Organic is the fastest growing sector of the U.S. food industry. Organic food sales increase by double digits annually, far outpacing the growth rate for the overall food market. As per a study by the Organic Trade Association (OTA), Americans have spent nearly $50 Billion on organic food in 2017.
With the takeover of Whole Foods by Amazon, indications are that organic food will become even more popular, and even more accessible, in the next years.
Especially younger consumers are driving the growth in the organic food category. They are also demanding more transparency about topics such as origin, production methods, food safety, genetically modified organisms, artificial ingredients, and pesticides. Consumers are interested in the story behind the food before they will buy it. Is it locally sourced or imported? Are the farmers being paid a fair price? Is it produced in an ethical manner?
Organic food companies need to go beyond just the product; they also need to ensure that the entire farm to fork supply chain is sustainable. This includes fair sourcing, being a good steward of all resources, minimizing the carbon footprint, and using recyclable / compostable packaging. This is not an easy path, as it can be quite costly and takes years to implement. Smaller companies in particular struggle to go full circle with their supply chain. In most cases, it is advisable to implement a sustainable supply chain in a phased approach and to team up with outside partners such as NGOs, trade associations, 3PLs, and long-term investors for parts of the supply chain.
The increasing worldwide demand for organic food, coupled with a growing population and climate change, poses several challenges for a sustainable supply chain. Many of the general sustainability challenges, such as the use of water, deforestation, poor working conditions, monocultures and genetically modified organisms, are more attributed to agriculture and processing than on the food logistics. However, the supply chains of organic food companies are playing an increasingly important role to improve their sustainability efforts, particularly in the area of visibility.
Here are some key factors organic food companies need to consider to ensure a sustainable supply chain:
One of the biggest contributors to a sustainable supply chain is the sourcing of products. Wherever possible, food, ingredients, and packaging should be sourced locally. A shorter supply chain offers greater predictability of delivery times, lower costs, and, most of the time, fresher and better tasting products. It is easier to meet with and get to know the suppliers and it benefits the local community. Localizing the supply chain also reduces emissions and energy usage.
However, it is not always possible to source all ingredients locally. Reasons can be seasonality or a consistent quality. And of course, a lot of ingredients just don’t grow in the U.S. thus must be imported from international markets. Food companies need to re-evaluate and optimize their supply chain and distribution network constantly, looking at the locations of their suppliers, manufacturing facilities, warehouses, and distribution centers. An optimized supply chain and distribution network will not only reduce the carbon footprint, but also reduce costs significantly, and potentially enhance customer service delivery.
Food manufacturing and processing
Food manufacturing and processing is another big source of environmental impact. This is generally also the area where the food industry has focused its sustainability efforts so far. For many products, food processing requires a lot of water. A substantial part of the food supply is also wasted at the point of processing.
Although much progress has been made in these areas, organic food companies and their supply chain partners need to further minimize the use of water, raw materials and energy. In addition, these companies should aim to use renewable energy, including using food waste to produce energy.
Food manufacturing and processing can pose great risks for contamination of organic products. Facilities where organic food is processed must meet organic standards and certification. Whenever organic and non-organic products are processed in the same facility (known as split operation), measures must be taken to prevent commingling and contamination of the organic ingredients and final products.
In the U.S., transporting products from the source to the processing facility or distributing it to retailers, distributors and consumers, involves in most cases trucks. And most of the vehicles run on fossil fuels. For organic food companies striving to improve sustainability, the first step to reduce emissions is to measure the carbon footprint along the transportation chain. This will help to identify opportunities to reduce the carbon footprint.
Each mile traveled represents additional emissions. Therefore, by reducing the overall number of miles driven, the carbon emissions are reduced. This can be achieved through a streamlined supply chain, increase in payload for each truck or container, optimized inventory management, modal shift to rail, or electric vehicles.
Organic food companies need to ensure that their products are not contaminated during transportation. Measures must be taken that trucks and containers are thoroughly cleaned before loading organic products and that organic products are carefully separated from non-organic products if a truck is shared.
Warehouses and Distribution Centers
More and more warehouses and distribution centers are pursuing Leadership in Energy and Environmental Design (LEED) certifications. This offers organic food companies wider options to expand their efforts for sustainability to their logistics network.
Energy efficient lighting is one of the most popular initiatives for sustainability in a warehouse and can easily be implemented in older buildings. It’s not only good for the environment, but also helps save energy costs. The architectural design of warehouse buildings, the material used, and the use of renewable energy has a positive impact of the environmental footprint of the distribution networks. Another approach to enhance sustainability is by recycling, reusing, and repurposing materials in the day-to-day operations.
The biggest impact on sustainability however is not the energy use of the building itself, but its location. An optimized, more energy-efficient logistics network can significantly reduce the environmental emissions.
It is important for organic food companies to chose logistics partners that meet all organic requirements. Because of contamination risks, most organic products cannot be stored with other products.
Consumers are not only demanding more organic products, but also that these products incorporate packaging that has minimal impact on the environment. For organic food companies, the big questions are whether to use packaging made of recycled materials and if the packaging should be recyclable, compostable, or biodegradable.
While recyclable packaging has become very popular, the number of compostable and biodegradable packaging available is still limited. Even if packaging is compostable or biodegradable, these claims only apply to professionally and dedicated waste facilities and it still can take a very long time for the products to break down.
Consumers buying organic products expect premium quality, and the same quality standards need to be reflected in the packaging. Therefore, packaging for organic products requires a unique blend of creativity to meet consumer expectations, and at the same time delivers on quality and brand promise.
Packaging needs to keep products fresh and maintain quality, taste, texture, and nutritional values. At the same time, food safety must be guaranteed. These factors often dictate what packaging can be used for certain products.
Recycling, composting, and biodegrading all have their benefits (and drawbacks) when compared to each other. Organic food companies also need to work on reducing packaging overall along the supply chain and strive towards zero waste.
Visibility and Traceability
A key sustainability challenge for organic food companies is the visibility of its supply chain. A food supply chain is highly complex and multi-tiered, most of the time involving dozens or even hundreds of suppliers, some of which are located in remote locations around the world. Not having visibility of the entire end-to-end supply chain and knowing all the involved players poses immense risks for organic food companies.
Supply chain visibility and traceability of the products is key to ensuring consumer safety and reducing recalls, mitigating foodborne illnesses, avoiding regulatory violations, and eliminating unethical work practices. However, significant numbers of food manufacturers still lack visibility into their supply chains.
In recent years, more technology to support supply chain visibility has become available, such as supply information systems, traceability systems, IoT tracking solutions, and blockchain. These systems help break down information silos to improve visibility and traceability from farm to fork. However, the foundation is critical. An organic food company needs to get to know its suppliers and all involved parties first, tier by tier and both upstream and downstream.
Considering sustainable practices throughout all elements of your supply chain will ensure a greater likelihood of delivering a truly farm to fork organic product.
About the Author
Rene Jacquat is the principal of LogiChain Solutions, LLC, based in San Francisco, United States. His experience includes operations, supply chain management and logistics in the consumer goods industry. Rene supports food & beverage companies in supply chain strategy, supply chain & distribution network design, supply chain diagnostics & risk management, sustainability and outsourcing logistics services.