ABN: Food sector underestimates climate change risks

The introduction of the European CSRD legislation presents food producers with a complex challenge. Not only are they required to report on their own impact on the environment and society, but they must also account for how external factors, such as climate change, affect their operations. However, many companies lack sufficient insight into this so-called financial materiality. According to a recent analysis by ABN AMRO, this gap in understanding could seriously jeopardize their future resilience.

Double materiality as a guideline

The CSRD legislation requires companies to report on double materiality. This means documenting both how their activities impact the world—such as CO₂ emissions or social conditions within the supply chain—and how external factors like climate change influence their business operations. While most large enterprises have already taken steps to analyze their own impact, insight into the effects of external risks, such as climate change and shifting consumer preferences, often lags behind.

ABN AMRO’s report highlights that financial materiality—encompassing risks such as rising raw material prices and extreme weather events—remains underrepresented in many reports. Yet physical and financial risks, such as flooding, can have direct consequences for the continuity of producers. These risks affect not only production facilities but also the availability and quality of raw materials.

Climate change disrupts the supply chain

The effects of climate change strike at the heart of the food supply chain. Local periods of drought or flooding are making agricultural products scarcer and more expensive. Producers dependent on international raw materials are particularly vulnerable to disruptions in their supply. Additionally, financiers and insurers, including ABN AMRO, are imposing stricter requirements for insight into these risks. This makes it imperative for producers to assess not just their own operations but the entire supply chain.

Medium-sized companies, which often have less experience with sustainability reporting, face heightened risks in this area. These businesses frequently lack visibility into deeper layers of the supply chain, where many risks originate. Collaboration with suppliers is therefore essential to unlock data and better manage risks.

From reporting to action

While the CSRD presents significant challenges for many companies, ABN AMRO emphasizes that it also creates opportunities. Companies that proactively manage climate risks can strengthen their market position. By choosing climate-resilient raw materials or working with farmers to implement sustainable agricultural practices, they can mitigate risks while seizing new opportunities. The key lies in translating qualitative insights into quantitative data, ensuring that strategies aimed at future resilience deliver tangible results.

Abnamro.nl