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By Catherine Early, June 10, 2024

https://www.reuters.com/sustainability/land-use-biodiversity/rewarding-farmers-regenerative-agriculture-is-critical-decarbonising-food-sector-2024-06-10/

Industry Insight from Ethical Corporation Magazine, a part of Thomson Reuters.

• Summary
• More regenerative farming practices could halve food system GHG emissions by 2030
• But introducing them can be costly and risky when farmers struggle to make a living
• Campaigners call on companies to shoulder more of the costs
• OFI and Nestle among companies piloting targeted regenerative practices and offering financial incentives
• EU pushing regenerative agriculture but lack of market premiums a barrier

June 6 – The food sector is one of the biggest contributors to the climate and nature crises. The way we grow, distribute, consume and dispose of food is responsible for one third of total greenhouse gas emissions annually. Food systems are the biggest contributor to galloping biodiversity loss, opens new tab, and account for 70% of freshwater withdrawals.

With half of food system emissions , opens new tabdown to agricultural production and land-use change in corporate value chains, food brands have an outsized role in food system transformation.

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Institutional investors such as Federated Hermes are pushing companies in the land and agriculture sector to adopt more regenerative agricultural practices as part of their net zero commitments, guided by the Science Based Targets initiative, which last year issued its guidance, opens new tab for companies in the sector.

While lacking in scientific definition, regenerative agriculture is an approach that reduces the use of water and chemicals, prevents land degradation and deforestation, and restores and enhances soil, water, biodiversity and carbon on and around farms.

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It includes practices such as low or no tillage, use of precision fertilisers, control of soil erosion, planting trees on farms and use of biochar fertilisers.

According to Future Fit Food and Agriculture, opens new tab, a recent report from the World Business Council for Sustainable Development, the Food and Land Use Coalition (FOLU) and We Mean Business (WMB), such practices could halve the global food system’s greenhouse gas (GHG) emissions by 2030 and reduce negative impacts of farming on plants, wildlife and freshwater.

However, the report highlights a major barrier: responsibility for delivering regenerative agriculture often rests with poorly paid farmers, who face added costs, coupled with a risk of short-term loss in yield, at a time when climate change is making their efforts to eke a living from the land increasingly precarious.

For example, mitigating only 30% of agricultural emissions for a large-scale beef farm in Brazil could cost up to 17% of revenues, enough to trigger insolvency. The impact on smallholder farmers in developing countries is even more prohibitive.

Companies further up the chain need to shoulder more cost and risk, the report concludes. The costs to them represent a much small proportion of their revenues, estimated at 3% of revenues for a typical meat trader, and less than 1% for a multinational food company, it says.

However, so far, not many are making much effort to share costs of the transition more equitably.

A report by the World Benchmarking Alliance, opens new tab found that although more companies were adopting regenerative agriculture practices, few were putting people at the centre of this. Some 27% of companies support farmers’ income stability through procurement and pricing practices, but less than 4% of companies identify living income benchmarks, or calculate income gaps.

Ingredients supplier OFI is encouraging regenerative practices among its thousands of smallholder farmer suppliers. One initiative involves identifying which methods are most relevant to a farmer according to what they are growing and where, to prevent farmers being overloaded with demands that are not appropriate to their circumstances.

For example, it would not be fair to ask coffee smallholder farmers in Ache (in northern Sumatra) to implement rotational grazing or improved pasture systems, because neither of these exist on their coffee farms, according to Piet van Asten, head of sustainable production systems at OFI.

OFI creates a shortlist of up to four practices that farmers should prioritise in order to have the biggest impact, and be actionable by individual farmers.

“We want to ask farmers which two or three of all the potential methods are the most relevant to them, and will help them to gain efficiency, reduce cost and their environmental footprint. These are the ones that we’re going to provide training and support for,” he says.

Nestle also runs regenerative agriculture programmes with its farmers. It has a network of around 700 agronomists around the world who support farmers directly, and is running pilots to test which regenerative methods work best, such as agroforestry in cocoa and coffee, according to Owen Bethell, the firm’s environmental impact lead global public affairs, speaking at a webinar, opens new tab hosted by FOLU in April.

Agroforestry has benefits for carbon and biodiversity benefits, as well as farmer income, he says. “It’s not just about the carbon. We need to look at this holistically,” he says.

Its Nespresso coffee brand is piloting micro insurance to protect harvests if they fail due to climate change, or if yields temporarily fall while regenerative agriculture methods are being introduced, he says.

 “Is there a way of insuring or providing stability of income through the transition period to give more confidence to the farmer? If we can show that can work, we can share it across industry and get the scale we need,” he says.

Milindi Sibomana, chief agriculture officer at One Acre Fund, an agricultural service provider supporting Africa’s smallholder farmers, welcomes the financial support from corporates to help with research and training. His organisation has used this funding to develop pilots to test different models of regenerative practices, and customise training for farmers to make the transition, he says.

But to properly deal with the issue, smallholders need more: they must be paid a premium for crops produced using regenerative agriculture, he believes. It does not make financial sense for farmers to go through all the training and adopt new practices, which may be more time-intensive, if nobody is prepared to pay more than if they just used existing methods, he says.

“Most of the farmers that we work with need to get a financial return in that particular season. For a short period of one to three years, it’s really an uphill battle because no one is willing to put in place a financial incentive,” he says.

Andrea Olivar, strategy director for Latin America at supply chain NGO Solidaridad agrees that the market premium for smallholders is typically missing from the move to regenerative agriculture.

“At the moment, premiums to producers for regenerative efforts are not widely implemented by the market,” she says.

According to Olivar, regulation is driving the uptake of regenerative agriculture in sectors covered by the EU Deforestation Regulation, opens new tab. “One of the key elements of our regenerative model is no deforestation. Selling this two years ago compared to now is quite different – before it was optional, now it’s law. Companies are assessing what they can do to prove that they are deforestation free,” she says.

Regulations such as the EU’s Corporate Sustainability Reporting Directive, opens new tab (CSRD) will also be a boost, according to Nestle’s Bethell. “The number one thing that companies should be thinking about is how they can allocate sufficient funding to the people on the frontline who implement projects that are part of their net zero plans. As implementation of the CSRD comes in over the next couple of years, there will be a lot more movement, because not only do you need to make a commitment, you need to show how you’re going to achieve it,” he says.

Emeline Fellus, senior director, agriculture and food at the WBCSD, believes that payment of premiums is only part of the answer. Current food system subsidies undermine regenerative agriculture because they make less sustainable foods far cheaper to produce. She gives the example of corn production in the United States, which is heavily subsidised, resulting in cheap feed for livestock and cheap sugar in the form of syrup.

“Of course, price premiums help, but the difficulty is, how much can companies pass on to the consumer when the baseline of production is not sustainable. That is where the changes need to happen so that regenerative practices are more competitive,” she says.

Some companies are using carbon credits to support farmers with transitioning to regenerative practices. U.S.-based Indigo Ag supports farmers to transition to regenerative practices by working with agronomists. It then collects soil samples and on-farm data, with carbon credits verified by carbon registry the Climate Action Reserve. Indigo Ag pays at least 75% of the average credit price directly to the farmers.

Since the programme’s inception in 2019, farmers have sequestered or abated nearly 300,000 metric tonnes of carbon dioxide, producing 163,048 carbon credits, earning more than $12 million. Speaking on a panel debate at the U.N. climate talks COP28 last year, Max DuBuisson, Indigo Ag’s executive director, acknowledged that carbon credits on their own do not necessarily help farmers pay for transitioning since they are not paid upfront.

However, in March 2023, Indigo Ag announced a partnership with the U.S. Federal Agricultural Mortgage Corporation (Farmer Mac), under which U.S. farmers can receive a 0.25% rebate on their mortgage for three years. “This is money that can start coming to them immediately to help them with that transition,” DuBuisson said.

In Brazil, fertiliser manufacturer OCP Group launched a carbon farming and certification project in the agricultural region of Matto Grosso. It is working with farmers’ cooperative Bioline by InVivo, and agtech company Agrorobotica on a project covering cotton, soybean and corn.

The partnership will use digital tools tailored to the area and the crop, such as an AI-led soil analysis tool known as laser-induced breakdown spectroscopy (LIBS), which will measure, report and verify carbon content and sequestration potential. The carbon credits generated will provide an additional source of income for farmers, and for OCP, which will use the credits towards its 2040 net zero target.

In a press release announcing the launch in November 2022, Laurent Martel, CEO of Bioline by InVivo, said: “Carbon farming is a nascent model that needs to be tested on different experimental grounds, alongside other tools to finance the transition.”

As experimentation and debate into the most equitable and effective method of rewarding farmers continues, it is becoming increasingly clear that environmental goals will not be achieved if people are not put at the centre of change.

Fellus at WBCSD points to the farmer protests across Europe as one example of the risk of pushback. “When it comes to sustainability, there’s more focus on climate or nature than social goals. It’s really urgent that we put farmers back in the centre – little by little, there’s a realisation of that, but there is a way to go,” she says.

Rob Cameron, global head of public affairs and ESG engagement at Nestle, puts it more bluntly. He says enhancing farmer livelihoods is not just an add-on to ensure the transition is just, but a requirement for transforming the food system and resolving the climate and nature crises.

“This is a mindset shift we need to start because, frankly, I’m sick and tired of hearing again and again that it’s got to be a just transition – the reason we’re in this mess is because we didn’t think about people’s livelihoods in the first place,” he said.

This article is part of The Ethical Corporation’s Decarbonising Industries series, which is being published over the course of this month. To read the rest of the articles in the series, click here, opens new tab

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Ethical Corporation Magazine, a part of Reuters Professional, is owned by Thomson Reuters and operates independently of Reuters News.