Fundamentally, adaptation to environmental change is a basic principle of all living systems on Earth.

Evolution is necessary to survive and thrive in a world that isn’t static. Thousands of years of human evolution has yielded incredible discovery and development. Today, as we see and feel the effects of a changing climate around us, that ingenuity and collaboration are critical to addressing the crises of today and tomorrow.

Adapting to the new normal of extreme natural disasters, unpredictable weather patterns, and yet-unknown future effects of climate change requires a sustained effort among businesses, industries, and leaders to adopt principles and practices that balance people and planet with profit.

Moral imperatives aside, regulations and mandates are coming, so it’s prudent to understand Environmental, Social, and Governance (ESG) frameworks used to assess non-financial risks and opportunities within a company’s day-to-day operations.

The U.S. Securities and Exchange Commission (SEC) has proposed rule changes that would require companies to include certain climate-related disclosures in their registration statements and periodic reports. According to the SEC, information would include climate-related risks that are “reasonably likely to have a material impact on their businesses, results of operations, or financial conditions as well as certain climate-related financial statement metrics in a note to their audited financial statements.”

Europe has already mandated certain reporting. Building on previous directives, the European Union’s Corporate Sustainability Reporting Directive (CSRD) was enacted in January applying to E.U.-based companies as well as those with significant operations within the E.U.

Across the board, more investors are incorporating ESG elements into their decision-making process, according to Deloitte, making ESG increasingly important for securing capital. ESG reporting is typically done through annual sustainability reports, although more companies are disclosing data online as well to showcase performance.

More than 90% of S&P 500 companies now publish ESG reports in some form, according to 2021 data from the Governance & Accountability Institute.

ESG certainly has its critics, particularly when framed as an impediment to the notion that the overriding purpose of business is to create and grow value over time.

According to a 2022 McKinsey report on ESG and sustainably, “what some critics overlook is that a precondition for sustaining long-term value is to manage, and address, massive, paradigm-shifting externalities. Companies can conduct their operations in a seemingly rational way, aspire to deliver returns quarter to quarter, and determine their strategy over a span of five or more years. But if they assume that the base case does not include externalities or the erosion of social license by failing to take externalities into account, their forecasts—and indeed, their core strategies—may not be achievable at all. Amid a thicket of metrics, estimates, targets, and benchmarks, managers can miss the very point of why they are measuring in the first place: to ensure that their business endures, with societal support, in a sustainable, environmentally viable way.”

No matter how it’s labeled, or whether companies report to shareholders or smaller circles of associates, forward-thinking vision has always been an important factor to long-term business success. 

Climate Crisis: Cause for Alarm

U.S. weather disasters are more costly as more people move into vulnerable areas and climate change raises the risks of extreme heat and rainfall, according to the National Oceanic and Atmospheric Administration, which issues an annual report on disasters that cost in excess of $1 billion.

In 2022, the U.S. experienced 18 separate weather and climate disasters costing at least $1 billion. That’s the third-highest number of billion-dollar disasters in a calendar year since tracking began in 1980. The most (22 events) came in 2020, just ahead of the 20 events in 2021.

Just before press time, the deadliest U.S. wildfire in more than a century tore through Maui, devastating the historic town of Lahaina and other communities.

Wilson Lau, president of Nuherbs said he’s “extremely concerned” about these types of climate events. “We have to start anticipating problems that not long ago seemed too unlikely to worry about, and have contingency plans.”

“Recently a typhoon hit Beijing that could have destroyed that city, but because of its cultural and political significance, the neighboring Province, Hebei, activated its flood storage and diversion areas to relieve some of the pressure on Beijing ... This is just one example of extreme weather, and attempts to survive it, having widespread repercussions.”

Beth Lambert, CEO of Herbalist & Alchemist, also said she’s extremely concerned about climate change, “not only for the stress it puts on the plants, but also on the farmers and wild-crafters. We have developed multiple (if available), geographically diverse sources for botanicals. And we work with David Winston, our founder and internationally known herbalist, to reformulate products containing hard to source botanicals.”

Alongside farming and wildcrafting communities, varied weather conditions, which are growing more extreme due to climate change, impact the bioactive compounds in plant-based products, noted Muhammed Majeed, founder and chairman of the Sami-Sabinsa Group.

“It is essential for plant-based nutraceutical products to have standardized bioactives so that there is consistency in the active molecules to give the desired benefits. It is crucial to develop reproducible and robust processes of extraction in order to enrich or maintain the desired bioactive compounds.”

Sustainable Standards

How should companies in the nutraceuticals industry think about “sustainability” and apply best practices in day-to-day business operations? 

“In defining sustainability, I borrow from permaculture basics,” said Lambert. “Sustainability is a designed system that maintains its own viability by using techniques that allow for continual reuse,” Lambert said. “It uses thoughtful observation rather than protracted and thoughtless labor and is rooted in principles: Care of the Earth, Care of People, and Setting Limits.”

Particularly in markets that are dependent on natural resources, the bottom line for business can’t just be about profit; it must also include people and planet, said Erin Smith, herbalist, ethnobotanist, and vice president of herbal science and research at Banyan Botanicals, a Certified B Corp that offers a range of Ayurvedic products.

Balancing finances in this equation is the biggest challenge, according to Smith. Banyan sources most of its herbal ingredients from India, but is adjusting to diversify and explore what it can source domestically or closer to the U.S.

“Herbs from India are cheaper than those grown in the U.S. or Costa Rica, for example. How do we make that shift and still be a financially responsible company, and then explain that shift to customers?”

For one, company leadership needs to be committed to the process. Open, honest, transparent communication with consumers is also essential, Smith added.

In the short-term it can be hard to make that case, but in the long-term it makes logical sense. It’s not only a question of how to operate business sustainably, but also a matter of protecting a planet that can sustain business.

This appears to resonate with younger consumers in particular, Smith noted. “I’m a big believer in telling the whole story. Share the journey. Sometimes you make mistakes but this is how we adjust and learn what we can do better. Don’t be afraid of transparency.”

Smith noted that Banyan is still committed to supporting its partners in India. “There are farmers that depend on us,” she said, emphasizing the need to support farmers and wildcrafters by sharing some risk and paying a fair price.

Banyan Botanicals is also certified Fair for Life, a standard for fair trade practices and responsible supply chains. According to the nonprofit, “By following the framework defined by Fair for Life certification, producers, processors and brand owners can secure their sales and supplies, thanks to tools such as long-term contracts that include fixed prices and volumes, and by establishing a real partnership between them.”

Smith said the certification process is rigorous, encompassing the entire company. The fair trade principles of Banyan have been part of “the ethos of the whole company,” since it was founded in 1996, and certification serves to “reaffirm those values,” she added.

“You have to have buy-in from leadership because everyone has to take part. When we go through audits we look at it as ‘we’re a better company because of this.’ It motivates you to reach your goals. Certifications are super important to making us a better company.”

In 2010 Herbalist & Alchemist became the first company in the dietary supplement and herb category to earn B Corp certification. “I was invited to a gathering about the B Corp program in 2009, and was immediately drawn to this idea,” said Lambert. “At that time, we had been running our company on similar principles to the B Corp standards for almost 30 years: making products that are good for people in a way that is good for the earth. We wanted to join with a group of like-minded businesses who share these principles. It was also a way to prove that we walk our talk.”

In 2019 Herbalist & Alchemist set a goal to become zero-waste in operations, and in 2021 met the qualifications required before pursuing Zero Waste certification, which means less than 10% of waste goes to landfill, with the other 90% diverted, reused, donated, or composted.

“Our Green Team, an internal coalition of employees working on sustainability in a more streamlined way, has done in-depth research into diverting materials usually landfilled,” said Lambert, “including donating ice packs used to keep herbs fresh in transport to local children’s camps and food pantries, sending pallet straps to an artist who creates abstract works from debris, and donating and upcycling 55-gallon barrels into rain barrels, raised beds, and for equine activities like barrel racing.”

Other changes have included smaller shipping boxes, substituting bubble wrap with plant-based material for smaller items, and working with TerraCycle and SustainAbilities. “Unusable and depleted plant material is composted to supply local organic farms; the 59,000 pounds we diverted from the landfill over the last decade means an estimated 13.4 tons of CO2 were sequestered.”

Sustainability is an important consideration that any company or industry must prioritize in its entire process of procurement, manufacturing, distribution, marketing, and sales, said Majeed.

“Sami-Sabinsa has developed a highly integrated and proven network over the past 35 years to meet our supply chain needs. This enables the business to sustainably fulfill the rising demand for our products. The company has for many years used a fair-trade contract farming model for sustainable availability of our key raw materials, such as turmeric, coleus, and others.”

Sami-Sabinsa believes in the “Farm to Mouth” philosophy, he added, “wherein the entire supply chain is managed and maintained to ensure ESG/sustainability principles.”

ESG and sustainability are at the core of Nuherbs, said Wilson. “We call it our ‘Ai Cao Yao’ sourcing framework, which translates loosely to ‘Love Herbal Remedies.’ It’s the approach that we apply to ourselves, our business, and how we want to develop our company.

“At Nuherbs we have been proponents of putting sustainability first for many, many years,” he continued. “For example, at the farm and wildcrafter level, we get a first-hand view of the state of wild herbs. Sometimes the herbs that you think shouldn’t be impacted are, and vice-versa, so you need to be close enough to have correct information. We all must promote the sustainability of herbs if we want to have future access to them. Purchasing herbs from companies that follow best practices contributes to ensuring the future of these plants.”

Diversification of supply chains goes beyond herbs and the land, extending to oceans as well. The omega-3 industry has embraced this worldview of diversity of sources, said Chris Gearheart, director of growth and engagement at the Global Organization for EPA and DHA Omega-3s (GOED). “The goal is to not only meet rising consumer demand but also to stabilize their inventory in the face of possible fish shortages.”

“Diversity in the omega-3 value chain is essential not only for meeting consumer demand for EPA+DHA, but also for absorbing shocks to our supply chain, whether geopolitical or climate-related (short or long term). It’s vital for legacy omega-3 fisheries to maintain a sustainability-focused management strategy and for the others in category to continue to develop non-fished sources of EPA+DHA.”

GOED’s Sustainability Committee, an educational venue for member companies, has featured presentations on shifting to post-consumer plastic for product bottles, eliminating outer product cartons, and finding new uses for used plastics in the global circular economy. The committee has also hosted sustainability-focused certification bodies such as the Marine Stewardship Council and Friend of the Sea.

Regenerative, Organic 

According to the Rodale Institute, the nonprofit dedicated to creating a resilient global food system that improves human health and the environment, regenerative organic agriculture refers to farming practices that not only maintain resources but improve them as well.

The Regenerative Organic Certified standard begins with the USDA Certified Organic baseline. From there, it adds important criteria and benchmarks that incorporate the three major pillars of regenerative organic agriculture: soil health, animal welfare, and social fairness.

“The number one priority in regenerative organic agriculture is soil health,” according to Rodale. “Soil health is intrinsically linked to the total health of our food system. Soil health affects everything from plant health to human wellbeing and the future of our planet. Regenerative prioritizes soil health while simultaneously encompassing high standards for animal welfare and worker fairness. The idea is to create farm systems that work in harmony with nature to improve quality of life for every creature involved.”

Regenerative farming improves the land by producing healthy soil that can yield high-quality, nutrient-dense plants, said Majeed. “It is an innovative and comprehensive strategy that combines organic and sustainable farming methods to increase topsoil, farmer incomes, and plant-based production in general.”

“In some ways, I think of it as a new name for some older ideas,” said Lambert. “It is a great way to get this next generation thinking about the health of the planet and the people responsible for farming in our industry.”

Smith agreed that the regenerative organic movement sounds much like traditional and indigenous farming techniques that have largely been replaced by the “modern technological farming experiment that didn’t really work.”

In terms of broader adoption of regenerative agriculture, Smith compared it to the organic movement that experienced some growing pains early on due to higher costs. Today though, organic is mainstream. Organic food sales in the U.S. eclipsed $60 billion in 2022, according to the Organic Trade Association.

In July this year ADM announced an expansion of its regenerative agriculture program in North America. After enrolling more than 1 million acres in 2022, the company is expanding to cover 2 million acres in 2023, on its way to a goal of 4 million acres by 2025.

“With a value chain that stretches from more than 200,000 producers to downstream customers spanning food, feed, fuel, industrial and consumer products, ADM has an unparalleled ability to scale regenerative agriculture practices around the globe,” Paul Scheetz, director of Climate Smart origination at ADM, said in the announcement.

In 2020, Cargill said it would aim to advance regenerative agriculture practices across 10 million acres of North American farmland by 2030. The initiative focuses primarily on row crop rotations that include corn, wheat, canola, soybeans, and other staple crops.

An Open Door for Biotech

As regenerative organic farming practices gain land share, venture capital funds and private equity firms have been planting their own seeds in biotech.

New technologies—and new terminology like “synbio” and “precision fermentation”—are cropping up to develop and scale ingredients that resemble agricultural products or isolated compounds found in botanical species.

Biotechnology has opened a door for non-fish sources of EPA and DHA omega-3s as well, noted Gearheart.

“It has allowed R&D teams to isolate wild algae strains that naturally produce abundant DHA or EPA, then cultivate them in land-based facilities worldwide. It has also allowed companies to bioengineer existing oilseed plants like canola and camelina to express EPA or DHA as they grow in the fields. Since there isn’t enough EPA+DHA yet for everyone in the ocean or on land to have even the most conservative daily recommended intake, all forms of the nutrients should be welcome.”

Precision fermentation can be useful, according to Majeed, “as long as the material is not too genetically altered or modified.”

“Overall, it appears quite promising but requires industry and consumer awareness and acceptance. The regulatory aspects would need to be supported with human safety trials to help achieve faster growth and acceptance of ingredients produced using this technology, as veganism is on the rise globally.”

The idiom that companies need to use the “right tool for the job” applies here, according to Lau. “There is a place for precise fermentation in our industry if you are taking a chemical approach to your dietary supplements,” he said. “You could argue, if you want 98% caffeine, and caffeine is the item that leads to energy, then the source of it doesn’t matter because there are not other things in the green tea, coffee, or other materials that matter to you. You really want that chemical at a high level.”

“However, if you apply traditional herbalism principles, such as Traditional Chinese Medicine,” he added, “you are looking for the sum of the plants versus individual chemical constituents. If we are using a formula, we are using certain herbs that interact with each other in specific, known ways to balance, to amplify, or reduce some action, so biotechnology/fermentation isn’t a good way to get to where we need to be. There really is no ‘one size fits all’ approach to working with herbs.”

Call for Collaboration

There are challenging tasks ahead. For example, understanding and reporting on a company’s true carbon footprint, including Scope 3 emissions, which occur indirectly both upstream and downstream within an organization’s value chain, can be a tall order, according to Smith.

Precompetitive collaboration between like-minded companies, through trade associations and other groups, offer significant value and support in meeting common goals, said Smith, who chairs the American Herbal Products Association’s Sustainability Committee and is actively involved in the Sustainable Herbs Program at the American Botanical Council.

“We all need this information, and if we can pool our resources and support industry as a whole, it’s easier to make changes as needed.”