Dive Brief:
- Food companies are reporting higher revenue and lower costs associated with their investments in sustainable agriculture, according to a new study from Deloitte and New York University.
- In a survey of 350 global food and agriculture company executives, 99% reported revenue growth and 98% reported cost reductions over the course of three years as a result of their sustainability investment. Close to 80% reported revenue growth of at least 2%.
- However, the value generated by these investments was uneven depending on the sector. Processors and food service providers tended to report more revenue growth, while retailers and restaurants were among those better able to reduce costs. Manufacturers, meanwhile, struggled to see a return on investment.
Dive Insight:
While sustainability has often been framed as an added cost for businesses, the price of doing nothing is much higher. Delays or a lack of additional investment in sustainability led to revenue loss for at least 57% of survey respondents.
“Modeling conducted by third-party economists on the cost-benefit ratio of ag climate initiatives for McDonald’s US found that every dollar invested in mitigation generated nearly three dollars of benefits resulting in enhanced supply chain resiliency,” a McDonald’s U.S. sustainability leader said as part of the study.
The top revenue-generating sustainability strategies included selling products with verifiable sustainability claims, in addition to initiatives around food safety and reducing the use of harmful chemicals. Sustainable and responsible supply chain sourcing, meanwhile, was among the top ways to reduce costs.
Many companies said that their primary motivator for investing in sustainability was to manage potential risk and avoid costs. Moving forward, many executives remain hesitant of a potential diminishing rate of returns on their investments as companies address more complex issues to reach their climate goals.
At least 40% of respondents said they expect the value of their investments to either remain the same or to decrease in the next two years. For some companies, part of the problem in understanding the financial benefit of sustainability comes from the difficulties measuring, monitoring, reporting and verifying sustainability claims.
“There are a lot of assumptions around customer loyalty, brand, operational risk management, and stakeholder engagement,” Cargill wrote as part of the survey. “Anecdotally it helps, but we struggled to comprehensively quantify that value.”