A Food System In Crisis - Why Investors Must Rethink Risk Management

In a world progressively defined by geopolitical volatility, ambiance disruption, and societal instability, 1 of nan astir underappreciated vulnerabilities sits softly connected our plates: nan world nutrient system. Despite mounting information and visible proviso concatenation stress, galore businesses still dainty biology disclosures arsenic regulatory box-ticking. It’s clip to telephone retired this retired and request effective consequence management.

In an bonzer move cutting done firm PR and greenwashing alike, an anonymous group of elder professionals from nan UK’s largest nutrient companies—Inside Track x Food—recently released a rare, candid memo warning that nan assemblage is heading toward unprecedented instability, and investors are dangerously unaware.

This isn’t ambiance activism. It’s a board-level SOS.

The Bottom Line: Our Food System Is Not Resilient

According to nan memo, yield, quality, and predictability from world sourcing regions tin nary longer beryllium taken for granted. Soil degradation, h2o scarcity, and ambiance volatility person go contiguous operational threats. Yet mitigation strategies presented to investors are often insufficient aliases misleading. “What was a semipermanent threat is now a short-term threat,” nan memo states. “The equilibrium of action needs to change.”

Frameworks for illustration TCFD, TNFD, and CSRD are being treated arsenic compliance tasks alternatively of strategical imperatives. Meanwhile, businesses stay focused connected short-term efficiency, ignoring systemic risks piling up successful their proviso chains.

Richard Zaltzman, main executive of EIT Food says: “Finance is complacent. Complacent pinch regards to its knowing of nan risks inherent successful nan nutrient sector, and besides nan needs of nan assemblage to support socio-economic stability. The Arab Spring was triggered, successful part, by wheat value spikes. Eventually, that displacement of consequence will travel backmost and wound you.” His informing echoes nan memo’s halfway message: what was erstwhile seen arsenic a semipermanent ambiance consequence is now an imminent threat to profitability, proviso stability, and geopolitical order.

A Perfect Storm: Climate Chaos Meets Corporate Complacency

The memo highlights really utmost upwind successful Spain has already affected nan UK's entree to tomatoes, salad, and broccoli, while world shocks person disrupted supplies of cocoa, coffee, and sunflower oil. Many companies are relying connected vague strategies to displacement sourcing to caller regions, but nan memo calls this dangerously naïve and says: “We cannot each root everything from location other astatine a clip erstwhile different companies and different countries are seeking to do nan same.”

It besides highlights a taste failure: short-term reasoning dominates boardrooms, while legal, audit, and consequence teams stay siloed and under-equipped to negociate nan challenges they face. At nan aforesaid time, companies prioritize bully news complete honesty—leaving shareholders pinch a mendacious consciousness of security.

System Risk Masked by Markets

Despite years of warnings, nan finance organization hasn’t genuinely grappled pinch nan standard of nutrient strategy risk. Capital continues flowing into high-growth sectors for illustration AI, leaving nan agrifood system—so captious to world stability—underfunded and misunderstood. “We’ve masked nan effects of consequence successful world nutrient proviso chains,” says Zaltzman. “When world nutrient prices rise, it’s not Wall Street that feels it—it’s often Africa aliases South America.”

The World Bank has estimated that trillions are required successful finance to make nan world nutrient strategy much robust, yet Earth Track study shows nan world still provides environmentally harmful subsidies to nan tune of $2.4 trillion a year. And superior markets, designed to optimize for returns—not prevention—are not built to respond.

A Failure of Leadership—and Imagination

The nutrient sector’s structural situation is some economical and political. For investors seeking long-term, unchangeable returns, nan mediate of nan nutrient chain—agriculture, processing, and logistics—is some high-risk and low-margin. “If you’re backstage equity aliases VC, you can’t extract nan return. If you’re a pension fund, it’s excessively volatile,” Zaltzman notes. “No one’s investing, and that’s a systemic failure.“

Pushback against ESG and ambiance regularisation is worsening nan problem. As ambiance action becomes politicized, companies consciousness little empowered to speak openly aliases prosecute associated strategies—further entrenching risk.

Still, Zaltzman sees dream successful examples for illustration the Andhra Pradesh Community Managed Natural Farming inaugural successful India. “You tin move godforsaken backmost into productive successful 2 aliases 3 years, he says. “Millions of farmers are already doing this. It’s 1 of nan best-kept secrets successful nan world.”

The early months of COVID showed really quickly nan situation tin respond erstwhile nan strategy is forced to pause. But assuming we’ll ever person clip to enactment later is, arsenic Zaltzman warns, “a vulnerable mindset.” “It’s for illustration discovering a pill that lets you cram for your A-levels successful a week,” Zaltzman says. “Once you cognize it works, you presume you tin ever do it tomorrow.”

The authors of nan memo impulse investors and boards to move from passive disclosure to proactive consequence management. They ask: is your committee treating this for illustration nan high-likelihood situation it is? The memo states: “This situation will beryllium moreover much important pinch nan quality that this clip we tin spot it coming.”

From Risk Registers to Real Action

For Zaltzman, what’s desperately needed is simply a displacement from firm consequence disclosure to value-chain consequence management. But title laws often guidelines successful nan way.

“Imagine a joined-up consequence appraisal for nan atom harvest worth chain—one that involves nan large players and cardinal investors. Right now, that’s difficult to do legally nether antitrust rules. But possibly it’s clip to prioritize nutrient information complete marketplace competition.”

He applauds organizations for illustration Unilever for making existent commitments to regenerative agriculture but warns that fewer initiatives person yet been stress-tested nether real-world unit adding, “That’s nan existent metric.”

The Bigger Picture: The Food System Is a Bubble

The astir striking metaphor successful nan memo compares nan world nutrient strategy to a “bubble”—one built connected overconfidence successful nan stableness of soil, water, and weather. Like nan lodging marketplace earlier 2008, it’s inflating connected flawed assumptions. When it bursts, nan consequences will beryllium financial, social, and political.

But there’s still time—if investors act.

What we’re seeing is simply a uncommon and candid infinitesimal of introspection from those wrong nan machine. This isn’t astir ESG model dressing aliases vague ambiance pledges—it’s a nonstop entreaty to nan financial stakeholders who person nan powerfulness to unit systemic change.

“This isn’t astir upside,” Zaltzman says. “This is astir preventing a strategy from collapse. And nan money is still dormant astatine nan wheel.” In a world wherever nutrient information is poised to go nan adjacent frontier of geopolitical and financial risk, failing to inquire nan correct questions looks for illustration thing much than a look for disaster.