Challenges: Old and New

Understand how Cargill addresses the current challenges posed by climate challenge in face of its founding mission of feeding the world

 

Finding what to eat is a problem humans have faced since the beginning of time. In fact, food has been the root cause of most conflicts to this date: from the Roman Empire, when Cicero invaded Egypt to control the country’s grain production and feed his population, to last year’s Arab Spring conflicts, involving Tunisia, Egypt and Libya, which, among other reasons, were linked to the rising price of food. [i] Climate change, on the other hand, is a recent phenomenon, which may be traced back to the Industrial Revolution, but whose true consequences have started to emerge, at least more radically, in the past few years. For instance, whereas average global surface temperatures rose by 0.9° C from 1880 to 2015, IPCC’s most recent reports project increases of another 3 to 7° C in the next 85 years. [ii] These projections include a wide range and are still subject to reviews, since  the consequences of our rapid industrialization have yet to be completely measured and understood. Addressing these two concerns – food supply and climate change – and, more specifically, the interconnection between them, is Cargill, the #1 agribusiness trading company in the world and United States’ largest privately-held enterprise. [iii]

First, it is interesting to note that the consequences of climate change on food production are not necessarily negative. On the positive side, rising temperatures may lead the way to double or even triple cropping within a one-year span and to the expansion of the agricultural frontier into northern latitudes, generating economic activity in once inhospitable environments. [iv]

Cargill, however, has put extra effort into diagnosing and combating the negative impacts of climate change. Increasing temperatures and variability on precipitation patterns have led to net negative effects on crop yields (quantity of food produced per unit of land). Furthermore, the exponentially-increasing rate of change poses a serious threat to human’s adaptive capacity. If climate change continues at this pace, we may not be able to duly adapt. [iv]

Cargill has taken a series of measures to both adapt and combat the consequences of climate change on food production. Regarding adaptation, the company invests heavily in innovation and advocates for open borders, aiming to enable a free flow of food from areas where there is too much to others where there is not enough. [iv]

As for direct measures to combat climate change, two of the company’s initiatives deserve special attention:

  • Reduction of the environmental impact of its own operations and supply chain. The company has acted globally to reduce greenhouse emissions and conserve energy, engaging in projects such as the installation of an energy storage product developed by Tesla, which reduces energy costs by storing electricity during off-peak hours and using it when demands are higher. Other creative projects include the use of recovered vegetable oils and animal fats to replace fossil fuels in a poultry processing plant in Thailand, and the use of biogas produced in a wastewater treatment plant in Holland to power the facility. [v]
  • Prevent deforestation. Forests capture carbon from the atmosphere and “place it in the ground”; the less forests we have, therefore, the more vulnerable we are to climate change. [vi] In addition, the burning forests is one of the major sources of greenhouse gas emissions, especially when considering the extensive areas of land utilized by Cargill’s suppliers. Besides being a signatory of the 2014 U.N. Declaration on Forests, through which the company agreed to cut natural forest loss in half by 2020, and end it by 2030, the company has partnered with NGOs and industries in Brazil to endorse the Soy Moratorium, an agreement to not purchase from or offer financing to farmers who grow soy on deforested lands in the Amazon, the world’s largest tropical forest. As a result, deforestation rates in the area have been reduced by more than 80%. [vii] Below is a video in which 30 forest advocates, including Cargill’s CEO, call for an end to deforestation:

In addition to these more direct measures, Cargill also partners with several NGOs, local governments and research centers to both increase awareness of the threats posed by climate change and foster developmental studies in the field. [viii]

From the initiatives detailed above, it is possible to conclude that Cargill is one of the leading companies on the topic of climate change. This issue, however, is complex and so much can be done, that there are areas in which Cargill may still improve. The company’s Minnesota headquarters, for instance, were just recently renovated, yet do not include the efficiency measures on insulation, furnace and lighting, that could reduce emissions by 25%. [ix] A LEED certification, in this case, could represent an even stronger signal to the company’s stakeholders that combatting climate change is as important to the company as its founding goal of feeding the world.

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[i] http://www.foodrepublic.com/2012/01/11/a-brief-history-of-food-war/

[ii] Rebecca M. Henderson, Sophus A. Reinert, Polina Dekhtyar and Amram Migdal, “Climate Change in 2016: Implications for Business,” HBS No. 2-317-032 (Boston, Harvard Business School Publishing, 2016), p.3.

[iii] https://www.oxfam.org/sites/www.oxfam.org/files/rr-cereal-secrets-grain-traders-agriculture-30082012-en.pdf

[iv] http://www.cargill.com/news/issues/food-security/climate-change/index.jsp

[v] http://www.cargill.com/corporate-responsibility/responsible-supply-chains/environmental-performance/index.jsp

[vi] Rebecca M. Henderson, Sophus A. Reinert, Polina Dekhtyar and Amram Migdal, “Climate Change in 2016: Implications for Business,” HBS No. 2-317-032 (Boston, Harvard Business School Publishing, 2016), p.7.

[vii] http://www.cargill.com/corporate-responsibility/responsible-supply-chains/soy/index.jsp

[viii] http://www.wsj.com/articles/cargills-food-empire-adapts-to-a-changing-world-1476670081

[ix] Rebecca M. Henderson, Sophus A. Reinert, Polina Dekhtyar and Amram Migdal, “Climate Change in 2016: Implications for Business,” HBS No. 2-317-032 (Boston, Harvard Business School Publishing, 2016), p.24.

 

 

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3 thoughts on “Challenges: Old and New

  1. Thank you Ricard, I really enjoyed reading your post. One of the things that I thought while reading was the importance of logistics and transportation in the overall price/value of food grains. Grains require dedicated ports, ships, cargo trains and trucks in order to be transported from the producer to the final consumer or processing plant. The need for special capital goods for transportation and the overall weight and volume of grains relative to its price is one of the biggest constraints in terms of increasing economically viability of grains in further regions. By sustainability actions, Cargill might be successful in reducing the share of transportation in the cost of the grain and make it viable a ibber share of the world’s population.

  2. I enjoyed reading the article and contributions that Cargill has made towards saving the Amazon. While reading, it did strike me though that companies as old and as BIG as Cargill should be doing more. Not only should they be focused on reducing energy costs but attempting to shift to clean energy completely. I agree with what you say about their Minnesota HQ. My question however is, should their target be to just reduce the emissions by 25% or should they be targeting 100% renewable energy building/business.

  3. Ricardo – well done on this post. On research for my blog on alleviating malnutrition in Africa, I found one major obstacle to be the ability to access these developing markets. Per the Food and Agriculture association of the United Nations, the areas most susceptible to the impact of climate change will be areas with poor infrastructure[1]. In addition to Marcelo’s point, has this impacted Cargill’s efforts to promote the free flow of food to areas lacking supply? Furthermore, I assume that the local economies of the Amazon are reliant on the income generated from soy growth, despite being from environmentally devastating practices like deforestation. Has there been any research done on a shift in production methods or economic activity of local farmers in the area now that these anti-purchase agreements have been put in place?

    1. Food and Agricultural Organization of the United Nations ftp://ftp.fao.org/docrep/fao/012/ak915e/ak915e00.pdf

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