By Aaron Hutchinson, Co-Founder and CEO, CropTrak
We will look back at 2022 as a pivotal year for the food supply chain. But not for what might seem (right now) to be the obvious reasons:
Inflation and rising food costs, high input prices shifting focus to alternative solutions, global supply chain shortages and the food supply’s contribution (and possible solutions) to the climate crisis have certainly grabbed headlines and dominated industry conference agendas.
But fundamentally, these problems are not new news. Indeed, since our inception in 2009, CropTrak has been deploying data solutions specifically to identify and address many of these issues in food production. So as alarming as the headlines have been, the past year’s events won’t be what moves the needle forward regarding food sustainability, security and better production efficiencies.
What will make 2022 a historically disruptive year in food production are two much-less discussed events affecting food production partners and enabling digitization from the top to bottom of the supply chain: new regulations and free (taxpayer) money.
A Better Food Supply is No Longer Optional. It’s the Law.
The regulatory hammer dropped twice in 2022 for the food supply chain.
The first came in March when the Securities and Exchange Commission (SEC) announced new mandated environmental, social and governance (ESG) disclosure requirements. As a result, publicly-held companies, including all the large food and agribusiness corporations, must capture and publish a publicly-accessible record of their sustainability metrics, including greenhouse gas emissions. Compliance dates begin triggering for the fiscal year 2023.
We’ve now come to a point where it’s no longer enough for a corporation to say they have accomplished, or are working toward, a neutral impact on climate and the environment. They have to prove it. They need digitization to transparently capture and record their sustainability efforts, starting from the production level, or face jeopardizing their value to stockholders and the market.
Even for companies already producing ESG reports, the new SEC disclosure requirements make compliance more difficult and complex in line with financial reporting. We are already seeing our customers working diligently to shift their reporting standards and, on our part, ensuring a technology platform delivers a platform to do so seamlessly.
The second hammer to fall was the long-discussed and much-delayed food safety traceability rule published under the Food Safety and Modernization Act (FSMA). Enforced by the Food and Drug Administration (FDA), this rule mandates a 24-hour end-to-end supply chain digital tracing response in case of a food-borne safety incident. This means an almost immediate and transparent digital record of everything that transpired in the growing, processing, transporting and manufacturing of a suspected food item. There can no longer be barriers between supply chain partners when sharing information to properly answer the reply request.
FSMA was signed into law under Pres. Obama in 2011, yet the traceability rule has been so long delayed that, in hindsight, many in the food industry hadn’t given it much attention until the recent rule enactment. Now, however, they’re reacting quickly to get their systems in place or risk missing compliance deadlines.
Taken together, we are entering a new regulatory environment with way more teeth than we have seen prior in food production. This alone will force change. Food companies can no longer choose to gather and share data as they feel fit. Now either they comply, risk being put out of business, or their CEO going to jail.
The Money to Make Things Happen
But that’s not all. This past year the U.S. food supply chain got a roughly $4 billion, taxpayer-funded shot-in-the-arm to form partnerships, share information and go climate-smart.
The United States Department of Agriculture (USDA) just announced a second funding round of $325 million in grants awarded under the Partnerships for Climate-Smart Commodities program. The Biden administration has now awarded over $3.1 billion of climate-smart grants to fund 141 projects projected to impact more than 60,000 farmers and 25 million acres of working agriculture lands.
CropTrak is a named partner in two funded projects (and will provide commercial products for multiple other projects). We’re proud to work with Elevated Foods, California and Arizona state officials, non-profit, research and for-profits partners to implement and document climate-smart practices, activities and systems across hundreds of thousands of acres in crucial production regions planted in fruit, nut and vegetable crops. And we’re partnering with the International Fresh Produce Association, Florida universities and multiple major farm businesses and brands to incentivize specialty crop growers through a traceable ‘climate-smart seal’ to adopt climate-smart practices like reduced tillage, water management and soil amendments.
This level of money, coming as it does from the government, engages a far broader share of food chain partners than we have seen in the VC-funded ag- and food-tech environment.
For the first time, we’re not asking the farmer to buy into a grand new idea and change their practices at their own risk while a downstream tech or food company profits or at least bears very little of their own risk (other than their investor’s money). Instead, these projects write farmers a check and say, for the life of this project at least, ‘You can’t lose. Let’s work together and let’s see what we can do.’
This fundamentally shifts the incentive for farmers and supply chain partners to work together.
The End of Food Supply Chain Fragmentation is in Sight
With these changes and the many standardization efforts like ASTM/SCORe, we are at the beginning of the end of fragmentation in the food supply chain.
We’ve been discussing better ways to work better together in food production for years. But nobody has wanted to share their data, even when not using it themselves. We ended up with data silos of very little value. Farmers, especially, were suspicious about data sharing. Granted, they typically saw very little financial reason to do so.
Now, with every food-producing entity forced to share data if they want to stay in business (new regulations) and yet incentivized with additional value (government grant funding) to change, those barriers are crumbling. Collaboration is in sight. Here at CropTrak, we already see it in our work demands and expanding partners’ lists.
The FSMA and SEC rules mean that the supply chain must collaborate via digitization to stay in business. The climate-smart funding provides opportunities for supply chain partners to work as a team versus separate entities, including bringing farmers actively into the equation. As a result, we have research partners, food and agricultural companies, government groups, NGOs and farmers sitting at the table with the money to make things happen they had only dreamed about a few years prior.
And with the 2023 Farm Bill negotiations starting to heat up, there is still plenty more to come for supporting supply chain collaboration. I expect the 2023 Farm Bill to pull additional levers enabling cooperation for new markets, healthier food and better sustainability in food production.
According to the LandCore Federal Soil Health Bill Tracker, there are more than 50 proposed bills – a record amount – currently in Congress impacting soil health and resilience (key climate-smart features). Many of these bills will find their way into the farm bill in some shape or manner, creating new value and mitigating risk for farmers and agricultural businesses.
Innovation Comes Next
As fragmentation erodes, information-gathering explodes, and data metrics evolve, what comes next for the supply chain? Innovation.
This past year we worked diligently to release new tools enabling more accessible data aggregation and metrics visualization. Tools like the Stewardship Index for Specialty Crops (SISC) Metrics Calculator make it easy for aggregators to visualize eight key sustainability metrics – applied water, energy (GHG), food loss, habitat and biodiversity, nitrogen, phosphorous and irrigation efficiency – across any network.
Coming up in 2023, CropTrak has numerous innovations in the works, some software and some user interface. Underneath it all is equal parts efficiency and collaboration.