2020 was an extraordinary year for the world and in particular, the food industry; supply chains were interrupted, and it was the year when most consumers in the developed world turned to the internet for their grocery shopping. It was also the year when the world’s largest food companies made strong commitments to greening their operating model. Danone is now described as a business where the social and environmental mission is as important as its ability to drive profits. Many others, including Nestle, Unilever, Migros, Loblaws, Mars, WalMart and Arla, have committed to achieving net-zero operations and have called for the implementation of regenerative sourcing practices. I am under no illusion, as an advisor to the food industry, that this process will be easy. In fact, some would argue that it is next to impossible to ‘retro-fit’ businesses with new regenerative business models. I am of the camp that believes it is indeed possible. Where there is a will, there is a way. And there must be willingness if your business is confronted with an existential threat like that of the climate crisis.
Finding a model for regenerative business
The big question is ‘HOW’? The short answer is that no-one truly knows the right model for ‘green’ transformation of an existing food business. What we do know is that we need to apply systems thinking with all its inherent complexity. This requires a willingness to stay open with an ability to learn and understand. What is central to a new business architecture is the creation of a living ecosystem of internal and external collaborators.
Throughout my career, I have subscribed to some handy models for business analysis and strategy. The first is Porter’s 5 Forces, used for mapping a business’ competitive environment with the specific aim of developing its Unique Selling Proposition (USP). The second is Kotler’s 5 Ps, that provides a framework for positioning a business or product in the marketplace. Some might argue that both of these models are outdated, but for me they still provide important ‘checklists’ to guide a process that is as relevant to business today as they were when KODAK was among the most popular case studies at Harvard Business School.
In order to address the needs of 21st century businesses, I have expanded on these models to include an updated list of aspects and predictions that should be included when designing a business model that is both resilient and which begins your journey to becoming a regenerative business.
The Ps are interconnected, intrinsically. Incorporating one area will not be possible without effecting the others. For a business to succeed, inclusive, complex, systemic application is needed. Each ‘P’ adds complexity and context to any strategic process within the food industry, or indeed any industry depending on natural resources to manufacture products (including Agriculture, Aquaculture, Fibre, Supplements and Natural Ingredients).
1. Planetary boundaries
All business is directly or indirectly reliant on the use of soil, air, water, fire, minerals and/or green space. Our accounts with nature need to be balanced. A sustainable business fundamentally means that your business and its employees, as well as close stakeholders, operate within the planetary boundaries. This demands a model which can provide positive returns on its business operations as well as its social and environmental impact.
A plan should work to quantify, value, restore, replenish and regenerate all these input resources in order to minimise the risks and sustain the long-term survival of the business.
Climate commitments from governments will change the marketplace conditions and be one of the key drivers of the business transformation. Staying close to the process and following the rapidly changing policy landscape is more important than ever.
Climate commitments include: global, regional and national policies to drive net-zero targets, such as future total costing model accountancy standards; current and future CO2 taxes; pollution taxes; penalties for exporting or importing environmental costs; changes in the agriculture subsidy systems; current and future circular economy / materials framewor; waste and material management; incentives for energy use; and low carbon manufacturing.
Eventually we will be a world where the planetary resource loss and depletion through consumption is replenished and regenerated. While we might be decades from this reality, the journey has begun.
Good leaders have followers: great leaders create leaders. A shift in the mindset of current boards and C-suite is required. A shift which allows for Regenerative Leadership to be understood and lived throughout the organisation. Now, for any true transformation to take place, re-education and fundamental cultural shifts will need to take place. Change is never easy; however, this one is guaranteed to provide you and your teams with renewed purpose and energy.
A deep transformation is happening in developing the products that will feed us in a regenerative world. The first generations of these products are out there; however, they rarely manage to cater to the requirement for human nutrition and planetary biodiversity (the two are connected at the hip!)
Currently, this is not being addressed in any meaningful way. For example, while addressing the urgent transition away from animal protein in our diets, most have been developed in linear, scalable models which, like the current food system, will end up collapsing. Applying nature’s wisdom (biodiverse and regenerative) to the mix will provide resilience and sustain the returns of new products. This will be true for products produced from soil, sea and ‘sheltered’ production units such as labs, vertical farming etc. Cradle-to-cradle thinking will apply to all new products creating a true circular economy in the developed world.
Smaller, more agile production units will become the way to scale in a regenerative world. This will demand new modular flexible models for everything from production machinery to energy dependency and packaging. The investment model for production assets will eventually change.
The drivers are the acceleration of product-life and go-to-market cycles, disruption driven by the structural changes and strains to supply chains and market requirements. Furthermore, changing reporting standards will profoundly impact COGS.
The localisation of supply chains will be needed to build resilience in supply. This localisation is driven by:
a) Crop availability and cost stability (including food security)
b) The drive to stop and replace the dependence on the destructive ‘commodity trade’
c) The need to ‘reconnect’ consumers with the products they consume and the land from
where it is produced
d) The need to reduce the time to market to meet accelerated product and time to market
For the immediate future, the marketplace will keep polarising between consumers that can access the low-nutrition (cheap and extractive) diets and high-nutrition (expensive and regenerative) diets. This, however, will be reversed as the West introduces carbon taxes and better policy linking climate change to poor diets and the spiraling healthcare costs (COVID-19 gave us the most stark example of this). At the same time, there will be less room for brands and SKUs in the marketplace. A few brands will dominate the food and drinks categories with private label products continuing to grow. Deeper vertical collaboration and integration between retailers and their local supplier base will develop circular systems surrounding food supply.
The 6 Ps will not be worth anything without a fair amount of common sense, wisdom and courage. In a world of unprecedented change, food and the ability to feed ourselves remains a constant and in order to sustain this, the harmony and balance with nature needs to be restored. We have arguably been on an extractive and destructive binge which has lasted the good part of 75 years. Being part of the journey to architect new regenerative models to restore this balance is the greatest motivator for my work.