10 EU climate governance: How does the agricultural processing chain respond to climate change? Climate adaptation at the Carlsberg Italia brewery

Text / Ho Han-yu

Compared with the impact and adaptation of Mediterranean agriculture, the effects on the agricultural processing chain have received less attention. But this is probably not good news for regions that relied on processing and industry to get started after the war and are known for agriculture and food processing. Italy is exactly such an example. The issue of climate impacts on the agricultural processing and rural industrial sectors especially affects rural livelihoods in Italy.

Generally speaking, rural settlements or regional economies centered on agricultural processing and manufacturing often find it difficult to support one another with adaptation experience because of differences among firms in business type, equipment, and management approaches, making it hard to respond to region-specific climate impacts from the perspective of the settlement as a whole. However, the public utilities, infrastructure, and complex dynamic networks of industrial chains involved in climate impacts cannot be sustained by a single enterprise alone. They require gradual and repeated attempts at climate adaptation planning, as well as the integration of multiple policy tools.

IRIS's adaptation guidance proposal: a decision-support tool combining climate risk assessment and enterprise adaptation consulting

For the climate impact issues of the processing industry, in addition to production processes and the complex supply chains they involve, equipment and factories, personnel, and infrastructure types also vary with business characteristics. Therefore, climate adaptation actions in the rural industrial sector must give priority to the needs of different enterprises, cultivate enterprises' ability to understand climate impacts and independently formulate adaptation actions, and also allow user feedback to flow back to the regional level.

In response, the IRIS project proposed a set of guidance principles that can support enterprises in making climate adaptation decisions, promoting small and medium-sized enterprises in rural areas to leverage the characteristics of clusters and supply chains and improve their climate adaptability. These principles aim to help enterprises understand climate change and adapt their own business and financial decisions. Based on knowledge from multiple observation networks, including the climate indicator reports, future climate regional projections, and model analyses of the Italian Institute for Environmental Protection and Research (ISPRA, Italian Institute for Environmental Protection and Research), the IRIS team designed the CAST tool platform (Climate Adaptation Support Tool), which visualizes climate risks and allows operators to customize adaptation strategies and the intensity of guidance.

First, the team used telephone interviews and online basic information forms to gain an initial understanding of enterprises interested in taking climate action and their needs, and then began training on climate change knowledge and CAST operation. Next, after users set business characteristics, historical climate events, and supply chain locations, the CAST interface provides regional historical risk analysis and suggested weights for adaptation targets, guiding enterprises to make climate action decisions. During the decision-making process, enterprises can also decide whether they need to book face-to-face expert consultation, technical and financing advisory services. Finally, CAST enters the decision effects of each enterprise into the system database for later reference and exchange by operators and users in the region.

Through CAST's guidance tools and methods, the IRIS team started from its own location in Italy's Emilia-Romagna region and selected one agricultural processing enterprise and two rural industrial areas mainly composed of small and medium-sized enterprises to begin promoting the project.

Climate change issues in the processing industry chain: the example of the Italian Carlsberg Italia brewery

Italy is internationally renowned for refined agricultural processed products such as olives and wheat produced and made locally. In the 2014-2018 LIFE climate adaptation proposals, this was a large-scale and key agricultural adaptation issue. However, the beer industry presents another aspect of Italian agricultural processing. Due to fragmented terrain, although Italy produces barley, it has few large areas of farmland that can fully supply the procurement and manufacturing scale needed for beer processing. Therefore, the climate action of Carlsberg Italia provides an adaptation path that helps us think about how production processes and complex supply chains that rely on imported raw materials of all kinds can begin climate adaptation.

Beer is a seasonal agricultural processed product with a short shelf life. Not only is its flavor related to brewing freshness, but its sales period is also deeply affected by the market's peak and off seasons. Summer is the peak season for beer sales every year. In order to sell fresh beer, breweries concentrate production from March to September each year, with June and July as the peak. However, sudden high or low temperatures can significantly affect beer sales, thereby affecting the brewery's assessment of overall production time, factory operations, and staffing needs.

Looking at Carlsberg Italia's climate experience in 2013-2015, during that period overall beer sales first declined because of a 5% increase in excise tax, but the cooling effect brought by extreme summer rainfall was the main reason for the sharp drop in performance during those years. The problem brought by low summer temperatures was that production exceeded sales, causing products to exceed their shelf life on store shelves and be returned.

The predicament of insufficient sales was difficult to solve by following the past practice of donating limited quantities to food banks. It was also necessary to devise promotional strategies for bottled and canned beer, as well as response measures for long-term procurement, production assessment, and logistics. Facing various challenges, Carlsberg Italia began to think about how to proceed from each individual industrial link toward the business path of sustainable beer (SustainaBEERity).

Climate action at the Carlsberg Italia brewery: adaptation decision-making experience in response to CAST

With the operation of CAST and IRIS's climate knowledge training, Carlsberg Italia recognized the chain-reaction impact of climate change on the processing industry chain and the importance of taking adaptation action. The beer ingredients barley and hops will be affected in quality and yield by heavy precipitation, extreme temperatures, and drought in producing areas, testing processing technology and reputation. When heatwaves strike or precipitation is insufficient, the high temperatures in the production process not only cause increased water demand for the factory, insufficient water supply, and other problems of energy consumption and lost capacity, but also expose employees to more dangerous and illness-prone working environments, developing into labor welfare and physical and mental health problems, and in the long term affecting factory operations and so on.