Food & Beverages Impact Report: Food & Beverage Manufacturing Edition, Q1 2025

Climate Risks and Trade Uncertainty Challenge Food Production Resilience

This report provides an in-depth analysis of how food and beverage manufacturers face increasingly significant climate-related challenges, with heat stress and water scarcity emerging as primary physical risks throughout their global value chains. This research reveals that approximately 25% of the world's crops are grown in regions experiencing high water stress or variability, creating material risks for manufacturers dependent on agricultural inputs from vulnerable areas, such as Uttar Pradesh, India, and California's San Joaquin Valley.

The report additionally highlights how recent tariff implementations have disrupted sustainability initiatives for 61% of manufacturers particularly affecting sustainable ingredient sourcing and packaging transitions.

Call to Action: Manufacturers should develop geographically diversified sourcing for climate-resilient ingredients and incorporate trade policy scenario planning into sustainability roadmaps particularly for agricultural regions facing both climate and trade vulnerabilities.

The analysis examines how these water-related risks manifest as both direct operational challenges and indirect supply chain vulnerabilities, requiring sophisticated materiality assessment processes that consider both financial materiality (through potential supply disruptions and price volatility) and impact materiality (through watershed depletion and community impacts). Companies implementing integrated water stewardship strategies are demonstrating an enhanced awareness of the double materiality principle, addressing both business imperatives and broader ecological and social responsibilities.

This research reveals significant disparities in climate resilience preparedness across the sector, with industry leaders such as Nestlé, PepsiCo, and Mondelez International implementing comprehensive climate adaptation strategies throughout their operations. These include supplier engagement programmes focused on climate-smart and regenerative agriculture practices that enhance soil health, water retention capacity, and overall ecosystem resilience while reducing dependency on external inputs, such as synthetic fertilisers and irrigation.

The report examines how evolving ESG disclosure requirements, particularly under the CSRD and the IFRS Sustainability Disclosure Standards, are reshaping manufacturers' approaches to climate risk management and reporting. Companies that implement science-based climate scenario analyses are gaining competitive advantages through enhanced risk identification, strategic planning, and stakeholder communication while also meeting emerging regulatory expectations.

Looking forward, the report identifies how technological innovations, including AI-powered climate analytics and precision agriculture systems, are enabling more sophisticated approaches to climate adaptation. These technologies would allow manufacturers to anticipate climate-related disruptions, optimise resource allocation, and develop more resilient sourcing strategies, representing both a risk mitigation opportunity and a potential source of competitive differentiation in increasingly climate-constrained operating environments.