For the second part of this piece, we use the example of the transitions underway in food and land systems to illustrate the importance of analysing companies from a systems perspective.
Generation has been investing in different parts of the food system since we were founded in 2004. We invest, for instance, in agricultural equipment, in alternative proteins, in online food retail, in green food logistics, in software platforms for restaurants, and in food and drink products.
We strive to continuously generate new insights in this area as it has direct relevance for how we allocate capital. Our library of research includes roadmaps on precision agriculture and irrigation, food-supply-chain traceability, last mile logistics, biologicals for pest and disease management, environmental intelligence and plant-based protein.
In the past few years, a series of high-profile reports and academic papers have shown conclusively that a transition in food and land systems is essential to meet the Sustainable Development Goals, as well as the Paris Agreement on Climate Change.1 The transition will have wide-ranging implications from farm to fork; a revolution in agricultural practices and logistics alongside a significant shift in our diets.
This emerging body of knowledge was reflected in the research-driven roadmaps put together by our investment teams. In turn, it fed into the discussions we had with many companies.
In the box below, we describe our recent engagement with one such company, in which we sought to assess whether the company is system positive. The following sections unpack some of the areas we discussed with the company and also provide other relevant company case studies.
Engaging a key player in agricultural ecosystems
In autumn 2019, we invited a company that provides goods and services to the agriculture sector to join us for an in-depth discussion on sustainable food systems.
We had engaged with this company on sustainability for many years. They have a long-term perspective we appreciate and they develop cutting-edge technology that could help enable a sustainable transition.
Yet for some time, our research had highlighted how much needs to change in the global food system for it to be sustainable. Nothing short of a fundamental reset will be sufficient. In light of this, we wanted to discuss the company’s strategy.
We sat together with the company’s leadership team, the CEO, Chairman, CFO and chief economist, at Generation’s London office. We shared with them the data and outlook by leading third party organisations (such as those we have cited in this piece) to illustrate the degree of change the food system needs to undergo if it is to be sustainable.
While there was no sharp disagreement between the company and us, there was a gulf in perspective over the scale and nature of the challenge. It became clear that the company, like many others in the industry, was not closely tracking the same data that we were. Notably, while they were familiar with specific issues raised, they did not have an integrated, broader view on how they would impact the future of food systems. As we note in this piece, the transition to sustainable food production and healthy diets has important implications for land use, for the type of equipment required and for new revenue streams for farming and food.
If management were not focused on how such sweeping changes could affect the business, risks were potentially going unmanaged. We also felt that the company could do more to use its position as a leader in the sector to drive change at all levels and help their customers better navigate these changes.
We continue to have constructive discussions with management and are optimistic that they can take a leadership role in this transition. As we hope this Insights piece makes clear, judging whether a company is system positive is a complex calculation, requiring constant review.