Customers, regulators, investors and employees are asking Agri businesses to account for food safety and transparency from the farm to the plate. The lessons they learn will be vital to other consumer and retail businesses as they strive to build greater trust and transparency in their value chains.

“I can’t believe they are still sending people with clipboards and pencils to audit my factory,” sighed a food manufacturing executive recently. “We get almost two dozen visits each year, some local, some from overseas. But they are all essentially asking the same questions and they are all carrying the same clipboards. It’s crazy. There must be a better way.”

He is not the only one keen to find a better way to manage transparency in the supply chain. Indeed, around the world, the pressure on organizations to improve the traceability and transparency of their supply chains is huge. And few are under more pressures than the food supply chain – making them an excellent source of insights, experience and inspiration for other consumer and retail organizations.

More transparency, please

In fact, the pressures underpinning the demand for greater transparency in the food supply chain are not remarkably different to those impacting other sectors. The agri value chain is large and complex, spanning from the seeds and input resources that go to the farm through to the distributors and retailers that sell the products to the consumers.

Perhaps not surprisingly, therefore, consumers are a massive driving force in the drive for greater transparency across the agri value chain; customer expectations are rapidly shifting and topics related to the environment, social and governance (ESG) agenda are having significant influence on the purchase decision.

Customers want to know the products they are buying were made sustainably, ethically and safely. Since they expect to be consuming food items or serving them to their families, they have particularly high standards around food quality, safety and traceability. And they want to be confident that the brands they are buying from are addressing issues such as modern slavery, climate change and fair trade.

As our recent report on the Future of Retail notes, customer consumption is being driven by six key drivers: value, convenience, experience, choice, purpose and safety/privacy. As part of that decision process, customers increasingly want to understand the full providence of the products they are purchasing (especially in the food sector).

That carrot comes with a stick

Investors and shareholders are also starting to force the issue. They, too, are adding ESG criteria into their investment decisions and looking for ways to use their investment clout to advocate for greater transparency in the way ESG metrics are measured, reported and compared. Boards and activist shareholders are asking difficult questions of management. Organizations are increasingly expected to account for their impact publicly through integrated reporting.

Regulators and governments are moving quickly to catch up to public sentiment (Greenpeace’s recent focus on Tesco’s beef supply chain suggests NGOs are also becoming more active). A bevy of new regulations are currently being promulgated for the food industry around the world. Even municipal and city governments are starting to demand more transparency on what ‘local’ really means. Stung by unfulfilled promises in the past, they are also keen to find more reliable, efficient and trustworthy ways to track and trace items through the supply chain. 

Time for a change

With pressure mounting on all sides, many food producers and retailers are also starting to recognize that their traditional approaches to providing transparency are no longer fit for purpose.

In part, this is because many supply chains are becoming increasingly complex. Supply chain issues during the pandemic, coupled with increased customer demand for locally-produced food items, has forced many food retailers to diversify and near-shore their supply chains. Expectations that retailers will have visibility right down to the farm level means tracking items across tens of thousands of suppliers, all the way down the value chain. For items with extensive value chains, the complexity can be mindboggling.

Traditional approaches to achieving transparency are also unfit to meet the data demands of regulators, investors and customers who are increasingly looking for more granular, objective data in a more standardized format. Transforming data from clipboards to databases is not only resource-intensive – it is also massively inefficient and ignores all of the value that could be generated from analyzing the data itself.

The events of the past 18 months have also demonstrated that traditional approaches are not flexible enough to keep up with rapidly changing expectations. While the demand for transparency is global, the way it manifests is often very local. And customer expectations tend to move faster than regulators; relying on a basic compliance approach simply isn’t good enough in today’s environment.

As the food manufacturing executive noted, current approaches also tend to be wildly inefficient. It’s not just the disruption caused by an unending parade of auditors on the factory floors. The way data is collected, managed and analyzed is rife with manual processes and opportunities for errors or mistakes. Historic attempts to work with the value chain to drive efficiency have often been viewed as ‘clobberation’ rather than ‘collaboration’, creating some feelings of mistrust.

It’s here and now

The topic is certainly moving up the executive agenda within the consumer and retail sector. KPMG professionals regularly field calls from consumer and retail clients looking for advice on how to improve the transparency of their supply chain. In the Agri and food sectors, we’ve worked with food manufacturers to reimagine transparency in their supply chain right down to the farm level. And we’ve worked with massive grocery chains to respond to demand for traceability and to conduct food safety assurance at the retail level.

Right across the consumer and retail sector (and beyond), we’ve been working with industry leaders, regulators, suppliers and technology providers to transform the way ESG criteria are collected and reported. Much like the need to demonstrate traceability in the food value chain, consumer and retailer organizations of all types are needing to demonstrate adherence to a range of other key issues including modern slavery, fair trade and the avoidance of conflict materials.

We’ve been developing valuable tools and technologies that respond to specific pain points organizations are facing as they drive for greater transparency. KPMG Origins, for example, is a blockchain-based track-and-trace solution that allows companies to confidently report key data (such as farm level data collected from remote sensing, food safety evidence, and digital temperature controls during transport) to consumers and clients, while increasing efficiencies in customs clearing and payments.

We have developed a supply chain predictor that creates a real-time digital twin view of an organization’s supply chain based on internal and external data, allowing decision-makers to simulate various business scenarios to help navigate their supply chain with greater precision, thereby reducing risks and costs. We have used demand planning to help reduce waste and manage raw material scarcity. And we have created integrated reporting approaches and frameworks that create stakeholder trust.

Specialized software providers like ChainPoint (a KPMG Alliance) have vast experience with on-line/off-line digital data collection tools on mobile phones to allow for data collection in remote rural areas without internet access and all sorts of traceability models like book & claim, mass-balance, segregation and identity preserved.

We say this, not to boast of our deep experience and valuable technologies and alliances, but rather to demonstrate that a better approach to transparency in the food supply chain is possible; that there are technologies and leading practices to learn from; and that there are tools that can accelerate the time to value. 

Here’s what we’ve learned

Our experience has helped us identify five key areas where all consumer and retail organizations (not just food and Agri businesses) should be focusing as they look to transform their current approaches to transparency and traceability in the supply chain.

  1. Understand why you are doing it. Start by identifying what you should be measuring and why. Consider what you want your customers to know you for. Think about the various stakeholders that will consume the data and how it will be communicated. View compliance as the baseline and customer expectations as the goal.
  2. Take a risk-led approach. Consider how transparency is prioritized within your risk registry. Understand the balance between compliance, risk, finance and customer expectations. Identify the areas of greatest risk and focus investment into areas of greatest concern (for you, your stakeholders and your customers). In the Agri sector, for example, common criteria range from food safety to human rights risks.
  3. Manage your data. Look for opportunities to digitize and automate your data (fight to banish clipboards). Digital access to remote suppliers is key, not only to ensure more granular data in key areas, but also to help your suppliers thrive (in the Agri sector, that may mean providing your farmers with digital services like weather forecasts, crop data, on-line training, access to inputs and markets, drone spraying and even micro finance to ensure security of safe supply over time). Start by identifying your data requirements internally and across your value chain. Understand how that data will need to be integrated to extract the insights you, your suppliers, clients and value chain need to increase operational excellence, and provide what your stakeholders demand.
  4. Align your systems. Map your current systems and interdependencies. Integrate into your ERP system. Identify existing problems and opportunities for enhancements. Reimagine new processes and systems that remove historic errors or bias. Explore how technologies like blockchain can help enhance trust in your data. To reach scale quickly, look for proven software that comes with multiple pre-defined traceability solutions, a strong data model and high configurability.
  5. Enhance reporting. Understand how reporting trends are evolving and how the shift to integrated reporting will impact your organization. Assess how you are going to report your data, against which standards and through what channels. Consider how reporting can be used to drive competitive advantage and differentiation for your business. 

Towards a better way

Ultimately, the drive towards greater transparency in the supply chain comes down to trust: trust in the data; trust in the value chain; trust between businesses and stakeholders; trust in the community; and trust with regulators. Trust is central to food safety as much as it is central to ESG reporting. Trust is what endows consumer and retailer organizations with their licence to operate. It is the key output that all resources should be aiming to deliver.

We believe that – by focusing on key areas such as risk, data, systems and reporting – consumer and retailer organizations of all types can start to make significant headway towards building trust in their value chains. The technologies, data and models are tested and available. The benefits are clear. And the pressure for change is undeniable.

“There must be a better way,” sighed the Agri sector executive. There is. And we can show you how to make it happen.

To continue the conversation, or to explore how the points we raised impact your particular organization, we encourage you to contact your local or regional KPMG Consumer and Retail sector leader.

The regional and country KPMG Consumer & Retail leaders — Anson Bailey, KPMG China; Paul Martin, KPMG in the UK; Linda Ellett, KPMG in the UK; Jessie Qian, KPMG China; Stephan Fetsch, KPMG in Germany; Angela Dosedel, KPMG in the US; Kostya Polyakov, KPMG in Canada; Eric Ropert, KPMG in France; Yoshinobu Nakamura, KPMG in Japan; Rene Aalberts, KPMG in the Netherlands; Harsha Razdan, KPMG in India; Enrique Porta, KPMG in Spain; Fernando Gamboa, KPMG in Brazil; Jang-Hun Shin, KPMG in Korea; Jean-Marc Liduena, KPMG in France and Massimo Curcio, KPMG in Italy.

Get in touch