Three Strategies to Build More Sustainable Food Retail Supply Chains

Why should food retailers work to build environmentally friendly, equitable, and socially just supply chains? Supermarkets are the lifeblood of many communities around the world, supplying food and other essential services like banking, pharmacies, and gasoline. Supermarket supply chains are global, extending across local communities, countries, and continents. The journey of a product from the place it was produced to the grocery store shelf can involve impacts that we cannot begin to imagine just by looking at the sticker on a pineapple or the label on a bag of coffee – impacts involving animal welfare, ocean health, soil health, transportation infrastructure, GHG emissions, subsistence farmers, child labor, and the economic development of emerging economies, to name just a few. The scope and scale of the effects of getting products to supermarket shelves arguably make it daunting for a retailer to take a comprehensive look at their supply chain and forge a path toward improved sustainability.

But there are compelling reasons to act. First, consumers are increasingly spending money with retailers that align with their values, and having sustainably-sourced and labelled products on the shelves can help maintain customer loyalty. Second, since food retail is an essential service, supermarkets have an obligation to their customers and the communities they serve to understand and mitigate any supply chain risks associated with making food available. Third, accounting for supply chain risks through sustainable sourcing strategies helps meet the needs of investors and other stakeholders and addresses increasing ESG risk-mitigation requirements.

Three Strategies to Build More Sustainable Food Retail Supply Chains

Partner to Reduce the Supply Chain Carbon Footprint

Food production is responsible for one quarter of the world’s greenhouse gas emissions. 82% of those emissions come from land use, crop production, and livestock and fish farms, while the remainder come from packaging, processing, transport, and retail operations. Although the majority of food production-related GHG emissions occur before food even hits grocery store shelves, these emissions are included within the retailer’s Scope 3, or indirect, emissions – and retailers can leverage their position as the nexus of the food system to work with suppliers, producers, and vendors to reduce the GHG emissions associated with producing food and getting it to markets. There are a number of starting places.

Retailers can work with their suppliers to share GHG reduction goals, targeting all supply chains or specific high-impact ones. Walmart founded its Project Gigaton in 2019 with the goal of eliminating one billion metric tons (a gigaton) of GHGs from its global value chain by 2030. To date, it has signed up over 3,169 suppliers to the project across its supply chain, offering guidance in setting emissions reduction targets and developing a tool for suppliers to calculate the greenhouse gas impact of their initiatives and share their progress. Costco has also launched a 4-year plan to reduce emissions, including from among its produce, textile, and paper product suppliers. Kroger uses Supplier Hub, a vendor management system that enables it to collect and maintain information on supplier conformance to company commitments.

Freight transportation to get food to market accounts for 6% of food-related emissions . Underutilized freight vehicles waste fuel, and vehicles returning empty waste even more. Optimizing freight transportation routes and logistics can help to reduce GHG emissions from fossil fuel combustion. Optimizing transportation networks can also help prevent food waste , which is responsible for about 6% to 8% of human-caused GHG emissions . FAO estimates that around 14% of the world’s food loss occurs after harvest and before retail, making optimizing transportation networks and schedules key to preventing spoilage and waste. Retailers can participate in the EPA SmartWay program to benchmark their transportation efficiency and find resources to improve their performance. Other emerging technologies like hydrogen cell trucks and electric trucks also offer pathways to zero emissions from freight transport.

A 2015 study by the Global Food Cold Chain Council (GFCCC) found that the expansion of the cold chain – the network of refrigerated freight vehicles and warehouses that fresh produce and refrigerated and frozen products pass through between production and retail – could actually reduce the GHG emissions associated with food waste by more than 50%. However, this reduction may not offset the carbon footprint of the energy used for refrigeration. It also may not address the effects of the hydrofluorocarbon (HFC) refrigerants that are often used to keep warehouses and vehicles cold, which are powerful greenhouse gases that contribute to global warming when they are leaked from refrigeration equipment. Retailers can work to reduce the global warming impact of their cold chains by improving energy efficiency in warehouses and converting to low-GWP or natural refrigerants. They could also go even further by converting warehouses to renewable energy sources.

Another source of GHG emissions associated with food supply chains is plastic packaging. According to the Climate Collaborative, packaging accounts for about 5% of the energy used in the life cycle of a food product, making it a significant source of GHG emissions. Retailers can work with suppliers to reduce plastic CPG packaging or convert to easier-to-recover alternatives that can then be recycled.

Finally, retailers can promote lower-carbon products to customers. These may include in-season, local produce that requires less refrigeration and fewer transportation miles to get to store shelves, thus producing fewer GHG emissions. Retailers may also consider highlighting lower-carbon plant-based alternatives to meat products . The methane gas produced during livestock and fish production is a powerful greenhouse gas and makes up 30% of food-related emissions .

Promote Social Equity in Supply Chains

Retailers are pillars of their communities, providing food and essential services, and they can go a long way to promote social equity through more targeted supply chain initiatives. Here are just a few of their options.

Source from smallholder producers: Smallholder farmers (defined as farming fewer than 2 hectares of land) form around 12% of all agricultural land and produce roughly 35% of the world’s food . However, they often lack the capital and resources to get their products to market or demand favorable prices. The UN Sustainable Development Goal 2.3 aims to double the agricultural productivity and incomes of small-scale food producers by 2030, in particular those of women, indigenous peoples, family farmers, pastoralists, and fishers. Sourcing products from smallholder cooperatives and using suppliers who source from smallholders will support this goal.

Promote living wages and living income among suppliers and supply chain workers: Retailers can work with suppliers to ensure that the prices being paid for goods amount to a living income for producers and a living wage for supply chain workers. In this area, the food retailer ALDI is paving the way for others to follow suit. ALDI Süd and Nord groups (ALDI Nord is the parent company of U.S. chain Trader Joe’s) released in June of 2021 a position statement on providing living wages and living incomes in their supply chains, stating that these are “an integral part of human rights if we want to address inequality and eradicate poverty.”

Promote local products & source fresh and in-season produce: Partnering with local farmers and producers to bring their products to store shelves contributes directly to their livelihoods and local economic well-being. It also means that more in-season produce is being offered to consumers, with less climate change impact and higher nutritional value.

Seek out diverse suppliers: The U.S.’s growing diversity should be mirrored on supermarket shelves, and a cadre of heritage-inspired food manufacturing companies is there to help retailers do this. Additionally, New American Table was founded this year to bring together food companies, retailers, and diverse producers to increase representation on the shelf and in the value chain – and to better satisfy customers’ desire for more diverse and healthier foods on grocery shelves.

Buy produce that supports farmworker equity: Fresh produce in the U.S. has historically been harvested by workers earning low wages under harsh conditions. Initiatives like the Fair Food Program and Equitable Food Initiative seek to ensure that agricultural workers are paid fairly for their work, work in safe conditions, and have a voice at the table. Retailers can source fresh produce from vendors who participate in these programs.

Improve Transparency and Source Third-Party Certified Products

Sustainable sourcing strategies not only allow retailers to align product attributes with customer values and retain their loyalty, but also minimize the risk that their supply chains are contributing to environmental degradation or social ills. Increased supply chain transparency helps achieve these two aims. Retailers can develop sourcing criteria for commodities that are known to have high social or environmental impacts. Retailer Ahold Delhaize’s USA companies each have responsible sourcing criteria for coffee, tea, cocoa, palm oil, seafood, soy and wood fiber, which “have been identified as ‘critical’ because they are linked to major sustainability issues such as deforestation, carbon emissions, human rights, illegal fishing and overfishing”, according to Justin Lacroix. Additionally, the company has sourcing policies related to animal welfare, GMOs, and forest conservation, says Lacroix.

Resources like FMI’s Sustainable Sourcing Guide can help retailers develop sourcing criteria and evaluate their supply chains for risk. Digital apps offer another useful tool for enhancing transparency. Whole Foods has begun having some produce and seafood third-party-certified according to their sourcing criteria through its Sourced for Good program, which partners with a number of third-party certifications. Ahold Delhaize uses the app HowGood to evaluate the ingredients of products against its sourcing criteria. Collecting information from suppliers on their ethical practices can be difficult, but digital platforms like SupplyShift can ease the process and greatly improve transparency.

Third-party product certifications offer retailers a way to source sustainably-produced goods within specific supply chains or more broadly across product categories. Product certifications add value to retail sourcing strategies by bringing transparency and assurance to the product’s attribute claims. Most certifications are third-party verified and have stronger validity than noncertified packaging claims. Certification labels also help consumers easily determine which products align with their values while perusing shelves. Table 1 offers an overview of select certifications, their covered product categories, and their sustainability impact focuses.

Table1: Summary of select food certifications

The Takeaway

Food retailers can have a dramatic impact on greenhouse gas emissions reduction, social equity, and environmental and social sustainability by leveraging their position as the nexus of the food system. Although the scope of what the supply chain impacts may seem daunting, taking action to reduce supply chain GHGs, promote social equity among suppliers, and source certified products can go a long way to demonstrating a strong commitment to the communities they serve and improving customer loyalty through shared values.

This article was published in partnership with Presidio Graduate School.