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Pandemic prompts rethink of food supply chains

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It has been a hectic year for Eleanor Herrin. Since the UK’s first lockdown in March, business has been booming for the chief executive of Farmdrop, an online start-up focused on distributing sustainable, locally produced food.

Monthly revenues tripled from pre-pandemic days, while the number of regular customers has jumped 80 per cent to 15,000 compared with the end of 2019. 

“We were able to be nimble and add capacity during the lockdown,” says Ms Herrin. As food producers found themselves deprived of restaurant customers, Farmdrop managed to connect them with shoppers instead.

Eleanor Herrin, chief executive of Farmdrop: ‘we definitely see organic sales growing’ © Natale Towell

“Having a local focus definitely helped us during the period because we were very quickly able to understand demand and we were able to help,” Ms Herrin adds.

As the pandemic exposed weaknesses in the ways that food is moved from farm to fork, small and local businesses like Farmdrop came into their own.

“Super-efficient, highly centralised food systems are fragile, because if they go ‘wrong’, they fail,” says Tim Benton, research director at Chatham House, the international affairs think-tank. 

A shock to the system

Supply chains in many developed countries struggled to cope both with the closure of centralised processing facilities, such as the large-scale meatpacking plants that became Covid-19 hotspots, and with rapid changes in demand, where restaurants and other hospitality outlets shut down while demand from stockpiling consumers soared.

A box of Farmdrop produce. The company has seen a surge in demand for its locally sourced food since the pandemic began © Natale Towell

Food suppliers and retailers scrambled to adjust to a demand mismatch, which emptied supermarket shelves on the one hand and on the other stranded supplies for wholesale use in the hospitality sector. In the UK, for example, grocery sales rose by almost a tenth between May and February, while out-of-home food consumption fell by 36 per cent in the first half of the year, according to market researcher Kantar.

For a more resilient system, there needs to be more spare capacity and diversity, especially at a time when risks of disruption are rising, says Prof Benton.

Ricardo Salvador, director of the food and environment programme at the Union of Concerned Scientists in the US, agrees. He compares food systems to communication networks, arguing that they should model themselves on the internet.

Modern communication over the internet is supported by networking technology originally built in the 1960s to remain functional even in the event of a nuclear holocaust. The network was designed to keep on running even if part of it was destroyed.

Mr Salvador thinks food supply chains should be similarly resilient. “[We need] food hubs that can withstand [disruption] and continue to both produce and distribute in different regional areas,” he says. That means investing in local and regional suppliers and distributors as part of an effort to diversify the food system.

A fruit and vegetable warehouse in London. Local and regional distributors are a key part of resilient food systems © Daniel Leal-Olivas/AFP via Getty Images

Proponents of localism argue that food production using renewable sources of energy without the “food miles” of transporting supplies makes environmental sense.

And while increasing redundancy in the food system could lead to more waste, because about a third of the food currently produced is wasted, simultaneous efforts to tackle that problem would both boost food availability and be good for the environment. Prof Benton says: “If we stop wasting, that means there is more food available in the system, in a way that is analogous to having a warehouse of stock.”

Safety first

For countries that rely heavily on food imports, the pandemic has also brought home the need for food security. 

While international food policy experts are relieved that the world has not seen a repeat of the global food price crisis of 2007-08, when surging prices for staple foods led to riots in some developing countries, this year’s lockdowns have raised the spectre of disruption in trade flows. 

“In a stable world, maximising comparative advantage by growing what we’re really good at, exporting the excess and buying in what we’re less good at growing, is economically sensible,” says Prof Benton. “[But] trade exposes us to risks.”

Some governments, aware of such risks, have moved to shore up state reserves. North African countries such as Egypt, Morocco and Algeria have been actively buying over the past few months to boost their wheat stockpiles.

An Egyptian labourer harvests wheat. Along with other north African countries, Egypt has sought to boost its wheat stockpile in recent months © Mohamed El-Shahed/AFP via Getty Images

Wayne Gordon, an analyst at Swiss bank UBS in Singapore, says state grain authorities are not panic buying. “[Governments] are buying for strategic purchases . . . it’s a different style of buying than in 07 and 08,” he says.

Big food importers are now making food security a central part of their national policy frameworks. China has been urging consumers to waste less, while governments in Singapore and the Gulf have been investing in new technologies to increase local food production. 

Investments in vertical farms and high-tech greenhouses in order to ensure stable supplies of fruit and vegetables even if trade flows falter are in vogue. Mr Gordon also notes that while many countries are building new storage facilities, including for chilled and frozen food. “They want to be prepared for supply disruptions,” he adds.

A worker walks down an aisle of lettuce in a Japanese vertical farm. High-tech facilities like this can help offset supply shocks © Charly Triballeau/AFP via Getty Images

Countries that produce their own food as well as importing from others may be less vulnerable to supply-chain crises but they are not immune. Prof Benton says it would be sensible for policymakers to weigh the costs and benefits of incentivising more diverse production — “especially given [that] the world’s stability cannot be relied on”.

The success of Farmdrop and other food start-ups suggests that, on the ground level, the food system is already evolving. Technology and shorter local supply chains are key elements in this shift, while food distributors that can respond to the need for convenience as well as the demand for fresh and nutritious food are making headway.

“[Because of] the appreciation for higher-quality, higher-welfare food, there are tailwinds — we definitely see organic sales growing,” says Ms Herrin. “It means money going into a system which is an alternative to big production and factory farming, whether that’s local or not.”

 



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Andrew Yang; Facebook; WallStreet Bets and much more . . . 



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A carbon registry leaves polluters with nowhere left to hide

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The writer is the founder and executive chair of the Carbon Tracker Initiative, a think-tank

No one yet knows which countries will extract the last barrel of oil, therm of gas or seam of coal. But the jostling has started. Every nation has reasons to believe it has the “right” to continue fossil fuel extraction, leaving others to deal with the climate crisis.

In the Middle East, oil producers can argue that the cost of extraction is low. In Canada, they market their human rights record. Norwegians trumpet the low-carbon intensity of their operations. And in the US under Donald Trump, they touted the virtues of “freedom gas” and called exports of liquefied natural gas “molecules of freedom”.

The dilemma for governments is that if one country stops producing fossil fuels domestically, others will step in to take market share. And so the obligation to contain emissions set out in the Paris Agreement risks being undermined by special pleading.

In the UK, the furore over plans for a new coal mine in Cumbria the year that the country is hosting the UN’s climate summit is indicative of the contrary positions many countries hold. Facing one way the government says it is addressing climate change. But looking the other, it consents not just to continued extraction, but to support and subsidise the expansion of production.

Climate Capital

Where climate change meets business, markets and politics. Explore the FT’s coverage here 

To keep warming under the Paris Agreement limit of 1.5C, countries need to decrease production of oil, gas and coal by 6 per cent a year for the next decade. Worryingly, they are instead planning increases of 2 per cent annually, the UN says. On this course, by 2030 production will be too high to keep temperature rises below 1.5C. The climate maths just doesn’t work.

One of the problems in attempting to track fossil-fuel production is the lack of transparency by both governments and corporations over how much CO2 is embedded in reserves likely to be developed. This makes it difficult to determine how to use the last of the world’s “carbon budget” before temperature thresholds such as 1.5C are exceeded.

Governments need a tool that establishes the extent to which business as usual overshoots their “allowance” of carbon. There needs to be a corrective because the cost competitiveness of renewable energy, and the risk of stranded energy assets, has not stopped governments heavily subsidising fossil fuels. During the pandemic, stimulus dollars have been dumped into the fossil-fuel sector regardless of its steady financial decline, staggering mounds of debt and falling job count. 

This is why my initiative and Global Energy Monitor, a non-profit group, are developing a global registry of fossil fuels, a publicly available database of all reserves in the ground and in production. This will allow governments, investors, researchers and civil society organisations, including the public, to assess the amount of embedded CO2 in coal, oil and gas projects globally. It will be a standalone tool and can provide a model for a potential UN-hosted registry.

With it, producer nations will have nowhere left to hide. It will help counter the absence of mechanisms in the UN’s climate change convention to restrain national beggar-thy-neighbour expansion of fossil-fuel production.

No country, community or company can go it alone. But governments can draw from the lessons of nuclear non-proliferation. First, they must stop adding to the problem; exploration and expansion into new reserves must end. This must be accompanied by “global disarmament” — using up stockpiles and ceasing production. Finally, access to renewable energy and low-carbon solutions must be developed in comprehensive and equitable transition plans.

The choice is between phasing out fossil fuels and fast-tracking low-carbon solutions, or locking-in economic, health and climate catastrophe. A fossil-fuel registry will help governments and international organisations plan for the low-carbon world ahead.

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Hasty, imperfect ESG is not the path for business

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The writer is a global economist. Her book ‘How Boards Work’ will be published in May

Good environmental, social and governance practices take a company from financial shareholder maximisation to multiple stakeholder optimisation: society, community, employees. But if done poorly, not only does ESG miss its sustainability goals, it can make things worse and let down the very stakeholders it should help.

To be sure, the ESG agenda should be pursued with determination. But there are a number of reasons why it threatens to create bad outcomes. The agenda is putting companies on the defensive. From boardrooms, I have seen organisations worry about meeting the demands of environmental and social justice activists, leading to risk aversion in allocating capital. Yet innovation is the most important tool to address many of the challenges of climate change, inequality and social discord.

Pursued by $45tn of investments, using the broadest classification, ESG is weighed down by inconsistent, blurry metrics. Investors and lobbyists use different evaluation standards and goals, which focus on varied issues such as CO2 emissions and diversity. Metrics also depend on business models.

Without a clear, unified compass, companies that measure themselves against today’s standards risk seeming off base once a more consistent regulator-led direction emerges (for example, from worker audits, the COP26 summit and the Paris Club lender nations).

ESG is not without cost and the best hope for long-term success lies with business leaders’ ability to stay attuned to its impact and unintended consequences. For example, while the case for diversity is incontrovertible, efforts at inclusion should account for the possible casualties of positive discrimination.

Furthermore, despite ESG advocates setting a strong and singular direction for governance, organisations have to maintain their operations and value while managing assets and people in a world where cultural and ethical values are far from universal. While laudable, a heightened focus on ethics (such as human rights, environmental concerns, gender and racial parity, data privacy and worker advocacy) places additional stress on global companies.

It is often asked if advocates appreciate that ESG is largely viewed from the west’s narrow and wealthy economic perspective. To be truly sustainable, ESG demands global solutions to global problems. Proposals need to be scalable, exportable and palatable to emerging countries like India and China, or no effort will truly move the needle.

Much of the agenda is too rigid, requires aggressive timelines and lacks the spirit of innovation to achieve long-term societal progress. Stakeholders’ interests differ, so ESG solutions must be nuanced, balanced and trade off speed of implementation against the breadth and depth of change.

Business leaders are aware of the need for greater focus and prioritisation of ESG. We also understand that deadlines can provide important levers for senior managers to spur their organisations into action. After all, in the face of pressure for a solution to the global pandemic, vaccines were produced in months instead of the usual 10 years.

I live at the crossroads of these tensions every day. Raised in Africa, I have lived in energy poverty, and seen how it continues to impede living standards globally. As a board member of a global energy company, I have seen much investment in the energy transition. Yet from my role with a university endowment, I have also been under pressure to divest from energy corporations. 

Business leaders must solve ESG concerns in ways that do not set corporations on a path to failure in the long term. They must have the boldness to adopt a flexible, measured and experimental agenda for lasting change. In this sense, they must push back against the politically led narrative that wants imperfect ESG changes at any cost.



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