Integrating nature in business practices for the food retail sector

Our key takeaway: Nature is often overlooked in business strategies compared to its more well-known counterpart, climate. Considering that nature loss and climate change are intrinsically linked - and a deterioration in one will cascade into the other - an integrated strategy which seeks to address both is absolutely critical for businesses. This is true of the food sector which exists and thrives on healthy and balanced ecosystems and a stable climate. Business-as-usual is not an option - for the health and wellbeing of people and the planet, but also for businesses. Integrating nature into business strategies ensures business resilience and long-term viability. And food retailers and suppliers - who operate at the nexus of extensive value chains and connect producers to consumers - have a critical role to play in driving the systems change necessary to address the crises head-on. The report by WBCSD issues a call to action: “Businesses that can pivot towards sustainable or circular business models, working in harmony with nature, stand to gain early-mover advantages in a world where growth must be redefined.”

The World Business Council for Sustainable Development (WBCSD) published its report Integrating Nature: Assessing Interconnected Risks in the Food Retail Ecosystem (May 2024):

• Food systems and environmental risks: The report highlights four key findings in relation to nature-related risks for the food retail sector. These are that: 1) “[t]raditional business models in the global food sector prioritize short to mid-term financial gains, often neglecting externalities like their impacts on nature and nature-based systems.” This approach poses significant risks to businesses by “undermining farmer resilience and perpetuating environmental depletion to cut costs”; 2) “[t]he combination of any risk with climate change and its consequences amplifies the magnitude of challenges faced by food systems.” This means that “solutions to climate risks may lie in broader nature-based strategies” and, therefore, “businesses should adopt holistic solutions to address both their climate exposures and nature-based risks”; 3) “[t]he challenges faced by food systems are too great to be addressed by any one single company.” At the same time, “food retailers and suppliers hold a pivotal position in the value chain, bridging the ‘first mile’ (producers) and the ‘last mile’ (consumers) and enabling them to instigate significant change both individually and collaboratively within supply chains”; and 4) “[t]here is an urgent need to develop more nuanced approaches to measuring success of companies within food value chains.” Nuanced approaches could involve “investing in educating teams about the environmental impacts of their operations, ensuring awareness across all departments, particularly finance and legal which often shape organizational policies.”
  

• The imperative of embedding nature into business models: The report emphasises how food retailers and suppliers are uniquely placed to facilitate the systems change needed to tackle the nature crisis and the closely connected climate crisis in relation to the food sector. While the report recognises that companies face competing priorities such as health and wellness, end-to-end value chain visibility and food safety, it argues that “[t]here is an opportunity to think more broadly about nature’s integration into business models by extending thinking across the entire value chain.” Tackling nature loss can mitigate wider challenges in two areas. It can tackle the cost-of-living crisis and food insecurity by, for instance, providing more nutritious food amidst more people resorting to lower-cost items as a result of higher prices and reduced access. It can tackle the uneconomical farming crisis because more sustainable farming practices like crop diversification will lessen farmers’ reliance on a small range of crops that are being impacted by climate change. The report issues a call to action to companies in the food sector: “prioritizing nature has been identified in this assessment as something which requires urgent action.”
  

• Recommendations for companies: The report identifies three key themes and possible action for each. The first theme is the lack of understanding and capability in relation to businesses’ dependencies on nature. It is recommended that 1) “[n]ature or natural systems be recognized as a non-negotiable fundamental in developing strategies”; 2) “[a]n assessment is carried out on the strategic nature-related risks faced and opportunities available to inform how companies can respond, embed nature into core business strategy and practices”; 3) “[a] holistic, foresight-based approach is taken to understanding potential impacts nature could have on companies’ strategies, business models and operations as well as the ability to meet regulatory and compliance standards at board and executive level”; 4) “[c]onsideration of nature-based risks becomes a standing item on board and executive agendas, with acknowledgement by those bodies of their responsibility and accountability for acting on, or assigning oversight to, board committees and/or management”; and 5) “[b]usinesses begin to take or accelerate genuine actions designed to stop further damage to nature-based systems and mitigate existing material impacts while plans are developed for restorative initiatives over time.” The second theme is that food retailers will need to work with partners up-and-down the value chain to create and lead change. It is recommended that businesses: 1) “[p]roactively increase engagement with the ‘first mile’ [producers], building deeper relationships with partners and workers”; 2) “[p]rovide additional financial reward and non-financial benefits to farmers that lead in adopting nature-based solutions within their farming systems.” What this means is that companies “must redesign how they work with farmers to move from inherently transactional structures based on short-term contracts with price as the only key metric”; 3) “[c]o-develop and use platforms for measuring, monitoring, and data sharing”; and 4) “[e]mbrace emerging technologies, both digital and physical…[i]t is critical that these costs are not seen solely as the responsibility of farmers to fund.” The third theme is that “[c]hanging to nature-based business models will require a fundamental restructuring of how the food retail sector connects with and manages relationships across its complex value and supply-chains.” This means: 1) “[e]ducating leaders and team members about the impacts, both direct and indirect, the business has on nature as well as the opportunities inherent in nature-based systems”; 2) “[i]nvesting in developing internal and external mechanisms to transform transactional relationships into partnerships to challenge, initiate and accelerate value chain change”; and 3) “[s]hifting from short-term contracts to long-term partnerships and commitments with suppliers who align on nature-related values and work collectively to find new ways to create value.”

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