Environmental social governance (ESG) reporting should no longer be an unknown concept. But a recent regulatory development now requires listed companies globally to report on their greenhouse gas (GHG) emissions as robustly as they do with annual financial reports. GHG emission disclosures refer to scope 1, 2, and 3 emissions such as emissions derived from the company's assets - what the company owns and can control such as delivery vans (scope 1), emissions purchased i.e. electricity and gas used (scope 2) and finally, emissions released outside of their direct control i.e. upstream and downstream supply chain (scope 3). As markets continue to face further pressure from the public sector to reduce their footprint, these climate-related disclosures will force businesses to re-evaluate their business models and to begin decarbonizing their value chains.
Hong Kong is nonetheless moving in that direction, with recent news from the Hong Kong Exchanges and Clearing Market (HKEX) proposing stricter ESG and climate disclosures to meet international standards (Ng, 2023). All listed companies will have to report their scope 3 emissions, an incredibly complex activity for any company, let alone for the food and hospitality sector.
So how is this relevant to F&B companies? Well, to put it simply, any food and hospitality portfolio listed as a subsidiary of these public companies would all be categorized as the company's scope 1 and/ 3 emissions. So even if the hotel entity itself were to be a private company, the emissions data yielded from the hotel operations will be critical to effectively and accurately assist the listed company in calculating its total GHG emissions.
Image Courtesy: Hyatt Centric Hong Kong
But more importantly, regardless of whether an F&B entity is part of a listed company or not, knowing what to measure, and how much GHG our operations emit, helps us all in the food and hospitality sector to manage and reduce our emissions more effectively.
Service excellence is a hallmark of Asian hospitality. And as restaurants strive to provide the highest and rarest quality products to dazzle customers, all of it comes at an enormous environmental and social cost. While there is nothing wrong with providing the best to our customers, the problem is that we often do not know the extent of what we source, how materials are grown, and the types (and amounts) of energy that are required for products to get manufactured, packaged, and transported to us.
In fact, a study done by HowGood shows that up to 87% of a food company's total GHG emissions are Scope 3 related - how ingredients are grown, how growing these ingredients contributes to a change in land use, what chemicals, fertilizers, and feed are used in the process, all are part of Scope 3 emissions. However, the lack of industry-wide knowledge and standards on how to measure and report GHG impact means that restaurant and hotel operators are not fully aware of the external costs they incur while they continue to conduct business as usual.
Until recently, the food and ag sector seriously lacked a scientifically-backed database on foods' life-cycle emissions beginning from cradle to grave. Furthermore, especially in Asia, current figures are fragmented and rarely provide insights to consumers on how a shift in consumption habits can drastically reduce our individual footprint. Tons of research has now shown consumers’ willingness to purchase lower-carbon-footprint goods plus pay a premium for it, but the lack of transparency in the industry and the difficulties in extracting data from our complex supply chains often make it unclear what low-carbon products actually entail. The good news now is, with the help of LCA researchers and software engineers all over the world, we are now able to gather first-hand data with just several clicks of a button! And one of those software engines backed by a strong LCA research team is our partner, Foodsteps.
Foodsteps' core offering is its dashboard that produces recipe carbon labels. "Consumers tell us it’s increasingly important to them to understand the eco-impact of their choices, so carbon footprint labelling is now a vital sales and marketing tool, especially for food companies. Research shows that consumers will change their behaviours when given ‘greener’ options, but they want their choices made simpler with easily accessible information."
Foodsteps empower food businesses to track and reduce their food's emissions from farm to fork. The platform aggregates complex LCA data, simplified into useable, digestible information. This data is comprised of thousands of peer-reviewed scientific studies alongside Foodsteps' own primary research, and is independently reviewed by academic and industry experts. We particularly love the easy-to-navigate software as well as their community knowledge hub, allowing us to keep up to date with the latest news on all things carbon foodprint related.
Whilst menu carbon labels help to drive education, change consumer habits, and inform chefs and recipe developers on how best to produce lower carbon footprint products that align with the net-zero target, identifying hotspots of impact throughout a food business' operation, knowing what to calculate and what reduction targets to set, is just as critical to close the gap on impending corporate climate disclosures.
In the last 15 months, ZFPA and Foodsteps have been piloting ZFPA's Carbon Neutrality Program (program name tbc) to analyze and evaluate a restaurant’s scope 1 & 2 (fuel & energy) and scope 3, category 1 emissions on food ingredients, as well as category 5 on waste generated in operations throughout the restaurant's supply chain. This will provide valuable science-backed data on where the most effective sources of carbon reduction activities should occur within a particular restaurant's operation, as well as tailored recommendations on how and what these activities should entail. With this level of data now available, the restaurant industry will have a much better understanding of what changes have to be made, while conscious consumers will then know which restaurants to support that will best allow citizens to participate in climate action.
Ng, E. (2023) Climate Change: Hong Kong’s bourse proposes tougher climate and sustainability disclosures for listed firms to align with international standards. South China Morning Posts. Retrieved from: https://www.scmp.com/business/article/3217141/climate-change-hong-kongs-bourse-proposes-tougher-climate-and-sustainability-disclosures-listed
Stevens, S. (n.d.) The Foodsteps' planetary carbon target: The universal benchmark metric that food businesses need. Foodsteps. Retrieved from: https://www.foodsteps.earth/post/is-there-such-a-thing-as-a-good-food-benchmark-for-climate-targets-now-there-is