Things are better than you think

In his book “Factfulness: Ten Reasons We’re Wrong About the World – and Why Things Are Better Than You Think”, Hans Rosling argues that although the world is far from perfect, real progress is being made. Things are bad, but they are getting better.

He writes,

“None of us has enough mental capacity to consume all the information out there. The question is, what part are we processing and how did it get selected? And what part are we ignoring?”

We all know that keeping mankind fed is one of the main causes of environmental degradation, and it is commonly accepted that the situation will only get worse as the world’s population increases.

However, although the first part of that statement is true (things are bad), genuine progress is being made in making it less so (things are getting better). That change is occurring within the supply chain, led by companies that are making a genuine impact in how your food is produced, and how it arrives on your plate.

So in case you screened out some of the good news, here are a couple of positive articles that have been published in the past week.

The first, published by Food Navigator, is entitled, “Why Mars thinks the commodities era is over”. It is an interview with Barry Parkin, the chief procurement and sustainability officer at Mars. The very fact that the head of procurement for Mars is also head of sustainability is good news in itself – and should give a clue as to where our business is heading (but more on that later).

Mars is at the forefront of change in terms of sustainable procurement and has mapped the origin of 23 different raw materials used in their products. The company buys either directly or indirectly from around one million farmers, half of which are smallholders. Parkin tells Food Navigator,

“We are in a transparency race. As a company we had better find out where our materials are coming from, and under what social and environmental conditions they are being produced. We need to get working on fixing it before somebody else tells us what is going on. I want to be on the front foot in this race. I want to win this race.”

Palm oil is one of the hottest issues in food production at the moment with a wide supply base. Mars buys only 0.2% of the world’s palm oil supply but is connected to “half” the palm oil mills in the world, more than 1,500 mills. The company has realized that they cannot “be on top of all the conditions in all those mills, each of which is probably connected to 20 plantations” and realizes that it needs to simplify its supply chain if it wants to really know what is going on.

Wilmar International Limited, the world’s biggest processor and merchandiser of palm oil, cannot simplify its supply chain, but it is in a fairly unique position (because of its market share) to influence the way palm is grown and harvested. The company aims to “to meet demand for certified sustainable palm oil by ensuring all suppliers become sustainable”. To further this goal the company has developed an online reporting tool to assess its suppliers in Malaysia, and plans to extend it to Indonesia and Latin America.

The company’s focus on sustainability is paying off not only in terms of brand protection, it is also lowering their cost of borrowing. Last week Singapore’s OCBC Bank announced that the interest rate on their existing US$200 million (S$267 million) revolving credit facility to Wilmar International will now be pegged to Wilmar’s sustainability performance.

But how will this affect the traditional agricultural trading houses? Better for some people may be worse for others. Barry Parkin warns

“You can no longer buy at arm’s length from unknown suppliers. You can no longer buy on price.”

 He adds,

“This is the end of the commodities era. Commodities were all about buying materials of unknown origin, on short-term contracts, with price being the only differentiator. What we now know is there are big differences in terms of the social and environmental impacts of what you source. It is no longer acceptable not to know where your materials are from. There are going to be very different sourcing models in the future.”

Bloomberg last week published an excellent “long read” on Cargill, and how the company is adapting to both technology and changing consumer demands. According to Bloomberg, Cargill Chief Executive Officer David MacLennan is transforming Cargill into “less of a trading operation and more of an integrated food company betting on growing global demand for proteins.”

Bloomberg continues,

“MacLennan, who became CEO in 2013, says he decided three years ago that the company could no longer rely on the occasional crop failure, export ban, or supply shortage to save the day. “I thought, Boy, if we wait for something to change without disrupting ourselves, we’ll be in trouble,” he says. “What’s that old adage? You put a frog in a pot of water and slowly turn up the heat, and the frog doesn’t notice it’s been boiled. I didn’t want to be the frog in the boiling water.”

No one wants to be the frog in boiling water, but the real question is “How do you get out of the pot once you are in it?” There is no clear answer to that question, but as Mr MacLennan realized, the most important first step is to realize that you are in hot water in the first place.

The second is to do what Wilmar is doing: map your supply chain and work to make sure that all your suppliers are sustainable. If all food were produced in a sustainable way the “tradeability versus traceability” dichotomy would go away.

So we know where we have to go. Let’s get going!

All photos sourced under creative commons from Pixabay