Senior professionals within the UK’s biggest food producers, manufacturers, and retailers have warned of an “interconnected set of crises” posing a threat to food security “like none other” in an anonymous memo. 

The group, known only as Inside Track x Food, flags growing uncertainties in agricultural yield, quality, and supply in critical sourcing regions. Additionally, it says that the data on degrading soil health, water availability, and extreme weather events confirm the complex linkages within the crises, which are set to have a significant commercial impact on F&B businesses.

However, the professionals warn that the industry is not fully accepting of the severity of the crises or sharing with investors due to various structural and cultural issues.

“If you own, are invested in, or are lending to several major producers, manufacturers, and retailers, we suggest you consider the risk to your portfolio of global shocks to the food supply system and of the implication of a continuation on the path of decline,” reads the memo.

“Wishful” strategies and lack of transparency

The workers believe that companies’ mitigation strategies are not proportionate to the level of risk the global food supply is facing, yet they are being presented as an appropriate “solution” to investors.

For example, company reports often propose transitions to alternative ingredients or products but do not measure the scale of change required. Moreover, the memo notes companies mention moving to other sourcing regions that may not be viable or have not been stress tested.

It also draws attention to deteriorating supply chains amid scientific warnings of a potential increase in drought, flooding, heat, and soil depletion in regions the UK’s food supply critically relies on. Moreover, dry spells in Spain have directly impacted Britain’s ability to source salad, tomatoes, and broccoli, while global disruptions have hindered cocoa, coffee, and sunflower oil supply chains.

According to the professionals, food manufacturers that rely on single crops from growing regions under threat are likely to face greater commercial risk than retailers, who will not be able to provide stock.

Insufficient industry action has turned these long-term issues into short-term issues, as companies remain “laser-focused” on quick production, says the memo. It flags that industry associations often lobby against regulatory changes or policies on behalf of businesses.

Investors, owners, creditors, and board members are being given “false confidence” in the form of environmental risk-related reports, which may not reflect the actual risk, the group warns.

It suggests that invested parties assess the viability of businesses by reviewing their plans. This includes understanding the economic viability of the changes proposed in sourcing strategies, upskilling auditors, or introducing third-party organizations.

The government should convene food industry experts, as it did in response to COVID-19, with representation from farmers, growers, and local authorities to drive collective action alongside government investment.

“A wake-up call”

The memo highlights that investors should play a key role in facilitating longer-term investment in building drought and flood resistance, soil health, and climate resilience in communities wher businesses source from and support action on dietary shifts.

“This is not a divestment campaign; it is a call for engagement to better secure our industry for the world we are now in. We can see a path for our industry to play a critical role to support this time of transition,” says the group.

Industry stakeholders joined the call, urging investors to act as climate change shocks will not only result in price hikes but also jeopardize the “very ability to produce food supply sustainably.”

“This memo should be a wake-up call to investors concerned about how decisions are made inside corporations, the influence of board members, and what impacts these will have on the value of their investments, let alone the natural world,” says Mark Campanale, founder of Planet Tracker and Carbon Tracker.

“While it comes from professionals working within the industry rather than external experts, it does echo research coming from Planet Tracker’s recent reports on food and agricultural companies. The idea of a soil and food systems collapse is real, and hopefully, investors will ask the questions the memo indicates and test their confidence in the strategies of the companies they own.”

According to climate law specialists, as climate regulations evolve in the EU, board directors may face legal proceedings.

“Under new climate and environmental regulation in Europe and the UK, companies will have more stringent climate and environmental reporting and due diligence obligations. These obligations increase the prospects of litigation, including against board directors for potentially breaching their fiduciary duties to shareholders,” notes Harj Narulla, a barrister at Doughty St Chambers.

Food Ingredients First has viewed the memo, coordinated by Ned Younger of Inside Track.