The industry will have to move faster and work harder on cutting emissions if it is to meet the 2020 targets. The tension is rising, says James Ball


A last chance to save the planet or a 10-day talking shop? On Monday, representatives from 192 countries will sit down in Copenhagen in an attempt to negotiate binding targets to stem climate change. Almost all have publicly committed to fight global warming, but slight differences of opinion still look likely to stymie efforts to set binding targets.

It's a situation paralleled almost exactly by the UK's food and drink industry. The industry has made a commitment to cut emissions, and is taking its responsibilities seriously: new research by IGD reveals 85% of fmcg companies have either held steady or increased their green spending over the past year. Last month, 17 leading companies including Tesco, Unilever, Kellogg's and Nestlé signed up to the Copenhagen Communiqué on climate change. But despite this united front, uncertainties and differences of opinion herald not days but months and possibly even years of tough debate.

Whenever it comes, a climate deal will have a huge effect on the food industry. Almost 19% of UK consumption-related greenhouse gas emissions stem from food consumption, equivalent to 159 million tonnes of CO2 each year, and the government has commissioned several reports looking into defining and encouraging sustainable diets.

Retailers and manufacturers are getting their blow in first ahead of potential regulation. In a keynote speech to a sustainability conference in October, Sir Terry Leahy pledged Tesco would become a "zero-carbon business" by 2050. But he went further. Recognising most of the environmental impact of Tesco's products comes at other stages of the supply chain (either during manufacture or after consumption), he also promised to cut the impact of Tesco products by 30% by 2020 believed by many in the industry to be the more ambitious of the two targets.

Suppliers should not fear having reductions foisted on them, he reassured. "We are neither imposing nor seeking to impose this target on you," he pledged to delegates. "That would be entirely the wrong approach. We can achieve our target only with your co-operation and collaboration."

Yet the potential for this ambitious approach to cause division remains the elephant in the room, as suppliers and retailers set out plans for emission cuts at differing paces. Reckitt Benckiser, whose CEO Bart Becht shared a platform with Sir Terry, has committed to cut emissions from its products by 2020 but by a comparatively modest 20%.

'We need a step change'
Suppliers and retailers have just a decade to agree these targets and then take the action needed to hit them. A tough ask given that action to date has moved at a modest pace. Tesco, for example, has cut distribution emissions by 11.5% and building emissions by 13% in the past two years; solid enough, but the rate of change will have to increase substantially to hit much more ambitious 2020 targets. The disparity between targets and current progress was sufficient for SC Johnson CEO Fisk Johnson to break ranks at the event and warn current industry efforts were not enough to achieve long-term targets or to beat climate change.

"What we, as an industry, are doing today is not adequate," he warned. "We need a step change."

There's no shortage of incentives both carrots and sticks encouraging the industry to do more. Foremost among these is a pile of regulations and voluntary codes, including the Carbon Reduction Commitment, Climate Change Act, Emissions Trading Directive and Climate Change Agreement.

The latter is an "unusually well designed" voluntary agreement popular in the industry for "containing the right mix of carrots and sticks", according to one industry source. Manufacturing sites receive an 80% discount on their climate change levy if they meet emissions reductions targets, set every two years. At the last update in 2008, the 850 food and drink sites signed up to the agreement had increased energy efficiency by 16% per tonne well ahead of the 13% target.

'Frustratingly short'
The downside is uncertainty over the scheme's future. The agreement expires in 2010, and a consultation to extend the programme is only looking to set targets until 2015 a "frustratingly short" time frame for a guaranteed discount given the investment required to cut emissions. With observers generally regarding binding global targets on emissions as a matter of when, rather than if, there is much broader uncertainty over how strict legislation will get.

It's not the only cause of friction for those in the middle of the supply chain. Cross-industry efforts to reduce emissions, whether through carbon labelling, impact assessments or retailer targets, are "a tension that's been in the system from the start". Labelling schemes, one manufacturing source says, generate debate rather than action: are they a tool to encourage consumer action, or are they engineered to persuade manufacturers to change processes?

To date, it's a question that's split opinion. Tesco has led the way with carbon labels, now on 120 lines. But some suppliers remain unconvinced of their merits. "Our experience with carbon labelling is not good," Gus Atri, environmental affairs controller at Northern Foods, told a conference on sustainability. "The information that supports the calculation for complex products is not there."

Flatulent cows
And what of the controversy over meat? For months, meat has been the green issue that dare not speak its name. Campaigners, the FSA, Defra and even Paul McCartney have all stressed that, thanks in large part to flatulent cows, a low-carbon diet means eating less meat or even none at all. The meat industry this week unveiled a series of targets aimed at cutting the sector's impact (see p34). Even though rows over how much meat the UK should eat will undoubtedly roll on, it's definitely progress.

Yet the main barrier to achieving a sustainable supply chain will require an even greater leap of faith. It's one that goes to the heart of all business: competition. "Green issues do enter into our negotiations with supermarkets these days, to different extents. But it's one issue on a long list of issues, and it hasn't got the highest priority," one major manufacturer says. "Negotiations hinge around price. In this climate, I can't imagine that changing in the near future."

In the long term, food bosses will have no choice but to put ­climate at the heart of their business strategy. It's a corporate social responsibility issue, a consumer issue, a major regulatory pressure and given the pressure already on agricultural supply chains a pressing long-term business survival concern.