Post on 18-Dec-2021
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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