The food and beverages industry faces a number of challenges next year. First and foremost, like most businesses, uncertainty drives up prices. Simultaneously, legislative pressure to decarbonize is also rising. 2023 could be a challenging year for companies that do not adapt and implement 21st-century solutions. To develop any strategic plan for the future, any business needs to understand the risks and challenges ahead. So what are some important trends that are likely to shape the industry in 2023?
Food supply chain disruption
Labor shortages and increasing transportation costs all create weak spots in a company’s supply chain. This can translate to compounding scarcity and unexpected costs. Transportation costs are directly linked to energy costs, so any fluctuation in one market negatively affects the other. Various vendors, manufacturers, and logistics providers all suffer from the same problem. As a result, the issue is likely to last into 2023 until the market recovers. This industry-wide disruption limits companies’ flexibility and forces businesses to make decisions based on more limited information. Companies need to develop the means to consistently limit costs to offset future supply issues.
Scope 3 and greenwashing risks
The global push for emissions reduction and decarbonization has implications for every business. Food and beverages are not excluded from these changes. Scope 3 emissions cover indirect, upstream, and downstream sources of GHG emissions. Upstream emissions can come from business travel, commuting to work, or the general waste created during workplace operations. Wastewater treatment and garbage disposal produce some GHG gasses, as do the transportation of goods. Third-party warehousing falls into the downstream category, along with investments, franchises, and leased assets. It is not yet mandatory to report these emissions but companies should start investigating how to measure them and how to reduce their carbon footprint. Identifying hot spots in a value chain is vital for developing a carbon footprint reduction plan.
Failure to decarbonize also carries some reputational risks due to the regulation of greenwashing. Greenwashing is defined as false or exaggerated claims about a company’s environmental impact or policies. Companies need to be aware of how the public perceives ESG contributions, regardless of how the courts rule in such cases. A headline with “company x faces greenwashing allegations” already paints a picture of deception. To mitigate risks, businesses need to have an ESG strategy ready for the shifting legal landscape of 2023.
Shifting consumer demand
Dovetailing off of changes to ESG reporting, consumer demand for more sustainable business practices is rising. Simultaneously, the market for specialized diets and global menus is expanding. The prevalence of food delivery services and food-related social media blogs have created a desire for world cuisine and ingredients. This is an opportunity for food companies to reach a new customer base. However, there are risks. The aforementioned transportation and supply chain costs could make percurrent difficult or costly. Downstream scope 3 emissions from packaging and waste management are also a factor that companies must consider. Companies must take care to avoid reputational risks. Greenwashing aside, the public can react negatively to paper-based packaging and non-recyclable items.
Rising costs for food production
Current energy prices are steadily increasing costs across many industries. Food and beverages, which consume 30% of global energy, are particularly at risk. It is unlikely that the market will retain stability as prices fluctuate and governments push to limit emissions. Additionally, other extreme events also have the potential to disrupt supply and prices. The unpredictability of energy prices is a primary concern going into 2023. Companies have to be prepared for a variety of scenarios. One thing is clear, consistent, sustainable energy gives a business stability. Otherwise, companies can explore a number of options to at least limit their energy use. Maintaining efficiency while cutting costs will be a key part of any 2023 strategy. Companies need to explore technological solutions to energy efficiency to keep spending in check.
What should companies do?
Understanding the possible problems is only half of any strategy. Companies also need to explore solutions. AI and machine learning have already been applied to energy efficiency. Learning from one’s peers is another beneficial method when building a roadmap for the future. The Global Summit on Scope 3 Emissions Reduction will bring together key industry experts to learn more about reporting strategies & carbon data management in a small-scale, industry-driven event, on 20-21st April 2023 in Amsterdam, the Netherlands. The two-day, hybrid event features in-depth case studies of supply chain transformation, carbon accounting, and networking breaks dedicated to exchanging insights and expertise on tackling Scope 3 emissions. Visit future-bridge.eu and netzero-events.com or follow us on our social media to track other energy use and decarbonization events.