Sustainability is the new normal
April 21, 2015
Cargill President and Chief Executive Officer Dave MacLennan declared that sustainability is the ‘new normal” at this week’s Financial Times Commodities Global Summit. He called on the commodities industries to embrace transparency and help define what sustainable supply chains could and should look like in a world where 9-plus billion people will need to be fed.
This year Cargill celebrates its 150th anniversary, and like everyone else in the commodities industry, we learned early that markets are always changing, there is always a “new normal” on the horizon, and if we are going to survive and thrive, we need to continually change and adapt.
In 1865, William Wallace Cargill purchased his first grain warehouse at the end of a railroad line in Conover, Iowa. With the railroads quickly expanding across the American prairies, Conover became an overnight boomtown with 200 buildings, fresh produce markets and 32 saloons. Just two years later, the railroad abruptly dismantled its tracks and train station, and Conover went from boomtown to ghost town. This was Cargill’s first new normal. We moved on.
But while commodity cycles will continue to shape and re-shape the markets and our industries, there is one aspect of the “new normal” in resources that is not going to go away: an increasing focus on sustainability.
Does sustainability bring constraints or opportunity for our industries? It certainly adds complexity, and where there is complexity, Cargill believes there also is more opportunity.
Here are some signposts of the “new normal” from the past year:
- The Rockefeller Foundation, built on the oil and gas fortune of Standard Oil founder John D. Rockefeller, is divesting itself of all interests in fossil fuel exploration and production.
- In an Accenture survey, 67 percent of CEOs say business is not doing enough to address global sustainability challenges.
- The 2015 World Economic Forum named water crises the #1 global risk in terms of potential impact and #8 in terms of likelihood.
- The Risky Business report on the economic impact of climate change estimates that U.S. production of corn, soy, wheat and cotton could fall by 14 percent below trend by mid-century and by as much as 42 percent later in the century as extreme heat spreads across the middle of the country.
- Last September at the U.N. Climate Summit in New York, Cargill joined hands with 41 companies, 32 governments and dozens of civil society groups in a pledge to do our part to halve deforestation by 2020 and end it by 2030.
So why are commodities in the spotlight? Physical commodities have big footprints. For example, according to U.N. agencies, agriculture represents 40 percent of the world’s land use, 70 percent of freshwater withdrawals and 24 percent of global greenhouse gas emissions. We could quibble about the numbers that are thrown around today, but that’s not the point. The point is the impact is significant.
While concerns about where and how crops, metals, minerals and energy are sourced, traded and processed are not new, they are becoming louder, more persistent and more intense.
So what can we do?
As a company and as an industry, we need to lean into the sustainability challenge. We recognize the growing complexity of the marketplace, increasing constraints on natural resources and rising consumer expectations. We also recognize that Cargill occupies a unique position in the supply chain and can be a catalyst for positive change.
We have learned a lot over the past decade, and for the past several months, we have been developing a new sustainability roadmap for Cargill. We are both broadening our vision and developing clear areas of focus. We have a responsibility to address sustainability in our business and across our supply chains. Moreover, we can help define what sustainability can and should look like in commodity supply chains. Our approach is fairly straightforward:
1) Embrace the call for greater transparency and build trust.
- We are working to be more open in explaining what we do and how we do it.
- We also are working to help bridge the gap between producers and consumers to develop pragmatic, practical solutions.
2) Lead the way in learning to do more with less.
- Over the last 40 years, the global food system has more than doubled crop production without taking much new land into production. There is more that we can do because there is still a real gap between actual yields and potential yields in developing but also developed countries.
- We’ll continue to encourage best practices in land use, production and farmer training.
3) Trust markets (and free trade) to help.
- Free trade and price mechanisms are not perfect, but they can ensure the right products are produced in the right place. For example, we can produce all the oranges we need in Minnesota. We just shouldn’t. Farmers will produce the most food in the most economically and environmentally sound ways if they plant the crops best suited to their growing conditions and trade the surpluses.
- Today, about 16 percent of food crosses borders, but that number will increase as populations become more urban and grow fastest in places not blessed with the natural resources suited to agriculture. As we face climate-related disruptions, trade will become even more important.
- Our efforts in sustainability need to stay focused on improving earnings, efficiency and execution—for everyone involved, including farmers.
4) Accelerate innovation.
- The agricultural industry is ripe for innovation, improved technology and further implementation of best practices.
- We need to be prepared to engage in healthy debate about the merits of new technology and one production system versus another. For example, are GMOs a boon to sustainability because they decrease a farmer’s carbon footprint and help mitigate the impact of climate change or are they a threat?
5) Focus on scalable solutions.
- We need to think about sustainability on a global scale and focus on solutions that will have the most impact.
Our sustainability roadmap at Cargill centers on four areas that touch a broad cross-section of our businesses and where we believe we can make a real difference. They are: land use, including deforestation; water; climate change; and farmer livelihoods.
For more than 20 years, we have set environmental goals for our own operations in water conservation, energy efficiency and the use of renewables, and reductions in greenhouse gas emissions. We have just set new 2020 goals and intend to accelerate our progress on reducing our own environmental impact. We also will build on these efforts by adding a much sharper focus on sustainability issues in our supply chains.
When W.W. Cargill purchased his first grain warehouse 150 years ago, this was the new normal: Global population was edging toward 1.3 billion. America was just emerging from a debilitating Civil War. The U.S. Corn Belt wasn’t even in its infancy, and new modes of transportation were just beginning to make it faster and easier to move food from where it was produced to where it was needed.
It’s tempting to think those were simpler times. It’s doubtful that W.W. and his brothers would agree. Every generation faces its own set of seemingly insurmountable challenges. Ours is to embrace sustainability in the context of meeting the needs of the 9-plus billion people who will be on our planet by mid-century, a global population that will be more urban, more prosperous and more demanding.
There is no getting around it. This is tough, challenging work. It’s also our new normal.
Note: This is an essay based on the speaker’s prepared remarks.