Business is booming.

Food sector faces pressure to adopt regenerative agriculture practices

By George George Idowu

The food sector is one of the largest contributors to climate change and environmental degradation, accounting for one-third of global greenhouse gas emissions and 70% of freshwater withdrawals.

Institutional investors, like Federated Hermes, are urging food companies to adopt regenerative agricultural practices to meet net zero commitments.

Regenerative agriculture, while lacking a precise scientific definition, emphasizes reducing water and chemical use, preventing land degradation, and enhancing soil, water, biodiversity, and carbon on farms. Techniques include low or no tillage, precision fertilization, soil erosion control, agroforestry, and biochar fertilization.

A report by the World Business Council for Sustainable Development (WBCSD) suggests these practices could halve food system emissions by 2030 and mitigate farming’s negative impacts on biodiversity and freshwater.

However, the burden of implementing regenerative practices often falls on poorly paid farmers who face additional costs and potential short-term yield losses.

For example, mitigating 30% of emissions on a large Brazilian beef farm could cost up to 17% of revenues, threatening insolvency. The impact on smallholder farmers in developing countries is even more severe.

The report emphasizes that companies higher up the supply chain should bear more of the cost and risk. For large corporations, the cost of supporting regenerative practices represents a small fraction of their revenues estimated at 3% for a meat trader and less than 1% for a multinational food company. Despite this, few companies are adequately supporting farmers in the transition.

OFI and Nestle are among the companies actively encouraging regenerative practices. OFI focuses on identifying relevant methods for smallholder farmers, while Nestle employs 700 agronomists globally to support farmers and pilot regenerative methods like agroforestry. Nestle’s Nespresso brand is testing micro insurance to protect harvests affected by climate change.

Financial support from corporations, such as funding for research and training, is welcomed by organizations like One Acre Fund.

However, smallholders need premiums for crops produced using regenerative methods to make the transition viable. The absence of market premiums for regenerative efforts is a significant barrier, as highlighted by Andrea Olivar of Solidaridad.

Regulations are driving the uptake of regenerative agriculture. The EU Deforestation Regulation and the Corporate Sustainability Reporting Directive (CSRD) are pushing companies to demonstrate deforestation-free practices and allocate funding to frontline implementation.

Payment of premiums is part of the solution, but systemic changes, such as revising food system subsidies, are necessary to make regenerative practices more competitive.

Some companies are leveraging carbon credits to support the transition. Indigo Ag’s program has sequestered nearly 300,000 metric tonnes of CO2 and generated 163,048 carbon credits since 2019, benefiting farmers with additional income.

In Brazil, OCP Group is collaborating on a carbon farming project that uses AI-led soil analysis to measure carbon content and generate credits.

As debates continue on the best ways to support farmers, it is clear that environmental goals will not be met without prioritizing farmers’ livelihoods.

Rob Cameron of Nestle emphasizes the need for a mindset shift, stating that enhancing farmer livelihoods is essential for transforming the food system and addressing climate and nature crises.

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