This report, authored by a group of senior executives from major UK food producers and retailers, highlights that the pressures of climate change, biodiversity loss, and soil degradation are causing material reductions in crop yield and quality. The industry is currently defaulting to short-term crisis management rather than the strategic, long-term changes required to improve the operating environment. This approach is expected to exacerbate existing challenges, with risks to food security previously identified in suppressed government reports from DEFRA and the Joint Intelligence Committee now beginning to manifest. While the industry has shown adaptability, failing to look beyond the short term will lead to increased costs, reduced food variety, and a move towards lower-welfare imported alternatives.

Key points

The report notes that following an exceptionally wet winter and the hottest summer on record, the cracks in the food system are becoming increasingly visible. The concept of ‘resilience’ has shifted from denoting long-term sustainability to becoming a by-word for the tactical switching of ingredients and sourcing regions. Long-term commitments often fail to meet the needs of growers and farmers, who currently bear the majority of the risk and costs associated with change. Furthermore, extreme weather is preventing farmers from meeting supplier requirements, leading to income loss and increased risk of defaulting on debt. Companies are being incentivised and optimised towards short-term decision-making, which undermines the long-term value relied upon by investors.

The challenges we are facing

Food waste has reached unprecedentedly high levels this year due to drought, flooding, and extreme heat. Many crops have been written off completely or have failed to meet quality specifications. In the retail environment, refrigeration systems and the cold chain have failed when faced with record temperatures, as current systems are not built to function beyond approximately 36 degrees Celsius. There are also growing concerns regarding farmed animal deaths during transit and on farms in extreme temperatures. Increased demand for water for crops and livestock is heightening competition with residential and industrial needs. Although companies have experienced only marginal financial ramifications so far, the executives warn that the current situation is unsustainable, as higher costs are being passed down to suppliers, farmers, and consumers.

What is blocking progress

Meaningful industry responses to climate-induced risks are being stalled by cultural factors. Many companies treat frameworks such as the Taskforce on Climate-related Financial Disclosures (TCFD), the Taskforce on Nature-related Financial Disclosures (TNFD), and the Corporate Sustainability Reporting Directive (CSRD) as mere accounting compliance exercises rather than essential inputs for strategy and risk mitigation. The potential value of these frameworks is being diluted, particularly as climate transition plans are no longer a requirement under the Corporate Sustainability Due Diligence Directive (CSDDD).

Short-term and long-term resilience

Current discussions around sourcing risks are often framed around tactical adaptation and short-term ‘fixes’ to switch sourcing to alternate regions. There is a lack of collective agreement on risk mitigation, and retailers are not consistently asking for risk registers from those in their supply chains. While regenerative methods offer potential for resilience, they remain limited to small-scale pilots due to a lack of corporate will to integrate them at scale. The report stresses that tactical sidesteps will not provide lasting protection against growing disruption unless industry acts to reduce environmental impacts and ensures farmers can access reliable income.

Boards and governance

There is a significant expertise gap regarding climate risk among non-executive board leaders. In-house expertise from sustainability divisions is often filtered through CEOs who prioritise positive news and short-term results. Consequently, boards rely on external reports from auditors and consultants that may not effectively analyse future risks. Remuneration packages and key performance indicators are frequently tied to short-term financial targets, creating structural pressure that focuses minds on commercial competition rather than the pre-competitive work needed to ensure a reliable food supply.

A note on public policy

The industry has a history of lobbying against or delaying necessary regulations, such as the Deposit Return Scheme and Extended Producer Responsibility. The executives argue that rather than resisting policy, businesses should use their influence to shape a more resilient system and support a dietary transition. They warn that knee-jerk policy responses are likely as climate impacts become more severe.

Our ask of investors

Investors are urged to challenge boards on their staffing and ability to manage climate risk. Valuable engagement should focus on how boards balance long-term environmental impacts with short-term adaptation and the technical details of how companies are preparing for different warming scenarios. The report warns that without material progress, supply disruptions, food price increases, and hard trade-offs between agriculture and other industries are inevitable.

Appendix: suggested questions

The report concludes with suggested questions for investors to put to businesses. These include enquiries into how recent heatwaves have affected cold-chain performance, the proportion of infrastructure that can operate above 40 degrees Celsius, and which commodities face the greatest exposure under different warming scenarios. Investors should also ask how sustainability targets are aligned with corporate growth and whether executive remuneration packages reflect these objectives.