As I take forward my new role as Global Lead for Science, Knowledge and Innovation in Agriculture and Food, I would be remiss if I did not start the new year with hope. In a recently published article in Science Magazine, my co-authors and I do just that, affirming that agriculture has the potential to heal the planet, spurring change in practices and land use and acting as a massive carbon sink. In the article, we choose to challenge the prevailing narrative that a highly fragmented sector, consisting mainly of millions of small and medium-sized farms and firms worldwide, is simply incapable of dealing with climate change.
Indeed, we see a missing link in the climate equation in the form of agricultural value chain (AVC) actors – ranging from input providers to traders to manufacturers. Already active and expanding in the Global South, these firms are crucial linchpins that have the potential and opportunity to spur real food systems transformation by helping farmers become “climate-smart.” They could be valuable champions for supporting sustainable, resource-wise approaches, including from their primary suppliers, who are farmers. AVC structures and incentives provide opportunities to address a range of problems facing farmers in taking climate action: from accessing technologies to introducing management change to accessing financial resources for climate-smart investments.
AVC firms have a broad toolkit: they have the capacity to respond to changes in incentives and requirements and can be powerful engines of change throughout the value chain, including for smallholder farms. These tools can be used to fulfill climate goals, especially as the reach and innovations of AVCs will continue to grow in the future.
But this is only possible if policy and climate dialogues adopt this constructive lens. All of this means a careful look at AVC incentives is in order. Internal incentives associated with basic firm motivations do not vary much by size and geography. Fragmented or not, they have common incentives that can be harnessed and enabled to encourage private sector investment in climate action with farmers – from ensuring inter-year continuity of supply to reducing supply side costs associated with inefficient water use or high fossil-fuel costs. Since many farmers in the Global South are not currently as affected by external incentives such as ‘green’ consumer demand and regulation as those in the Global North, harnessing basic business incentives can be just as impactful as good regulation.
To fully realize the potential of agricultural value chains, several policy implications need to be considered – some of which come with a price tag. Investments with public good aspects include reliable green energy, support to innovation development and risk mitigated adoption, and adapting technology for smallholders. They will require resources, at least initially. An important source of funding for these investments could be the roughly US$650 billion that governments spend each year on public policies and expenditures supporting agriculture. While much of this support is currently just not good value for money, with some subsidies being distortive and contributing to poor outcomes, this money can be turned into a force for good.
Policies can be designed in a way that explicitly recognizes AVC structures in relation to farmers, the risks AVCs face and the importance of both internal and external incentives. Because AVC firms have internal incentives to use their tools to require and help farmers to be climate-smart, policies that enable and oversee private-sector investment growth in the agrifood sector have the potential to contribute to this agenda. Support to both supply and demand fall into this category – for example through consumer campaigns on the supply side and green public procurement on the demand side.
While external incentives such as regulation can be impactful, attention to compliance cost burdens for smaller actors and realism around enforcement is essential. In the meantime, harnessing every firm’s response to internal incentives holds great potential. Finally, investments in public Research and Development (R&D) can deliver very high returns, while partnerships with the private sector for ‘last mile delivery’ of research innovations can help scale these significantly. Conversely, stimulating private R&D in innovations and linking public extension services to these can also contribute to scaling up technologies that are climate-smart and resource-saving.
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