Why the ag sector needs to self-regulate to meet the changing needs of consumers

Editor’s note: Peter Leppan is regional director, Europe, Middle East, and Africa, at Proagrica. The views expressed in this guest article do not necessarily represent those of AFN.

A recent decision from the Court of Justice of the EU, holding that EU member states can implement mandatory country of origin labelling on dairy and other food types, should serve as a further call to action for our industry.

The ruling follows years of lobbying from French consumer groups in the wake of the 2013 horse meat scandal. This activist success is indicative of changing attitudes towards provenance.

This has been followed in the UK by calls from a coalition of health professionals to impose a ‘climate tax’ on meat and dairy products.

Clearly, lobbying from both grassroots groups and experts is here to stay. This puts greater pressures on the ag sector to self-regulate if it’s to avoid having punitive actions imposed on it at a national or international level.

Food origin and food safety both feature within the top three purchase decisions according to research conducted earlier this year by the European Food Safety Authority. However, there is a whole raft of consumer concerns — from sustainability to nutrition and animal welfare — that make provenance and traceability increasingly important considerations.

Until there is consolidated action to offer full transparency across the supply chain, we cannot discount another international scandal. This would put the industry back to square one on trust within the court of public opinion.

At the moment this seems to be a case of when, rather than if.

Hurdles to self-regulation

Proactive self-regulation is the best possible option for the sector, but admittedly this is not without challenges.

Most significant is the lack of information sharing across the supply chain. The challenge is many ag businesses are understandably concerned about losing control of their core non-crop asset – their intellectual property.

The net result of this lack of connectivity up or downstream is thousands of tonnes of fraudulent food seized each year in the EU alone. This doesn’t send a positive message to end consumers. Data sharing would greatly improve the situation and squeeze out the criminal elements.

There’s some way to go before this potential is realized though, as insufficient data sharing is an endemic problem in our industry. Sixty-two percent of farmers do not collect or share data. Even if ag businesses want to share information, few have the capabilities to do so, particularly in real time. To put this in context, our own research revealed only 16% of US ag retailers employ digital customer relationship management tools.

This paints a picture of a fragmented industry where trust and collaboration are in short supply. Yet, interoperability between supply chain stakeholders is the only bedrock upon which provenance and traceability are workable.

Success is contingent on the exchange of secure and targeted sharing of data for specified purposes that are clearly understood by all players. Specifically, businesses need to be 100% certain that their data is shared responsibly, only trusted partners can access it, and they are working to the same goals.

There’s no way of avoiding the fact that building the infrastructure and systems to support self-regulation will result in capex costs at a time when margins are already tight. But it’s important to demonstrate that the industry as a whole takes consumer concerns seriously.

Building a supply chain network

Collaboration would allow the ag sector to transition from a supply chain into a connected supply network. This is a seamless system of interconnected ag businesses feeding into the network vertically up and down the supply chain, and also horizontally from the agronomist to the ag retailer.

This is no small feat. At the moment, each stakeholder in the agricultural system has to trust that the player upstream of them is operating in a compliant way. However, as we’ve established, this is not always the case. So before anything further can happen, the value exchange of these relationships needs to be placed front-and-center to secure buy-in from stakeholders.

The benefits are clear: growers are better able to leverage their ethical credentials and certification to support negotiations with processors and other buyers; while ag retailers and manufacturers are positioned to serve their customers through expanded and premium services, and also to take advantage of up-sell and cross-sell opportunities.

A mindset shift is underway. Rather than seeing the blocks, data sharing is already opening up growth opportunities for players across the supply chain. There are examples of supply networks working successfully at a local level.

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One trial in the Netherlands has seen agro-chemical manufacturers, distributors, and growers collaborate to cut counterfeiters out of the equation. This has enabled near real-time identification of fraudulent product location to ensure faster recalls, thus protecting all stakeholders.

These types of projects are becoming more commonplace. Although typically region-focused, they are leading the charge in demonstrating what is possible. In time they will expand into larger initiatives. Imagine what could be achieved if this was extended to take in a broader set of ag businesses – and across multiple territories?

Self-regulation holds the key to making this dream into a reality. However, it’s becoming clear there’s a limited time to make this happen. As it stands, we’re only one more horse meat scandal away from a less favourable set-up being imposed by third-party regulators.

The technology is in place and the industry is demonstrating it has the will to make it happen. Ensuring it happens quickly enough will depend on the reserves of our most valuable commodity – trust.