Beer industry’s efforts to embrace regenerative agriculture face ‘significant hurdles’

Dive Brief:

  • Efforts by the beer industry to use regenerative agriculture as a way to lower emissions throughout its supply chain are facing “significant hurdles,” according to a report by Rabobank.
  • The financial services company said “regenerative agriculture” and “sustainability” can be hard to define and progress difficult to measure. Practices to reduce emissions need to be adjusted by crop and region — making it hard to agree upon a uniform strategy. And a “lack of alignment” across the supply chain between farmers and beverage companies, and even within a business itself, further challenges implementation.   
  • The report noted despite these obstacles, it is becoming “critical” for beverage companies to engage in this process and “forge a path to success.” 

Dive Insight:

As Rabobank studied the challenges slowing the adoption of sustainable farming practices in the beer industry, the firm discovered what may be the biggest obstacle preventing it from gaining momentum: Most people agree it should be done, but they just can’t reach a consensus on how to get there. 

After talking with various stakeholders throughout the supply chain, such as farmers, barley grain elevator operators, maltsters and brewers, Rabobank found “there is still no clarity about what production practices, if any, are required to become more sustainable, and the mechanisms and incentives to promote more sustainable practices have yet to be defined.” 

Sustainability initiatives are one of the primary tools large food and beverage companies are using to not only reduce their environmental footprint but also connect with consumers who consider them when deciding what products to buy. A study by Nielsen in 2018 found nearly half of consumers are likely to change what they buy to meet environmental standards. 

To be sure, large beer companies such as AB InBev and Molson Coors have taken steps to reduce their environmental footprint throughout their supply chains.

Anheuser-Busch is working with researchers to develop commodities like barley, rice and hops that require fewer inputs and partnering with farmers to raise their crops with less carbon and nitrogen emissions in exchange for financial incentives. And Molson Coors has pledged to source 100% of its barley and hops from suppliers by 2025 who grow, produce and deliver in a manner that embraces the company’s sustainability standards.

But Rabobank noted that while the industry as a whole is interested in adopting sustainable agricultural practices, brewers can undermine those efforts by “applying overly aggressive pricing pressure on growers.” It added that “this seems to reflect conflicting internal priorities within some brewers, which will need to be addressed.”

The report found that for meaningful progress to be made, there will need to be more alignment throughout the value chain. Brewers, retailers and others interested in reducing Scope 3 emissions — generally defined as indirect emissions from across a company’s supply and value chain — from their agricultural supply chain will have to provide farmers with financial incentives. 

Rabobank estimated that 90% of the emissions from larger beer companies are Scope 3.

“For most farmers, barley is a rotation crop, and they have other options to choose from if adequate incentives are not provided,” Rabobank said.

The challenges beer companies are facing when it comes to sustainability have cropped up among other beverage companies, too. 

PepsiCo, for example, noted recently the advancements it has made in regenerative agriculture and water-use efficiency in high water-risk areas. Despite these inroads, PepsiCo conceded that increased demand for snacks has created some challenges when it comes to curtailing emissions from its supply and value chain. Scope 3 emissions — which account for 93% of the company’s emissions — increased by 5% from 2015, due to “unprecedented business growth.”