opportunity to secure a place on the market for low-emission raw materials.
sources: (1), (2), (3), (4), (5), (6), (7), (8), (9), (10), (11), (12), (13)
Get more information about using the potential of regenerative agriculture in your company.
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The Market for Low-Emission Raw Materials
One of the most important ways to reduce emissions is through a company's supply chains. If raw materials with low greenhouse gas emissions are produced, Scope 3 emissions can be significantly reduced. As a result, there is an increasing demand for raw materials that have been produced in a low-emission manner and produce fewer greenhouse gas emissions.
Key messages:
- In view of the increasing financial market pressure and government regulations, reducing emissions within a company is becoming increasingly important.
- The secret of far-reaching emissions reductions lies in supply chains of companies through the reduction of raw material emissions.
- Food companies are increasingly relying on regenerative agriculture to source raw materials with a lower greenhouse gas footprint. Through collaborative efforts within the supply chain, the challenges of this transition can be effectively addressed.
Why companies should take measures to reduce raw material emissions
The market for low-emission raw materials relates to the growing demand for raw materials produced using methods that emit fewer greenhouse gases. Even excluding the energy and agriculture sectors, raw material production accounts for around 18% of the EU's total emissions. (1) By sourcing raw materials with a lower greenhouse gas footprint, companies can reduce their emissions along the entire supply chain — which has a significant impact on the company's overall emissions.
The reduction in raw material emissions also reflects a shift away from general concepts such as “sustainability” or “green” towards concrete measures. Sustainability is a buzzword in business that is used far too often and understood far too little. As a result of increasing pressure from stakeholders, particularly investors, on climate protection measures, the consequences of increasing crop failures, supply uncertainties due to climate change and growing skepticism about greenwashing, companies recognize that concrete, measurable measures are needed. This is why emissions reductions are so valuable: They can be measured and proven.
Regulations are also one reason why demand for low-emission raw materials is increasing. Governments are already charging a price for greenhouse gas emissions — carbon emissions have a price in 40 countries and more than 20 cities, states and provinces. (2) This price is likely to continue to rise (3), making access to low-emission raw materials the cheaper option in the medium to long term.
Food companies are urged to join the market for low-emission raw materials
The food industry is playing a crucial role in addressing the challenges of the climate crisis. Agriculture is among the sectors hardest hit by the crisis, suffering from the adverse effects of droughts, heavy rains, and storms, which jeopardise crops and create uncertainties across the supply chain. The industry recognises the urgent need for action to mitigate and adapt to climate change, as the climate crisis poses an immediate threat to its operations.
Additionally, the financial sector is putting pressure on companies, as market participants increasingly demand climate-related information to enhance their decision-making processes. Both lenders and investors are actively seeking reliable, comparable, and transparent information on potential risks (4). This need for information is increasing particularly in the food sector, as it is extremely vulnerable to weather-related risks.
At the same time, new regulations are pushing companies in the food sector towards compliance. One example is the EU Directive on corporate due diligence in sustainability, adopted by the European Parliament in early June. Tripartite negotiations are ongoing to finalise the Directive’s adoption by the end of 2023. This Directive classifies the agricultural sector as 'high-impact,' requiring companies with more than 250 employees and net sales exceeding 40 million euros globally to comply (5). Compliance requires a systematic review of the supply chain to address human rights and environmental concerns. This is just one example of several upcoming regulations.
Food companies are using the momentum and testing various initiatives to reduce emissions and meet consumer demand. This year, the 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 stated the carbon emissions of its products on the packaging and used the comparatively low emissions as a selling point. In a sensational campaign, Oatly even asked the dairy industry to report its emissions transparently by booking two billboards lying next to each other and leaving one of them to the dairy industry to publish its emissions data. (7)
These examples show that many food companies have already recognised the importance of reducing emissions. However, efforts go beyond individual projects that only address consumer demand and include restructuring supply chains. Many major food companies, including Nestlé, PepsiCo, and Unilever, are committed to regenerative agriculture as a means of securing low-footprint raw materials, which points to a shift to far-reaching efforts to reduce emissions. (8), (9), (10)
Food companies should seize their opportunity 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 ideal area for food companies to reduce their emissions. When food companies purchase low-emission raw materials that are produced in an efficient, climate-friendly way, they can drastically reduce their biggest source of emissions.
What needs to be considered on the market for low-emission raw materials?
- Supply and demand imbalance: To reduce emissions from agricultural production, companies depend on soil, which is the world's second-largest carbon sink. (13) Access to high-quality soil is becoming increasingly scarce. 33% of the world's soils are degraded and over 90% could be degraded by 2050. (14) Competition for high-quality soil is therefore likely to increase as many food companies try to reduce emissions in the supply chain.
- Complexity of supply chains: The complex supply chains of food companies make it difficult to implement changes and collect data, making it a challenge to optimise the supply chain.
Klim gives food companies the opportunity to reduce the emissions of their raw materials and offers practical solutions to the two challenges mentioned above. We work directly with farmers in companies' supply chains. With our digital platform for regenerative agriculture, we help farmers switch to regenerative practices in a flexible, efficient and fair way. We focus on farmers — through individual onboarding, a user-friendly platform and a dedicated team of farmers with decades of joint experience in agriculture. This ensures that farmers are guaranteed to produce raw materials for food production and at the same time produce fewer emissions.
Cooperation with Klim is therefore an opportunity to secure a place on the market for low-emission raw materials.
sources: (1), (2), (3), (4), (5), (6), (7), (8), (9), (10), (11), (12), (13)
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