Sustainability in Food and Beverage

Industry Overview

The food and beverage industry sits at the nexus of agriculture, manufacturing, logistics, and consumer behavior—making it one of the most complex sectors to decarbonize. Food systems account for roughly one-third of global greenhouse gas emissions, spanning agricultural production, processing, packaging, transportation, retail, and waste. For food and beverage companies, sustainability is not a peripheral concern—it touches every aspect of operations from farm to fork.

Consumer expectations are shifting rapidly. Many consumers say they consider sustainability when making food purchases, though willingness to pay premiums varies by category and demographic. Retailers are imposing sustainability requirements on suppliers, including emissions data, packaging recyclability targets, and deforestation-free sourcing commitments. Major food retailers like Walmart, Tesco, and Carrefour have set Scope 3 reduction targets that cascade through their supply chains.

Water scarcity, soil degradation, biodiversity loss, and extreme weather events are not abstract risks for this industry—they directly threaten raw material availability and cost stability. Companies that invest in agricultural resilience, regenerative sourcing, and supply chain transparency are building long-term competitive advantages. Those that treat sustainability as a packaging redesign exercise are missing the strategic imperative.

Key Sustainability Challenges

Agricultural Supply Chain Emissions

For most food and beverage companies, the bulk of total emissions originates in agricultural production—livestock, fertilizer use, rice cultivation, and land-use change. Purchased goods and services, chiefly agricultural ingredients, made up 77% of Scope 3 emissions and 67% of total emissions reported by food, beverage, and tobacco companies to CDP in 2021. These emissions are diffuse, occurring across thousands of farms with varying practices and data capabilities. Engaging farmers on emissions reduction requires technical assistance, financial incentives, and long-term purchasing commitments that most companies have been reluctant to make at scale.

Packaging Waste and Circularity

Food and beverages account for the largest share of packaging placed on the EU market, according to a 2026 study by the European Commission's Joint Research Centre. Plastic packaging waste has become a lightning rod for consumer and regulatory action. The EU's Packaging and Packaging Waste Regulation mandates recycled content minimums, recyclability requirements, and reuse targets. Extended producer responsibility (EPR) schemes are expanding worldwide. Transitioning to circular packaging while maintaining food safety, shelf life, and cost competitiveness requires material innovation and infrastructure investment.

Food Waste Across the Value Chain

Approximately one-third of all food produced globally is lost or wasted: about 13% is lost between harvest and retail, and in 2022 another 1.05 billion tonnes, 19% of the food available to consumers, was wasted in retail, food service, and households, according to UNEP's Food Waste Index Report 2024. Food waste in landfills generates methane, a potent greenhouse gas. For food companies, waste occurs at every stage: agricultural losses, processing waste, retail spoilage, and consumer disposal. Reducing food waste delivers a triple benefit: lower emissions, reduced costs, and improved food security.

Regulatory Landscape

The EU is leading regulatory action on food system sustainability. The Farm to Fork Strategy targets a 50% reduction in pesticide use, 20% reduction in fertilizer use, and 25% of farmland under organic production by 2030, though these targets are not binding and the Commission withdrew its proposed pesticide-reduction regulation in 2024. The EU Deforestation Regulation (EUDR) requires companies to prove that key commodities (soy, palm oil, cattle, cocoa, coffee, rubber, wood) were not produced on land deforested after December 2020; after two postponements, it applies to large and medium operators from December 30, 2026 and to micro and small operators from June 30, 2027.

In the U.S., the FDA's voluntary sodium reduction targets, USDA organic standards, and EPA food waste reduction goals provide a lighter regulatory touch. However, California's SB 1383 mandates organic waste diversion, and several states are implementing EPR laws for packaging. The SEC's 2024 climate disclosure rules, which would have applied to publicly traded food companies, never took effect, and the SEC proposed rescinding them in 2026. California's SB 253 now requires large companies doing business in the state to report Scope 1 and 2 emissions, with first reports due November 10, 2026, and Scope 3 reporting starting in 2027.

Globally, the Science Based Targets initiative (SBTi) has developed the FLAG (Forest, Land and Agriculture) guidance specifically for companies with land-intensive supply chains, providing sector-specific pathways for setting credible emissions reduction targets.

Opportunities

Regenerative agriculture represents both a climate solution and a supply chain resilience strategy. Companies investing in regenerative sourcing programs—cover cropping, reduced tillage, integrated pest management, rotational grazing—report improved soil health, reduced input costs, and more stable yields over time. Early movers like General Mills, Danone, and Nestlé are building regenerative supply chains that reduce Scope 3 emissions while securing long-term raw material access.

Plant-based and alternative protein markets have moderated after initial hype cycles, growing in some categories and regions and declining in others. Global retail sales of plant-based meat, seafood, milk, yogurt, ice cream, and cheese reached an estimated $28.9 billion in 2025, up 3% from 2024, while U.S. retail sales of plant-based meat and seafood fell 10%, according to the Good Food Institute. Companies that develop or acquire alternative protein capabilities position themselves for a structural shift in protein consumption patterns.

Food waste reduction is perhaps the highest-ROI sustainability intervention available. Project Drawdown counts reducing food loss and waste among the largest climate solutions across all sectors. Companies implementing waste reduction programs across their value chains report cost savings of 14:1 on every dollar invested, according to Champions 12.3 research.

How Council Fire Can Help

Council Fire works with food and beverage companies across the value chain—from agricultural commodity traders to consumer packaged goods brands to food retailers. We develop Scope 3 measurement programs that address the unique challenges of agricultural emissions, including primary data collection from farm-level operations. Our team supports FLAG-aligned target setting, EUDR compliance, and packaging circularity strategies.

We help companies build regenerative sourcing programs, design food waste reduction initiatives, and develop consumer-facing sustainability communications that are credible and compliant with green claims regulations. Our approach integrates sustainability strategy with commercial reality—because in this industry, the supply chain is the sustainability strategy.

Frequently Asked Questions

What is the EU Deforestation Regulation and how do we comply?

The EUDR requires companies placing relevant commodities (soy, palm oil, cattle, cocoa, coffee, rubber, wood) on the EU market to conduct due diligence demonstrating that products are deforestation-free (no deforestation after December 31, 2020) and legal under the country of origin's laws. Compliance requires geolocation data for production plots, risk assessment and mitigation procedures, and due diligence statements filed through the EU's information system. Companies must establish traceability systems linking finished products to specific production areas—a significant operational challenge for commodities sourced through complex trading networks. The rules apply to large and medium operators from December 30, 2026 and to micro and small operators from June 30, 2027.

How do we set science-based targets when most of our emissions are in agriculture?

Use the SBTi FLAG guidance, which provides sector-specific pathways for companies with significant land-use and agricultural emissions. FLAG targets require companies to set separate land-related and energy/industrial targets. The methodology accounts for the unique characteristics of agricultural emissions—including biogenic carbon, land-use change, and the limited abatement options for certain biological processes. Start by mapping your commodity footprint, identifying hotspot crops and regions, and engaging agricultural suppliers on primary data collection.

What's the business case for investing in regenerative agriculture?

The business case operates on multiple levels. Near-term, regenerative practices reduce input costs (less synthetic fertilizer, fewer pesticides) and can improve yields after a 3-5 year transition period. Medium-term, healthier soils are more resilient to drought and extreme weather, reducing supply disruption risk. Long-term, companies with regenerative supply chains will be better positioned as carbon pricing and agricultural regulations tighten. Research from the Rodale Institute's Farming Systems Trial shows that regenerative organic systems match conventional yields after the transition period and, with organic price premiums, are much more profitable than conventional systems. For branded companies, regenerative sourcing claims also resonate with consumers and support premium pricing strategies.