2023 Trends That Will Drive Change in the Food and Agriculture Industries

2022 brought new challenges to the world economy and the agricultural industry. We’ve witnessed the consequences of COVID-19 and war in Europe, leading to rising gas and electricity prices, continuous difficulties in sourcing ag equipment, and parts scarcity. However, food demand hasn’t decreased, and growers still face the challenge of feeding a fast-growing population.

“With climate top of mind and biodiversity rapidly rising as a key business issue, we expect to see sustainable food systems transitions accelerate in 2023.” said Erica Ward, DLL Sustainability Consultant. “Increased transparency driven by the Global Biodiversity Framework, SBTi’s FLAG (Forest, Land, and Agriculture Guidance), and the launch of the Taskforce for Nature-Related Financial Disclosure (TNFD) Framework will mean public, science-based targets and clear risk management approaches will become table stakes for agriculture and food companies.”

We at DLL consistently monitor the market and explore future trends to be able to provide our customers with flexible financial solutions to help them keep up with the required pace of innovation in the food and ag sector.

Regenerative agriculture

According to studies, 75% of millennials are now adjusting their consumer behavior, keeping its environmental impact in mind ¹, and transitioning to regenerative agriculture is the next step for food producers. At its core, regenerative agriculture is a principle-based approach to farming that leverages natural systems to restore degraded soil’s carbon profile to turn agricultural lands into carbon sinks instead of sources of greenhouse gas emissions. It aims at minimizing the use of chemicals and synthetic fertilizers, which not only leads to healthier food as a benefit for us as humans, but also improves biodiversity and creates environmental benefits for our planet.

This concept is, in fact, not a new idea and brings us back to farming methods that have been around for thousands of years. However, the term slowly started to gain popularity in the last two decades and in early 2020, Whole Foods announced regenerative agriculture to be the No. 1 Food trend in the future. We can see many big companies, especially in the USA, committing to adopting regenerative agriculture practices or, in some cases, advancing current efforts on farmlands with the size of 50 million acres.

Specialists see regenerative farming as a big trend that will only grow further in the future and encourage agri-food companies along the value chain to pay closer attention to the economic benefits it can provide for their businesses. “Front running companies will be going from pilots to scale on their climate, nature, and circular economy initiatives to capture the business opportunity of the transition to a sustainable food system.” notes Erica. Improving soil fertility will lead to higher crop yields and resiliency to pests, dryness, or floods, which consequently will reduce risks for the farmers. Furthermore, another benefit of this farming concept is reduction of the cost of inputs such as synthetic fertilizers, pesticides, and chemicals that will positively influence farm profitability. Regenerative farming is a triple-win situation for consumers, farmers, and the planet that will have a better chance to heal from soil degradation.

Sustainable packaging

Sustainability will continue to be a priority not only in agriculture, but also in the fast-paced packaging industry, and environmentally friendly and recyclable packages should be a part of business strategies in 2023. This, of course, includes the use of smarter waste reduction techniques and relying more on recyclable materials; however, there are more factors to consider. The economic and social backdrop implies that businesses will need to seriously look into reducing their packaging costs . While cutting these costs will be crucial for many businesses, it shouldn’t come at the expense of sustainability. On the contrary, both these trends should be addressed, and even though it might be difficult, it is not impossible.

Lightweight packaging is a trend that reduces the materials that are being used and cuts manufacturing costs, while at the same time decreasing the environmental impact of transporting goods. Since it is light and doesn’t take up a lot of space while being transported, it is a great opportunity to also reduce fuel use and carbon emissions that come from logistics. For example, using certain bio-based materials for packaging can reduce fuel consumption by 70 %, compared to other production methods². Lightweight packaging has been around for a few years; however, it is expected to be adopted by more and more food and beverage manufacturers as it is easy, cost-effective, and puts emphasis on the benefits of sustainability.

Carbon emissions

Emission reduction has been a very important topic of conversation in almost all industries for some time now, and Food and Agriculture are no exception. The International Energy Agency forecast that CO2 emissions will hit record levels in 2023 , and the food processing, packaging, and waste disposal are placing the food supply chain as a main emitter of greenhouse gases.

Greenhouse gas emissions are divided into three categories called 'Scopes', where Scope 1 includes emissions such as fuel combustion, company vehicles, and fugitive emissions from operations , Scope 2 refers to purchased electricity, heat, and steam, and Scope 3 includes all other indirect emissions that occur in a company’s value chain from purchased goods and services, waste generated in operations, to the use of sold products and employee commuting. Scope 1 and 2 are emissions that a company owns or has the possibility to control, whereas Scope 3 emissions are a consequence of activities that occur from sources not owned or controlled by the company. Furthermore, scope 3 makes up to 97% of the emissions produced by retailers and more than 90% of the emissions produced by food processing companies.

The environmental impact of these emissions on the planet leads to 61% of investors saying they would not invest in a company without a net zero plan³. That is why it is crucial for companies within the food industry to consider this and develop effective solutions to address this issue. This will require retailers and food and beverage companies to transform their relationships with partners, farmers, and suppliers. Regenerative agriculture, for example, offers a possible solution to CO2 emission reduction; however, the wide adoption of the concept requires investments and collaboration within the sector.

Conclusion

Moving towards more sustainable solutions and keeping responsible business practices in mind will continue to be the theme of 2023. The food and agriculture industries are faced with changes that need to be made to meet customer demand and now more than ever, we should think about the long-term actions that will contribute to the environment and build a better future.

If you have any questions about how financing can support your food and agriculture business, or the needs of your customers, please contact us, or check out our website for more information.

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