Risks

Pressure from increasing population and growing wealth is putting pressure on the world’s resources.  The impacts are widespread and well documented1 including climate change, water shortages and loss of bio-diversity.  These are often interlinked.

According to the World Economic Forum, ‘growth may be inexorably undermining its own foundations through its negative side-effects on ecosystems, biodiversity and the climate’.

We have identified the following food risk factors:

Resource and Environmental Pressures

- Land – split into sub-categories:

  • Land Value Required - the extent to which the production of the raw material requires high quality land, and the scarcity/competition for land to meet such requirements
  • Land Use Change associated with sensitive ecosystems & habitats - the extent to which the production of the material is associated with expansion into undeveloped areas and the potential impacts on areas of high biodiversity/ecosystems service value

- Water - the amount of water required to produce the material and scarcity/competition in the source location, including seasonal variations in water risk

- Other inputs - the amount of energy, feed, agrochemicals, etc. required to produce the material and scarcity/competition in the source location 

- Severe weather events - the likelihood that the production of the material is impacted by severe weather events (e.g. through disruptions to production or logistics)

- Climate change - the extent to which the material is projected to be impacted by climate change in the source location

Socio-economic Pressures

- Supply & Demand Balance – split into sub-categories:

  • Concentration of production & global stocks - the extent to which supply is constrained, through concentration of production in a small number of locations, limited stocks or limited production expansion capability
  • Growth in demand & competition – the extent to which there is growing or competing demand for the material, for domestic and overseas markets, or as animal feed, for bio-fuels or bio-materials, etc.

- State Fragility - the extent of production that occurs within countries or regions considered fragile or conflict afflicted

- People & livelihoods – the extent to which the raw material and source location are subject to pressures such as poor labour conditions, aging farming population, rural displacement, access to know-how, markets and investment (to respond to issues such as disease, weather, etc.). 

 

Failure to take account of resource efficiency and sustainability in buying decisions can expose you to numerous risks:

  • sourcing ingredients from certain countries and geographic areas can create risks particularly in relation to certain agricultural practices;
  • irresponsible practices in the production of some key ingredients have been recognised as having a damaging environmental impact;
  • potential liability claims if due diligence is not followed;
  • continuity of supply;
  • cost increases or one off disruption costs.

 

The following Fact Sheets Itemising Risks and How to identify high sustainability, reputation, supply chain risk and resilience (PSF Topic Guide) can be downloaded here.