Marty Matlock 2015-06-23 01:01:47
Editor’s note: This is the final article in a four-part series on the role of agricultural and biological engineers in sustainable agriculture. The first three articles appeared in the March/April 2014, May/June 2014, and May/June 2015 issues of Resource. The three axioms of sustainability are (1) everything is connected, (2) everything is changing, and (3) we are all in this together. These axioms are especially apparent in our modern global agricultural supply chains. Supply chains are the networks of suppliers, technical support, producers, processors, consumers, and affiliated enterprises engaged in the delivery of a product to consumers. Globalization is the process of extending supply chains across national and geographic borders and is often associated with the expansion of branded food products into emerging markets. This expansion into developing economies is no accident; it is driven by demographic shifts in populations around the world (see graph). Our current population of approximately 7.2 billion will expand to over 10 billion in the next 40 years; these 3 billion additional people will live in emerging markets. They will be younger, more prosperous, and more connected than ever before. They are the growth market of the future for consumer packaged goods (CPG) companies. Supply chain complexities Agricultural companies engaged in managing food supply chains are among the largest and most complex companies in the world. Agricultural supply chains are increasingly complicated because of the breadth of products they encompass: fruits, vegetables, grains, animal products, and animal proteins. They are also complicated because of the depth of engagement of agricultural companies across every life cycle category: extraction, production, processing, transportation, distribution, consumption, and disposal. These companies are competing on a global scale for expanding markets, but they face real risks of disruptions due to competition for limited land, water, and crops. In response to global market pressures, every sector of agricultural production has undergone some degree of horizontal and vertical integration, creating interconnected global networks of private and commercial branded products. Horizontal integration is the aggregation of products and brands within a supply chain category; vertical integration is the aggregation of products and services up and down the supply chain. The leading companies driving horizontal and vertical integration of agricultural supply chains include: • Cargill, the world’s largest private company (estimated annual sales of $135 billion), with more than 152,000 employees in 67 countries, is engaged in every stage of agricultural supply chains. • Unilever, the world’s largest CPG company (estimated annual sales of $59 billion annually), employs almost 175,000 globally and manages more than 400 brands, of which 14 have annual sales greater than $1 billion. • Tyson Foods, one of the world’s largest animal protein companies (estimated annual sales of $38 billon annually), employs 124,000 people in more than 110 facilities globally, sourcing animals from more than 11,000 independently owned farms. • ConAgra, the largest U.S. CPG company (estimated annual sales of $16 billion annually), employs 33,000 people and owns 47 private brands. These four companies generate a quarter of a trillion dollars in sales each year, employ half a million people, and control two-thirds of food brands on the grocery shelf. Each of these companies is very concerned about global sustainability challenges, as indicated in their annual reports, and more importantly, in their corporate decision-making. Dining on the biosphere The impact of global-scale agricultural production systems on Earth’s biosphere is significant. Environmental key performance indicators such as soil erosion, water quality impairment, habitat loss, and biodiversity loss are getting worse. The rates of these changes are accelerating to the point that we are altering Earth’s surface at continental scales. The 2014 Living Planet Report from the World Wildlife Fund (wwf.panda.org) estimated that more than 50% of vertebrate life has been lost since 1970. We have destroyed half the vertebrates (measured in numbers and species) on Earth in two generations. This rate of decline is increasing, driven by habitat destruction, habitat alteration, and over-exploitation. In many parts of the world, if it moves, it’s meat. We are eating the biosphere upon which our prosperity depends. We currently consume more than one and a half times the annual production capacity of Earth. We use more than 40% of Earth’s terrestrial surface for agricultural production (including pasture and grazing lands). The only remaining arable lands to expand production are tropical forests and wetlands. The only way we will meet the food needs of 10 billion people without irreversibly damaging the biosphere is through intensification of production on existing agricultural lands. The world’s leading environmental conservation organizations have joined with modern agricultural production organizations to create strategies to ensure that the drive for intensification does not have undesirable consequences. Food and agriculture supply chain companies recognize that changes on the land will be driven by decisions made through these companies, not by governments or international super-governmental organizations. Finding alignment of values, interests, and priorities is key to creating global improvements at local levels. More than 20 years ago, John Elkington (volans.com) coined the term “triple bottom line” to express the business model for sustainability: Triple bottom line = Financial performance + Environmental performance + Social justice performance The rationale for this framing is that the true cost of doing business includes managing risks across environmental and social domains. For most companies, this means increasing efficiency across the entire life cycle of their products, understanding supply chain risks, and creating demand for innovation throughout their organization. Increasing supply chain efficiency is where most sustainability discussions begin within companies. Inefficiency is waste, and waste is loss: lost revenues, lost time, lost resources, and lost opportunities. The presumption has generally been that successful companies are those that have achieved some threshold of efficiency in order to be competitive. However, the data on life cycle process management do not support this assumption because many true costs of operation are distributed across operational management categories. Water costs provide an example of how costs can be hidden from facility managers and corporate planners. A food processing facility might pay as little as $0.75 per thousand gallons at the meter at the front of the processing plant, but it may pay as much as $15.00 per thousand gallons surcharge to the municipal wastewater treatment plant for disposal of that water. Decisions on capital expenditures for water conservation generally do not make economic sense at $0.75 per thousand gallons but may very well make economic sense at $15.75 per thousand gallons. This decision is still economic; it does not touch on the additional costs associated with risks from water scarcity or pollution impacts. Finding the masked inefficiencies in global companies that are horizontally and vertically integrated is daunting. This challenge requires process knowledge, lifecycle assessment, and systems thinking. Risk averse and beyond Reducing risks is where most sustainability initiatives engage with environmental and social issues. Compliance with environmental regulations is no longer recognized as adequate environmental risk management; regulations represent just the baseline of acceptable practices. Companies must now manage the reputation of their brands through proactive control over their supply chains to ensure that their products, processes, and practices are not associated with environmental damage. This means that companies must know where the materials used to make their products come from, how they are grown/produced/processed, and how their supplier companies address environmental issues. Companies can no longer employ a “do no harm” environmental ethic; they must adopt a “make things better” environmental ethic. Understanding potential reputational risks requires understanding the impacts from all facets of a company’s activities and many facets of its suppliers’ activities. This requires expertise in risk assessment associated with geochemical processes, landscape ecology, and social and political equity. Similarly, social responsibility within companies requires much more than compliance with safety, payroll, and welfare laws and regulations. Social sustainability issues within supply chains such as child labor, equitable pay, environmental justice, and worker safety must be managed and reported across the entire supply chain. A company that sources raw materials from an enterprise that engages in unethical labor practices will assume significant reputational risks. Child labor is a particularly vexing challenge. Globally, 60% of child labor (more than 98 million boys and girls ages 5 to 17) occurs in agricultural production. Agriculture is one of humanity’s most dangerous enterprises; risks to the health and welfare of children anywhere in a supply chain translate directly to reputational risks to companies. Five years ago, companies that use chocolate in their supply chain were rocked by allegations that they were supporting child slave labor through participation in the cocoa trade from Côte d’Ivoire and Ghana. Many private brands were linked directly to alleged child trafficking practices for cultivation, harvesting, and processing of cocoa pods. In response, Cargill developed the Cocoa Promise, committing to making “a tangible difference to farmer productivity and increasing their income and improving livelihoods for generations to come.” Cargill has implemented programs in farmer training to increase productivity and profitability, community support to increase access to education and healthcare, and farm development to improve smallholder cocoa tree health and genetics. As of 2014, Cargill has trained more than 115,000 farmers in good agricultural practices, established more than 2,500 Farmer Field Schools around the world, and provided almost 34,000 children in producer communities with improved access to education. In 2014, more than 50,000 cocoa producers, mostly small landholders (2 to 3 ha) in Côte d’Ivoire alone were certified as sustainable growers. These producers are not Cargill employees; they are suppliers of raw materials in the chocolate supply chain. Cargill recognized that if they were going to be able to sell products made with cocoa, they had a responsibility to create a sustainable product from farm to table. This translation of risk across supply chains to CPG brands is driving sustainability initiatives around the world. Imagine the cocoa story multiplied by 100 (the number of primary ingredients that each CPG manages) and you get a sense of the challenge facing agricultural companies around the world. Palm oil plantations are destroying critical rainforest habitat for orangutans and other key species; beef production in Brazil is damaging the Pantanal wetland ecosystem and accelerating Amazonian deforestation; cotton irrigation in Asia is reported to be a major driver of water scarcity in many regions. These examples illustrate the complexity and diversity of the supply chain challenges faced by global agricultural CPG companies. And these are just the challenges supported by some level of scientific data; companies also have to fend off a swarm of non-scientific reputational assaults from advocacy groups that exist solely to make unfounded accusations loud enough to achieve their ideological goals. For example, these organizations insist, without evidence, that genetically modified foods (GMOs) are bad for your health and the environment, or that the only sustainable production strategy for animals is free-range, pasture-fed, or cage-free. Agricultural production companies must either respond to these non-scientific allegations with science-based sustainability metrics or capitulate to reputational extortion. The clarity of our role The role of biological, biosystems, bioprocess, and agricultural (bio/ag) engineers in managing complex supply chains should be clear. Our profession is well positioned to address the challenges of global product safety, security, and stability through integrated geographic information systems (GIS) traceability, transportation logistics, and data management technologies. Food safety technologies have been a hallmark of bio/ag engineering for decades. For example, our profession is developing and deploying real-time sensors, indicators, and sentinels for bacterial contamination. Most important, bio/ag engineering has a 50-year history of assessing and mitigating environmental risks associated with production agriculture, starting with soil and water, and more recently assessing the design and sustainability of ecosystem services. The challenges for our profession’s leadership is to guide undergraduate and graduate programs to prepare engineers who have the breadth of systems knowledge to understand the interconnected continuum of global supply chains and the depth of process knowledge to effectively address very specific challenges in agricultural food systems. No single professional can meet all of these challenges; teams of professionals across technology specializations are necessary to create integrated solutions to global problems. These teams will need leaders who understand how the processes fit together. These leaders must have an understanding of the processes that drive the triple bottom line: environmental, economic, and social systems. As Executive Director for Sustainability at the University of Arkansas, I am responsible for administering our Sustainability Minor, open to all students across disciplines, to provide this global systems framework. I have seen students from bio/ag engineering engage in project leadership with amazing competence and effectiveness, which they attribute to the interdisciplinary nature of bio/ag engineering degree programs. We have the opportunity to define our profession as the leader in sustainable agricultural systems thinking, design, and management for the next century. Our profession understands that everything is connected, everything is changing, and most importantly, we are all in this together. ASABE member Marty Matlock, P.E., Professor, Department of Biological Engineering, and Executive Director, Office for Sustainability, University of Arkansas, Fayetteville, USA, firstname.lastname@example.org.
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