Advancements in distributed ledgers, IoT and food sensing technologies have reinvigorated the possibility of an end to end food traceability.

Traceability provides the opportunity to improve our understanding of food provenance, safety and sustainability. Large scale social challenges, related to food and agriculture, can now be measured, isolated and addressed thanks to the potential of modern traceability solutions. Despite the advancements in technology and new emerging consumer demands, there are several risks and challenges to mass adoption.

The potential benefits of traceability

• Meeting consumer demands for transparency: An emerging consumer segment is now demanding greater transparency of where their food is coming from in order to make informed purchasing decisions. This segment is using their purchasing power to reshape food production ethics, legality and counter all fake foods. Traceability provides the opportunity to meet this consumer demand through in-depth tracking of supply chain data.

• Addressing food safety concerns: The World Health Organisation estimates 1in 10 people in the world fall ill after eating contaminated food with 420,000 dying each year. Traceability allows regulators and companies to identify, isolate and address food safety issues.

• Supply chain optimisation: Nearly 1/3^rd of total food production is wasted each year. Traceability enables more effective identification of vulnerabilities in supply chains to ensure efficiency and the ability of supply chains to meet population growth demands.

• Sustainability: Visible supply chains will ensure greater accountability for companies and governments in their commitments to sustainability goals. Measure real-time social and environmental footprint of food production.

Food & agriculture must change:

Agriculture faces fundamental challenges which will govern the future of our planet. Food production systems are responsible for 25% of global green house gas emissions, 70% of fresh water use and 60-70% of biodiversity loss. Food and agriculture remain the largest employer in the world. However, climate change threatens the livelihood of all employed with estimates of up to 25% reduction in crop yields as a result of climate change. 800 million people globally are either chronically malnourished or overweight, while population growth is expected to grow to 10bn by 2050.

Challenges to overcome:

• Small holder stakeholders: Small holder farmers, processors and distributors risk being excluded from traceability initiatives for multiple reasons. The total output production is concentrated in large industrial farms with greater technology adoption and financing capabilities, whilst the low margins experienced by small holder limits their capacity to participate. Market access for all is the primary challenge with smaller stakeholders also lacking the operational bandwidth to implement new processes.

• Inclusivity, consensus and collaboration: Multiple stakeholders throughout value chains require building a consensus, culture of inclusivity and collaboration across vertical supply chains. Retailers can initiate the need for traceability drawing to consumer pressures as a justification. Agribusiness will need to take the lead with implementation and identifying new opportunities created through traceability. Food producers and growers must articulate the value chain their adoption concerns. 

• Standardisation: The development of clear, consistent and globally harmonized standards for data collection, governance, ownership and sharing is required. Without alignment, traceability solutions will not scale and prove burdensome by creating friction in the adoption process.

• Liability concerns: Fake food and contamination scandals have rocked large supply chain members. At present, traceability solutions adopted by food processors and retailers have mitigated the liability risk which in turn has led to the lack of end to end solutions being deployed.

The solution: Innovation ecosystems and stakeholder collaboration

A transformative approach to partnerships and investments, rooted in innovation ecosystems is needed. This level of collaboration will enable new business models, investments, policy frameworks, adoption and technical capacity building. Historically, collaboration in agriculture is more common than in other industries.

Participating in the ecosystem for agriculture stakeholders must create intrinsic value for all participants but can also create value for those external to the ecosystem. This will stimulate further creativity and inspire investments. Successful stakeholder collaborations will reduce interdependency risk and adoption risk. Ecosystems must include diverse stakeholders including small holder farmers/processors through to large agribusiness, retailers and restaurant chains.

Investments in agtech has been growing steadily for the last 8 years. However, they lack significantly behind other areas. In 2017, total venture capital investments in healthcare were almost 4x as much as agriculture. 75% of the total investments went to developed countries, despite only producing 25% of total ag production. Successful ecosystems will help address this imbalance and inspire investors to take advantage of the value creating opportunities arising in food ecosystems.

Recommendations for policy makers:

• Maximise the utilisation of state resources to develop technical capabilities

Social returns on public sector r&d investments in developed economies yield between 25-30% ROI on average. This does not include private government returns. Considering the positive externalities and impact on sustainability, governments should help facilitate traceability r&d expenditure.

• Reduce the cost of adoption through the financing of capital expenditure and operational costs

Traceability measures will require a small-scale stakeholder to invest in new technologies. The necessary upfront capital expenditure will be unaffordable for most small-scale stakeholders, creating friction in the adoption process. Governments, civil society, industry or other value chain players should consider financial support for these upfront costs. In most cases, retailers and processors will act as leaders in pushing for traceability adoption from their suppliers. Financial incentives must ease adoption.

• Incentivise collaborative ecosystems with government acting as the glue

Transformational innovation and disruption across major industries have less to do with individuals and specific technological breakthroughs and everything to do with complex systems, partnerships and supply chains aligning together. The government can act as an orchestrator which provides the glue that gives the ecosystem its infrastructure and holds it in place. Stakeholders must see intrinsic value in participation and governments should build policy to incentivise them to do so.

• Develop harmonised data standards for collection, governance, ownership and sharing
  Neutral organisations such as regulators and government will play a key role in convening different stakeholders and value chain members to align on clear and consistent standards. Agreements on data collection, requirements, storage, collection methodology, data ownership and data sharing are required to prevent adoption friction and inconsistencies across different markets.

• Reduce the liability costs and risks during food traceability’s infancy

Adoption of traceability has the potential to create superior value for all stakeholders including consumers while addressing large scale social challenges. The liability risk has prevented mass adoption by the largest retailers and food processors. Emerging technologies like traceability will require sensitive data sharing which may place stakeholders at risk. Regulators must be sympathetic in the early stages of food traceability’s development.

Technologies enabling end to end traceability:

Source: Worldbank

Solution

Advancements in distributed ledgers, IoT and food sensing technologies have reinvigorated the possibility of an end to end food traceability Solution