It’s no secret that industrial companies have historically put sustainability on the back burner, but things have changed. Because their operations involve longer product life cycles, complex manufacturing processes, demanding customer requirements, and applications that make it difficult to implement maintenance programs, these barriers are largely overcome. the incentives to choose a greener path, especially in traditional food industries.
In agworld and agtech, profit margins are small (2-3%) compared to other industries. This means that everyone is competing for 2% of the returns instead of a larger share worth competing and dividing the industry. When food companies reduce food waste by 30% to 40%, it affects everyone and makes change necessary rather than optional because margins have the potential to grow — product is sold instead of wasted.
Interestingly, more companies are becoming “food companies” because the profits are greater. This means there are more financial resources to focus on innovative sustainability efforts. Combined with industry knowledge and a startup mentality, agworld and agtech are well positioned to harness innovation for the future.
Companies are now hiring ESG initiatives seriously because the benefits can be enormous. For example, companies with high ESG scores quickly capture valuation premiums. Industrial product manufacturers are also seeing modest benefits. However, given the low margins in the agworld and agtech industry, traditional food companies cannot simply take the shiny ESG idea and force it into tradition. These companies need to disrupt incrementally and make incremental improvements to see real change and lasting change. Once these companies embrace the new technology and improving the supply chainthey can fully embrace sustainability and reduce food waste more efficiently.
Midwest Companies Leading Innovation
While traditional food companies have been slow to adopt innovation, there are some outliers who are paving the way toward sustainability. Bungean agricultural business that connects farmers to consumers, has partnered with CoverCressa Chevron-invested startup that brings renewable oilseed and animal feed crops to market.
The partnership marks a long-term commercial agreement to convert annual field pennycress to a CoverCress crop that has a smaller footprint and can fit into existing corn and soybean rotations. Adding a new crop to existing farmland has the potential to provide farmers with additional income while also offering the ecological benefits of a crop in improving soil health and reducing nitrogen losses.
This relatively new focus on sustainability has emphasized its role in the overall value chain. Sustainability is a long-term goal that will eventually yield income, but stockholders want immediate income to prove the value of their investment. In this way, maintenance can affect profits and losses. However, to truly innovate, industry leaders need to think outside the normal confines of profit and loss to see the true impact of ESG.
For example, agricultural-input manufacturers should shift their focus from how sustainability affects product sales to how it affects sales solutions. For as long as anyone can remember, farming has been governed under an input-output model — specifically, how fertilizers affect the productivity of a particular crop.
The sustainability mindset of farmers is to invest in cleaner farming tools and methods that are ecologically sound but evidence-based. Farmers have always prioritized sustainability, but now they can take advantage of the newfound focus on digital tools and new biological products that lead to more innovation and better results.
Sustainability Next Steps for Midwest Entrepreneurs, Investors, and Business Leaders
Because sustainability and the traditional food industry don’t always go hand in hand, it can be intimidating for industry leaders to embrace change. However, if leaders can tell the value of sustainability initiatives, then they are worth the time and resources. The key here is to ask, “Should this really be done?” If the initiative will add value and efficiency to your company, the answer is yes.
Here are some ways industry leaders in the Midwest can embrace sustainability in the coming years:
1. Explore all the ways to reduce waste
At the heart of all sustainability efforts is waste reduction. Companies that pride themselves on sustainability must consciously work every day to limit resource consumption and waste production. This may require a lot of nuanced work, research, and reflection. However, when companies continue to take small steps to reduce waste and make the most of the resources they have, they improve their operations and create value for their investors, their audience, and the world.
Zooming out, everyone involved in food production should be interested waste reduction to increase income. Less waste in fertilizer, electrical processes, and manpower can improve the bottom line throughout the value chain. In particular, reducing waste provides more material that can be recycled and composted for crops. Also, more food will be processed, less waste in landfills, and more supply to meet consumer demand. Additionally, investors tend to feel more comfortable investing in companies that prioritize waste reduction.
2. Strengthen the supply chain through innovation
The transition to more sustainable operations requires many moving parts — specifically, manufacturing goods that are more sustainable. Walmart, for example, is working with its suppliers to reduce carbon emissions across the board. Through its Project Gigaton, it has committed resources to its suppliers to help reduce 1 gigaton of greenhouse gas emissions from its global value chain. As this example makes clear, sustainability requires the capacity of your suppliers to truly succeed.
Also the CoverCress collaboration bringing renewable seed and animal feed crops to market strengthens the supply chain by helping to meet the demand for renewable fuels. That’s because CoverCress takes winter weeds that have been bred and gene-edited to fit into corn and soybean rotations.
Adding new crops to existing soil during the winter is not only profitable, but it is particularly good for the soil, provides cover for the soil, and reduces nitrogen losses. Farmers can use this one-time weed to plant more crops throughout the year, improving supply.
3. Focus on innovative technologies
Sustainability efforts cannot be achieved without the right technology to put the plans in place. Because sustainability really boils down to efficiency, industry leaders must invest in technology to innovate in the food industry. In fact, investments in food technology will reach $13.5 billion by 2021.
Although investments were down in the second quarter, one thing is clear – people are devoting significant resources toward technology that helps create a safer, cleaner food system. Soon, cutting-edge technology, such as smart sensors in food packagingcan be seen in every aspect of food packaging.
These sensors will be essential in sterilization and food processes, which will also reduce waste. They are used in most stages of food packaging. As the technology continues to improve over time, manufacturers can use it to detect microbial contamination and even changes in the gas composition of sealed packages. Not only do sensors support the value chain with efficiency, they also support the goal of safety; These joints are a key component in maintenance.
When it comes to sustainability in the food industry, there’s a lot to consider, from setting goals to getting suppliers on board. However, even traditional industries in the Midwest can prioritize sustainability in the coming years with careful coordination and the right partners. All it takes is a goal and the right allocation of resources.
Once all of these things are in place, companies can work seamlessly to build a cleaner, safer future for food production.