Resource scarcity poses major threat to food industry

By Nick Hughes

- Last updated on GMT

Related tags: Economics

Food and drink manufacturers face being exposed to higher and increasingly volatile prices within the next decade due to scarcity of natural resources, a new report has warned.

Estimations of a one billion increase in global consumers by 2020 will result in a fundamental consumption imbalance with demand for natural resources outstripping supply, says the report published by the World Economic Forum in collaboration with Deloitte Touche Tohmatsu. It urges the consumer goods industry to act now to redesign value chains to reduce resource use and decouple economic growth from environmental degradation.

Factors such as water shortages and energy inefficiencies leading to shortages will mean the price of key resources such as fuel and food supplies increasing sharply over the next decade.

Sarita Nayyar, senior director of consumer industries at the World Economic Forum, said businesses must act now to avoid damage to the bottom line in the future: “Commodity prices may have declined at the beginning of the global economic downturn but the recent rebound reflects that long-term trends of rising demand and shrinking supply will endure beyond the current economic crisis, and so cannot be ignored. It is critical business leaders do not allow the urgent to overtake the important.”

Preventative actions

The report outlines a series of actions manufacturers must take in order to move towards a more sustainable future.

It urges businesses to look at collaborating with each other through ‘open source’ innovation to help set industry standards and reduce the risk to the first mover. The traditional linear supply chain model needs to be replaced with a model that enables resources to go full circle, according to the report, which states activities at every stage of the supply chain – from sourcing and manufacturing through to distribution, consumption and end-of-life – will have to be revisited to optimize resource utilization.

Policy also has a role to play, it suggests. If regulators can give businesses a more consistent and predictable regulatory environment, it can level the playing field, allowing businesses to take longer-term decisions without the risk of losing short-term competitive advantage.

Consumer engagement

Finally, the report says businesses must engage with consumer needs by balancing the growing interest in sustainable products with demands for convenience and price sensitivity.

“Consumer industry leaders are already adapting their business strategies in response to the very different economic situation in which we now find ourselves,”​ said Lawrence Hutter, global leader of Deloitte Touche Tahmatsu’s consumer business group. “However, we are also seeing a growing recognition of the need to give greater priority to the sustainability of business models in the longer term.”

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