It’s only natural to feel a bit of geopolitical whiplash at the moment. Regional uncertainties in many areas are making things highly uncertain, and the rising use of tariffs is making many industries wonder whether they will be next. But one trend in particular is giving many a cause for anxiety – how the entrepreneurial environment is influenced by changing governmental policy opinions on environment, social, and governance (ESG). How can you build your business strategy in this environment?
It is not a uniform picture. In China for instance, significant political and financial support is being given to the green transition, including on ESG reporting. But in some major markets we are seeing a step backwards, notably a number of important policies are being reversed in the United States, and the European Union are looking at lowering their ambitions – particularly for requirements on how companies report their sustainability impact – in the hope of being competitive in the global market place.
When you have a global industry like animal feed, we are used to regional regulatory differences. Sure, it can cause operational challenges, which is partly why schemes like ours help to level the playing field. But at a strategic level the question our community must answer is; what is the right thing for the future of the feed industry?
Cost of inaction
How strong the ‘push’ is for ESG from legislation and regulation is only one part of the picture. Another is the demand-driven ‘pull’ from consumers and retailers, who are increasingly expecting companies to take responsibility for ESG. This introduces a number of market dynamics, most notably the competitive edge that comes with differentiation. We see and hear signs from the market that producers are looking into how they can distinguish themselves from competitors, because they recognise that there are opportunities as a brand to stand out to consumers.
We can easily imagine two different companies; one who makes this investment in time, and one who does not. Not so long ago there was a belief that consumer desire for animal welfare was ‘latent’, meaning it was not strong enough to justify investing in animal welfare labelling and certification. Today, these labels can increasingly be found in supermarkets around the world, and in some regions the untapped consumer market for a socially conscious option is being captured.
Small but meaningful steps early on meant their advantages accumulated over time; being ready for opportunities as they became available meant they were not spending time and money playing catch-up, but instead could take advantage of standing out from the crowd. These companies were ahead of the curve when labelling became mainstream, and gained all the benefits that come with early investment. The companies who waited had to play catch up, which lost them market share, opportunity, and relevance.
Making the most of demand-driven change is all about your base level of readiness. To realise that differentiating position, you need to invest in good data and data collection. Reporting on ESG is fundamental here, because without it you will not have the evidence – and therefore credibility – to seize the opportunities that will be available to others. That is the foundation, and GMP+ is looking at how benchmarking can support this work. When consumer demand becomes more tangible, those who can prove their existing ESG impact will be best placed to capture market position.
The business case for ESG
At an industry-wide level there is another component; the future stability of the sector. At a product level, companies are thinking about how they can source materials and create products in a way that is sustainable over the longer term. This includes sourcing and supply strategy, which goes beyond relatively short-term considerations like commodity trading conditions or regional disruption, and extends into the longer-term impacts of climate and nature change. A short-term mindset might tell us to just keep chasing sourcing origins around the world until they are depleted. Whereas a long-term mindset would tell us to invest in the resiliency of our supply chains.
We need to be focused on the future. We have to take steps because too many practices in animal feed have an overall negative impact on the world – from conventional agriculture, to transport, to energy usage. Even small steps can make a big difference, but we need to take them now so they will count toward the big steps we need to take within the next 5-10 years. Otherwise, we will not have a sustainable industry.
And if we need to do it, we may as well report on it. Being transparent with our impact data means you can say you are on the way towards being planet-proof. GMP+ International is working closely with the Community and partners on how we can catalyse this market movement, and support the industry with standardised and consistent approaches to sustainable sourcing strategies.
Beyond compliance
Reporting is not just about compliance – it is about retailers and consumers, because that market is changing. We’ve seen it change before, and we are going to see it change again. Even small investments in ESG impact and reporting now puts you in a better and more differentiated market position compared to companies who do not. As a company you could decide not to do anything now – it might be the easy option. But you need to be aware that, before too long, you might be too late.
Companies who choose to be sustainable do so not because they’re told to, but because if they are, they win. And this is all independent of what happens in the world of politics.