A changing climate forces industry to re-calculate the ag & food business case

The annual Sustainable Food Lab leadership summit was held in Mexico. Tobias was one of the speakers and his contribution was about true cost accounting.

The annual Sustainable Food Lab leadership summit was held last March in Mexico. Mostly representatives of larger Food companies such as Heineken, AB InBev, Danone, Nestle, PepsiCo, Starbucks, Unilever visited as well as NGOs. https://sustainablefoodlab.org/the-food-lab/annual-leadership-summit/201…

Tobias was one of the speakers. His contribution was about true cost accounting, as part of the session about financing incentives for mitigation.

As Tobias knows this conference for years, for him most valuable of this leadership conference is the openness. It’s not about ppt consumerism but about purpose driven action. In depth exchanges on the true challenges and opportunities within the ag & food sector versus the role of your company and personal leadership.

And, as we all know, companies differ. Some are optimizing their compliance performance, other companies or individual leaders move far out of the shareholder directed comfort zone of the company.

Out of comfort zone – leadership

We admire these forms of ‘out of comfort zone’ – leadership.

As set out on stage e.g. by the CEO of Heineken Mexico about their Tecate campaign, one of their largest brands. Tecate is considered to be as “the” image for masculinity and macho-ness. This, while 2 out 3 women in Mexico experience domestic violence, a serious concern of his staff. Trapped between corporate targets to further grow the business and the demand from his staff to give a clear statement towards a large client group, they showed leadership and produced the following commercial: https://youtu.be/uGFnvGOvrXc.

True and real costs of climate change

Daring to prioritize stakeholders as employees versus running the risk of not meeting targets may sound of a leadership choice.  Much less of a choice is that this CEO as well as other representatives e.g. in coffee acknowledge that companies have to undertake sever adjustments of their sourcing strategy due to climate change.

Climate change risks are real, are happening and do cost money right now. E.g. in regions in Mexico, or wider LatAm, water stress is so tangible that there are agriculture production regions where there will be no more water for farming in 10-15 years.

Ironically, climate change so becomes a traditional business case. But it fuels action. Without this proper business case farmers and other stakeholders will not progress continuously.

New order

That is why Tobias in his presentation said: “If these climate change projections and related impact on e.g. coffee are real, as businesses we have to assist producers in adapting their practices and have to adjust prices paid for raw materials accordingly. If we don’t act the costs will be much greater. We only can properly calculate a business case if all costs and benefits of production are included. So also costs companies are indebted due to the use of e.g. natural capital.

Large companies are commissioning credit agencies to evaluate the impact of climate change on expected future earnings.  Climate related raw material insecurity has been forecasted to cause a major dip in future cash flow. Exactly the reason why banks and their supervisory bodies also become very curious. https://www.dnb.nl/en/news/news-and-archive/Speeches2018/dnb374433.jsp

In this new order rents for the use of water and fertile soil will land on the desks of CFOs.

It will become part of corporate decision making, instead of ‘only’ part of admirable brave, individual leadership.