The Australian Food and Grocery Council (AFGC) recently released its Sustainability Commitment report for 2010-11 (Report). The Report sets out the AFCG's key objectives and efficiency targets, described as its 'Sustainability Commitment', for improving sustainability in the food & beverage and grocery industry. 

In this alert, we highlight these objectives and targets and review the national legislative and policy underpinnings of the Sustainability Commitment in the key areas of water, waste, energy & emissions, packaging and procurement.

Sustainability in the food & beverage and grocery sector

The Report recognises that sustainability is a broad concept encompassing economic, environmental and social dimensions. Today the sector faces complex sustainability challenges arising from increased consumer awareness and demand for environmentally and ethically sustainable practices, rising energy costs, the impact of climate change and increased Government regulation. Core to the sustainability concept is a focus on raising efficiency, adopting best practice procedures, and minimising adverse impacts of resource usage upon the community, the economy and the environment. 

Today organisations are raising their sustainability profile not simply for reputational purposes or to appease public sentiment but in recognition of the potential cost savings available through more efficient resource and energy management. In other words, sustainability makes both commercial and ethical sense.

The focus areas of the AFGC's Sustainability Commitment

The AFGC has outlined key objectives and efficiency targets in five focus areas for achieving sustainability improvements. The objectives relate not only to an organisation's own affairs but also its supply chain. We highlight these objectives and targets below as well as the legislation and Government policy which is the reference point for the Sustainability Commitment.

Water

The AFGC's first objective is to increase water efficiency. Its target is the reduction of water consumption per tonne of production by 20% by 2020 relative to a 2010-2011 baseline. 

Industry's response to water scarcity has included the installation of water recycling plants and rain water harvesting. Future initiatives may include the implementation of smart water meters which can provide real-time water consumption data to assist in the monitoring and management of water use. Perhaps the most significant action industry can take in the future is to promote water efficiency measures among the food & beverage supply chain in light of the fact that the industry is a major consumer of agricultural production, which in itself accounts for 66% of Australian water usage. 

The promotion of water efficiency in Australia is regulated by the Government's long term initiative called Water for the Future (WFTF). WFTF is a set of urban and rural policies and programs created to take action on climate change, improve the wise use of water, secure water supplies and support healthy rivers. Forming part of the WFTF initiative is the National Water Initiative (NWI), the Water Act 2007 (Cth) and the Water Efficiency Opportunities (WEO) program. 

The NWI involves governments across Australia committing to a cohesive national approach to managing and planning water use and storage. 

The WEO program encourages water efficiency and use of alternative water supplies by the commercial and industrial sectors to produce net economic and environmental benefits. The program's key components include the Prime Minister's Water Wise Award to recognise businesses who save significant water use, various grants and rebate schemes to help businesses fund opportunities and information assistance to businesses to plan and implement water efficiency.

Waste

The second key objective of the Sustainability Commitment is for companies to reduce waste they generate as well as develop partnerships with retailers and consumers to reduce food waste and investigate waste-to-energy opportunities at an industry level. The target is a reduction of waste to landfill per tonne of production of 40% by 2020 relative to a 2010-2011 baseline. 

The Report highlights what a major problem food waste is in Australia by observing that the equivalent of one out of every five purchased grocery bags is thrown out by Australian households. 

The reduction of waste throughout the food supply chain is also a key objective of state and federal governments. The National Waste Policy came into effect in November 2009 and was endorsed by the Council of Australian Governments (COAG) in October 2010. It is a collaborative policy between the Commonwealth and the states and territories which focuses on Australia's waste management and resource recovery policy toward 2020. In 2011, the Standing Committee on Environment and Water was created by COAG to manage the implementation of the National Waste Policy. 

The National Waste Policy focuses on a number of key areas and strategies. These include product stewardship, packaging management, management of landfill emissions and clarification of the scope of 'waste' and best practice principles. The Commonwealth has also introduced a range of legislative measures to facilitate the implementation of the National Waste Policy. These include the Product Stewardship Act 2011 (Cth), the Australian Packaging Covenant (discussed below) and legislation associated with the Carbon Pollution Reduction Scheme.

Energy & Emissions

The third objective of the Sustainability Commitment is the increase of energy efficiency and the reduction of emissions in the supply chain. The target is a reduction of carbon emissions per tonne of production by 20% and energy usage per tonne of production by 10% by 2020 relative to a 2010-2011 baseline. 

The Report recognises that while the food & beverage and grocery industry's direct energy consumption accounts for only 1% of Australia's 'scope 1'¹  emissions, its indirect impact stretches to the wider supply chain. Industry has responded by the use of low-emissions technologies, including photovoltaic solar panels, biogas and biomass fired boilers, and natural gas generators. Energy efficient and emissions reductions initiatives have been adopted by industry to ensure compliance with federal schemes regulating energy use and emissions output. The three primary schemes are:

• the Energy Efficiency Opportunities (EEO) program under the Energy Efficiency Opportunities Act 2006 (Cth). This program aims to encourage businesses which consume large amounts of energy to identify, evaluate and report publically on cost effective energy efficiency opportunities, improve productivity and reduce greenhouse gas emissions. The EEO requires registered corporations to: 
  
  
  • assess their energy efficiency opportunities to a minimum standard in order to improve the way in which those opportunities are identified and evaluated; and 
    
    
  • report the assessment outcomes publicly to demonstrate to the community that those businesses are effectively managing their energy use (Section 3(2)). 
    
    
• the National Greenhouse and Energy Reporting Scheme ('NGERS') under the National Greenhouse and Energy Reporting Act2007 (Cth). This scheme was created to provide a single national reporting framework for greenhouse gas emissions and projects, and energy consumption and production. The NGERS underpins the Clean Energy Act 2011 (Cth), informs Government policy-making and is the basis of Australia's international emissions reporting obligations. 
  
  
• the National Pollutant Inventory (NPI) under the National Environment Protection (National Pollutant Inventory) Measure Act 1998 (Cth). The NPI tracks pollution across Australia and gives the public access to information regarding the emission and transfers of toxic and hazardous substances. The NPI information is released annually by the Commonwealth, with the purpose of maintaining and improving air and water quality, minimising environmental impacts associated with hazardous wastes and improving the sustainable use of resources.

Packaging

The fourth objective of the Sustainability Commitment is the optimisation of packaging techniques and recycling initiatives throughout the supply chain with the aim of increasing the recycling rate of packaging to 70% by 2015 and reducing packaging litter by 20% by 2020.

The AFGC's sustainability objectives and targets in packaging are largely governed by the Australian Packaging Covenant (APC). The APC forms the voluntary component of a co-regulatory arrangement between Government and companies at each level of the supply chain to reduce the adverse environmental impacts of consumer packaging. It is enforced by the National Environmental Protection (Used Packaging Materials) Measure 2011 (Cth) (NEPM). As signatories, the AFGC and its members are committed to improving packaging design by the use of more resource efficient and recyclable inputs, increasing recycling of used packaging and taking steps to reduce the volume and impact of litter. 

The Sustainable Packaging Guidelines (SPG) are an important component of the APC. The SPGs are designed to assist APC signatories in reviewing and optimising their own packaging initiatives against a set of pre-defined principles and practical strategies for sustainable packaging. APC signatories are required to document how each of the strategies in the SPG have been considered in their packaging design and procurement process, and what initiatives they have undertaken to make their packaging more sustainable. 

Whilst participation in the APC is voluntary, brand owners with an annual turnover of over $5 million who choose not to become signatories to, or fail to comply with, the APC will be subject to regulation under the NEPM (and the corresponding regulations under each state or territory).

Sustainable and ethical procurement

The final objective of the Sustainability Commitment is the ethical sourcing of products and minimising any ecological impact. The target is for all companies to have a sustainable sourcing policy in place by 2015. 

The Report recognises that the sector is a large consumer of raw commodities and thus has the capacity to play a major role in promoting sustainable and ethical sourcing arrangements. 

A key means by which industry participants can ensure their raw materials are sustainably sourced is through compliance with independent certification schemes such as the Roundtable on Sustainable Palm Oil, the Forest Stewardship Council, Fair Trade Certification and UTZ Certified (which certifies sustainably grown coffee, cocoa and tea).

Sustainable procurement by government

The AFGC's Sustainability Commitment reflects the Australian Government's approach towards sustainable environmental purchasing and procurement. As outlined in its Environmental Purchasing Guide, Australian Government officers involved in procuring goods and services are encouraged and in certain instances required to factor into account environmental and sustainability considerations when purchasing products and/or services on behalf of Government agencies. Similar to the key focus areas of the AFGC's Sustainability Commitment, sustainable procurement by the government is expressed to cover key sustainability issues such as energy, waste management, packaging, greenhouse gas emissions and environmental health. The Guide also recognises that the Australian Government is the single largest buyer of goods and services in the economy and is thus in a position to exercise its significant purchasing power to influence environmental and sustainability outcomes.

Concluding remarks

Sustainable development is no longer a subsidiary issue in corporate decision making processes. As the Sustainability Commitment demonstrates, sustainable practices both within an organisation and at all stages of its supply chain are increasingly important for the food & beverage and grocery industry. Both Federal and State Governments have implemented a range of regulatory schemes to foster sustainable development, but achieving sustainability will ultimately require a long-term commitment from all stakeholders. 

Best practice suggests that companies should consider implementing a sustainability compliance policy if they have not already done so. In doing so, companies should be mindful of not making any misleading or deceptive statements about their environmental credentials and sustainability procedures so as to avoid any liability under the Competition and Consumer Act 2010 (Cth). Minter Ellison can assist clients with navigating the complex minefield of sustainability regulations to ensure their sustainability policies are fully compliant with Australia's regulatory regimes.

¹ 'Scope 1' emissions are the release of greenhouse gases into the atmosphere as a direct result of an activity that constitutes the facility. An example would be greenhouse gases emitted as a result of coal burnt at a power station. These are distinct from Scope 2 emissions, which are releases of greenhouse gases as a direct result of activities that generate electricity, heating, cooling or steam that is consumed by the facility, but does not form part of the facility.