It’s set to be the big issue in the food and drink industry this year. Liz Hamson gauges industry attitudes to sustainability while, overleaf, Lord Bach outlines the government’s agenda

The government and pressure groups have been banging on about it for years. But most people’s eyes glaze over at the mere mention of the word. Even The Grocer has shied away from the worthy but dull debate about what it all means. Not any longer.
Like it or not, sustainability is going to be the burning issue for the industry this year. Whether you take it to mean economic activity that doesn’t use up more resources than it replaces, or you define it in pure economic terms as activity that is profitable, the big question has to be: is the food and drink industry sustainable?
The short answer is no, say leading industry figures and commentators, and 2006 will be the year in which the industry either sorts out its act or suffers the consequences.
There is a long list of issues that they expect to come to a head this year: the plight of British farmers, the threat to energy supplies, aggressive supermarket pricing agendas, retailer-supplier relationships, supply chain efficiencies, global sourcing, corporate social responsibility, consumer backlash, ethical trading and the state of British manufacturing, to name a few.
Frances Buckingham, senior adviser at independent think tank and strategy consultancy SustainAbility, says: “Pressure has been building slowly over the past few years - there are a number of reasons, including food scares, concerns about health and obesity, concentration of power within the supply chain, growing awareness of fair trade and growth of organic and local markets.”
Throw in a few hurricanes, a fuel crisis and general economic uncertainty, and both the industry and the general public are forced to confront some unpalatable truths about sustainability.
Melanie Leech, director general of the Food and Drink Federation, says: “It’s not difficult to anticipate some of the issues: labour legislation, the development of an improved skills base for the UK, the extent of distortion of the market in the food and health arena, the improvement - or lack - of UK companies’ ability to source high-quality ingredients globally and the constantly turning ratchet of retailer competitiveness.”
This year will be a crunch year, agrees Tim Bennett, president of the National Farmers’ Union. However, he says: “Delivering a sustainable countryside is perfectly possible providing we have two things: profitability and a sustainable relationship with government in terms of regulation.
“The government has to work with us to set sustainable targets, but also allow us to deliver them without hitting us with bureaucracy. We’ve spent the past two years trying to convince Defra that there’s a better way of doing things. The other important thing is that farmers deliver sustainability through profitable businesses. We need to find ways of driving profit into the supply chain. If we don’t succeed in doing this, we’re going to lose a lot of businesses in the next 12 months.”
For Bennett, it is key that the government continues to adopt a more pragmatic approach to its sustainability agenda.
However, Patrick Holden, director of the Soil Association, believes that the general public - rather than the government - are pulling the strings. “There’s a big food revolution in the pipeline. I think a lot of people believe that cheap, globally sourced, industrially produced food is with us to stay. I think they are wrong. The supertanker that is the supermarkets has tremendous momentum, but that’s all it’s running on now.
“There are a lot of counterforces. The government will not lead this. They will follow. There are two key forces: public opinion and external factors - things that we can’t even imagine yet.”
Holden predicts that the same people power that transformed organic and fair trade into mainstream categories will force retailers and suppliers to make fundamental changes to the way they do business.
“There’s a sense of disconnectedness, a sense that food has become homogenised. It’s not all about the supermarkets, but the supermarkets that listen will do better - they pick up on customers’ changing perceptions.
“The reason that 2006 is significant is that it is a tipping point. Once you’ve reached that point, ideas spread much more quickly than any forecasts can mathematically predict.”
Consumers are, for instance, demanding more locally sourced food, he says. Retailers will have to meet that demand, however challenging it is to pull off within centralised distribution chains. In the longer term, the pressures will lead to a fundamental rethink of the way food is processed and distributed, he argues. If energy prices rocket, as predicted, it will change everything: everyday low pricing strategies won’t be sustainable.
Kevin Hawkins, director general of the British Retail Consortium, says life is going to get tougher for retailers - big and small. “Sustainability is an issue for policy makers and the food industry because of global warming. Retailers are involved as users of energy and operators of global distribution networks. They also influence the level of waste. So as long as politicians continue scratching around for solutions to global warming, retailers will be in the firing line.”
They won’t be the only ones. Vicki Hird, senior campaigner, food and farming, for Friends of the Earth, says: “All food companies will begin to feel the pain of climate change, both in terms of challenges to supplies and the cost and vulnerability of fuel supplies.”
It is easy to underestimate the significance of climate change to the food and drink industry - yet it is the sector arguably most at risk, adds Buckingham. “Think about the impact on agriculture, the potential problem of water scarcity and our dependency on oil.”
David Rae, chief executive of the Association of Convenience Stores, highlights another sustainability issue: succession. “It is vitally important. Keeping local shops going has been increasingly difficult as younger generations fail to take on the business. The skills and workforce shortfall can challenge the sustainability of local shopping.”
If pressure groups made life hard enough last year, it was nothing compared with what’s in store this year. Top of the ‘to do’ list, says Hird, is persuading the competition authorities to “shake themselves into action to address the massive and, in many situations, highly damaging effects of the multiples’ growth and their stranglehold on the supply chain and the high street”.
She says: “With a market study by the competition authorities, we should uncover the truth behind the corporate claims of fair play, community ethics and high standards. This issue will be the big story of 2006 and we and others will take it as far as we need to ensure that the food system eventually becomes more equitable and sustainable.”
Hird is not alone in believing that the supermarket pricing wars will become fiercer this year. She also feels that the consumer backlash against the multiples will gather momentum and that dovetailing with this, consumers will try to reconnect with farmers and the whole concept of where food comes from - benefiting independent retailers to the detriment of the multiples.
Rae adds that there will be a revival of interest in local shops as well as local food.
Despite the pressure all this will put on retailers, they must continue to respond in a measured way, says Hawkins. “Sustainability has, in fact, been actively pursued by retailers for many years. But that does not mean they will uncritically accept every proposal emanating from government. Retailers will continue to promote sustainability in 2006, but they will do so in their own way.”
They certainly won’t over-react to a consumer backlash that has arguably yet to materialise, he suggests.
Just because it hasn’t happened yet doesn’t mean it won’t, says Felicity Lawrence, author of Not On The Label. “If 2005 was the year that large numbers of new consumers woke up to the fact that much of their food was denatured and deracinated, 2006 will be the year they want change.”
The question is: will the industry react quickly enough? Lawrence is sceptical: “I don’t expect things to move fast. Real change will depend on pulling the economic levers - eliminating subsidies that favour intensive unsustainable production and establishing international competition authorities to curb the excessive power of supermarkets that allows them to push prices below sustainable levels. I don’t expect anyone to be brave enough to pull those levers in 2006.”
It’s up to the industry to prove her wrong.