Boards are neither asking the right questions to understand the risk the food industry is facing from shocks to the system, nor allocating the time, energy or budget to materially reduce that risk. This was just one of a series of damning statements made by a group of anonymous industry insiders who returned this month with a fresh warning that current supply chains will not be resilient in the face of the climate crisis and other structural vulnerabilities. In this week’s episode, Nick speaks with Ana Cuddeford from the NGO Inside Track, which coordinated the memo, to explore why the group has once again felt the need to sound the alarm to investors and what they hope to achieve. With a new group of insiders specific to the hospitality and foodservice sector about to launch, Ana explains how concerned professionals can lend their own voice to the movement and why their warnings should not be seen as an attempt to bring their businesses down, but rather to ensure those businesses, and the food system they are a part of, are equipped to deal with the challenges of the future.
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Further reading
From sustainability to resilience – but has anything changed?
Jack Thompson, editor of TABLE’s Fodder newsletter, explores the context in which food’s latest buzzword is being used and why we need to interrogate what it actually means in practice
Realism or retreat – should we be worried by net-zero backsliding?
Businesses including McDonald’s and Starbucks are struggling to decarbonise large, legacy operations, leading to questions over whether they remain fully committed to emissions reduction
Transcript
Ana Cuddeford: Really, it’s about the insiders within the industry saying to us that the conversations about resilience in the food businesses are very much focused on the very tactical short term adaptations and quick fixes and much less about the more longer term strategic planning in order to reduce the climate impacts. Really. And the way I look at it is what they’re really trying to say to us is that essentially the industry’s greatest power, which is the ability to adapt and to manage disruption, has almost become its greatest weakness.
Nick Hughes: Hello and welcome to the Small Print, a podcast by Footprint Media Group. I’m Nick Hughes, Footprint’s editorial director. Each week we delve beneath the headlines of an issue impacting the hospitality and food service sector through our unique lens of environmental and social affairs. Boards are neither asking the right questions to understand the risk the food industry is facing from shocks to the system, nor allocating the time, energy or or budget to materially reduce that risk. This was just one of a series of damning statements made by a group of anonymous industry insiders who return this month with a fresh warning that current supply chains will not be resilient in the face of the climate crisis and other structural vulnerabilities. In this week’s episode, I speak with Anna Cuddeford from the NGO Inside Track, which coordinated the memoir to explore why the group has once again felt the need to sound the alarm to investors and what they hope to achieve. With a new group of insiders specific to the hospitality and food service sector about to launch, Anna explains how concerned professionals can lend their own voice to the movement and why their warning should not be seen as an attempt to bring their businesses down, but rather to ensure those businesses and the food system they are a part of are equipped to deal with the challenges of the future. Anna, welcome to the Small Print. Thank you very much for joining me. How’s the past week been for you since this latest food industry memo dropped? Busy, I imagine.
Ana Cuddeford: Thanks for having me, Nick. And yes, it’s been pretty much non stop, both with my colleagues, but also speaking to investors. I’ve had a couple of roundtables, couple of podcasts, so it’s been, or go on the whole, pretty positive. So really pleased with the traction we’ve got.
Nick Hughes: Good. Well, look, let’s start perhaps by summarizing the key messages contained in this latest memo from food industry insiders. As I’m conscious some listeners may not have read it in full or even seen the coverage I suspect most of them will have done. And then we’ll take a step back and talk a little bit more about InsideTrack and the role you’re playing as, I guess, effectively a facilitator for making private concerns public. So what does the memo say, in a nutshell?
Ana Cuddeford: So the memo is titled the Illusion of Resilience in a Degrading Supply Chain. And essentially it’s really very much in the context of the summer’s heat waves, the incoming El Nino that your listeners and we will all be sort of familiar with. But really it’s kind of talking about the pressures from climate change and biodiversity loss, soil degradation, and how these are materially affecting the crop yields, quality, supply, reliability. But really it’s about the insiders within the industry saying to us that the conversations about resilience in the food businesses are very much focused on the very tactical short term adaptations and quick fixes and much less about the more longer term strategic planning in order to reduce the climate impacts. Really. And the way I look at it is what they’re really trying to say to us is that essentially the industry’s greatest power, which is the ability to adapt and to manage disruption, has almost become its greatest weakness and doesn’t necessarily mean that the food system or the food industry itself has sort of becoming more resilient. So for example, when something goes wrong, businesses switch suppliers, switch sourcing regions and reformulate products, et cetera. And that all makes sense and it’s also very impressive the capabilities that the industry has. But, but I guess the insiders in the memo are asking a more uncomfortable question, which is really sort of what happens if this underlying productivity is really deteriorating the system as a whole? And the other thing that they’re highlighting within the memo is how boards are actually not able or they’re ill equipped to understand and manage some of these longer term risks. And it’s particularly addressed to investors because I think this is a lever that we are trying to pull that if the investment community can actually start to ask some of the questions, then hopefully that will put a little bit of pressure on the boards to find out the correct information and essentially help the businesses to thrive.
Nick Hughes: Okay, great. Well, look, there’s plenty there that we’ll pick up on later in the conversation, particularly around this word resilience and how notions of resilience seem to exist across quite a broad spectrum, I think it’s fair to say. But tell us first, Anna, a little bit more about InsideTrack. Specifically, what is your role in bringing these kind of concerns that exist among industry professionals to light and what is your motivation for doing so?
Ana Cuddeford: Say insidetrack starts from a fairly straightforward observation, and that is really that people working inside industries, not just the food industry, but they often understand the barriers that are there extraordinarily well. I think the issue is more that individually they kind of feel that they have very little ability to change them. And that’s mostly because they work in a certain department, they have certain disciplines that they have to follow, and mostly they have a certain loyalty to their industry. They like it. They feel that they want their industries to thrive, they don’t want the industries to fail. They definitely don’t want to be whistleblowers in the ordinary sense of the word, because they enjoy their jobs. They’re normally senior professionals that have been there 20 years, 25 years plus, but feel that perhaps senior management are not really kind of listening to what’s going on on a department by department basis. And then also, as one. One insider has put it to us in the past, is when they compare that, when they look at the notes and they start to see what other insiders are saying, it’s almost like to validate that they’re not going mad themselves because it’s not just happening within one company, but it’s actually validated that it’s much more of a systems issue. So at InsideTrack, what we do is really give them just the infrastructure to be able to give us these insights, which are so valuable both for the businesses and for investors and other stakeholders, but in a safe way and in a way that they can actually vocalize some of the real concerns that they have without kind of being at risk of losing their jobs or actually causing harm, which is not what the intention is at all.
Nick Hughes: Okay. And we’re obviously talking about the food industry specifically in this particular memo, but perhaps you can share some examples of. Of movements for change, if you like, that you’ve helped facilitate in other sectors. Is their work more advanced?
Ana Cuddeford: So actually, I would say it’s the other way around, Nick, because we’ve. Yeah, because we’ve done so. This is our third memo in the food sector and we’ve also published a food memo in the French food sector, which has had an enormous amount of traction in France particular, I think, given the culture, the food culture that they have over there. But we have got insider groups in the tech industry, which we think are going to be really interesting. Insurance, which is quite adjacent to food venture capital, and we’ve got other sectors that we’ve got in the pipeline.
Nick Hughes: These food industry memos are addressed directly to financial stakeholders, to investors Owners, bondholders and creditors. Is that a deliberate attempt to speak to the people who the group of insiders believe really have the ear of senior decision makers within their businesses and the ability via their deployment of capital to shape business strategy?
Ana Cuddeford: Yes, I think, you know, when we speak to the insiders and by the way they set the agenda, they tell us who they feel have the levers of power. So it’s not inside track, imposing, saying you should address this to investors, it is they themselves believing and seeing from inside the businesses that probably, you know, investors, whether it be physical investors and not just kind of the asset managers and asset owners of the world, but that they’re probably not asking the right questions and that that is why they, they felt very strongly that we should be addressing it to the investment community as a whole. Because as soon as you start to ask where the capital is going, the business really has to look at the commercial side of things and really has to start to interrogate itself as to where they’re going to invest their money and how long really is, what is the sustainability of the investment period? And I mean that in terms of, is it a long term investment, short term investment? So capital and money is really what is driving a lot of this conversation. And the sense that we’re getting is when investors come in and ask and do due diligence, particularly the larger asset owners, they don’t really understand fully the food system. And I think it is such a complex system. As somebody put it to me the other day, you know, if you were talking about cell phones, mobile phones, there’s only a certain number of models and it’s one product. The issue with the food system is that it’s so complex. The amount of SKUs, different products, what you’re having to look at in terms of whether it’s the nutritional value, whether it’s the number of products, the organic, you can start to very quickly see that even if you are a financial analyst, you’re looking at a very narrow piece of information that is being fed to you by the company. So what are you reporting? What are the margins? What does your growth look like? What are your projections of growth? And there is a sense that unless you have lived and breathed the food system business, it’s almost impossible to understand on a whole, you know, on a wholesale level. And I would actually argue that, you know, you would, you would understand the piece that you work in only rather than the system as a whole.
Nick Hughes: Interesting. I wonder, I mean, well, firstly, are you finding, I know it’s still reasonably early Days. But are you finding a receptive audience within the investment community? And I wonder, given what you were saying about the food system and its complexities and how it’s very hard to learn it from the outside, if you like, whether you might find a more receptive audience from people coming at this afresh, rather than those that have been working within sort of legacy business models for the last 20 plus years and are very used to doing things a certain way and very used to working towards a fixed set of incentives. And, you know, how are investors reacting to this?
Ana Cuddeford: So so far I think they’re grateful because if you look at what we do within the memo, or what the insiders have done is they’ve actually provided questions for investors to take to boards to their investee companies. So in some respects we’ve started to do their job for them or we’ve helped them to start to do that. Secondly, I think it is the start of a conversation with the investment community because they have to, and excuse the pun, but they have to digest what we say in the memo, right? They have to then go away, think about exactly how they’re going to use that, what is going to be useful together with all the data points. Because one of the best things I think about this memo is that it’s qualitative in nature because the investment community does not lack data. I think the food industry does not lack data. What I think is lacking sometimes when those conversations are ongoing is the richness of the conversation, which is what this, I believe, starts to unlock. So what we’re doing at the moment is we’re planning a roundtable with senior investors later on in the year. And that, I think that that is where we’re really going to start to see, hopefully, the power of communications such as this. Because, you know, a week in it’s been. Look, this is such an interesting piece. Can you tell me more about it? Let me go away, do some work with my analysts, with my sustainability team, with my stewardship team. But it’s too soon to see that.
Nick Hughes: But yeah, yeah, okay. And we should note, shouldn’t we, that There are other NGOs also working in this investment space as well. I know the likes of Share Action, for example, have done consistently good engagement with investors on issues of nutrition and environmental sustainability over many years. So, Anna, you mentioned that this is the third memo to have been issued by this particular group. I think the first one was back in April last year, wasn’t it? So how does this latest warning move things on? Because that original memo set out quite a similar case in terms of food businesses being unresponsive to these structural threats to the system through the climate crisis, biodiversity loss, et cetera. And the focus being too short term, essentially. So is this latest warning, the insiders in effect, saying that initial warning has fallen on deaf ears? Is it an escalation of attempts to shine a light on a lack of business engagement with these issues? What’s the purpose?
Ana Cuddeford: So we had anecdotal evidence, again from insiders and other people within the industry, that the first memo businesses were bringing it to the boardroom. It was being discussed within the industry. So it’s absolutely. I don’t think we can say it’s the case that it fell on, you know, deaf ears at all. It was much more the fact that people have to start the conversation somewhere. And what we’re trying to do is human nature, Nick. We, you know, we get distracted by anything. And just as we said at the top of the top of this conversation, we adapt to crisis. We have all been through the hot summer that we’ve had, et cetera. So it’s not necessarily that we’re bringing or that the insiders are bringing something completely new. I think we have to keep the conversation on the table. And I think we need to engage with the fact that it’s not just business, but it’s the other stakeholders that also have to listen. So it’s bringing it on a little in the fact that we now have tangible evidence, having gone through the summer that we have gone through and what we’re about to experience from, you know, what all the. The forecasters are saying, that this is, you know, this is real, and this is real not just for the uk, but it’s a global issue. So it’s bringing on, but it’s bringing on about the urgency that we really need to look at this.
Nick Hughes: Yes. And your point about the weather we experienced over the summer, as difficult and problematic as that’s been, clearly, I guess there’s an opportunity to use it as a point of leverage to say these are the tangible impacts that we’re already facing from the climate crisis. And to your point about there’s no shortage of data within food organizations? Well, perhaps there is a shortage of people able to decode that data and present it in a way that’s, you know, a language that CEOs understand. And when you have food prices increasing, availability lessening, quality issues among food, these are the tangible risks that we’re talking about. It’s no longer abstract, is it? It’s actually it’s here, it’s now. Does that, is that helpful, do you think? I mean, I don’t want to frame it in that way because obviously it’s been really incredibly hard for farmers. But in terms of messaging, do you think it’s, it will help gain an audience in the boardroom for this?
Ana Cuddeford: It should do, you know, it absolutely should do. But, but, but Nick, to your point, you know, the, the margins are small in the food business and they’ve held up during the latest period of kind of difficulty. And it’s because the food business is so brilliant at adaptation. But that doesn’t mean to say that the P and LS of the farmers aren’t untouched. To your point, all of this is just being pushed downstream. And that is exactly the point, that if you start to push downstream, then there is, you know, the fact that the bottom of the start of the chain starts to collapse. And so therefore we need to make this more urgent. And that is the conversations that CEOs upstream need to have in order to say, well, if we lose all of our suppliers, then our margins are going to collapse as well. So it is absolutely a lever that we can pull. It is also an attempt, I think, to try and highlight the fact that someone is losing out, someone is under pressure and that is not sustainable or resilient.
Nick Hughes: Yes, well, let’s dig into this word resilient and what it means, because it really has been a buzzword for the industry this past year and there’s been some quite good analysis around this recently. What does resilience actually mean and for whom? And what the memo suggests is that for a lot of businesses who are talking the language of resilience, what they’re really talking about is short term tactical switching of ingredients and sourcing regions, which may bring inverted commas. Resilience in the very short term, but hard to argue that that’s building long term food system resilience. So why is that framing of resilience problematic in your view?
Ana Cuddeford: I’m not sure we’ve got all the time to discuss this, but it’s a huge question. I was at a roundtable about two weeks ago with people that are doing a lot of complex system analysis and somebody there said to the group, if we look at a complex system, and I would, you know, argue that the food system is probably one of the most complex systems we have, resilience is actually a neutral, Right? So resilience is not a positive and it’s not a negative. It’s the fact that you can, or an Organism can withstand the different pressures and you adapt. And that adaptability is amazing in the short term. In the long term it becomes problematic because we can all adapt to hardship. It doesn’t mean to say that’s a good thing. And I think that the term resilience gets used very much as. Is it food security? Is it the ability to feed ourselves? Is it climate resilience? Is it the resilience of profits? I think it can mean very different things to do different people. And I don’t necessarily think it’s helpful to just sort of say, look, we need to be resilient, we need to think about the longer term. And I think it’s, you know, mitigation is probably gone off the table now and it’s adaptation and how we can address the issues going forward and how we can stop them getting worse.
Nick Hughes: Yeah, yeah. And look, I think. Well, I expect some people within the industry would argue that they’re doing both. Perhaps they are making short term tactical plays to ensure continued supply of high quality affordable ingredients in the short term whilst also investing for the long term. And they might suggest that this memo paints an overly negative picture. Those investing in adoption of regenerative farming practices, for example, and offering financial incentives to farmers on longer term contracts. How would you respond to that particular critique? Are there some businesses doing those kind of things? And if so, is the issue perhaps that they’re often quite small scale and the businesses doing them are often in the minority?
Ana Cuddeford: Yes, and yeah, absolutely. And look, I think our insiders, as I mentioned, they, they are very proud of what they’re doing. This isn’t a scaremongering kind of that they think the industry is completely broken or that there aren’t companies or people doing the best they can. It is absolutely not that there are hundreds and hundreds of people working towards a better food future, if you like. The issue, and you’ve, you nailed it Nick, is the fact that, you know, then relatively small scale, they are also potentially not even UK businesses. Right. So it could be that a lot of regenerative farming is being used for farmers abroad, which is incredibly important, but we don’t have enough of a kind of movement by the larger companies. We’re not seeing, we’re not seeing that. I also think that potentially it’s a lack of, lack of understanding of the true long term effects that are going on, you know, as we would probably get onto it. But if there are people that are not climate experts within a board, for example, it’s not that they don’t have the willingness to push this forward. But it probably is that they don’t have the expertise to actually look deeply enough into the data and interrogate their buyers. For example, somebody told me recently, I said, you know, this is red. The memo is probably read by the sustainability people. We want this memo to be read by the businesses, by the people who do the buying, by the people who do the sourcing, and by the people that actually deal with the downstream producers. Because otherwise we’re not going to know. To answer your question, we’re not going to know if it’s enough. People are actually looking at this.
Nick Hughes: Yeah. And that’s interesting. And it speaks to the point made in the memo, doesn’t it, that boards just aren’t asking the right questions to understand the risk the industry is facing and they’re not allocating enough time and energy or budget to materially reduce that risk. And I think we’ve seen to your point about resilience and its stickiness, if you like. We’ve seen over the past year a fair bit of unwinding of corporate net zero commitments. We’ve seen certain organizations decouple executive incentives from achievement of sustainability goals. And it feels like one of the issues here is that from a sort of leadership perspective, business incentives, they just don’t really incentivize long term value and resilience, do they? They incentivize short term financial performance. You know, and perhaps this is where investors do have some leverage, right, to try and shift that culture and encourage greater alignment between financial incentives and long term resilience and sustainability. But do you see that as part of the problem, that the incentives are just not aligned in the way that perhaps they need to be?
Ana Cuddeford: Absolutely. And I think that unfortunately, with the current political climate has been unwound quite rapidly. I don’t necessarily mean in this country, but the global political climate. What we are kind of seeing is if you look back to sort of four or five years ago where we felt that there really was an upturn in trying to align incentives of executives, both in the financial services industry, but across the board. And there was a moment in time where I was really hopeful that this, this was actually going to happen. We all know what’s happened with various elections around the world and they have been unwound. What I’m hearing is that there are so many people in the background still really keen to push this through and are potentially waiting for when the political climate changes. But all the work is kind of being done behind the scenes now. And this is coming more from My investment background than more on the food industry. I do think that we are also being a little bit hijacked in financial services by the performance of certain other sectors like the tech stocks, et cetera, that suddenly people investors and it could be the businesses themselves are getting a bit of fomo, right. So they’re there not getting the returns, so they feel they have to do something else in order to protect short term returns. And it just is a bit of a spiral to kind of beat the next person. I think what this memo is kind of trying to say is, all right, let’s just step back and look and we can continue to maintain a healthy business if we just kind of slow down and stop those short termisms. My hope, Nick, is that we will return to a more equitable and sustainable kind of less shareholder focused incentive system than the one we’re currently in.
Nick Hughes: Yes, well, look, before we finish, Anna, I want us to speak directly to professionals within the hospitality and food service sector. Because to date I know that the group of insiders has been formed of producers, manufacturers and retailers. But you are about to announce a group of insiders specific to the eating out of home sector. Can you tell us a little bit more about that group and what they will be doing? Will they be amplifying the messages of the existing food industry group or are they coming armed with their own sector specific messages?
Ana Cuddeford: So, yes, absolutely. Right. We have got a group already beginning to amass. If your audience is sitting there thinking this is very attractive infrastructure of me trying to kind of come on board, then please, you know, do, and we can, we can talk about that in a moment. But they will come with their own agenda, they will come with their own issues because clearly it’s a different part of the food business. I think what we’re seeing currently is that some of the themes are similar. However, there are different drivers, there are different pressures on those businesses. And again, just to reiterate, we don’t ask them to amplify something from before. It’s whatever comes out as the group starts to sort of mature and the themes that come out, they will drive it. But yes, absolutely, it will be more focused on particular issues that affect the out of home sector.
Nick Hughes: Yeah, and clearly your preservation of anonymity is key. So how can concerned professionals get in touch with you and how can you sort of ease any, allay any fears they may have around, you know, exposing themselves and their organizations? Because like you say, you know, these, these will be people proud of the work that they’re doing, proud of their organizations by and large and perhaps, you know, slightly uneasy about speaking out.
Ana Cuddeford: So they can get in touch with us if by on insidetrack.org UK we have a team of people that interact with our insiders. I don’t know who they are, who the insiders are. And we have a legal team that also help them look through contracts and talk them through essentially any fears that they have from a legal perspective. And the third thing is also we have a coaching team that can also help to really kind of, you know, that the, these issues are real, that people don’t want to lose their jobs, this is their livelihood. And again, to just reiterate, this isn’t a, you know, I want to take my company down, this is, I want to improve it. So the anonymity is everything. Without that, I don’t think InsideTrack could continue. And we are very careful to not name companies. We are very careful to also we won’t take documents from the company because what we are trying to do is address the systems level issues that we can actually try and tackle as a group.
Nick Hughes: Yes. And I think that’s a really important point to end on, isn’t it? That the people involved in these groups are motivated to create a food system for the future, essentially that’s resilient, affordable, nutritious and doing all the things that a healthy food system should. This isn’t like you say about trying to bring companies down from the inside. So look, Anna, thank you so much for sharing the work of the group. There is, I think, no shortage of warnings being issued at the moment to government and business leaders about the vulnerabilities of the UK food system to a range of shocks. But the fact it is coming from inside the industry feels as though it should really carry some extra weight. So let’s hope that things start to change for the better soon. And we look forward to hearing more from the insiders in due course.
Ana Cuddeford: Brilliant. Nick, thanks so much for having, having me and absolutely, you know, I think this work is so important and really hope that we can, you know, continue the conversation.
Nick Hughes: We’ll be back next week with another episode of the Small Print. If you like what you’ve heard, please take a moment to rate, share and subscribe.
