10 Steps to Net Zero

The largest players in the food industry are committing to net zero. While this commitment is setting the direction for our sector, whether externally validated by SBTi or CDP, alternatively internally owned, the way towards it can still be unclear. With such hard targets and uncertainty surrounding the practices that can actionably lead the industry to net zero, companies large and small find themselves in climate action paralysis.

CarbonCloud developed this Net-Zero handbook for the food industry, to lead food product owners and brands to own their climate strategy, create a climate strategy roadmap tailored to their operations, and fully integrate climate action and tracking into their core business.

THE LANDSCAPE

NET ZERO: What does it mean for the food industry?

Generally, the term net zero and accompanying initiatives stem from the Paris Agreement. In 2015, 196 countries set the goal to limit warming to well below 2, preferably to 1.5 degrees Celsius. Net-zero targets are derived as a means to achieve this goal. The consequent goal is set for 2050, when the transition to a net-zero economy needs to be complete.

The term ‘net-zero’ has two implications:

1

Net zero implies that there is an input of greenhouse gases and an output, and the sum between the two is zero: What goes in, comes out. 

2

It implies that setting a generic ‘net-zero’ target, does not necessarily mean reducing greenhouse gas emissions. But it does not necessarily imply that all emissions will be offset – and offsetting is in its majority a loose practice.

1. Is gross zero feasible for food?

Let’s start with the first implication: What if everyone in the food sector does in fact commit to reducing their greenhouse gas emissions. Can the input in the atmosphere reach gross zero?

For the next few decades and possibly for our lifetimes, the truthful answer is no

The largest portion of greenhouse gas emissions in the food sector comes from nitrous oxide and methane. So even if the food industry follows the roadmap of other industries and decarbonizes fully, it will continue to contribute heavily to greenhouse gas emissions. Because we will continue to eat food.

We repeat: The climate footprint of food will never be gross-zero.

After you take a moment to process that, let it empower you and be your North Star from this point.

2. Does offsetting address the gross zero impossibility?

On to the second implication: Offsetting – wouldn’t that cover the remaining emissions from the food supply chain? Offsetting is not guaranteed to work effectively. In fact, there are numerous issues tied with offsetting and the conversation is now becoming mainstream – both in the public narrative as well as in environmental claim guidelines and climate schemes.

What targets are viable for the food sector?

If emissions from food cannot go down to zero and the industry cannot rely on offsetting, how can we still reach the goal of transitioning to a net-zero economy and limit warming to no less than 2° by 2050? Realistically, what are we working with?

Need more information? Read our explainer on scopes 1, 2, and 3 emissions and how to manage scope 3 emissions.

Climate action cornerstones for food systems

⚠️ The food sector cannot rely on offsetting to reach the Paris agreement goal

⚠️ The food sector cannot go down to gross zero

⚠️ The food sector needs to reduce greenhouse gas emissions as much as possible

⚠️ Climate action needs to be a strategy, as opposed to one-off initiatives

⚠️ Change management will take time – if you are not planning to break the bank

⚠️ As always in change management, some resource allocation is necessary

⚠️ You cannot have sufficient results unless climate strategy enters at the core of your overall business strategy

⚠️ Aim for the maximum possible reductions with the resources and tools available – and accessible

How to reach your climate targets

The essence of setting up your business to withstand and strive beyond climate change is change management. When managing this change, keep your eye on three points on the horizon.

1

Future-proof your business

…against climate change. Changes in this domain need to cover responding to upcoming regulations, changes in production, standardized reporting against your targets, and consumer behavior change.

2

Stay flexible & scale up

Build a scalable change management strategy robustly enough to safeguard your operations at present but with enough flexibility to allow for the integration of innovation and different stakeholder expectations.

3

Reduce emissions

There are no shortcuts on this one – everything you plan needs to go towards this direction. Emission reductions is your holy grail, albeit less mystical and more tangible!

LEVEL 1: STRATEGIZE

1. Measure your baseline

To start reducing, you need to know where you are reducing from. Step 1 for every company is to calculate your baseline climate footprint and understand where your emissions come from.

At this stage, don’t allow perfection to be the enemy of progress. Primary data from the get-go is a moonshot that can hinder the process of reaching net zero.

Ignite your journey with an initial mapping of the supply chain with benchmark data at a portfolio level. This is the sketch before the drawing. At the end of this process, you have a conservative overview of the emissions throughout your supply chain and an actionable picture of the emission-heavy activities.

Keep in mind that your system boundaries must be consistent to get a representative and actionable aggregation that propels you to step 2.

👉 With this in mind, opt for a software, service –or both!– that enables continuous supply chain engagement, monitoring, scaling, and puts you in the driver’s seat.

2. Set long and short-term targets at a company level

Now that you understand your baseline emissions and the hotspots in your supply chain, the achievable short-term goals are in clear sight. To set your short-term goals, take a 3 prong approach. Account for:

a) What you can act on short-term,
b) that has the largest effect,
c) and your finances can afford.

Use the hotspots you identified in your climate footprint calculation process to set emission reduction goals and KPIs for the next 12 months. If your software/service enables you to, you can also build the scenarios and get the quantified results. These can help you build your case internally and with external stakeholders.

For your long-term goals, find a balance between inspiration and realism. There are many unknowns here, namely how will the innovation for nitrous oxide and methane emission reductions develop and how fast, how will ‘Net-zero’ be standardized in the future for food and agriculture, how credible will offsetting be in the future, and what are the implications of your organization accounting for it?

So don’t be afraid to go bold and set a moonshot for your organization! But don’t set yourselves up for failure either. After all, your long-term goal will be your winning ticket to the net-zero food market.

3. Budget for your goals

With robust goals for your organization and with a climate impact ROI from your software/service, you can strategically finance your climate change mitigation strategy – both in yearly budgeting as well as in investment decks.

Present your budget based on your short-term goals and use your scenarios based on supply chain alterations as evidence. If funds are not available inside the company, there are other ways to go. Green bonds are expected to reach as high as $1 trillion globally in 2022, according to the Climate Bonds Initiative. Funding for real-world climate impact projects is ripe for the taking.

Example case: Setting up a climate strategy

Jamie Knox, Sustainability manager at Food Inc. and her team have calculated the climate footprint of Food Inc’s supply chain.

During the assessment, Jamie and her team identified two flaming emission hotspots:

a) The packaging of their beverages is virgin aluminum, which comprises 30-60% of the climate footprints of the beverages.
b) Food Inc. sources rice from an Indonesian supplier. Due to high levels of deforestation in the area, the climate footprint of their products which include rice is 30% higher than the benchmarks.

During budgeting with Taylor Brown, CFO at Food Inc., Jamie shows Taylor the climate footprint reduction in beverages with a switch to recycled aluminum and to rice products with rice from another supplier. Taylor assesses that a 100% switch to recycled aluminum is too costly for this year so Jamie and Taylor conclude to budget for a 50% switch to recycled aluminum and account for a 100% switch in the coming five years.

Jamie presents a quote from rice suppliers with a deforestation certificate. They are between 10-15% more expensive than their current rice supplier. As Jamie is able to present the climate ROI in the rice products, Taylor agrees to the value of the switch. Moreover, this switch is covered by the increased allocation in the ESG department’s budget, as Zero deforestation is a company goal and the CEO has agreed with Taylor to extend the resources for it.

LEVEL 2: IMPLEMENT

4. Build/Hire resources internally

As climate targets become a part of your core business strategy, your organization will need to implement the climate roadmap as well as monitor and report on the results. Every department needs to jump into the climate strategy, educate themselves, and buy into the targets.

Top management needs to commit to climate targets and free up resources to reach them. Department managers also need to integrate the climate strategy as a variable in their operations: Supply chain managers tracking and authorizing emission reductions, product owners, R&D managers taking into account ingredient climate performance, marketing leveraging all the hard work towards your climate goals.

Conversely, monitoring and tracking data is a full-time position. At CarbonCloud, we have already seen our largest and most mature customers building teams and experts on mapping, tracking, and working with climate footprint performance. Depending on your operations, consider an expert or a team solely focusing on climate performance; a valuable resource who will track the data against your targets and feed the knowledge to management and the rest of the organization.

5. Dig deeper in Scope 3

After your baseline is established and you have a good picture of your climate performance calculation, it is time to increase transparency throughout your supply chain. You are now in a great place to start involving your suppliers and get them to the initial mapping stage. As your suppliers enter their data and their climate strategy matures, your data quality increases and you get an increasingly clearer picture of the climate impact of your supply chain.

It is likely that your suppliers’ data collection process is not yet automated or refined. However, it is only a matter of time until your suppliers need to automate their climate data collection process and your organization requesting this data is moving the process forward significantly. Centralizing the climate accounting process streamlines the process for you.

Nevertheless, enterprise food producers have a large mandate. A lot of them are already providing incentives to their suppliers, and facilitating climate data collection for them in a single place is a win-win.

Example case: Engaging your suppliers

Food Inc. has decided to mature from benchmark data in Scope 3 to primary data, as the company is mobilizing towards their goal of 50% reduction in Scope 3 emissions by 2030. Robin Gayes, Supply chain manager at Food Inc. is running the project. Food Inc. is already working with CarbonCloud for their climate footprint in all Scopes, using primary data for Scope 1 and 2, and so far, benchmark data for Scope 3. Food Inc.

Robin and CarbonCloud agree to offer a 20% discount to Food Inc’s suppliers. Food Inc. suppliers map out their supply chain with their primary data and get their own climate footprint.

The suppliers can use this automated process for Food Inc. as well as their other clients. Robin’s team can then find the specific ingredients from each supplier and add them to Food Inc.’s mapping, much like they did before, but now the climate footprint results are based on primary data.

Moreover, with more potential suppliers in the database, Robin’s team can benchmark the climate performance of ingredients from diferent suppliers and make climatesmart procurement choices.

6. Start decarbonizing

While decarbonization may be a longer process, it is what our society has agreed upon and where it is heading with high speed. With nitrous oxide and methane being so prominent in the food industry, decarbonization may not generate a huge difference in the final climate footprint of your products but it is an essential step towards reaching net-zero in Scope 1 and 2. The decarbonization process is threefold for food producers:

- Switch to renewable electricity

…And keep the receipts or PPA for your data audit!

- Maintain top-energy efficiency

Set guidelines for energy usage, plan regular maintenance, optimize heating and cooling practices.

- Electrify logistics

…As much as you can afford now, and more in the future. While huge leaps are taken in the electrification of vehicles, a full switch at the moment, break the bank or even be impossible, as decarbonized solutions for ship and air freight are not available at the moment.

7. Reformulate product development

Aside from your existing products and supply chain, your climate strategy and targets need to be an integral part of new product formulation, where the climate footprint is accounted for from the get-go. This initiative goes exceptionally well with the market shift, with many examples from investors and food giants investing more in alternative protein product development.

Nevertheless, there are 2 steps that are tangible, timeless, scalable, and completely in line with climate goals. Let’s explore them ➡

Step 1: Set sourcing requirements

You don’t need to know the right agricultural practices but your suppliers need to – and if they do, it will show in their climate footprints. Set measurable climate footprint requirements in your procurement process that are in line with your climate targets. Pinpoint certain practices that align with your climate targets, e.g. zero deforestation or wetland farming, and request the appropriate certificates. Be prepared to translate the financial investment into a climate footprint return.

Step 2: Build climate scenarios

Before fully formulating your product or even a new production facility, explore how you can proceed in the most climate-smart way. Build scenarios with different ingredients, from different suppliers, try different locations and packaging materials, and go ahead with the best-case climate scenario with confidence.

LEVEL 3: IMPROVE

8. Monitor continuously, report often

As you move through time and closer to your climate goals with large hotspots addressed, the non-issue of yesterday becomes the hotspot of today. To access these insights, monitoring your climate performance needs to be continuous and reporting on your climate KPIs a regular occurrence.

The benefits are multiple:

➕ You gain transparency of your emissions throughout time
➕ You track your organizations climate performance truthfully
➕ You visualize the next steps
➕ You build trust in your climate goals internally and externally
➕ You integrate climate strategy deeper into your core business
➕ You showcase robust ROI

Moreover, reporting in compliance with different standards such as CSRD, TFCD, or GRI is becoming a climate-strategy incentive for many companies in itself, highlighting the importance of recurrent climate performance reporting. Following steps 1-7 is the process to follow to fulfill the existing standardized reporting requirements as you reduce your climate impact.

9. Keep an eye on innovation

Climate innovation is advancing in heaps and bounds – a result of how critical of a global risk climate change is and how central to the industry the need for innovation is. However, the problem is still not fully solved technically and groundbreaking innovations may still be financially unapproachable. The good news is that as businesses set climate targets and implement strategies to reach them, they also provide fruitful ground for development.

As you develop your climate strategy, keep an eye out for innovations applicable to your supply chain. Prioritize the aspects that are important to you and invest in them.

Are you committed to ofsetting? Invest in direct air carbon capture. Are you determined to keep livestock but reduce methane? Be the ground of improvement for feeding solutions. Is decarbonizing your primary target? Become an early adopter of fully electrified logistics. Even the minimal step of setting climate requirements in your procurement process incentivizes your entire network to look for innovative solutions.

Not only are you part of subsidizing climate innovation for the food industry, you also are an early benefactor of it. Just remember to keep an eye on your bank and make these investments consciously.

10.Communicate your targets – and your strategy

Disclosing your climate targets may be voluntary for now and even a communicative advantage for business but the process will soon become standardized and mandatory in one way or the other. However, communicating your climate footprints as you move through your strategy is a bulletproof way of disclosing your climate performance that has several benefits and diferent layers of impact for a business.

Transparency

Climate footprint on scopes 1, 2, 3 are quantitative values that facilitate transparency in how well you perform towards your long-term target.

Since the number is comparable across the board and for all food products, stakeholders can navigate among products and companies on that same ground – so long as your climate footprints are based on open and compatible data that cover the entire value chain.

Commitment & responsibility

Climate footprints are not your climate impact in quantity; it shows your commitment to lowering it.

As you work through your climate strategy and lower your climate footprints, you are showing your stakeholders that you are committed to not just disclosing your emissions, but to lowering them – you walk the talk.

With continuous reporting, your ever-evolving climate footprint communicates that you take responsibility and you deliver on it.

Competitive edge

Entrenching transparent climate performance into your communication tells the entire food industry that solving climate change is consistent with running and growing a business in the food sector. It shows policy makers what to build regulations upon and influences decision-makers to follow suit.

And consider this: The more climate footprint becomes visible on products, the more consumers are able to compare, choose, and factor climate performance into their purchasing decisions.

Food producers!
You got this 💪

Even building on these 10 pillars, there will be as many climate strategies and business decisions toward targets as there are supply chains. However, the launchpad that triggers your upward spiral and holds it together throughout the years is singular:

A transparent, data-driven mapping out of the supply chain.

One that scales, stays up to date and brings forth actionable insights and reports at any stage of maturity – like CarbonCloud!

🎯 Ready to navigate to net zero with robust climate data? Contact us below!