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Transforming food and land systems in the EU to achieve the SDGs

Part 3

The previous Europe Sustainable Development Reports introduced six major priority SDG Transformations to achieve the SDGs in the European Union. These build on the Six Transformations framework developed by the SDSN and its partners in 2019 (Sachs et al., 2019). This Part focuses on Transformation 4: 'Sustainable food production, healthy diets, and biodiversity protection', possibly the most complex of these transformations to undertake since it cuts across numerous policy areas and has a strong international dimension. Food systems are responsible for about a third of global greenhouse gas emissions and generate other major climate and biodiversity impacts. Current diets are a major driver of rising healthcare costs in the EU, through rising obesity rates and chronic conditions. As emphasized in Part 1, the EU performs particularly poorly on SDG 2 (No Hunger) due to unsustainable diets, high and rising obesity rates, and unsustainable agriculture and farming. At the same time, food systems provide employment and are a major source of income for workers in the EU and globally.

Since the 1990s, the EU member states have made significant progress towards greater sustainability of food and land systems. However, recent trends show a slow-down in this progress. On the climate side, the EU was able to cut by a quarter its agricultural GHG emissions between 1990 and 2013, thanks to reductions in cattle numbers and fertilizer use, while still increasing agricultural production (Guyomard et al., 2020). Yet between 2013 and 2017, EU agricultural GHG emissions increased again - by 4% - suggesting that it will be harder to achieve further emissions reduction in agriculture without deeper changes in the production system. The carbon sink of European forests has also deteriorated over the last few years due to extreme climate events and higher timber-harvesting intensities (Urrutia, Herold, and Gores, 2021). On current trends, this will lead to an increase in net emissions from the EU land sector, rather than a decrease.

Developments around biodiversity in the EU are also uneven. While the Habitats Directive (European Council 1992) protects over 1,000 animal and plant species as well as 200 rare and characteristic habitat types, biodiversity overall continues to decline: the European Environment Agency's 2020 assessment found that 60% of non-bird species in the EU have an unfavourable conservation status, with 22% showing deteriorating trends (European Environment Agency, 2020). Given that agricultural land accounts for almost half of the European territory, accelerating the transition towards sustainable agricultural practices is essential to reverse the decline in biodiversity.

This chapter aims at highlighting major recent policy initiatives, priorities and tools to support a food and land transformation in the EU. We first provide an overview of key policies related to food and land systems in the EU and, in particular, the ambitious initiatives around the EU Green Deal and its Farm to Fork Strategy. We compare the modelled impacts of the new EU policies and discuss the role of models in supporting the transformation of food systems. We also consider the role of the agri-food industry in facilitating and accelerating the transition to sustainable food production and consumption, and finally present a framework for SDG-aligned reporting and strategies to address their impacts across the food supply chain.

3.1 EU Food and land policy framework and targets

Overview

Many mechanisms have been put in place to drive food and land systems towards greater sustainability in the EU (Figure 3.1). The oldest policy instrument is the Common Agricultural Policy (CAP), which was established in 1962 to provide sufficient, stable, and affordable food for EU citizens and a fair standard of living for farmers. After five major reforms, the CAP is now a producer support mechanism with payments decoupled from production, which supports a broader range of objectives including rural development, landscapes, food safety, the environment, and animal welfare. The CAP has been the only tool available to provide financial incentives at the EU level to deliver on these objectives (Maréchal et al., 2020). The EU has also set legally binding rules to limit negative externalities of agri-food production on the environment (for example, the Water Framework Directive and the Fertilizer Regulation), and on health (for example, the 2002 General Food Law Directive) (in green in Figure 3.1). The level of complexity of the EU policy framework related to food and land systems, and especially the CAP, has been a subject of concern.

Figure 3.1 | EU food and land policy framework

Figure 3.1 | EU food and land policy framework

The European Green Deal

The EU Green Deal (European Commission, 2019) represents the overarching policy framework for the EU going forward, with three main goals: 1) to achieve net-zero emissions by 2050; 2) to decouple growth from resource exploitation; and 3) to foster an inclusive green transition. The EU has enshrined its aspirational goals in a comprehensive climate policy framework: comprising the Climate Law (European Parliament and European Council, 2021) and the 2030 Climate Target Plan (European Commission, 2020f), alongside two new strategies, the Farm to Fork Strategy (European Commission, 2020a) and the EU Biodiversity Strategy 2030 (European Commission, 2020d) (Figure 3.1). As part of the 'Fit for 55' package, the European Commission aims to align the EU's relevant legislation and programmes with the near-term 2030 55% reduction target and the 2050 climate neutrality target (Figure 3.1).1 The Farm to Fork Strategy represents the first holistic approach in the EU to cover all relevant actors involved in the food chain. This is an important step towards a Common EU Food policy, which the EESC and the international panel of experts on sustainable food systems have called for to bring different policies into coherence and 'avoid that narrowly-defined efficiency and competitiveness gains are prioritised to the detriment of sustainability and public health' (EESC, 2021; iPES, 2019). Similarly, the EU Biodiversity Strategy aims to ensure that Europe's biodiversity is on the path to recovery.

While the European Green Deal has been widely welcomed for its high level of ambition, many voices also point to challenges around its implementation: on one hand, the EU's approach may be insufficient to meet such ambitious environmental targets, on the other hand, the plan might prove too destabilising for Europe's current land-based economic activities.

Short-term and long-term targets

Quantitative and qualitative targets for both the near future and long term are central elements of the EU's policy approaches and frameworks, setting clear objectives and facilitating the monitoring of progress. Table 3.1 highlights the main quantitative and qualitative targets that can be found in EU policies related to climate, food, and land, and the main SDGs associated with them. While several quantitative targets link strongly with SDG 15 (Life on land), SDG 13 (Climate action) and SDG 14 (Life below water), others are insufficient, including those related to SDG 2 (Zero hunger and good quality food for everyone), SDG 8 (Decent work and economic growth), and SDG 12 (Responsible consumption and production). For the agri-food sector, there is only one clear quantitative target: the reduction of per-capita food waste by 50%. While the transition to heathier and sustainable diets in Europe is crucial to achieve the aims of the Green Deal, Farm to Fork is missing clear incentives to rapidly achieve this transition, for instance through new sustainable dietary guidelines (EESC, 2018).

Table 3.1 | EU food and land targets related to the most relevant SDGs

Table 3.1 | EU food and land targets related to the most relevant SDGs

On climate, as part of the 'Fit for 55' package, Europe proposes an overall EU target for reaching climate neutrality in 'agriculture, forestry and other land use' (AFOLU) by 2035, effectively bringing agriculture and 'land use, land use change and forestry' (LULUCF) under the same reduction target for the first time (Table 3.1). As a consequence, however, the possibility of compensating for agricultural emissions via higher removals from LULUCF might limit efforts to reduce emissions in agriculture.2 If achieved, other Farm to Fork targets such as reducing fertilizer and pesticide use, encouraging more organic farming, and transitioning to a more plant-based diet (as well as the EU/US-led initiative announced at COP26 to cut methane emissions by 30% globally) could lead to significant reduction in the emissions from agriculture, but they are not legally binding. While the Commission has outlined how the 2030 LULUCF target should be shared across member states (European Parliament and European Council, 2018b), alignment of the allocations and expected results to the Commission's criteria are not always intuitive (for example, the large differences between Sweden and Finland). The target for increasing the share of renewables in the EU's total energy mix by 2030 (European Parliament and European Council, 2018a) would require strengthening the sustainability criteria for forest biomass, to ensure that it does not conflict with biodiversity targets.

The EU biodiversity strategy introduces several new quantitative targets that should contribute to the realisation of SDGs 14 and 15 (Table 3.1). One of the most urgent actions is to agree on a common definition of primary and old-growth forests and to map them to ensure they suffer no further deterioration. Illegal deforestation of primary forests has been witnessed in several member states in recent years. Among the urgent efforts needed is the establishment of a Forest Information System for Europe (FISE) capable of using state-of-the-art remote sensing techniques and satellite images to track illegal land activities in all member states (Atzberger et al., 2020). This information should be publicly accessible so that civil society can verify and complement the satellite-based data with on-the-ground information. The importance of citizen science is also highlighted in the context of large-scale biodiversity monitoring in the EU (Bàrberi and Moonen, 2020).

Box 3. The Food, Environment, Land and Development (FELD) Action Tracker

The Food, Environment, Land and Development (FELD) action tracker is a strategic initiative of the Food and Land use Coalition (FOLU), led by the SDSN. Its purpose is the systematic analysis of national policies relevant for the transformation of food and land systems in line with the Paris Climate Agreement and the SDGs. The FELD team inventories existing policies and assesses their design and implementation progress; it undertakes cross-country comparative analyses to identify good policy practices; and it facilitates accelerated ambitious country action through joint learning and horizontal capacity building. Recent analyses include a review of Nationally Determined Contributions (NDCs), including from the European Union, from a food and land perspective ahead of the November 2021 COP26 in Glasgow (Ferrat et al., 2021).

Incentives

The share of the EU budget allocated to agriculture has steadily declined over recent decades. In the 1980s, the CAP accounted for 66% of EU budget; in 2014-2020, it accounted for 38%. Funding for 2021-2027 CAP will be about a third of the EU budget, 10% lower than the previous one (2014-2020) (Massot, 2021). The new CAP's enhanced conditionality links payment to farmers to a stronger set of mandatory requirements, such as dedicating at least 3% of arable land on every farm to biodiversity and non-productive elements. Farmers who adopt agricultural practices that directly benefit the environment and climate will also have the possibility of receiving additional support via 'eco-schemes' (Röder, 2021). The second pillar should also provide financial support to foster sustainable forest management, reforestation, and afforestation, enhancing multi-functionality and the role of forests as carbon sinks, protecting forest ecosystems to ensure good condition of habitats and species, building forest resilience to climate change, and enhancing the socio-economic development of rural areas. In total, 40% of the EU's budget is expected to contribute to climate action (European Commission, 2021e).

Compared to the previous CAP, member states have a higher degree of autonomy (Maréchal et al., 2020). For instance, member states can decide which agricultural practices will be funded through the 'eco-schemes' (Hulot and Pagnon, 2021). Many of the recommended practices would enhance in-field crop diversification, with expected benefits for biodiversity while also helping sustain yields (European Commission, 2021d; Tscharntke et al., 2021). The Commission has provided each member state with a set of recommendations to align their plans with EU climate ambitions, yet these recommendations are not legally binding. The combination of higher member state autonomy and the lack of clear requirements and evaluation criteria3 might lead to increased heterogeneity across member states and a 'race to the bottom', where changes are minimized compared to previous CAPs (European Council, 2020; Pe'er et al., 2019). Moreover, while there is a very ambitious target for organic farming (25% of agricultural land by 2030, compared to less than 10% today), current organic farmers in several member states feel that they will be penalised by the new CAP. Many NGOs have denounced what they see as a watering down of environmental and fairness objectives of the initial proposal with the replacement of the term 'mandatory' with 'voluntary': for instance, for capping payments (Agriculture and Rural Convention, 2020). The new CAP was approved by the EU Parliament on 23 November 2021, although the Social Democrats were divided on it and both the Greens and the far left voted against it.

As discussed in Part 2, some measures contained in National Recovery and Resilience Plans (NRRP) provide additional incentives for the environmental transformation of the agri-food and fisheries sectors.

The risk of international spillovers

A central concern around the EU's GHG inventory approach is that it does not consider the GHG emissions associated with imported products, even though food and feed chains in the EU are strongly connected with the rest of the world: the EU is both the leading importer and the leading exporter of agri-food products in the world (DG for Agriculture and Rural Development, 2017). Agri-food supply chains are a major source of income and prosperity, including in low- and middle-income exporting countries, but they also also generate significant environmental impacts outside the EU, which need to be measured and addressed (Box 4).

Box 4. International spillovers embodied in EU's food supply chains

Considerable negative spillover impacts arisein international supply chains that satisfy the food demand of EU residents. Countries in Latin America, Asia-Pacific, Africa, Eastern Europe and Central Asia all experience negative environmental impacts associated with agri-food systems producing exports for the EU market. International trade has been shown to be a growing driver of environmental degradation in developing and emerging economies, particularly for trade satisfying the demand of the developed world (Wiedmann and Lenzen, 2018).

A new study prepared by the SDSN and University of Sydney, in cooperation with the German Government, quantifies these spillover impacts by looking at CO₂ emissions, particulate-matter air pollution and land-use impacts generated abroad to satisfy the EU's consumption of agri-food commodities. The study also quantifies income and employment generated abroad through EU's imports of agri-food commodities. The impacts related to the indicators captured in this study have further flow-on effects: for example, land use leads to biodiversity threats due to the rearing of livestock or production (Marques et al., 2019) and particulate matter deteriorates air quality, leading to health impacts on respiratory and cardiovascular systems, among others (Kim et al. 2015).

Figure 3.2 | Food supply chains lead to negative environmental impacts abroad, including CO₂ emissions, air pollution and biodiversity threats

Figure 3.2 | Food supply chains lead to negative environmental impacts abroad, including CO₂ emissions, air pollution and biodiversity threats

Several actions have been taken by the EU to tackle the issue of spillovers. For instance, the JRC consumption footprint indicator (Sala et al., 2019) is a candidate for inclusion on the revised monitoring framework for circular economy and for the 8th Environment Action programme. For biofuels, the Renewable Energy Directive was reviewed in 2019 to address the risk of indirect land-use change related to biofuel production through two measures that: 1) limit the total contribution towards the renewable energy targets of biofuels produced from food or feed crops to a maximum of 7%, and 2) progressively stop the accounting of high-ILUC risk feedstock4 for bioenergy production in the renewable target by 2030 (Searchinger et al. 2008; Valin et al. 2016). In the EU Forest Strategy, the Commission reaffirms its full commitment to ensuring that no products sold on the EU market, whether sourced within the EU or from third countries, contribute to global deforestation. A key challenge is that European stakeholders are often unable to make meaningful conclusions about timber legality risk due to the vast amount of information that is required by the Timber Regulation. Through the Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan, the EU provides technical and financial assistance to timber-exporting countries (including within the EU) to increase the sustainability of timber production. More recently, at COP26 in November 2021, the European Commission pledged one billion euros to sustainably manage, restore and protect world forests.

The 'Fit for 55' package proposes a new mechanism to ensure fair pricing of GHG emissions associated with imported goods and prevent the risk of carbon leakage. A Carbon Border Adjustment Mechanism (CBAM) will be applied to a few selected products first, with the number of products covered to be gradually extended in compliance with WTO rules. This is an important condition for EU agriculture and food producers, who have long complained about unfair competition with imported products from countries with weaker environmental, food-safety and animal-welfare regulations, yet it is unclear if and which agri-food commodities will be included in this mechanism, or how indirect emissions from land use change will be accounted for. The combination of strong EU diplomacy, long-term financing solutions for global public goods, and increased technical cooperation to accelerate the transformation of agri-food systems and energy systems in developing countries will be crucial to ensure legitimacy.

3.2 The role of impact assessment models and scientific collaboration

Modelling is a key input in the EU policy cycle. The European Commission makes extensive use of models to support its policy-formulation phase, with models used in about a third of the impact assessments carried out since 2015 (Acs et al., 2019). Climate and agriculture are areas in which certain models have been systematically used in impact assessments for the past ten years (Delincé, and M'barek, 2015). The modelling work related to food and land is broader though, including studies from many different European and non-European research institutes.

Main results

Projections of the PRIMES-GAINS-GLOBIOM modelling toolset used in the latest impact assessment of Europe's revised climate targets suggest that the new targets will decrease non-CO₂ emissions from agriculture only slightly (European Commission, 2020f), while the assessment notes that the 'land use, land use change and forestry' (LULUCF) sector is included in the EU targets with only very conservative assumptions (it was excluded in the previous EU climate targets).

Agriculture is set to become the single largest emission source in the EU by 2030 and is the most challenging sector when it comes to reducing non-CO₂ emissions, although this is partly because EU farming is seen as relatively efficient overall. In the most ambitious scenario, by 2050, technical mitigation options could further reduce non-CO₂ emissions from agriculture by 25% compared to the baseline. The LULUCF sector reduces total emissions in the more ambitious scenarios by only 3 percentage points by 2030 (from 1990 levels). However, other studies have found that the LULUCF net sink could reach 425 MtCO₂e in 2050 (equivalent to emissions from agriculture in 2019). In fact, there is broad variation in estimates of the EU LULUCF sink potential across studies: ranging from 77-210 MtCO₂ for afforestation and 150-488 MtCO₂ for managed forests annually by 2050, and from 309-456 MtCO₂ by 2030 for short-term annual carbon sink in harvested wood products (Böttcher, Reise, and Hennenberg, 2021).

Implications of the Farm to Fork strategy for the agricultural sector have been assessed by several studies using economic models (Barreiro-Hurle et al., 2021; Beckman et al., 2020; Bremmer et al., 2021; Henning and Witzke, 2021). Yet these studies have simulated only a subset of Farm to Fork, focusing on the targeted reduction of pesticide and fertilizer use5, the removal of 10% of agricultural land from production, and an increased share of organic farming (European Commission, 2021b). Their results show reduced agricultural production (10-20%) and exports and increased agricultural prices and imports, domestically and internationally. Farm income is negatively impacted by reduced productivity but positively impacted by lower input costs and higher prices. The overall impact on farm income tends to be negative, although this varies across sectors. The JRC-CAPRI study (Barreiro-Hurle et al., 2021) also predicts significant carbon leakage, with two-thirds of the reduction in non-CO₂ emissions from EU agriculture being offset by higher emissions in the rest of the world.

Other non-economic models have been used to simulate more radical changes in food and land systems in the EU, with the aim of reaching greater sustainability. For instance, the Ten Years for Agroecology (TYFA) modelling exercise (Poux and Aubert, 2018) used a mass-balance model to explore the possibility of a transition towards an EU-wide agroecological project based on the phasing-out of pesticides and synthetic fertilisers, the redeployment of extensive grasslands and landscape infrastructures, the reduction of non-food uses of biomass, and the adoption of healthier diets. This study also forecasts a decline in EU agricultural production (-40% for livestock products), but notes that this will still be enough to meet the European demand for food in 2050 (thanks to dietary shifts), maintain 92% of current total agricultural land (including agro-ecological infrastructures), and maintain the current level of wheat exports. Zero trade balance is assumed for the other products. GHG emissions reduction mainly comes from the reduction of nitrogen use. Similar approaches have been used in other recent analysis (European Environmental Bureau, 2021; Lórant and Allen, 2019).

The first group of studies, based on economic models, are currently frequently cited by farmers' unions and relayed through the media, emphasizing production and export losses, while the second group of studies are largely cited by environmental NGOs, emphasizing the possibility of having an even more ambitious environmental transition in agriculture that could still meet domestic food demand.

Critical assumptions and consequences

What impacts will the Farm to Fork Strategy have on agricultural productivity? In fact, the impacts of reduced pesticide use on agricultural production involve complex and imbricated mechanisms at different scales that are very hard to quantify (Guyomard et al., 2020). The impact of a reduction in fertilizer use depends on factors relating to the potential use of manure or the incorporation of nitrogen-fixing legumes in crop rotation, etc. The assumed impacts on productivity tend to be lower in the second group of models, in which production systems are redefined to compensate for any potential negative impacts of the policy restrictions, while most agricultural economic models assume no significant changes to current production systems. None of the studies cited include feedback loops on agriculture from a better environment: such as through better pollination, lower impacts of climate change, or higher resilience to climate shocks.

How and to what extent will the recommendations of the Farm to Fork strategy regarding the transition to healthier and sustainable diets materialise? Many studies highlight the large climate benefits expected from healthier diets (FABLE, 2021; Springmann et al. 2016; 2018). In terms of economic impacts on the agricultural sector, the adoption of healthier diets would counterbalance price increases and reduce the leakage effect for cereals, oilseeds, or animal products that will be consumed less, and provide incentives to diversify EU agricultural production towards more fruits and vegetables, nuts, and pulses, through higher market prices. The impact of the EU objective of expanding organic farming also depends on the evolution of the demand for organic products. If there is no equivalent sustained growth in demand for organic products in the coming decade, the price premium will fall, potentially putting at risk the economic profitability of organic farms.

What economic incentives or compensation will there be for farmers? The EU average share of CAP support in farm income is 33% (DG AGRI, 2021), but the JRC-CAPRI study is alone in including the CAP payments in its report (European Commission, 2021b). The study shows that the decline in EU production and variations in prices and income can be reduced by 20% with implementation of the new CAP.

How will consumption patterns and environmental restrictions in the rest of the world evolve? Leakage from the EU strategies depends on the current intensity of agricultural production that is displaced in the rest of the world, as well as on the evolution of productivity and environmental policies and their level of enforcement outside the EU. The CAPRI-based studies do not assume there will be any changes in production conditions in the rest of the world. The USDA-GTAP study assumes that, to comply with CBAM, a similar reduction in input use as in the EU would be implemented in the rest of the world. This is highly misleading because many developing countries would still be able to increase their input use to reach similar input intensity to that of EU's agricultural production, even after the input cut.

Will we see a saturation of the forest sink in the EU and if so, by when?Assumptions concerning forest harvest rates largely explains the broad differences in projections of the EU forest carbon sink, with a lower forest harvest rate leading to higher forest sink. However, some argue that reducing the harvest rate might be a short-term solution towards increasing the EU forest carbon sink, as older forests might accumulate less carbon (Nabuurs et al. 2013)

Modelling gaps

Investments are needed to improve or allow the representation of: 1) different actors in the supply chain to the final consumers, to capture the holistic approach of Farm to Fork, 2) more complex agricultural practices that follow agroecological principles, 3) the impacts of supply-side measures on pollution and biodiversity metrics used in the Biodiversity Strategy, and 4) the impacts of reduced pollution and biodiversity losses on agricultural productivity and resilience. Another key question concerns prices. It is to be expected that higher quality food which tackles negative environmental externalities will be more costly to produce, at least in the initial stages. For producers, in addition to public support, higher prices would provide economic incentives to make changes. But the impacts of policy changes on prices is hard to predict in a context of information asymmetries and potential market powers and increasing climate risks on the supply side (Guyomard et al., 2020). The Green Deal principle of 'leaving no one behind' requires studying in greater detail the distributional impacts of the policies on farm income and on household expenditures to be able to provide financial support to the persons who are the most likely to need it.

Models can inform and support policy cycles in many different ways. For example, they can enable more structured and timebound input from various stakeholder groups, discipline the discourse to stick to facts, and build a shared understanding of the most important issues to be tackled. However, there is a danger of placing too much emphasis on final numbers produced by modelling, which is not an exact science. The same numbers may never be reproduced using a different model. The high complexity of models involved in EU impact assessments makes the contribution and scrutiny of non-modellers difficult, reinforcing the risk that models might be used as a 'hired gun': a way to discourage further legitimate debate with a broader range of stakeholders over values that lie at the core of the policies (Haller and Gerrie, 2007). Greater transparency has been achieved over recent years, but progress is still needed. Collaborative modelling initiatives such as the Food, Agriculture, Biodiversity, Land-Use, and Energy (FABLE) Consortium, which promotes open-source models, the use of simpler models for stakeholder consultation (Mosnier et al., 2020), online open-model databases that include key parameters and results, and cross-national comparisons, should support the involvement of a broader range of stakeholders in the policy process (Box 5).

Box 5. The Food, Agriculture, Biodiversity, Land-Use, and (bio)Energy (FABLE) Consortium

FABLE is a collaborative initiative to support the development of mid-century national food and land-use pathways that are consistent at the global level and that could inform policies towards greater sustainability (FABLE, 2019, 2020). FABLE is convened as part of the Food and Land Use Coalition (FOLU). The Consortium brings together teams of researchers from 20 countries and international partners from SDSN, the International Institute for Applied Systems Analysis (IIASA), the Alliance Bioversity-CIAT, and the Potsdam Institute for Climate Impact Research.

Pathways work backwards from the mid-century targets and shed light on the major transformations that are needed to achieve them (FABLE, 2021). All FABLE country teams commit to meeting the global targets jointly and each team sets its own national targets. The Scenathon ('Scenario Marathons') process consists of iterative coordinated submissions of pathways to progressively increase the level of ambition to meet the global targets. The results can be monitored on the online Scenathon dashboard, which covers all FABLE targets and visualizes the contribution of each country pathway to each global target and in global trade flows.

Figure 3.3 | Countries in which FABLE operates

Figure 3.3 | Countries in which FABLE operates

3.3 Business leadership and due diligence

Companies have a crucial role in promoting sustainability within societies. This is especially true in the agri-food sector, as food represents a transversal vector of sustainability for the achievement of the SDGs (Fassio and Tecco, 2019). From the business perspective, aligning with the SDGs not only presents opportunities to meet social responsibilities and stakeholder expectations, but also helps to address medium- and long-term risks to the resilience and financial success of agri-food companies, such as climate change (Crippa et al., 2021), global pandemics (Aiyar and Pingali, 2020) and the exodus of agricultural producers and workers (Ivanhoe, Prapha and Wilshaw, 2020). Complying with sustainability requirements should be seen by companies not as a burden, but as an opportunity for economic profitability (Cupertino, Vitale and Riccaboni, 2021). The EU Code of Conduct on Responsible Food Business and Marketing Practices stands out as one of the deliverables of the Farm to Fork Strategy and an integral part of its action plan, providing a set of objectives and targets which agri-food companies may choose to achieve.

However, following the (soft) law is not sufficient to align practices with the SDGs, nor to avoid associated reputational, legal and other business risks. In this regard, a lack of consensus on the key principles defining an 'SDGs-aligned' or 'sustainable' business creates confusion and enables green-washing (Berg, Kölbel and Rigobon, 2020). The heterogeneity and voluntary nature of available frameworks do not readily permit comparisons of companies' sustainability performances, and at the same time leave companies to self-report on their preferred issues while ignoring less-convenient elements (Smith, 2016). This leaves the public, investors, consumers and governments with an incomplete picture of each company's sustainability practices and SDGs alignment.

The Four Pillar Framework for corporate SDG alignment

Alignment between the corporate sector and the SDGs is still weak (Van Tulder et al., 2021). The SDGs are generally poorly integrated into business practices, and corporate contributions to implementing Agenda 2030 are still inadequate, as highlighted in recent studies (PwC, 2015; Sachs et al., 2021a; UN Global Compact, 2020; WBCSD and DNV GL, 2018). To address these issues, the Fixing the Business of Food initiative6 has developed a 'Four Pillar Framework', which advances a robust, holistic approach to understanding corporate SDG alignment by identifying four overarching areas of consideration. This framework can be used to refine other sustainability reporting models, standards, policies, rankings and certifications to ensure a comprehensive approach to aligning food-sector practices with the SDGs. It can also help large companies, SMEs and farmers to determine which technological, organizational or social innovations will promote such alignment. To make the maximum possible contribution to the SDGs, agri-food sector companies must address all four of these pillars. The Four Pillar Framework brings clarity by identifying (1) the four broad areas of business activity that affect the SDGs, (2) the underlying nutritional, environmental, social and governance topics that food-sector companies need to tackle through those business activities, and (3) standards for each of those topics.

Reviewing the sustainability reports of the 100 largest food companies in terms of market capital (of which 30% are European) through the lens of the Four Pillar Framework (Sachs et al., 2021a), it was found that:

• Pillar 1 - Beneficial products and strategies contributing to healthy and sustainable diets: Companies tend to disclose information mainly in a narrative way, and the most-used Key Performance Indicators (KPIs) are clearly marketing-oriented. The qualitative nature of the information reported for Pillar 1 is also due to gaps in current Global Reporting Initiative (GRI) standards, the most common standards used by the investigated companies.

• Pillar 2 - Sustainable business operations and internal processes:Companies report more information on these topics than on any others, in terms of general goals, targets, baselines, results and KPIs. Gaps indicating a low integration of sustainability principles were found in planning, control and risk-management activities, with few corporate environmental, social and governance (ESG) compensation policies. Materiality analysis7 is still not fully embraced by many companies. On the other hand, positive evidence has been highlighted regarding the adoption of sustainability committees, data protection policies, and codes of conduct.

• Pillar 3 - Sustainable management of supply chain: This features only marginally in corporate strategic planning and reporting. Only food producers make a noticeable attempt to incorporate it (especially in OECD countries). Furthermore, companies tend not to monitor the implementation of supply-chain activities effectively, with scant use of KPIs, despite asserting specific ESG policies and claiming that they monitor and assess their supply chains' ESG impacts.

• Pillar 4 - Good corporate citizenship: This is also poorly reflected, in terms of strategic goals and reporting, in the sustainability reports of the agri-food and beverage companies. Only 'community engagement' and 'anti-corruption activities' were reported by a third or more of the companies studied. Furthermore, there is a wide heterogeneity in the KPIs used, due to the complexity and variety of sustainability issues.

Generally, it seems that companies stress those KPIs and metrics that are financially material and can offer benefits in terms of investment and marketing. In the supply-chain context, it would be useful for companies to disclose a more detailed estimation of the ESG impacts of their suppliers' activities. To this end, it would be desirable that the commonly used sustainability reporting standards providers improve their support to companies, enriching the set of standards proposed.

The EU code of conduct on responsible food business and marketing practices

The EU Code of Conduct on Responsible Food Business and Marketing Practices (European Commission, 2021a) is an integral part of the Farm to Fork Strategy's action plan, included in the pillar 'Stimulate sustainable food processing, wholesale, retail, hospitality and food services practices'. It is a voluntary framework, complementary to compliance with existing legal obligations, and is applicable to all activities relating to the production, trade, processing, promotion, distribution and serving of food. The Code of Conduct calls on European companies in the agri-food sector to make formal, concrete and measurable commitments to align their activities to the SDGs. Commitments undertaken by signatories8 will be monitored by the Commission, which may adopt legislative measures if progress is considered insufficient (European Commission, 2020e).

The Code of Conduct entered into force on 5 July 2021 and had been signed by 36 associations, 59 companies and one collaborative supporter as of October 2021. It seeks to improve sustainability on three levels: a) in relation to food consumption patterns for healthy and sustainable diets; b) within internal processes, operations and organisation at the level of actors in the middle part of the food chain; and c) throughout the supply chain, in liaison with primary producers and other actors (Table 3.2). The Code comprises two main components: 1) a general framework of seven aspirational objectives, each with specific targets, supported by a range of indicative actions, and 2) a framework of more ambitious commitments for companies 'with frontrunner ambition'.

Table 3.2 | The seven aspirational objectives of the EU Code of Conduct on Responsible Food Business and Marketing Practices, with related targets

Table 3.2 | The seven aspirational objectives of the EU Code of Conduct on Responsible Food Business and Marketing Practices, with related targets

As far as the second main component of the Code of Conduct is concerned, commitments should be, inter alia, ambitious, tangible, measurable and consistent with the aspirational objectives mentioned above. Furthermore, they should concern every aspect of sustainability (environmental, social and health) and contribute to the achievement of the objectives of the European Green Deal and relevant global agreements.

Despite not being legally binding (as of now), the Code represents an important instrument for integrating sustainability principles into the activities the EU agri-food sector, and may constitute a real turning point. The ever-growing number of associations and companies that have signed it since its adoption attests to a concrete commitment in this regard and may act as a driving force for other companies to do so. Finally, since the objectives and actions envisaged in the Code touch upon at least three pillars of the Four Pillar Framework (with the exception of Pillar 4), the initiatives undertaken by its signatories may contribute to more virtuous conduct in the long run and concretely help to 'fix the business of food'.

Standards and the duediligence approach

As known, most (agri-food) companies - including within the EU - employ standards when reporting on sustainability matters. The most widely used and universally recognized standards are those of the Global Reporting Initiative (GRI).9 These standards comply with a due-diligence approach and have been recently strengthened with the launch of the revised Universal Standards.10 Due diligence is a proactive and ongoing management process that companies are familiar with in the context of managing risk to their business. The due diligence approach provides the structure for each of the Four Pillar Framework's standards, which consist of the following steps that a company should take to meet the standard (Figure 3.4).

Figure 3.4 | The due-diligence process

Figure 3.4 | The due-diligence process

Aligning practices with the SDGs requires proactive efforts beyond the company's own operations, including acting within its value chain and broader ecosystems. Companies have an existing responsibility to respect human rights in their own operations and throughout their value chains (OECD, 2011; OHCHR, 2011). This corporate responsibility entails preventing and mitigating impacts on people with which they are involved, including those that are directly linked to their operations, products, or services by their business relationships.11 It is also well recognized that to achieve climate targets companies need to reduce not only their direct emissions (so-called 'Scope 1' emissions), but also their indirect emissions and emissions from value-chain sources that the company does not control or own (Scope 2 and 3) which often constitute the biggest greenhouse gas impacts (WRI and WBCSD, n.d.). By taking action in their value chains, companies can increase their contributions to the SDGs many-fold. Companies can spur transformative changes for people and the planet due to their existing connections and business relationships across their value chains. Engagement through these existing relationships serves as a great 'opportunity to uplift millions of people's lives' and enable them to enjoy the benefits of development (Shift, 2016).

The 'Grammar' of sustainability and the valorisation of good practices

There are a lot of small and medium-sized agri-food enterprises (SMEs) in the EU that play a crucial role in food production, food security, rural development and maintenance of local traditions (European Parliament, 2020). To foster real improvement to agri-food systems in terms of sustainability, it is necessary to focus both on large companies and on smaller businesses, which often see sustainability as a threat and not as an opportunity. Smaller companies need support in the ongoing transformation process. They need to be taught the 'grammar' of sustainability: its advantages, good solutions already adopted by other companies, how to self-assess sustainability performance, and how to integrate metrics and targets in their governance, management and reporting systems.

The dissemination of good practices in the agri-food sector is a useful way for SMEs to learn about innovative sustainability solutions and become actively involved in their transition to sustainable models. The Prima Observatory on Innovation (POI), a digital platform developed by the Partnership for Research and Innovation in the Mediterranean Area (PRIMA) to collect and promote good practices in the agri-food sector, is a good example in this regard. POI contributors include around 60 mostly small and medium agri-food companies and business associations. Examples of good sustainability practices range from farms reusing wastewater for irrigation or cultivating new varieties of fruit and vegetables that are nutritionally healthier and have less impact on the environment to businesses introducing new solutions for the conservation of perishable foods.

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The Europe Sustainable Development Report 2021 is the third edition of our independent quantitative report on the progress of the European Union and its member states towards Sustainable Development Goals (SDGs). The report was prepared by teams of independent experts at the Sustainable Development Solutions Network (SDSN) and the Institute for European Environmental Policy (IEEP).

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