Analysis of Upstream Sustainability Trends Within the Food Production Industry. Case Study: a Food Manufacturer

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Analysis of Upstream Sustainability Trends Within the Food Production Industry. Case Study: a Food Manufacturer P a g e | 1 Analysis of Upstream Sustainability Trends within the Food Production Industry. Case Study: A food manufacturer Sarah Dallas, Jessica Lam, Nora Stabert Academic Advisor: Deborah Gallagher Spring 2013 P a g e | 2 Table of Contents Executive Summary ......................................................................................................................................... 3 Guide to Reading the Report ........................................................................................................................ 4 Literature Review ............................................................................................................................................ 5 Motivation ........................................................................................................................................................ 20 The Food Manufacturer Case .................................................................................................................... 25 Supply Chain.................................................................................................................................................... 26 Customer Analysis ........................................................................................................................................ 28 Climate Change ............................................................................................................................................... 34 Competitor Analysis ..................................................................................................................................... 47 Recommendations ........................................................................................................................................ 54 Glossary ............................................................................................................................................................. 59 Appendix ........................................................................................................................................................... 60 Works Cited ..................................................................................................................................................... 64 P a g e | 3 Executive Summary The concept of sustainability was first set by the United Nations Brundtland Report, which stated “sustainable development…meets the needs of the present without compromising the ability of future generations to meet their own needs.”1 Since then there has been a growing recognition of the need for sustainability efforts and this idea has grown to be incorporated into business practices. As awareness of the environmental issues and depletion of natural resources grows companies, particularly consumer-facing, are developing and or enhancing sustainability efforts. A Food Manufacturer (FMC) being a supplier of several consumer-facing companies has experienced increased inquiries regarding sustainability practices within their operations. The Duke MP Team created qualitative and quantitative tools in this report to assist FMC in better understanding their environmental impact. Furthermore, the information in this report can be used by FMC to gauge future sustainability trends and best practices in order to align with increasing customer requests. To accomplish this, a variety of different analyses presented below. Current Status of Operations: Supply Chain: Over the past year, the team’s background research and interviews with FMC employees and service consultants served as the basis for the supply chain narrative. The analysis focuses on raw material acquisition, packaging, and transportation. The supply chain section can be used as a template to educate a future FMC sustainability employee as well as serve as a foundation upon which FMC can add more data detailing 100% of FMC’s operations. This report can be translated into a database, storing order information that specifies the service providers and associated sustainability information. Climate Impact of Operations: Based on electricity and natural gas utility data provided by FMC for FY2011, the team quantified the corresponding greenhouse gas emissions at each of the active facilities. The Excel based inventory tool was designed in accordance with internationally recognized protocols and formatted similarly to FMC’s accounting spreadsheets to minimize confusion. This section serves a dual functionality for FMC, both as a learning tool for FMC employees to be educated on climate change topics and as a basis for future emission inventory inquiries from customers. Customer Analysis: FMC’s top six customers were profiled to summarize existing environmental and social priorities. Understanding how customers define sustainability will allow FMC to anticipate future customer expectations in terms of sustainability. Using publicly available data, these companies were profiled using twelve broad topics. The report details specific initiatives each company is pursuing within those twelve topics. The analysis revealed product safety is the topic of most concern among the six customers. The next most common topic was a three-way tie between energy, greenhouse gases and waste. This section assists FMC in beginning to understand how their existing customers 1 Johnson, Thomas. "Sustainability and “Lean Operations”©." Cost Management 20.2 (2006): 40-45. P a g e | 4 define and approach sustainability and can be used to align future sustainability priorities for FMC. Competitor Analysis: The competitor analysis ranks FMC in terms of its prioritization of sustainability against six top competitors, identified by FMC’s Vice President of Sales. This tool was developed, using six discrete indicators, to quantify a sustainability score for each company. A competitor, identified as the industry leader in terms of sustainability, published a report in 2009 with defined metrics and objectives. This information was used to define the tool’s measurable indicators. This tool can evolve to reflect the industry best practices and new sustainability information. The team found that sustainability has not significantly penetrated the upstream, however this can change quickly. Many of FMC’s competitors have parent companies, with significant sustainability programs that can be used to implement sustainability within operations. As FMC decides how sustainability will be prioritized within its operations, it should discuss the potential opportunities associated with becoming an industry leader in sustainability. More importantly, FMC must evaluate the risks of becoming the “laggard” within the competitive landscape. Recommendations: Develop Internal Strategy: Moving forward, FMC will need to define an internal sustainable strategy to steer the onset of its sustainability program. The strategy should include establishment of executive support, designation of sustainability roles, continuous maintenance of relevant tools, and evaluation of industry trends relevant to sustainability. Leverage Current Relationships: As a manufacturer, FMC has developed many relationships with its customers and service providers. FMC should evaluate certain existing customer relationships by implementing a model that meets customer expectations and uses industry best practices. By pursuing issues its customers are prioritizing, FMC will be in a better position to anticipate future sustainability trends. Knowing Your Resources: Finally, the team recommends FMC enters the sustainability conversation through public resources and industry roundtables. There are several public databases for federal and state tax incentives, as well as rebates for energy efficiency and renewable energy. These resources can optimize future cost savings for FMC. Additionally, several roundtables and partnerships exist to further the dialogue of industry best practices and current trends within the food manufacturing industry. Guide to Reading the Report This report was compiled to meet the standards and expectations of both Duke University’s Nicholas School of the Environment’s Master’s Project (MP) and the team’s client, P a g e | 5 a food manufacturer (FMC). Sarah Dallas, Jessica Lam, and Nora Stabert (to be referred to as the Duke MP Team) began a client-based MP in March 2012. The MP team investigated the penetration of sustainability in the food manufacturing industry, FMC's current operations, the expectations of its customers, and the prioritization of sustainability by its top competitors. This report is not a full analysis of sustainability but rather a focused study on how sustainability applies to FMC. The data is from public resources, FMC employees, and FMC service consultants from the 2012-2013 academic year. This report is not intended to meet GRI (Global Reporting Initiatives) standards. It intends to serve as a foundation upon which a future FMC sustainability employee can build. The team defined three MP goals: . Define sustainability as it applies to FMC . Develop tools to evaluate future initiatives . Recommend an approach to sustainability To achieve the MP goals, the team defined the current status of FMC’s operations, looking specifically at the supply chain and its climate impact. Following, the team researched FMC’s top customers to gain an understanding of the customers’ sustainability expectations. The third deliverable is the competitor analysis, which indicates how FMC ranks amongst its competitors. The team
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