Sustainability & the Food Industry, in conversation with Juan Aguiriano of Kerry Group

Andrew Kris discusses climate change, its impact, and how the food industry is going to  contribute to sustainability in conversation with Juan Aguiriano, of Kerry Group, who explains how the food industry has a very special role to play.

Transcript

Andrew Kris: 0:05

This is Juan Aguiriano of The Kerry Group, a special welcome to you. We're going to do several sessions together, this is the first of those sessions. And we want to focus on climate impact and how the food industry is going to be able to contribute to the whole discussion on climate change. Because really, as you said in early conversations, the food industry has a very special role to play. Since you're an expert in this field, how do you feel about this topic?

Juan Aguiriano: 0:32

Yes, it's a very timely topic. And you're right in saying that the food industry has a big role to play here. There are a number of studies that have been published, one recently, says the agriculture and food industry contributes anything from 25 to 33% of total greenhouse gases. So as an industry we're definitely making a big impact and have a big responsibility to improve. The good thing is that the industry is moving and committing. As an example, you can see two large corporations, McDonald's or Mars, have announced that they will commit to science based targets of zero carbon by 2050, and with absolute reductions in their carbon footprints by 2030. And so, a lot of companies are committing to what is called"1.5 degrees" science based targets. There is a coalition of companies that agree to follow scientifically based goal setting towards limiting the temperature increase to 1.5 degrees as per the famous Paris agreement. And this is calculated the same way that it's calculated at the calorie level, so you can calculate that at the company level globally, and it's externally validated. So, it's not something that you announce and you can say your targets, or you can self declare. You have to have that validated by the science based target alliance, which is organized by several very prestigious NGOs. So, that is good news that more companies are signing up to this. Kerry is one of the companies that have signed up to science based targets, and that puts our ambitions out there and it's a great way to mobilize a company. Interesting thing about this is that your targets are not only your internal targets, which is called scope one, but it's also the fuel that you consume to run your factories and the electricity you purchase from the grids to run your electrical equipment, which fall under scope two. It also includes scope three, is all the carbon that is embedded in the raw materials that you purchase. So, automatically when you sign up, you are involving all of your supply chain, all your suppliers, all the way to the farm. This is particularly important, because if you look at where the majority of the climate impact of the food industry happens is that the agricultural level. Nowadays, agriculture is particularly intensive and uses a lot of energy and fertilizers, etc. We also have very large livestock industry that emits methane directly or indirectly, in the case of cows or pigs. And so, the source of that is happening at the farm. So, when corporations are in the middle, producing fast moving consumer goods like Mars, or QSR like McDonald's, or companies like Kerry in ingredients, we buy ingredients which we convert in several steps, and then we sell them to retailers who sell them to consumers. It's a very long chain, right? So, they all have a responsibility here to look

at: 3:34

how can we transform company goals and commit to reducing 30% or 50% of carbon at the company level? And how about at the value supply chain level? And how do you land that on the day to day at the product level? And why is that important? Well, for a number of reasons. First, consumers want to consume more sustainably. Half of the consumers nowadays are interested in having an impact in the way they consume. And it used to be something that was just nice to have. But today, they proactively search and want to learn what's in the products they buy. And carbon is one of the elements they are looking at. So, an example of that is Oatly, which is oat milk. And they have a prominent logo on the package which talks about the amount of carbon per liter for that beverage. That is a fantastic selling argument for consumers and Oatly has been doing very, very well since they have it listed on there. A lot of the value in the company is the environmental impact that oats have versus regular milk. And it's been very interesting to watch the dynamics of the industry and how carbon is becoming the next competitive aspect of the value proposition. We're not just talking about price, quality, or taste anymore. We're still talking about that, but we're also talking environmental impact, in this case, carbon.

Andrew Kris: 4:58

I think they've done a wonderful marketing job too in bringing that to the forefront and helping their valuation. Of course, as you say, it's one thing to do a great marketing job in all of this and to announce what you're going to do, as so many companies have done, but it's another thing altogether to actually do something about it.

Juan Aguiriano: 5:14

Exactly. And so, the new consumer will not take greenwashing with labeling or marketing. You need to back these with data. You need to be able to use a number of sophisticated methodologies that will guarantee that what you're putting on the label is backed by data, lifecycle assessment, and that they'll be able to track the carbon and be able to convert that using some standards and methodology at the product level. Because, they need to take the oats, it's processed several times, and then it eventually becomes a beverage. So, you need to look at all the steps there.

Andrew Kris: 5:50

And of course, how you package as well, and the efficiency of transportation, supply chain, logistics, and so on.

Juan Aguiriano: 5:59

Exactly. And all these steps add to the carbon equation, and you have to be able to calculate all that. It gets a little bit technical, but the industry is working fast with a number of external partners to help do LCAs which are much more precise. And the more you do, the more you add to the common knowledge for everybody, and basically raise the quality of the knowledge out there. And so, what's important here is progress versus perfection. It's very, very difficult to say what's absolutely sustainable, but what

you can say is: 6:29

this new alternative is more sustainable than the past. Because, relatively speaking, it uses less carbon, less water, has less of an impact on deforestation, has a better usage of land, and has a higher nutritional value. It's the integration of nutritional science with environmental science that makes it more sustainable, but you have to have the data that proves that you're improving and have that validated and verified, sometimes by external parties, who will guarantee that you're using the right methodologies. And you'll have that on the package. The beauty of today is that you can have a QR code to take the consumer on to your website. And then the consumer is really interested to get the whole story about your brand. So, leading brands, other than Oatly, like the Impossible Burgers, which are the plant based burgers, and they did the same thing. It used to be the exception three to five years ago, but now it's becoming quite common to the point that there are emerging scores that are appearing on the backs. So, we had the UK traffic light labels, which would measure sugar, salt, and saturated fat. And you would have a Nutri-Score, which would measure other things from the official point of view. So, you start having a lot of scoring systems being launched by organizations and being adopted by retailers quite quickly already.

Andrew Kris: 8:08

It sounds like what you're referring to is very similar to the electricity consumption coding that we get on every electrical appliance these days, to show the efficiency and the consumption value of all electrical devices. Do you think there will be EU standardization?

Juan Aguiriano: 8:32

Yeah, you you look at the EU, and within that, the farm to fork collaboration by the Commission, there is definitely a number of chapters around responsible consumption where the declaration of intent is to set a standard that will help create a level playing field for everybody. For the time being, there are individual organizations trying to establish a winning standard, and it will measure carbon and other types of impacts. But I think the consumer will drive a faster adoption because of their desire to buy more products that provide the right type of benefits: nutritional, environmental, and social. So we will definitely have a lot more ambition from brands to communicate, with science backed data and good methodologies, the impact that they're having from farm to fork.

Andrew Kris: 9:35

And it sounds to me that Kerry and other companies in your business will then become sources of information going downstream from the food producers to the retailers. And also your knowledge base will increase dramatically in the field of carbon going back all the way to the farm.

Juan Aguiriano: 9:55

Yes, it does turn into doing good for the planet, but also the opportunity to do well for the company, since it does become a competitive advantage. I'll give you a couple of examples of things we've done in Kerry. So, we started by analyzing our portfolio according to nutritional profiling methodology, which is inspired or similar to the UK traffic light system, but adapted to ingredients. The UK traffic light system is one of the best because it's very stringent. You have to look at the content of sugar, salt, fat, trans fat, and saturated fat. And depending on the threshold of limits that are defined by nutritionists, your product is either red, yellow, or green. But if you're passing a threshold in one of the five categories, you're red. So, it's very penalizing. It's not as if you're very good in one category, such as sugar, but you're very bad in salt, then you take the average. No. You'll be penalized and end up in the red if even one of the categories is bad. So, we applied that to our ingredients. And how do we do that? Well, you basically take the ingredients and standard formulations, to say, "If you use our ingredients in standard formulation, your product will be green, yellow, or red." And 80% of our portfolio is either green, positive nutrition, or yellow, balanced nutrition. We even calculated the millions of consumers we reach through the business we have with our customers, and it's 1 billion people that we reach with positive and balanced nutrition already today. Though, we set our goal for ourselves that we want to reach 2 billion people by 2030. Once we do that and know this works as a methodology, we'll do the same for carbon. So, more nutrition, or positive nutrition, with less carbon. That's the real challenge the industry has: providing more nutrition, or better nutrition, for 6 billion today, 10 billion tomorrow, but with one planet, instead of two or three. And so, you do that by landing these big corporate goals at the product level. So for carbon, it's a lot more complicated. We started doing LCAs for critical raw materials and critical ingredients. Once we have that, you calculate that in a carbon calculator. For example, we have a sugar replacement solution, it's called TasteSense, and what we've done is: we can replace the sugar in beverages, on average, by 30%. And you can't taste the difference. And for every kilo of sugar you replace, you're reducing your water usage by 1200 liters, and cutting the CO2 use in half. So, you're also creating less calories, which is very important in the context of so many kids. So, this is an integrated solution for sustainable nutrition to land corporate commitments to reduce carbon and help customers reduce their carbon footprint.

Andrew Kris: 13:05

So, I'm not asking you to speak for the industry as a whole here, but if I talked to the other major players in your field, would I find them doing similar things?

Juan Aguiriano: 13:15

I think it's starting. We're one of the leading company in ingredients, but we've seen a couple of competitors coming out with LCAs and carbon calculations. But what I described to you here was a little bit more sophisticated, since we're not only reducing electricity, or what you do in your own factory, but we also calculate how much you are helping your customer make a difference in carbon use. For example, we've created a brewing calculator with which, by using our technologies in brewing, we can help people reduce the costs of the beer. And by doing that, they can also reduce up to 40% of the CO2 used to create beer. So, if you can minimize the amount of energy and water in the brewing process, you usually have a "win win win" of lower cost, less CO2 and less water. You'll start applying "reduce and reuse," which are the principles of circular economy, which again brings us back to carbon. Sometimes, you reduce carbon directly by reducing energy use, and other times by reducing waste.