The Future in Focus

Welcome back to The Future in Focus podcast by LRQA or if you’re new here, thank you.

In this episode we are joined by LRQA’s Technical Account Manager for Agriculture, James Sage to discuss the food supply chain and the increasing pressure on suppliers to demonstrate their commitment to ethical production of agricultural products.

Hi James, thank you for joining us today. Could I start by asking you to introduce yourself to our audience?

Hi Holly, thank you very much. My name is James Sage and I am the Technical Account Manager for Agriculture here at LRQA. I’ve been with the business for 4½ years and my background is coming up to 20 years now in the food and agriculture assurance sector both working for governments, working in charitable sectors and then in the private sector for the last few years and my primary work has been in and around farm based audits and everything up to the point of meat processing primarily.

Great, thanks James. So we’re here today to talk about the food supply chain specifically farming and agriculture. Now some might think that’s not relevant to me, I’m further along in the supply chain that doesn’t affect me, but we’ve seen in recent years that supply chain disruption can and quite often does originate at the primary source.

Can you shed some light on some of the common issues that can result in supply chain disruption?

Absolutely so I think the first thing is when people think oh that’s not relevant to me, most of us certainly in the Western world are lucky enough to be able to eat three times a day and therefore agriculture and primary production is extremely relevant to our lives unfortunately we’re maybe a bit disconnected from it. But the common issues we’re seeing in supply chain disruption and pressures are the war in the Ukraine in the last 12 months and how that’s affected global supply and it’s shed a light on how much our diets have changed and how much food is imported and exported globally especially if we’re talking the European region the pressures that’s put on the industry.

We’ve also seen because of some of the issues out of again the war in Ukraine, the price of imports into the agricultural sector so fertiliser has skyrocketed in the last 12 months as has the cost of electricity which if we look at various sectors, so dairy for an example, a dairy farm will use a lot of electricity in pasteurising and chilling the milk on the farm, that’s added a huge pressure to their industries. Abattoirs have huge refrigerators and freezer facilities that’s a big user of electricity.

So that’s what we’re seeing in terms of a live theme going but we’re also the constant pressures of labour shortages in most regions across the globe are being experienced partially through the economic downturn that we’re currently in post pandemic and as that starts to pick up hopefully those situations will be reversed.

Great, and there’s something I’ve seen a lot recently in the media is the animal welfare piece specifically consumer demand for ethically farmed meat, dairy and egg products. Can we talk about this what implications does this have on retailers, what does this mean for suppliers of these products?

Yes, there’s never been greater pressure on the retailer and that’s primarily due to the increased consumer awareness of the supply chains and that’s actually if anything accelerated in the last few years possibly through social media and interaction, and there are a number of social media accounts there of primary producers/farmers but also brands highlighting the good work they’re doing.

And also the plant based movement is shining an ever greater light on animal based protein sources and therefore all the animals we eat need to be reared and slaughtered in an ethically acceptable manner, they need to be given an excellent quality of life.

And the vast majority of production systems, and for certain species, that really works well but there are systems that in certain parts of the world its still, you know there’s a number of regions in the world where barn reared or cage reared eggs that’s just the industry norm and that’s something we’re seeing moving away from. We’re working with brands that currently are looking for how they can come up with a free range offer which we’re lucky in Europe certainly and a number of other regions that the industry norm is now not barn reared.

We’re also seeing brands and retailers questioning existing standards and looking at new options in the market as well as certainly bespoke options so whether they’re launching maybe their own audit programme, maybe its something a bit more innovative in terms of looking at a risk based approach but what we’re seeing is people moving away from some of those existing standards and just exploring what’s out there. Certainly outside of the UK, the UK is probably one of the most heavily farm audited countries in the world, however the quality of animal welfare, the ability to trace products back through the supply chain is greater than a lot of other places but what we are seeing in some of the work we’re doing is that that level of oversight is being demanded and brands are having to react to that at a significant speed.

So I think its an interesting, its an exciting time, its also a time that ethical and sustainability standards are going to come to the fore and we’re seeing that with some of the programmes we’re working with.

And perhaps going hand in hand with the rising expectations for a demonstrated commitment to animal welfare is the sustainability piece.

How are retailers and suppliers addressing the demand for sustainable products both in terms of environmental sustainability and also social sustainability?

Yes, we’re seeing that the whole ESG piece is just taking off and accelerating but in terms of environmental sustainability, regenerative agriculture, agroforestry, I think trends and themes like this are ever coming to the fore.

We’re working with a number of brands on the offering we can make and work with them in the regenerative space and I think that there’s exciting options will be coming forward on that because we’ve got brands making significant claims. We’re also looking at carbon capture options that are on farm and soil improvement options, organic matter, things like reintroducing ruminants back into arable crop rotation systems so that you’re reducing the reliance on manufactured fertilisers and using organic fertilisers from animals which is a great use of ruminants and allows us to be far more sustainable.

In terms of social sustainability, we’re obviously at LRQA we’re really lucky that recently well in the last few months, ELEVATE have come onboard and we’ve been linking up with colleagues there in terms of they work with a number of brands and they’re obviously working on a social sustainability and worker welfare but we’re able to tie in the missing piece in terms of farm animal welfare and vice versa.

And what’s coming more to the fore is that as well as treating the animals with dignity and respect and treating them in an ethical and appropriate manner at all times, worker welfare etc. is vitally important. We’ve seen that happen in the textiles sectors to an extent but still plenty more work to do and we’re seeing that come onboard in farm standards. LRQA’s new standard, Farm First, that has a significant focus on worker and ethical welfare and sustainability.

Thanks James. So shifting the focus a bit now, are regulatory pressures for ethical farmed products also rising, if so, do you have any examples you could share with our audience?

So what we’re seeing is the market primarily is driving the increase in standards certainly to start with. We are seeing regulatory standards catching up and possibly accelerating in some areas. Water pollution is certainly, water and plastic pollution we’re starting to see come into some standards although it’s been mature in others for quite some time.

Waste management and disposal through the Agri supply chain is ever more being pressured as it is in all our lives, 25 years ago who recycled whereas now, you know recycling is now the norm for many of us in lots of different regions around the world and I think we’ll see that further penetrate into primary production and primary production standards and what that looks like.

I think the challenge for some products is going to be the point of difference and how we work on that, whether the various options for stating the point of difference and what we’ll see is a number of retailers looking to make sure that their standard or the scheme that they’re working to is market leading and how those trends will develop, its something to keep an eye on.

I think the marketplace will look quite different by 2030 especially with zero carbon commitments looking to be made by then and therefore will some supply chains, some global supply chains will they be broken back down to more regional ones to reduce transportation or will there be other efficiencies in the carbon footprints of supply chains.

It sounds like a tough landscape to navigate with a lot of moving parts and evolving trends. What does best practice look like for retailers and suppliers?

There are many different options out there and working in a global market there are some areas that are maybe further down the track in terms of having a mature industry standard present in the marketplace and in some areas, they’re having to accelerate through that process at speed.

Ultimately what we are seeing is that a full robust assessment or audit regime through the whole supply chain is now becoming the industry norm and that’s happened in food service and processing for a significant period of time. What we’re seeing now is that that’s being rolled back into primary production methods and that’s a really healthy thing, we’re ten years on now from the ‘horse gate’ meat crisis and that introduced a real lift in not only farms and processing units being audited but also the robustness of those schemes.

Unfortunately at some stage there’ll be another crisis of that nature and that ilk and there is a greater risk of that possibly in a recession where people are looking to cut corners and cut costs. However, a full robust audit programme at least doing a sample check but preferably everything with the appropriate measures like trace, product traces and we should be able to take, and we know with our schemes you can take a pizza that’s used frozen chicken from Thailand as an example, and you can trace it right back to the crop and the farm all the way through. And consumers are going to want to see that more and more and at some stage we’re going to start seeing that on pack.

So ultimately in conclusion, it is about being out in front as a brand or as a retailer and having a robust and diligent assessment and audit regime of your supply chain where you then have the confidence to go to your consumers with making the animal welfare claims, making the environmental sustainability and social sustainability claims so that you can stand by those values, stand by that programme, and the risk to your brand is significantly reduced and it also means that your supply chain becomes more well known.

We’ve started working recently at LRQA with a retailer who initially was sourcing for one crop, one protein source was sourcing a third of it from the spot markets, so there was no direct supply chain. And what they’ve moved to is a supply chain they’re able to now pay a premium because they’re not subject to some of the market volatilities, so they’re paying a cost of production plus model. So that’s where they pay the cost of production and a premium for the producer hitting a number of environmental and sustainability and animal welfare standards.

And that then means the farmer all the way down the supply chain the farmer then has, he knows what his incomes going to be depending on his crop, he knows that he’s got to rear his animals to that standard, but it gives him a medium to long-term outlook on what his payments are going to be like. That’s a good model and probably a fair model for those suppliers all the way through the chain. At a time that we have seen over the last 12 months prices fluctuate, that will cause a stress, but equally it does allow both the retailer and the farmer to know what the prices are likely to be over a rolling 12 or 24 month programme which builds in a degree of resilience to the supply chain and works to give some reassurance through the supply market.

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