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6 THE AGRI-FOOD CHAIN

Summary

The agri-food chain earns space in this analysis by virtue of its scale, breadth, and exposure to

climate change impacts. It provides a very large and complex market that reaches from the

providers of its agricultural inputs (e.g. Syngenta (seeds and plant protection products), Genus

(animal genetics) and Yara (fertilisers)) through the farming sector to small and large companies

(e.g. Unilever, Associated British Foods, Tesco) in food manufacturing, retail and service, through

to the consumer.

Sensible generalisation about the opportunities created by adaptation responses across such a

diverse set of businesses is difficult so this chapter highlights some selected themes from

particular parts of the system, with an emphasis on production in the UK and those locations from

which the UK sources its food.

Investments being made by the sector in the short term in better resource efficiency to reduce

costs can also improve resilience to climate change – e.g. more efficient irrigation systems

and use of water-saving technologies in food processing. Manufacturers and retailers are

also set to make greater use of water foot-printing and audit tools.

In the medium year (5 years onwards) these trends seem set to deepen and broaden, and the

pressure to raise supply chain transparency vis-à-vis water management is likely to increase;

Shifts in the climate are also creating opportunities for changes, diversification and innovation

in the crops that are grown in the UK as well as requiring adaptation of buildings and

transport infrastructure (e.g. to reduce risk of heat stress effects on livestock). Globally, the

market for crop varieties with greater resilience to heat and water stress is expected to

increase, and as pests and diseases move under the influence of a shifting climate there will

be implications for the plant protection and animal health sectors;

Maintaining a resilient food chain in the face of climate change will require complementary

adaptations in other sectors – transport, built environment and energy systems – and may

encourage greater integration and cooperation along the food supply chain.

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Figure 6.1 Impacts and adaptation opportunities in the agri-food chain

The UK food system is seen as being ahead of many other countries in accommodating climate

and other pressures, with responses ranging from green buildings to product labelling. Retailers

are piloting climate-adapted, low carbon stores that will inform templates for future new build and

retro-fit projects. For small firms better water management can provide direct business benefits

(in cost reduction and continuity of supply) and for larger firms water use (in-house and in the

supply chain) is set to shift from being a business efficiency proposition to a potential reputational

risk. UK consulting firms have skills in water foot-printing and supply chain audit that will be

increasingly marketable as large food companies look to understand their exposure to climate

risks and to secure their supply chains accordingly. Abstraction licensing, water pricing and the

integrated pollution control regime are helping to drive change in the UK, though there is further to

go. Some adaptation products, such as new drought-tolerant crops, will require sizeable, long

term investment before they reach market, and demand is not yet there in the market place to

drive the process. UK has significant strengths in basic science in biotechnology but, along with

the rest of the EU, has seen investment in its translation shift elsewhere.

Climate change impacts• Climatic shifts will impact unevenly on global agriculture, but

be net negative in the long term• Impact on UK agriculture over medium term may be positive• Changes in temporal/spatial water distribution • Increased risk of extreme climatic events, disrupting

production and supply chains, increasing market volatility

Demand shifts• Shifts in what is grown and where• Crops may need to be drought and heat

tolerant• Potential for shifts in consumer

purchasing patterns in response to relative food price changes

UK resilience activities• Agricultural advisory services• Contingency planning to maintain food

chain integrity including hedging / defence strategies to secure supplies

• Improved resource efficiency, including water management

Current opportunities (5yr)• Intelligent water measurement and

management (on-farm, food processing)• Supply chain diagnostics and

development (e.g. water foot-printing )• Green buildings

Barriers• Limited technical and financial

capacity of small enterprises in farming and processing

• Demand side fragmentation• Limited awareness / more

pressing priorities

• Regulatory environment

Future opportunities (+5 yrs)• Drought-resistant crops• Animal/plant health – vaccines,

protection products• Systems that provide full

transparency on supply chain water use and management

Sector interdependencies• Water sector (supply, flood management)• Human health (zoonoses, nutrition)• IT (remote sensing, logistics)• Energy (e.g. dependence of ‘chill chain’ on

uninterrupted power; demand for heat/cooling services)

• Packaging and materials • Built environment (resilient buildings)

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Figure 6.2: SWOC analysis - UK agri-food system

6.1 Physical impacts

UK and northern European farmers are expected to be less affected by climate

change impacts than those in the southern EU Member States

Principal expected impacts in the UK are: warmer, wetter winters; hotter, drier

summers; more summer droughts; and more extreme weather events, including more

intense rainfall that increases the threat of soil loss and flooding. For the UK the

increased risk of severe flood events and rising sea levels is an issue when there are

over 1.3 million hectares of farmland in flood plains, including over half of the most

productive land1 (an estimated 40% of produce was lost on the 42,000ha of land

flooded in summer 20072). Buildings containing food manufacturing, distribution and

retail activities may also be located in flood plains. Across Europe as a whole there is

an expectation that the increased frequency and severity of extreme climatic events will

cause more production losses in Europe than will temperature rises.3

A key issue for agriculture and the rest of the food chain is water and how its

distribution in space and in time will alter under the influence of climate change

Climate change’s impact on water resources is a key issue for agriculture and, to a

lesser extent, elsewhere in the food chain. Water availability and patterns of water

stress and excess (i.e. flooding) will change. Tensions between agriculture, other uses

and the health of rivers and other aquatic ecosystems are likely to increase, especially

in the south and east of England. With abstraction rights becoming more scarce and

expensive over time there will be pressure to ensure that, where applied, irrigation is as

efficient as possible even as total demand for water for irrigation rises. Access and

affordability of water will also become a more significant impact for processors and

manufacturers in certain areas, particularly in the south and east of England.

1 Environment Agency, Case Study: 2007 summer floods – Impacts on Lincolnshire’s farmers

2 ADAS, Impacts of 2007 floods on agriculture

3 Porter & Semenov, 2005.

Strengths Sophisticated, innovative and competitive food market in which business practices are regularly examined by NGOs and influenced by consumer opinion Large firms with resources to test and deploy solutions, and scale to influence supply chains Scientific base/expertise in biotechnology, climate forecasting, remote sensing, animal welfare

Opportunities Water reduction/re-use technologiescompatible with maintaining food safety Systems for monitoring & managing water in the supply chain Crop diversification Development of more heat/drought tolerant varieties Pest/disease prevention & containment

Weaknesses Lack of UK dominance in market for supplying equipment to food processing sector Knowledge transfer mechanisms weak in some farming sectors Absence of skills, or limited skills, across all scales of businesses, even retailers, hinder development of new technical solutions and ability to manage/operate advanced equipment and technologies

Constraints Large numbers of ‘hard to reach’ SMEs –especially in production (farming) and processing GM regulation impacts on biotech sector Short-termism & financial constraints limit adaptation investment CAP a major influence on farm investment/behaviour Water scarcity impacting on adaptation options

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Scarcity of water resources is already a major issue in southern Spain, from where

many of our salad crops are imported. The Mediterranean basin is a region that is

expected to become more water stressed in the future as a result of declining rainfall,

even as the population in coastal regions increases. Sustainable management of

water resources in the face of rising demand is also a challenge in Kenya and some

other parts of Africa that supply fruit and vegetables to the UK.

Farmers will need to adjust to changes in the farming calendar and to shifts in

the distribution and spectrum of pests and diseases

The growing season is expected to be extended, more so in the south of the UK. There

is already evidence of warming having an effect on the timing of, for instance, pollen

release. Insect-pollinated crops rely on those insects adjusting to the shift in the

seasons. An additional concern is how plant and animal diseases will shift in range and

intensity, including the prospect of diseases previously unknown in the UK becoming a

threat. Fewer hard frosts mean more pests successfully overwintering, which is likely

to require changes in pest management regimes. In a recent survey over half the

English farmers questioned said they were already affected by climate change, more

than 60% expected to be affected within a decade.4

Higher average temperatures, together with more frequent and extreme heat

events, are a challenge for livestock producers

Heat-induced stress affects animal welfare and farm productivity. Its avoidance may

mean design modification to, for instance, poultry sheds, dairy parlours, and the trucks

used to move animals to farm and to slaughter. Sub-tropical animal diseases are

expected to migrate northwards as their insect vectors move. Bluetongue disease,

which reached livestock farms in the UK in 2007, can thus been seen is an early

example of what is expected to become a more common problem in the future.

Continued vigilance by the global and European animal health sector will be needed.

Managing the consequences of higher temperatures in other parts of the system

is also likely to require adaptations

High temperatures will affect demand for heating/cooling services in buildings used for

manufacturing, distribution and retail, and create new challenges in maintaining the

integrity of the ‘chill chain’.

The fertilisation effect of higher CO2 levels, and increased temperatures, could

lead to higher yields - if the water and other conditions permit

A CO2 fertilisation effect may support yields but such gains could easily be offset by

impacts of increased water stress. Crop, forest and livestock productivity have all

been predicted to increase in the short to medium term. UK agricultural yields have

been projected to increase during the 2020s as a direct result of climate change.

However, without further adaptation, yield rates are forecast to decline by the 2050s

and finally become negative across the sector by the 2080s, with substantial economic

losses5.

Looking beyond the UK and Europe those areas of the world that are already

water scarce, such as the Sahel and the Mediterranean basin, are expected to

become drier still, with potential severe consequences for regional food security

If the current agri-climate models are correct, climate change will undermine food

security in those parts of the world – sub-Saharan Africa and south Asia – where the

inter-related conditions of poverty and hunger are most prevalent today.

4 www.farmingfutures.org.uk

5 Metroeconomica, 2006.

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A recent report6 looked forward to 2050 and concluded that climate change will:

- cause yield declines for the most important crops in developing countries, with South Asia

particularly hard hit;

- have varying effects on irrigated yields across regions, but irrigated yields for all crops in

South Asia will experience large declines;

- result in additional price increases for the most important agricultural crops–rice, wheat,

maize, and soybeans. Higher feed prices will result in higher meat prices. As a result,

climate change is projected to reduce the growth in meat consumption slightly and cause a

more substantial fall in cereals consumption;

It also projected that calorie availability in 2050 will not only be lower than in the ‘no climate

change’ scenario, it will decline relative to 2000 levels throughout the developing world.

Some agricultural land is particularly at threat from flooding linked to climate change.

Salt-water intrusion is a growing problem in low lying regions. Groundwater is pumped

to meet demand for agriculture, sucking saltwater into aquifers and rendering land

unsuitable for farming. Such intrusion is being aggravated by rising sea levels (e.g.

Nile delta – see Box below

Coastal erosion in the Nile delta is starting to create opportunities for planning and

infrastructure consultancy support as well as low carbon desalination technologies

The Nile delta contains 10,000 square miles of farmland, produces ~60% of Egypt’s food supply

and is home to two thirds of the country’s population. However, it is highly vulnerable to sea

level rise - a 1m rise will cause 20% of the delta to disappear. Yields are already declining due

to salination and in some places land erodes at a rate of almost 100m a year. Increased salinity

is linked to other environmental problems because of an increased need for fertilisers and

decreased quality of drinking water. Egypt already has a major freshwater deficit, having only

700 cubic metres per person - well below the 1,000 cubic metres minimum for water security.

Increased evaporation and upstream use is also projected to lead to a decrease of 70% in Nile

waters reaching the delta over the next 50 years.

Source: The Guardian, ‘Death of the Nile’, August 21st 2009

6.2 Demand shifts

Climate change is expected to shift food production patterns, opportunities and

constraints here in the UK and elsewhere, with effects that will be transmitted down the

supply chain towards consumers, and back up the chain to suppliers of inputs to

farming and food processing. As later discussion shows, there are also likely to be

responses both from consumers, and from intermediaries (retailers, manufacturers)

seeking to manage direct and indirect climate risks (Figure 1)

Direct and indirect impacts on demand in UK agricultural markets can be

expected

There is potential for UK farmer to be affected directly by events (and prices) in global

markets, such as through higher prices for arable farmers, and indirectly as the UK

food supply chain seeks to secure supplies and manage price volatility, including the

prospect that other sources might become less reliable and/or more expensive. These

shifts will change the shape of demand for farms inputs, creating opportunities for

suppliers of seeds, equipment, etc. These are examined in the ‘opportunities’ section

below.

Climate-driven demand shifts will interact with changing patterns of consumer demand

and competition between food and bio-fuel applications for agricultural outputs. There

are also supply-side forces at work that include pressure to restructure under the

6 Climate Change - Impact on Agriculture and Costs of Adaptation. IFPRI, 2009.

http://www.ifpri.org/sites/default/files/publications/pr21.pdf

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influence of global competition and shifts in support payments, movements in the euro-

sterling exchange rate, an expected increase in the long term price of key inputs

(fertiliser, energy), and stronger GHG mitigation measures.

Figure 6.3 Climate change will trigger changes in demand in UK production,

processing and consumption that will be transmitted up and down

the food chain, and out to suppliers

And climate impacts could contribute to volatility in unstable food markets7

Food prices are sensitive to energy prices (which have been very variable over recent

years). There is a tight balance between global supply and demand in some key grain

markets and some of the large reserves (such as the EU’s grain mountains) that once

distorted markets but could also buffer them against price volatility have been

dismantled. It is entirely possible that another episode of high food prices will be

prompted by weather-related problems in a key food producing region elsewhere in the

world.

The 2008 food price spike prompted renewed interest in investment in land and food

commodities, and highlighted the need for firms to have insights into market trends and

behaviour. UK advisory firms such as Bidwells are well placed to do this. Bidwells, traditionally

focused on the UK market, has already expanded its services into the Middle East. This is a

region where governments have been looking hard at the case for domestic and overseas

investment in agriculture as a means of increasing their own food security.

Climate change is likely to result not only in changes in production in the UK but

also shifts in the sourcing of imports and other strategies

Firms will need to build the resilience of the food chain to risks exacerbated by climate

change. There are already anecdotal reports of fresh produce suppliers shifting from

southern Spain into north Africa due in some part to issues with water supply.

The UK food chain, from retailer back to the farmer, responds to patterns of consumer

demand that change through the seasons and from year to year. Climate change

impacts seem likely to affect demand through driving changes in relative prices and,

potentially, in food purchasing patterns.

7 See for instance Food Futures: Rethinking UK Strategy, Chatham House. 2009.

Multiple retailersIndependent

retailFood service

Distribution & wholesale for

multiples

Independent wholesale &

distribution

Manufacturing & processing

Agriculture & fisheries

Consumer demand

Producer to consumer

transmission of

climate-related

impacts on

production via prices/availability

Consumer to producer transmission of demand

changes & of supply

chain transparency &

management systems,

e.g. water foot-printing

Technologies, inputs & support services to

manufacturing &

processing:

Technologies, inputs & support services to

primary production

Technologies, inputs & support services to

Retail / wholesale /

distributionTechnologies, inputs

& support services

to food service

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Investment in supply capacity and developing more robust supply chains can

provide insulation against market volatility

A view amongst analysts that food prices are now on a long term upward trend helped

to fuel interest worldwide in agricultural land as an investment over recent years.

Uncertainty about the reliability of global markets and the resilience of producers to

price volatility is likely to encourage investment in sustaining local UK and wider EU

capacity.

The major retailers and food manufacturers are in a position to exert influence

on their supply chains on matters such as water management, as far back as the

farm

Water management poses a potential reputational risk to major food and drink

companies, as recognised by companies such as SAB Miller and Coca-Cola.

Increased NGO and consumer focus on ‘embedded’ water, especially in food products

sourced from the water-scarce regions in the developing world seems likely to drive

demand for measures that increase transparency of the supply chain. By such means

consumer and NGO pressure on major companies can be transmitted to smaller firms,

as far back as the farm.

6.3 UK resilience

A recent study concluded that UK agriculture was generally well adapted to

current climate variability

The UK food chain is generally regarded as robust. It has proven able to maintain

consumer access to food when animal diseases or other events have caused

interruptions to specific sources of supply. Climate change will test the food chain’s

resilience by altering the contingent and systemic risks that the system is exposed to.

One study found that UK production output is less affected by droughts and heat

waves today compared to the 1970s, with yield losses from droughts generally

decreasing during the last four decades8.

The Government has published details of the indicators by which UK food security will

be monitored9. The framework covers a wide range of issue ranging from resilience of

the UK logistic chains to contingent events through to global issues of sustainable food

production. It points to interconnected nature of the UK and global food system.

Adaptation in the UK alone will not be enough to provide full food security.

Advice to farmers on adaptation responses stresses the importance of good water, soil

and vegetation management10

, including looking at opportunities to retain water in-farm

in reservoirs where allowed. Managing water costs seems set to become a bigger

issue given projections of increasing water scarcity, the tightening of abstraction

licensing and the cost of mains water11

. These forces will compound existing

pressures on farmers to economise on water expenditure. A 2009 report found 40% of

dairy farmers are intending to make changes to improve their water use efficiency in

the following 12 months12

.

Responses may involve changes in practice and capital investment. A reactive

response may not be sufficient for the challenges that climate change will present in

8 Adaptation and Mitigation Strategies: supporting European climate policy. D-A2.7: Adaptation in agriculture: historic

effects of extreme events on UK agriculture and an assessment of the economics of adaptation. Tyndall Centre for Climate Change Research and School of Environmental Sciences, UEA, Norwich, UK. (The specific factors that have

delivered this response are not explained). 9 UK Food Security Assessment: Detailed Analysis. Defra, 2009, Updated January 2010.

10 See for instance www.farmingfutures.org.uk/x366.xml

11 DairyCo estimate that the average dairy farm spends £31/cow/year on water - www.dairyco.org.uk/farming-info-

centre/environment/water-use.aspx 12

Milk Roadmap - one year down the road. August 2009. Dairy Supply Chain Forum’s Sustainable Consumption and

Production Taskforce.

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the future; an anticipatory approaches may be needed. While adaptation to gradual

change is manageable, adaptation to low-probability catastrophic events is hard. More

awareness raising and information gathering will be required to address known

problems and opportunities for the supply chain in recognising and addressing the

adaptation that will be required in the medium and longer term.

Any comment on UK agriculture’s resilience to climate change impacts needs to be

qualified by a note on the wide variation in structure and economic circumstances

present within the sector. Egg and poultry production, for instance, is highly

concentrated in a small number of firms which operate at large scale. There is rapid

transmission of genetic innovations through the system from breeders to growers, and

substantial capital at stake. By contrast much red meat livestock farming is still

practised in family farms at small scale, and transmission of innovations, genetic or

otherwise, is typically less rapid.

Climate change makes the challenge of deploying sustainable farming systems

that deliver higher productivity a more difficult and more urgent task

Globally, climate impacts on agriculture will take place against a backdrop of increasing

global demand for food, limitations on the extent to which that can be met by putting

more land into production, and expectations of higher prices for inputs such as energy

and fertiliser. There is therefore expected to be demand for ‘climate-proofed’ solutions

to these challenges. This includes higher yield crops that are also more drought

tolerant but goes much wider, into the package of measures needed to provide food

security – such as infrastructure (for food storage and transport), efficient markets (for

agricultural inputs and outputs), market/product development (food processing) and

social protection measures (so that one bad harvest does not force poor farmers to sell

all their assets to raise money to pay for essential needs.

Table 6.1: Summary of resilience across the UK agri-food chain

Impact Resilience State of

preparedness

Flooding

Significant food distribution/retail facilities that have been

built in floodplains may warrant investment in defensive

measures against site flooding. Land management

practices can help reduce run-off from farmland.

Increased

understanding of the

issue but it is not yet

clear whether the

distribution chain is

fully proofed against

plausible flood risks

Drought

Efficient irrigation systems; effective catchment

management, including engagement from businesses

with abstraction licences (e.g. via Water Abstraction

Groups13

); more drought-tolerant crops

Mixed picture

Heat

Crop choice adjustments by farmers. Modifications to

livestock housing & transportation facilities to reduce

heat-related stress to animals. Processing, distribution

and retail sectors would need to adapt buildings to

maintain reasonable working conditions for consumers,

workers. Increased energy use for cooling, chilling and

refrigeration.

Mixed picture

13

www.ukia.org/eeda_files/4927%20WAGs%20Brochure.pdf

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6.4 Current opportunities

In agriculture there are opportunities to diversify into new crops, in helping

improve the efficiency of water use in existing production systems and design-in

resilience to higher temperatures

UK agriculture

UK agriculture encompasses a diverse range of activities, from upland livestock

farming to horticulture to intensive cereal production. The opportunities created by

climate change for these sectors will vary. The long term models suggest that northern

Europe will have a global role as a source of grain, especially wheat, to help meet

growing global demand, particularly under conditions where productivity in other

regions of the world is compromised.

It is expected that there will be shifts in the location of production of some crops within

Europe as temperature regimes change and water becomes scarcer. This may favour

some sectors in the UK (horticulture being a possible example) and support those

looking to diversify into some alternative crops, such as vines and lavender.

Agriculture’s adaptation to climate change will be seen in the sector’s investment in solutions to

the problems of:

- Decreasing water availability; e.g. water management, irrigation infrastructure, measures

to improving soil structure and to store water;

- Increased rainfall and flooding; e.g. improving drainage capacity, avoiding livestock on

flood prone areas and collecting excess rainwater for use in periods of drought;

- Changes in seasonality; e.g. adapting to changing growing seasons, changing crops and

taking advantage of possibility for double-cropping;

- Extreme weather events; e.g. 'speculative' planting to minimise yield variability,

infrastructure investments, shelter belts for protection of crops and livestock and building

maintenance;

- New pests and diseases; e.g. using greater crop rotation and encouraging pest predators

on unused land.

A range of technical solutions are required to meet these challenges ranging from

infrastructural improvements to biotech solutions for increasing crop resilience. Cost-

effective technologies for improved resource management and efficiency are already

available; e.g. a switch from rain guns to ‘trickle’ irrigation could provide both higher

yields and significant water savings. Optimal water management is crucial for

adaptation to be a smooth process and markets for technological innovations, more

efficient irrigation systems and on-farm water storage options such as reservoirs will

continue to grow in the near future.

There are already opportunities arising from the increased need for technical

improvements to increase the resilience assets and infrastructure to climate impacts.

Immediate needs in this area include maintenance and protection of building stock,

installation of ventilation/cooling systems, extending capacity of irrigation systems and

other solutions for dealing with extreme weather. Investment in on-farm water

infrastructure and water use technologies is likely to increase significantly over the next

years. An alternative model, for horticulture, is controlled, intensive systems such as

the ‘Planet Thanet’ operation in Essex, which uses hydroponic techniques to produce

vegetables in a carefully managed ‘greenhouse’ environment.

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The UK financial sector can have a role in, and benefit from, development of adaptation markets

even when these are overseas. For instance, WHEB Ventures, a UK clean technology venture

capital firm, was an early investor in Agrilink, now known as AquaSpy, which is an Australian

company that developed a range of sensors, telemetry and software systems that monitor soil

moisture, salinity, water depth as well as weather. A network of these sensors, tailored according

to the type of crop being monitored, provides farmers with intelligent water management that can

significantly reduce water usage.

AquaSpy has delivered up to 50% savings in water in the agriculture sector (20-70% depending

upon the specific application), improved yields as well as quality, reduced maintenance costs

and energy savings. In cotton production, for example, AquaSpy has shown increased yields of

30% and 30-40% savings in water use which translate into water use efficiency gains of 60-80%.

Sources: www.aquaspy.com; www.whebventures.com/en/portfolio/aquaspy

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Figure 6.4 Summary of opportunities for adaptation goods and services across the agri-food chain

Agriculture,

forestry,

fisheries

Food processing

& manufacturing

Food distribution

/ wholesale Food retail Food service

Consultancy

and planning

Adaptation advisory work

integrated into general

farm advisory services

Planning support relating

to adapted buildings

Planning support

relating to adapted

buildings

Planning etc. fees

relating to new and

retro-fit ‘green stores’

Research, advocacy and

supply chain development

consultancy on climate

risk identification &

mitigation

As per food processing

Research, advocacy and

supply chain

development

consultancy on climate

risk identification &

mitigation

Agricultural development

& climate services in

developing world, e.g. via

donor support.

Water footprinting

methods & associated

supply chain development

Reputational risk

management

As per food processing

Water foot-printing

methods & associated

supply chain

development

Reputational risk

management

Design

New designs for vehicles

used to transport animals

to reduce heat stress

Design of ‘adapted

buildings’

Design of ‘adapted

buildings’

Design of ‘adapted

buildings’

Technology

Drought-resistant crop

varieties (global)

Water re-use / recycling /

management systems

Water recycling/treatment

& management systems

(e.g. washers)

Efficient irrigation systems

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Vaccines, medicines,

pesticides, plant

protection products to

address new/resurgent

pests & diseases

Water management

software [site / supply

chain]

Remote sensing systems

Construction Modifications to livestock

accommodation to

counter heat stress

Construction/retrofit of

green store for major

multiples

Services

Monitoring services (see

Aquaspy example below)

Finance

Crop insurance [global]

Social protection

mechanisms for rural poor

in developing world

Advisory & investment

services for land,

commodities, etc

Provision of credit or other

financing to invest in new

technologies, etc

Provision of credit or

other financing to invest

in new technologies, etc

Provision of credit or

other financing to invest

in new technologies, etc

Provision of credit or other

financing to invest in new

technologies, etc

:

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Food chain

The opportunities range from servicing demand for more (water) efficient

processing facilities through equipment that cuts consumption and cuts costs,

while maintaining food safety, and for design and development of ‘green’

buildings.

Major retailers, forward-thinking food service companies and manufacturers are

already exploring their exposure to water-related business risks. Water risk may be

direct, e.g. an inability to secure adequate supply at a reasonable price for washing or

processing facilities. It could also be indirect, in the form of consumer concern and

NGO pressure about sustainable sourcing. This analysis implies increased demand

for:

Water auditing, ‘foot-printing’ and associated advisory services to help

companies understand the issue, manage it and communicate their activities to

the supply chain and to consumers (see Coca-Cola and Cadbury case studies);

Water-efficient food processing technologies, including systems that are able to

recycle water without compromising food safety (See Jaspers case study below

for an example) or requiring increased energy or other resource use;

It also suggests a role for trade organisations and, where appropriate, government in

raising awareness amongst firms in the sector of both the issue and the opportunities.

Flooding is a different kind of water-related risk. Factories, shops and distribution

centres in low-lying areas are potentially at risk.

Retailers (e.g. M&S, Tesco, Sainsbury’s14

) have already developed pilot green stores,

developing solutions for future retro-fit and new build projects, working with architects,

building specialists and sustainability consultants. Though the prime focus of these

projects is energy efficiency and carbon emission reductions, they incorporate water-

saving technologies, passive heat management system, green roofs, etc. As new

models for ‘climate-friendly’ formats emerge, both there will be opportunities in the

modified supply chain for relevant goods and services.

In 2007, Jaspers (Treburley) Ltd, a supplier of beef products in Cornwall, installed a membrane

filtration treatment system at its abattoir. This has enabled the firm to re-use 60% of its water,

producing annual water savings of around £10,000 and reducing discharge costs. An Enhanced

Capital Allowance (ECA) on the technology enabled the firm to depreciate the full capital cost in

the first year the system was installed, helping to reduce the firm’s tax liability. The abattoir is the

first in the UK to be awarded a Certificate of Environmental Benefit from Defra for its approach to

water recycling. In 2008, South West Water awarded the company with a Certificate for

Exceptional Levels achieved in Water Efficiency.

Sources: Tomorrow’s Company, Can You Afford Not To? Business Success in the Low Carbon Economy,

November 2009; www.jaspersbeef.co.uk/projects.htm; and Watershed, Issue 8, Sept 2007 (Water

Technology List ECA newsletter)

Brewer Adnams has attracted attention for its investments in low-impact buildings and water-

efficient production technologies. The Adnams distribution centre in Suffolk has a 6000m2 green

roof that helps to reduce heat transfer into the building, regulate the buildings core temperature

and to reduce water run-off. And after significant investment in brewery itself the company is

now achieving close to using 3 pints of water per pint of beer produced, a cut of over 60%.

14

www.tescoplc.com/plc/storage/pdf/build_env.pdf ; www.j-sainsbury.co.uk/cr/index.asp?pageid=69

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Coca-Cola has adopted a climate change adaptation strategy - the Global Water Stewardship

programme - which is focused on water. The company used approximately 300 billion litres of

water in 200715

and has identified quality and quantity of water supply to be a key business risk.

A range of adaptation measures are now being implemented around the world to deliver

operational water efficiency and to move towards water neutrality. These measures include:

Setting goals to offset the litres of water used in products through local projects supporting

communities and nature. Coca-Cola has 150 Community Water Projects focused on water

resource protection and improving access to clean water (e.g. educating consumers in Spain

of the importance of water saving);

Working with the European Water Partnership (EWP) on achieving water stewardship

certification for its operations in order to achieve locally sustainable water management in

each territory.

A local example of these adaptation measures is provided by Coca Cola’s production plant in

Brisbane, Australia where water shortages and drought are becoming increasingly common.

The site has introduced a number of measures to reduce and where possible eliminate water

wastage, whilst recycling and reusing water where appropriate. The measures were the result

of: an assessment of operations to identify water saving opportunities; R&D into new products

and water saving technologies; and a cultural change in staff perceptions of the importance of

saving water, and included:

Investing in machinery to collect and reuse water;

Using smaller nozzles in the bottling process, to reduce wastage;

Using a nano-filtration plant to reuse site water for the product;

Recycling grey water for use in toilets, washing trucks and in the gardens.

As well as significant water saving, the introduction of these global strategies and programmes

has created additional employment, both within Coca-Cola for new roles responsible for the

environmental strategies and actions and amongst the designers, engineers and installers of the

new adaptation measures.

Source: The Impacts of Climate Change on European Employment and Skills in the Short to Medium-Term,

GHK Consulting for DG Employment, May 2009

Cadbury is a global confectionery company operating in more than 60 countries. The company

aims to reduce carbon, water use and packaging as part of its environmental agenda ‘Purple

Goes Green’. This sets targets for energy, water, packaging and the reduction of carbon

emissions by 50% by 2020. Climate change presents a number of risks to the business

including:

Increased prices for ingredients and reduced crop yields (especially for sugar, cocoa and

milk) as an indirect result of climate change impacts on agriculture.

Reduced rainfall and water availability, which is a major risk since water is used in cleaning,

cooling, as a process aid (e.g. dissolving) and as an ingredient.

Cadbury has implemented a programme of water management to minimise water use, switch to

more sustainable sources of water and recycle water on site. The initial focus has been on sites

in water scarce areas such as Australia, and a target has been set to ensure all ‘water scarce’

areas have water reduction programmes in place. These measures are already achieving water

savings and the company reduced its water consumption by 10% between 2006 and 2007.

Cadbury is also part of the Water Footprint Network, which promotes the transition towards

sustainable, fair and efficient use of fresh water resources worldwide, and has signed up to the

CEO Water Mandate, a private-public initiative which aims to develop solutions to the emerging

global water crisis through the engagement of a critical mass of companies from around the

world.

Source: The Impacts of Climate Change on European Employment and Skills in the Short to Medium-Term,

GHK Consulting for DG Employment, May 2009

15

Coca-Cola, Sustainability Review, 2007-08

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6.5 Future opportunities

There are opportunities ahead in servicing the demands of future farming systems,

whether agro-ecological or ‘intensive’. The mix of plant protection products, veterinary

medicines and pesticides that farmers will need will also change. At a global level, the

challenges of producing more with less (water, GHGs) are not to be understated.

New crop varieties that display traits helpful in the context of climate change (e.g.

heat/drought tolerance) will be needed in the global market. Internationally,

biotechnology and seed companies are anticipating this by investing in the

development of plant strains that demonstrate greater drought tolerance. These

genetic and breeding efforts are long term endeavours that are often likely to take more

than a decade before a marketable product is available. Such investments are focused

on crops grown in warmer regions (such as maize), and not currently directed at the

main UK crops, e.g. wheat.

Figure 3: High level overview of market opportunities in global agri-food

Climate change adaptation response Supply side opportunities

Category Opportunities Technology /

manufacturing Construction

Planning /

consultancy / management

Capital / finance

Resilience

Crop management strategies adapted to greater risk of extreme

weather events & forecasting / support systems

Plant and animal protection

products and integrated approaches needed to counter new diseases + pests

Adapted built infrastructure

Shift in location and defence of agri-food supply chain infrastructure to reduce flood /

disruption risks

Low-energy, low-waste irrigation

systems and infrastructure

Financial mechanisms e.g. private

crop insurance, and social protection mechanisms for developing countries

Market shift

Supply side shift - crop diversification (including to non-

food crops) / change in distribution of fisheries

Change in seasonality of production

Shifts in comparative advantage in

production within the EU/elsewhere

Resource management

Agri-environment schemes to

maintain water quality & ecosystem services

Changing land management

techniques to be less vulnerable to erosion from wind and water, inc afforestration

Technology Drought/flood resistant seeds

Skills training for new agricultural

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Climate change adaptation response Supply side opportunities

Category Opportunities Technology /

manufacturing Construction

Planning /

consultancy / management

Capital / finance

technologies/ systems

Forecasting/modelling to deliver better predictive capacity

6.6 Barriers

Inertia and behavioural effects, and lack of hard cost drivers appear to inhibit take-up in

the sector, especially among SMEs. Lack of knowledge or shortage of appropriate

skills are other factors which can inhibit action from these businesses. The food

manufacturing sector has a very large number of small firms (including family firms)

that can be ‘hard to reach’ and not easily engaged. In such areas adaptations seem

likely to occur in responsive mode rather than anticipating problems, and directed at

short term business benefit.

In some areas (e.g. high yield, drought tolerant crops) there is presenting a lack of

supply of products on the global market, though there are signs that this will gradually

change over the coming years. Investment is being made by the major biotech

companies in the major crops such as maize, but it is recognised that increased public

investment by the global community is likely to be needed to support the process in the

developing world. This work would focus on developing varieties suitable for local

circumstances, and to extend the programme beyond the maize and other major

traded commodities into traditional crops. In the UK domestic market breeders are not

seeing direct demand for drought-tolerance as a trait; quality and yield under standard

conditions remain dominant16

.

6.7 UK competitive advantage

Projections suggest UK farm output should be less affected that that in southern EU

Member States. The UK agriculture sector has farms that are larger than typical for

much of the EU. The evolution of the Common Agricultural Policy will shape the

economic environment within which farm investments are made.

The UK has a strong foundation in the biosciences and companies such as Syngenta

that are working on plant development and deployment to the market. Translation of

basic science to crops in the commercial field is constrained by the regulatory

environment and products for the global market are developed elsewhere in the world.

The UK food retail and manufacturing sector is highly competitive and innovative, and

on various issues has acted as a ‘laboratory’ within which solutions have been

developed to address pressures on environmental and broader sustainability concerns.

It has large companies that have an influence over the supply chain sufficient to

‘enable’ change. On issues such as carbon labelling, animal welfare measures

(including consumer labelling for some) and Fair Trade the UK is ahead of Europe.

Consultancies and research groups provide a range of research, technical and

advisory services.

The UK is less strong in the supply of technologies and equipment, whether in farm

irrigation (well served by French and Italian companies) or in the food manufacturing

sector (a market in which Germany has leading expertise).

16

The British Society of Plant Breeders

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6.8 Recommendations

Agri-food adaptations in the UK seem likely to be driven from the farm end by reaction

to (and anticipation of) changing climatic and operating conditions (e.g. increasing

water scarcity), and from the consumer end by supply chain initiatives that identify and

encourage good practice in water management.

The system as a whole will need to be ‘proofed’ against heat-induced stresses, and

against flood risk. ‘Generic’ policies on flood-proofing land development and the

existing built environment should raise awareness and encourage greater resilience in

the food chain. Similarly, water resource management policies will generate demand

for more water-efficient technologies.

Business

o Large food businesses have an important role in raising awareness in their supply

chains about water risk and how it can be managed and pointing to appropriate risk

monitoring and management solutions. There is a similar role for trade

associations.

o Farm businesses reliant on abstracted water could consider working with other

users in the same catchment through formation of a Water Abstractors Group to

help promote effective representation and collaboration.17

Government

o The UK’s capacity to exploit adaptation markets in the agri-food sector will be

supported by access to a workforce with skills in science, technology, engineering

and maths (STEM). Adaptation markets in the agri-food sector will support demand

for people with skills in a range of scientific and engineering disciplines, from

biotechnology to agronomy to water engineering and green building design and

further underline the importance of effective strategies to support STEM skills.

o Government has a supporting role in awareness raising and advisory activities,

with a particular focus on parts of the food-chain with a heavy SME presence, e.g.

farming and food manufacture, where information failures tend to occur. Publicly-

funded initiatives seeking to engage with small food businesses on climate change

(e.g. regional business support programmes for the sector), whether from a

business innovation or resource efficiency perspective, should not neglect the

adaptation agenda.

o There is a public interest in ensuring that the research pipeline begins to explore

drought resilience for crops of the kind grown here (wheat, vegetables, fruit, etc.).

At the moment the market alone is unlikely to fund research or develop varieties

with such attributes because of lack of demand, and lead times can be significant.

This is relevant to government’s consideration of UK research priorities but also

scoping of EU research activity.

o Robust domestic policies on ‘food defence’ that seek to safeguard the UK food

chain against contingent climate-related risks will create demand for adaptation

solutions (e.g. modifications of sites or buildings to reduce the risk of flooding to

food distribution or food safety).

17

See for instance www.ukia.org/eeda_files/4927%20WAGs%20Brochure.pdf

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Consultees

ADAS (various consultees)

Alison Austin, ex-Sainsburys

Carl Atkin, Bidwells

Dr Penny Maplestone, British Society of Plant Breeders

William Frazer, Farming Futures

Food & Drink Federation

Tara Garnett, Food Climate Research Network

Phil Sketchley, National Office of Animal Health

Dr Ceris Jones, National Farmers Union