Agriculture in transition

By Niko Wojtynia, Dico Drost, Richard Janssen, Шопа Buddingh-Maas, Niels Dijkman, Louke Koopmans, Katie Minderhoud, Tom Vereijken and Rogier Verschoor

Introduction

At the height of the 2019 Amazon rainforest fires, more than 18,000km² — almost the size of Slovenia, or the US state of New Jersey — were ablaze.²⁶⁸ The leading cause? For a large part, slash-and-burn agriculture, clearing land by Fire to grow soybeans and create pasture for cows.²⁶⁹

Breaking news at the end of the summer of 2019: leading food multinationals are sourcing “conflict palm oil” from a biodiversity hotspot from the Indonesian island of Sumatra, putting endangered elephants, rhinos, tigers and orangutans at even greater risk of extinction.²⁷⁰

In Europe, older generations talk about the decline of birdsong and chirping insects in the summer. In 2017, German scientists publish a paper confirming an astounding 82% decline in insect biodiversity since 1980,^2/1 driven primarily by an intensification of farming practices.²⁷²

Importance of food and farming to society

Agriculture has given us access to new sources of food and allowed us to build civilizations the world had never seen before. Throughout the millennia, we have carefully created new strains of crops, rendering them edible, more nutritious and, in the most modern cases, even making them more resistant against certain pests and diseases. Agriculture provides for the most elemental physiological human needs: food is on the same level as air, water and shelter in making human life possible. It is also intimately connected with the human need of health, as anyone familiar with the fortifying properties of grandma’s chicken soup, or a vibrant, vitamin-rich green smoothie will know. Agriculture also provides direct employment for hundreds of millions of people, as we will see later in this discussion. On a higher level, food aids in our sense of belonging: sharing food is one of the most grounding and intimate experiences, and breaking bread has signified peace since biblical times and is even the origin of the word “company”. What is more central to a culture than its food — what is Italy without pizza, India without curries or Hungary without goulash?

Major sustainability challenges

It is clear that we cannot do without food. It is also clear, as the opening paragraph to this chapter shows, that the way we produce it has turned into a crisis of frightening proportions: conventional farming methods deplete soils, destroy habitats, pollute water and air, and make a major contribution to global warming, all in the pursuit of efficiently producing food. At the same time the primary purpose of food production — to feed and nourish us — is not being met: a fifth of people in poor countries suffer hunger, 1.2 billion worldwide lack the right nutrients in their diet, and 1.9 billion are overweight or obese. If you add these up, more than half of the human population is malnourished. To put this in perspective, more people die in the 21st century due to a poor diet than because of unsafe sex, alcohol, drug and tobacco use combined.²⁷³ How did we get into this mess? Who is causing this? What are governments and powerful corporations doing to address it? Are we collectively doing enough of the right things to turn the tide — and if not, what should be done? These are the questions we will try to answer in this chapter.

A food system with many faces

Several distinctions can be made to understand the different types of agriculture. The first is whether or not a crop is grown for consumption of the farmer and his family, or for sale (subsistence farming vs. cash crop). While subsistence farmers number in the hundreds of millions and are crucial for providing food for many families, they account for just a few percent of global food production.²⁷⁴

A second distinction is whether a crop is grown for human consumption, for livestock feed, or for other purposes (food vs. feed vs. other purposes). These other purposes include biofuels, fiber for clothing, use as ornamentals and industrial applications.

A third distinction is the degree of processing required before a crop can be consumed or used (raw vs. processed food). Fresh fruits and vegetables can often be eaten raw (cleaned of course of any soil or agrochemical clinging to the outside), while palm oil or rapeseed are useless in their raw state. Such oilseeds on the other hand can be crushed and then stored for a relatively long period of time, whereas fresh produce, dairy, meat, poultry, fish and eggs are all at risk of spoiling if not stored and cooled.

With this understanding of crop and agriculture types in mind, let’s look at the world’s 20 most important agricultural products in the table below.

Looking at this table of most important agricultural products, a few things stand out:

• • Almost all of these products require some kind of processing or cold storage to be useful to consumers. This means that considerable industrial efforts are needed to make use of agricultural products in the global food market. We will look at this industry in detail in the next section;
• • Similarly, almost all of these products can be easily stored and transported over long distances. This has enabled a globally integrated food and agricultural system, the implications of which are explored later in this section;
• • Some crops, primarily sorghum and soy, are grown mostly if not exclusively for animal feed. This highlights the high land and water footprint of increased meat consumption, specifically the potential for increased food-feed competition (using land and resources to

Table 4.3 The 20 most produced agricultural products in the world

grow feed that could also grow food crops, in some cases exacerbating food security issues);

• • Maize, wheat, soybeans and sugarcane are all major sources of biofuel. Similar to the previous point, this highlights the potential tradeoffs between finding alternative sources of fuel and producing food in terms of land use;
• • The BRIC countries (Brazil, Russia, India and China) are highly prominent among the top producers, underscoring the fact that middle-income countries account for almost three quarters of global food production;²⁷⁵
• • Despite being a high-income country, the USA is the number one producer of six of these products. This is partly due to its large and wealthy domestic market, particularly the high meat consumption.

Looking at the column of gross production value, we can also see that agriculture is big business. In the next section, we will see just how big.

The economic importance of agriculture

One in three working-age people worldwide are farmers or agricultural workers; in sub-Saharan Africa, it’s almost two in three.²⁷⁶ If you count their dependents — young children and the elderly, who rely on breadwinners in the absence of a social safety net or pension schemes — agriculture provides an income for perhaps as much as half of the world population.

While agriculture is of huge economic importance worldwide, it is not equally important everywhere, as the following table shows: the wealthier a country, the less important agriculture becomes in terms of GDP, employment, trade and investment.

Table 4.4 Macroeconomic indicators of agriculture

There are some notable exceptions to this distribution, and the most important ones concern trade. First, some high-income countries have significant industry and service sectors built around the processing and trade of agricultural produce. In the Netherlands for example, five people are employed in food processing, trade and technology for every farm worker and farmer; more than 20% of GDP can be attributed to this wider “agrifood” sector; and almost half of the Dutch trade balance is made up of food and food-related goods.²⁷⁷ This explains why, as we shall see later, governments in countries like the Netherlands protect and subsidize domestic farming sectors while pursuing open global markets to import raw product like cocoa beans and export processed foods like chocolate and milk powder. These open markets further allow excess food products from developed economies to be exported to low-income countries. Many sub-Saharan African countries have become net food importers as a result.

Overview of key actors in the food system

Let’s look at the agricultural value chain in more detail. First, we look at the core value chain — the “from farm to fork” activities that ensure food ends up on our plates. Second, we look at the extended value chain. These are the supporting processes that provide inputs and direct services to actors in the core value chain. Third, we look at the so-called enabling environment.

Core value chain²⁷⁸

When you think of agriculture, you probably picture tractors, combine harvesters, large fields with row upon row of wheat or maize or irrigated paddies with rice. If you think of livestock farming, you may think of barns full of cows and pigs, perhaps pastures where the cows graze, and machines that milk them. This is primary agricultural production: the act of sowing crops, tending to them, and eventually harvesting them; for livestock sectors, it includes raising them and looking after them, collecting their eggs or milk, and eventually having them collected and taken to a slaughterhouse. In modern times, the scale at which food is produced has become truly industrial. The average corn Field in the USA is now 135 hectares, roughly as much as 250 football fields; combine harvesters can harvest more than 12-meter-wide rows of grain at a time. Livestock farming has become stunningly — or shockingly — industrial as well: in American CAFOs (Concentrated Animal Feeding Operations) thousands of cows or hundreds of thousands of chickens are confined in small areas to be fattened for slaughter. In fact, the phrase itself implies a significant departure from the romantic view of cows grazing in a meadow happily ever after. As we will see in the next section, this has severe implications for animal welfare, but also human health and the environment. Without trying to be unsavory, if you picture these CAFO’s in your mind can you almost see the waste, the claustrophobia, smell the smell, and hear the noise?

Primary production (the actual production of the raw materials) is not necessarily the link in the value chain that generates most money or employs the most people — certainly not in middle- and high-income countries. That is more often the next steps in the core value chain: aggregation, manufacturing and processing, distribution, marketing and retail; and eventually household consumption (see Figure 4.14). Let’s have a quick look at what these steps entail:

• Aggregation entails the pooling of harvested crops to facilitate transport and trade. The harvest is taken to large silos. Here it sits, in the hope that market dynamics lead to higher prices in the future — you can already imagine the role financial service providers with

Figure 4.14 Core value chain.

predictive computer models can play. Such storage facilities are often in the hands of commodity traders, whose business model largely relies on making small margins from bulk products that are largely indistinguishable in terms of quality. This is a highly concentrated market, with just a handful of companies controlling two thirds or more of the market share for certain staples;

• • These companies are also involved in primary processing. As you already know, some crops require heavy processing before they are edible. Grains need to be hulled and milled before they find their way to supermarket shelves in the form of flour or cornmeal; oilseeds are crushed into a pulp that can be fed to animals and oils that can be further refined into cooking oil or margarine; cocoa beans are turned into cocoa powder and cocoa butter;
• • Then the manufacturers come in: they turn powders, oils, pastes and other semi-raw products into things we would see on supermarket shelves. Whereas primary processing is relatively crude and mechanistic, manufacturing (or secondary processing) involves quite a lot of chemistry and introduces ingredients that you’d sooner expect on a tube of glue than a candy bar. This is to create uniform products that have a long shelf life, can be easily transported, and won’t require a narrow temperature range to stay edible;
• • From the manufacturers, food is then distributed to where consumers encounter it: supermarkets and (fast food) restaurants.

Outside of the core value chain, there are further industries that make all this happen: input providers like fertilizer, pesticides and herbicides, seed producers, and machinery like tractors, harvesters, on-farm storage, milk robots)., service providers like veterinarians, crop insurance and weather forecasting services and finance to overcome the income gap between seeding crops and selling harvests.

Again, these are concentrated sectors where relatively few large multinationals control the market. Fertilizer production is a case in point: in four of the Five top potash-producing countries, the four largest fertilizer companies account for 100% of production.² ’ In addition, agricultural commodity traders have branched out and now provide weather information, insurance and other financial products, leading to even stronger vertical integration for companies that already have revenues of over $80

billion annually²⁸⁰ and, with only a handful of other companies, control the trade of staple grains like wheat and maize.

Sustainability issues in the food system

Environmental issues

In Part I of this book, we learned about the nine planetary boundaries: critical earth system processes that are being dangerously overstretched. Agriculture has an impact on, and arguably is impacted by, all nine; for now, let’s focus on the boundaries that are already being overstepped.

Climate change

Agriculture is responsible for around 20% of global greenhouse gas emissions and more than 50% of non-C02 greenhouse gases (primarily methane and nitrous oxide which have a larger warming effect), making it the single greatest climate change causing sector.^2812x2 Within agriculture, the greatest source of emissions is enteric fermentation — a fancy term for gas coming out of the front and rear end of animals, actually to most people’s surprise most comes from the front end — at around 40% of total agricultural emissions. The application of manure is second at 15%, and the production of chemical fertilizers third at 12%. Considering that 30% of all food (in terms of calorific value) is grown not fur human but animal consumption,²⁸³ this means that one way or another the livestock sector is responsible for well more than half of the global warming effect of farming.

While hotter climates can increase crop yields under certain conditions, on the whole the risk is greater that production will decrease. A review of more than a thousand studies estimating crop yield fluctuations in a warmer world for critical staple crops like rice, soybean and maize, has found that long-term productivity will decline.²⁸⁴ In addition, some studies are projecting that the nutritional quality of many crops will deteriorate at higher atmospheric C02 concentrations.²⁸⁵

Biogeochemical flows

As we have seen in Part I of this book, nitrogen is “the unknown killer”, making soils too acidic and thereby harming plant (and indirectly animal) life. Agriculture is the main source of nitrogen emissions in many places, specifically through livestock waste and the overapplication of chemical fertilizers.²⁸⁶ Phosphorus flows are similarly dominated by agriculture, accounting for 80-90% of global demand. One immediate concern is that mined phosphorus (phosphate rock) is a finite resource and will run out in the next three hundred years if consumed at present levels. This would imply that phosphorus is no longer available to mankind, as it dilutes away, making agriculture difficult if not impossible for future generations. A second, but equally worrisome concern is the overapplication and leakage of phosphorus. This results in eutrophication, an overabundance of plant growth in water bodies which starves the water of oxygen and kills aquatic life. This process has notably created the Gulf of Mexico’s “Dead Zone,” a marine area almost the size of Slovenia that has too little oxygen to let life flourish. The cause? Overfertilization in the agricultural areas along the Mississippi and its tributaries. This shows the systemic nature of sustainability problems in agriculture: driving up crop production thousands of miles upstream from the Mississippi delta puts the survival of fisheries at risk.

Biosphere integrity and land system change

Current agricultural practices are driving biodiversity decline (expressed in extinctions per million species per year) at a 10 to 100-fold rate over what experts consider safe; if we continue with business as usual this will most certainly exceed 100 times the safe limit by 2050. There are two main mechanisms at play here: the degradation of habitat quality, and the replacement of nature by agriculture. Habitat quality is degraded for example by nitrogen deposition, which literally kills plants, and through indiscriminate application of pesticides and herbicides that kill insects (and by extension birds) on and near fields. This is a troubling issue in densely populated North-West European countries, where intensive livestock farms with high emissions of nitrogen to the air are situated near protected nature areas. Agriculture taking over nature simply takes the natural habitat away and replaces it with cropland or pasture. This is what happened to large stretches of European and North American grasslands and forests and what is currently happening in the Amazon.

It is important to note that agriculture and “wild” plants and animals can and do in principle have a mutually beneficial relationship.

The classic example here is pollination: without bees carrying genetic material between plants in their quest to harvest pollen, many crops simply cannot be produced. But the bees are suffering. Already in some areas, workers are being employed to carry out this function: go from flower to flower, gently brush up some pollen, and apply it to another plant. Put a different way, next time you’re in the produce section of the supermarket imagine it without melons, courgettes, pumpkins, cucumbers, apples, avocadoes or tomatoes. These are just some of the plants that rely heavily on pollination.

Water

In addition, agriculture is the world’s largest freshwater-using sector by a large margin, consuming 70% of global freshwater.²⁸⁷ Some locations are already under severe water stress — California being a prominent example, with its extremely “thirsty” stone fruit and nut production. One implication is that freshwater and groundwater sources become depleted or unfit for human consumption through farming operations while not producing food that local population will eat. On a global scale, it is predicted that some regions that are already net food importers will have to import even more food as local water sources can’t keep up with food demand. Furthermore, there will be increased competition for water resources between agriculture and other sectors, and even potential for armed conflict between countries over this increasingly scarce resource.²⁸⁸

Socioeconomic issues

Safe thresholds or limits are more difficult to define in the social sphere, and discussions will quickly turn philosophical. Nevertheless, in the “donut” of a safe and fair operating space for humanity introduced in Part I, we have a useful framework that defines a necessary social foundation for a good life.²⁸⁹ Let’s run through some of the main issues to see what impact agriculture has on our societies.

Food and health

The main purpose of agriculture is to feed the world’s human population, and as we saw in the beginning of this chapter food is crucial for a healthy life. Food output has grown faster than population growth over the past half century, yet close to 800 million people do not have enough food to live a healthy life. While there has been a general downward trend for abject hunger, rates of undernutrition have actually been rising again in the past years in sub-Saharan Africa and the Middle East. A further two billion suffer micronutrient deficiencies, meaning they don’t consume enough vitamins and minerals like iron and calcium and as a result are more prone to health problems. Add to that the more than two billion who are overweight and obese, and you have more than half the world suffering from a poor diet in one way or another. This is — to a large extent — the result of a homogenization (and Westernization) of our diets, with high consumption of sugar, fat, salt and processed foods low

• • • ООП

in micronutrients.^-

But it is not just on the consumer end that our food system produces disastrous health outcomes: agricultural workers can also suffer from health problems due to farming. If pesticides are toxic for animals, so too are they for humans. Lack of safety equipment, or simply the continued exposure to these harmful chemicals, is a cause of cancer and other diseases for agricultural workers. This is not a problem confined to banana plantations in Latin America, as you might think: workers in French vineyards are experiencing higher rates of cancer, Parkinson’s disease and other chronic illnesses due to the chemicals used; and a Californian court famously ruled in the spring of 2019 that the infamous weed killer Roundup caused blood cancer.^291,292

Health impacts from agricultural production are not limited to farmers and other agricultural workers, however. Emissions of chemicals and animal waste to water bodies and the air affect those living near farms. In the Netherlands for example, particulate matter emission from intensive livestock farms have been linked to as many as 12,000 premature deaths

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a year.

Total cost accounting

Current prices do not provide the true value of food because not all costs and benefits are internalized. The standard accounting and economic evaluation systems do not consider positive nor negative externalities which are critical for the long-term resilience of eco-agri-food systems and the people depending on them. Agriculture and food production do not only rely on produced capital but also on natural, social and human. Ignoring externalities and some forms of capital leads to distorted markets and false accounting. True Cost Accounting (TCA) aims at evaluating the externalities of a defined eco-agri-food system that goes beyond the traditional measurement of economic KPIs. Expressing impacts via the monetary loss or gain they become harder to neglect by decision-makers. TCA does therefore not only inform but also justify in economic terms decision-making of policymakers and thereby promote a food system that has a positive impact on society and the environment. By making the real costs of production and consumption transparent to society, governments and businesses, it is an instrument to transform our current food system into a more sustainable one.

The eco-agri-food system is highly interconnected and linked to other systems like the health sector. Food provides energy and nutrients but at the same time, contaminated food (e.g. pesticides) poses a threat to consumers' well-being and health. TCA uses a systemic approach to evaluate all visible and invisible, direct and indirect impacts of the eco-agri-food system. SDG goals, such as freshwater (SDG 6), biodiversity and ecosystems (SDGs 14 and 15), human health (SDG 3), social equity (SDGs 5 and 10) and livelihoods (SDGs 1 and 8) can be analysed together within one eco- agri-food system which enables a more holistic view, often not applied in other reporting schemes. Even though TCA has gained quite some attention in the private and public sector while at the same time being more researched, its applications vary widely depending on the interpretation of existing frameworks, use of methods and availability of data.

Income and resilience

While we have seen that one in three working-age adults worldwide work in agriculture, the vast majority of these workers do not earn a living income. If we assume that an average farmer or agricultural worker needs to generate at least $2 per day for himself, his family and any investments in his farm or education, they need to earn $5,000 a year. The current global average is just $2,000, and 94% of agricultural workers make less than $5,000 a year.²⁴⁴ This means that hundreds of millions of farmers or agricultural workers and their families are stuck in a so-called “poverty trap”:²⁹⁵ they earn so little they can’t save, they have so little they can’t put up collateral for a loan, and as a result are unable to invest in their enterprise or education to increase their income.

Resilience is the ability to adapt to changing circumstances. Practically, this means that if a harvest fails, the rains don’t come, or the bottom falls out of a commodity market, those dependent on agriculture can find other ways to survive. As noted above, climate change is expected to reduce yields in most regions throughout the coming decades, and already increases the frequency and intensity of extreme weather events like heatwaves and storms. As more and more agricultural land is converted to produce just a handful of staple crops, the resilience of even large industrial farms is called into question.²⁹⁶

Profits in agricultural value chains are very unevenly distributed, and this inequality is only becoming more extreme. Whereas cocoa farmers used to earn 16% of the retail value of a chocolate bar, the percentage has shrunk to just 6%.²⁹' In addition, from the previous paragraph it should be clear that power is also highly unevenly distributed. While women are the unsung heroines of agriculture, making up 70% of smallholder farmers in Africa,^29S they rarely own the land they work on and are not paid as much as their male colleagues on the factory floor. They also more frequently work in unsafe conditions or on short-term contracts.²⁹⁹

Employment

While food and agriculture are certainly big business, they do not always provide good employment opportunities. We have already noted some issues around working conditions and pesticide exposure, endangering worker health. Jobs in food and agriculture are also not very secure, with many workers finding only seasonal work opportunities. Workers in the supply chain face long hours, lack poor safety standards, work unpaid overtime and often lack any meaningful representation.³""

Child labor

Many farms are family farms, whether a high-tech dairy in the United States or a smallholder subsistence plot in East Africa. Whereas there is a system in place to ensure schooling up to at least middle school age in most places, some countries don’t have such rules or don’t enforce them, and children are often required to do even hazardous work at ages as young as five. According to a UN report on the matter, “Agriculture is by far the largest sector employing children, with unpaid family farm work dominating. Some 60 million children are involved. Young girls who should be in school are collecting water and firewood or caring for siblings. In West Africa, an estimated two million children are involved in cultivating cocoa, while some 400,000 children are working on India’s cotton seed farms”.³⁰¹

Land access, use and ownership

As noted above, many workers in the global food system have no representation through unions or workers’ rights associations. A similarly troubling, if more complex, aspect of our food system with respect to democracy is the issue of insecure tenure rights: people lack documentation of their rights to land — be it individual or communal access, use or ownership rights. Weak land administration in combination with weak law enforcement puts communities, landowners and land-users in a vulnerable position where they cannot claim and protect their rights. Economically, such insecurity means not being able to use land as collateral to get access to finance or — in the worst case — puts households or farmers at risk to be expelled from their land. The concept of “land grab” relates to this wider issue of insecure tenure rights, where powerful elites or foreign corporations forge land deals in the shape of long-term leases or outright purchase of large stretches of farmland or forest, frequently displacing local populations without adequate compensation and often by violent means.³⁰² These kinds of deals have been growing in number and area over the past decade, partly in response to food price hikes in 2008 and ostensibly motivated by a need for food security. Since most of these deals take place in countries with a weak rule of law it is difficult to find precise data covering the extent of the problem, but one initiative covering the issue has counted deals in 78 countries and covering more than 30 million hectares.³⁰³

So, there we have it. Probably the most important sector in the world from a human survival and economic point of view is also by far the most unsustainable sector in the world. The production of our food violates almost all of the nine planetary boundaries. It contributes to most of the SDGs and it is probably the largest driver for the overshoots of the donut model. It begs the question: how come such important sector is so unsustainable? And why are we so ineffective in changing it? Let’s take a look at the four loops as described in Part II of the book.

The rules of the agriculture game

By now it should be clear that our food and farming systems are broken, causing environmental harm and human misery on a catastrophic scale. So far, the chapter has given us an idea of what the problems are. Before we start looking at solutions, let’s examine the system dynamics — the loops introduced in Part II — that produce these market failures.

Loop I: market dynamics

We already have a good view of what global food markets look like: huge masses of uniform products — commodities — are produced and traded. They are indistinguishable: there is no reason anyone should pay more for one kind of soybean or palm oil kernel than for another if they are crushed and pressed into what is essentially oil, sludge or dry pellets that are then fed to cows or turned into cosmetics. The logical conclusion is that price is far and away the single most important factor in this market, and so the main incentive is to produce food as cheaply as possible. This leads to the following collective behavior:

• • Farmers seek to increase productivity through the expansion of their land, applying agrochemicals to boost crop yields, and irrigating as much as necessary in places without enough rainfall to supply crops with water. Livestock farmers keep ever larger herds, which in some cases leads to the concentrated animal feeding operations discussed above, and in other cases to the creation of pastureland from forests or natural grasslands;
• • Costs are lowered where possible to achieve profits with slim margins, including by hiring only seasonal low-paid workers, by planting huge Fields with the same crop to be able to harvest efficiently (monocropping), or even using slavery or child labor;

• • If farmers don’t own land, they rent it for short periods of time, so they have no responsibility to act as stewards of that land after they have harvested;
• • Traders, processors and buying offices encourage price competition due to their reliance on huge volumes with slim margins.

This kind of behavior has consequences. Small-scale farming and nature give way to huge fields and pastures, where monocropping increases the risk of catastrophic crop failure, lowers farm resilience and decreases biodiversity. Soils and freshwater sources become polluted and degraded due to overuse of agrochemicals or overapplication of animal manure. Workers have no job security, and seasonal work opportunities in agriculture stimulate problematic migration dynamics. Farmers are no longer stewards of the land and are instead driven to exploit resources and labor as efficiently as possible due to price pressure from big buyers.

Loop II: enabling environment

In the first part of this discussion we learned about the different actors in the agricultural system, among them those that constitute the enabling environment. To begin with, let’s remember that agriculture makes a sizeable contribution to the GDP of low-income countries. In countries like Ghana and Cote d’Ivoire, a cash crop sector like cocoa makes up as much as 15% of national income.³"⁴ While most farmers (and their children) working in this sector struggle to earn enough for basic necessities, the comparatively low prices fuel a steady demand. This in turn leads to unsustainable production-boosting practices, neglecting long term management of production landscapes and investments in future conditions for a thriving sector. But so long as the government earns foreign exchange and is able to tax this sector, it won’t be inclined to make much structural changes to deal with sustainability issues. In fact, it will be incentivized to boost production and keep food prices low. This is also favorable for autocratic governments because they can more easily satisfy the primary needs of the urban poor, who may otherwise protest and even overthrow their government. By some accounts, for example, food price spikes were one of the main causes of the Arab Spring.³⁰⁵

In high-income countries by contrast, governments have established effective production support policies that led to increased prosperity for the farmers. However, these policies resulted in a ballooning of the size of agricultural sectors (in the European Union for example) that makes these sectors fundamentally unsustainable, as the previous section illustrated: there is an overall failure of farm subsidies to benefit the public good, with just 1% of the more than $700 billion spent annually leading to positive environmental outcomes. Much of the subsidies instead promote livestock sectors with high GHG emissions, high agrochemical use, and which drive deforestation.³⁰⁶'³"⁷ This can be explained by the phenomenon of path dependency: once policies have been enacted and become fundamental parts of the institutional makeup of a sector, they are very difficult to change or abandon. Farmers have become used to subsidies that incentivize large-scale agriculture; consumers have become used to cheap food; the industry around food and farming has become used to continued economic growth.

If path dependency is the mechanism that keeps the agricultural system on a certain path, the size of powerful actors — and their resistance to change — is the force that prevents them from turning to a different path. In the oligopolies we have, where the power of agricultural commodity traders, agrochemical companies, seed companies, meat processors and retailers is incredibly concentrated, it is wishful thinking to just hope or expect billion dollar enterprises to abandon business models that have generated huge returns for decades.³"⁸

Lastly, governments have a tendency to enact policies or start programs and initiatives that tackle symptoms rather than causes. This “fire-fight- ing” style of policymaking can yield to quick and easy wins that politicians can campaign on but cannot lead to systemic change. What is more, longterm transitions towards more sustainable systems almost always have losers as well as winners, and this is a difficult message to sell to the media, the public and most important to the sector itself. And thus the loop continues.

Loop III: mismatch benefits and effects

The consequences of this unsustainable food and agricultural system are not felt evenly around the globe, and some of them will not even be felt by current generations. There are a few themes that illustrate this general assessment.

• • First, we can see that the earnings of the agricultural workforce differ greatly, with Sub-Saharan Africa and South-East Asia showing the lowest annual earnings (around $400-1000 for countries like Mozambique or Bangladesh) and Europe, North America and Australia showing the highest earnings (up to $95,000 in the case of Canada);³⁰⁹
• • Second, the primary function of agriculture (to feed people) is least fulfilled in very much the same regions that earn the least: hunger and malnutrition are concentrated in Sub-Saharan Africa and South- East Asia, and in Mozambique for example the prevalence of chronic malnutrition for children is a shocking 43%;³¹"
• • Third, social-environmental impacts like water stress similarly do not affect the world equally, though here we begin to see that some of the more affluent agricultural producers like the USA can experience these problems too. High and extremely high water stress is evident almost exclusively in poorer countries, however.

There are two main implications of this inequality in feeling the social and environmental consequences of an unsustainable food and agricultural system. The first is that most people who experience these effects have very little power, domestically or internationally, to bring about change: they often live in countries with a weak rule of law and therefore can’t hold their governments, who are often complicit in producing unsustainable food system outcomes, to account. On a national level, these countries similarly appear powerless in the face of wealthy nations: they have little to no power to change for example the trade policies of the EU that distort local markets in African countries. The second is that, although the impacts of unsustainable food systems have reached crisislike proportions in some places, the effects are not yet felt widely enough to trigger collective awareness and a willingness to change.

Loop IV: lack of alternatives

We now know that world agriculture is fundamentally unsustainable. So, what is missing to make a change?

First of all, farmers are lacking incentives and knowledge to make a switch. In low-income countries, there are three reasons for this. The First is that in many regions, there are no jobs outside of agriculture.

This means farmers farm because they have to, not because they want to. The second is related to an often poor-enabling environment, specifically a lack of land rights and lack of knowledge, so farmers farm on land they are not sure they will be able to farm on in the future and often don’t use the best farming methods for lack of knowledge. The third reason relates to the extended value chain, specifically a lack of access to capital and technology: because they are stuck in a poverty trap, many farmers can’t borrow money to invest in inputs; and because these farmers present no lucrative market, there isn’t a lot of affordable technology or a financial sector that is developed for them. Just to increase their productivity and modernize their farms, these farmers need $150 billion; ’¹¹ by other estimates, in India alone $175 billion are needed.’¹² To summarize: people farm because they have to; they have no reason to invest in land they don’t own; they often don’t know what to change, and even if they did, they wouldn’t be able to afford it.

For farmers in high-income markets the problem is that there is no market demand for more sustainable products, which are more expensive: there is a mismatch between societal demands for more sustainable farming sectors, and consumers’ willingness to pay accordingly. Similar to farmers in developing countries, farmers in Western or middle-income economies often require structural changes and investments to implement more sustainable practices — individual farmers alone can only do so much, even when their customers are happy to pay a premium. For structural change, agribusinesses and governments need to mobilize resources to — for example — compensate more nature conservation on farmland, facilitate more diverse and seasonal product offerings, and even in some cases compensate farmers for reducing their output — particularly in livestock sectors.

In conclusion, let’s put the four loops together (see Figure 4.15). When we take all four of these loops into consideration, it is no wonder that agriculture is stuck in a system producing unsustainable outcomes. The markets reward unsustainable production, the enabling environment doesn’t rectify this, the consequences are only felt by the poor and powerless (and future generations), and there are no alternatives for many farmers to act differently.

All this is not to say that serious efforts at changing the game in our food systems are not underway. In fact, much is being done to change it.

Figure 4.15 The systemic loops that lead to an unsustainable agricultural sector.

In the next section we will look at the four phases of market transformation in food and agriculture, and we will see just how hard many actors try to change how we produce, process and consume our food.

The sector takes action

Phase 1: inception - increasing urgency and move towards actionable alternatives through projects and pioneering

It all starts with a crisis. Reports of child labor on cocoa farms; the near extinction of orangutans; the burning rainforest. Closer to home we can think of anti-freeze being found in wine, mad cow disease, horse meat sold as beef, reports of poor working conditions and animal cruelty in slaughterhouses. As we learned in Part III, the first reaction to a crisis is most often one of denial and of disowning the problem (“these are subcontractors and we have no control over them, the reports are not true”) or a frantic urge to do something.

This urge to do something translates to the first phase of market transformation, setting up projects that address whatever issue has gotten public attention: if children in cocoa producing countries of West Africa don’t go to school, then let’s build a school. This is what major cocoa and confectionary companies did in Cote d’Ivoire in 2013.³¹³ Smallholder farmers are starving? Let’s teach them how to farm better, as Bayer Crop Science does by setting up smallholder training programs for better pesticide use.³¹⁴ Illegal logging is cutting down the rainforest and destroying the habitat of threatened species? Let’s partner with WWF, like major German supermarket chain EDEKA.^3b We feel we have to do something; anything is better than nothing; and so, we do. Hundreds of millions of dollars are spend on development aid, charities and NGO projects.

It is easy to be cynical about this phase, since the problems keep coming back. However, this phase of market transformation makes a crucial contribution: instead of ignoring the sustainability issues, dominant actors start to learn what can be done. And by doing so, they alter something in the “conditions to change” system loop. By experimenting, initiating projects, learning what works and doesn’t work and cooperating with previously ignored actors in their value chain, the alternatives might be all over the place, but at least they are being created. Furthermore, it mobilizes funds spend on solving sustainability issues (albeit not in a structured way) and gets the attention of those with the power to make a change. Slowly the minds are ripened for the next phase.

Phase 2: competitive advantage - creating new business models through innovation and competition

Eventually, companies who spend money on projects that address the most flagrant sustainability problems figure out that there is money to be made here: if consumers are pleased with a company’s effort to build schools or partner with NGOs, they may be willing to pay for a product they believe entails some structural efforts at making a supply chain more sustainable. This leads to the development of voluntary sustainability standards (VSS): schemes that certify that particular practices were followed in production and / or processing and trade, and which can be seen by consumers on product labels. And agriculture has no shortage of these voluntary schemes.

The basic mechanisms by which adhering to voluntary sustainability standards translates to higher farmer incomes are reduced production costs (by access to cheaper inputs), higher yields (by implementing sustainable productivity-boosting practices and sound resource management) and higher prices (because some of the premium paid by consumers trickles down to the farmer).

Different standards have different focuses. Within the coffee sector for example:³¹⁶

• • FairTrade certifies the payment of fair and regular prices to farmers;
• • Utz certifies good agricultural practices aimed at improving yields and reducing environmental impacts of production;
• • 4C certifies the elimination of “worst practices”;
• • Starbucks and Nespresso company standards focus on product quality as well as social and ecological improvements on the farm.

Currently, there are hundreds of voluntary sustainability standards for agriculture, Fisheries and food products:³¹⁷

• • 56 standards for aquaculture and wild captured fish;
• • 53 standards for livestock;
• • 67 standards for processed foods;
• • 150 standards for agriculture.

But at the end of the day, voluntary sustainability standards have been found not to be the silver bullet many had hoped for. Often, standards are now treated as ceilings for high performing products, while it should be a minimum threshold for all products. The same report cited above notes critically that setting up training programs for a standard is costly and often requires funding from philanthropists or development agencies to operate. This is not a long-term solution; in fact, another study concluded that services to certified farmers often change or fall away, leading to stagnating income gains.³¹⁸ Furthermore, while certified farmers earned slightly more than their non-certified peers, they did not necessarily score higher on social or environmental criteria.

In some European supermarkets, it is normal to find certified products in almost every product category.³¹⁴ It is fair to say, then, that generally speaking this second phase of market transformation is currently dominant for food and agriculture. But the impact is limited and restricted to some parts of the food sector. Only systemic change will have an impact — and companies have started to realize this.

Phase 3: pre-competitive collaboration - enabling scaling through collaboration between multi stakeholder coalitions and platforms

Phase 3 begins when companies who engage in sustainability projects in their supply chains, or who sell certified products, realize that individually setting up slightly different programs in their supply chains is not efficient (it costs a lot to run and doesn’t deliver the desired impact) and lacks legitimacy (companies can be too easily accused of greenwashing). A vehicle of change in this phase is the multi-stakeholder initiative (MSI): organizations where a number of civil society organisations, suppliers and companies active in the same sector (or concerned about the same issue) come together to develop a pre competitive agenda for change, make strong commitments towards achieving this agenda, and monitor their progress. Often also called round tables, these initiatives include not just the industry but also NGOs, governments and financiers.

An example is the Roundtable on Sustainable Palm Oil (RSPO). It works in a market where consumers do not buy the certified crop as a product, yet it has achieved certification of 19% of global production. RSPO furthermore has translated its standard into mandatory nation-wide standards in Indonesia, with Indonesia setting up the Indonesian Sustainable Palm Oil standard based on RSPO.³²⁰ It is also piloting a jurisdictional approach to certification and smallholder involvement in entire provinces of Indonesia, Malaysia and all of Ecuador’s palm oil production. ³²¹

This example shows that when agribusiness and governments work together, slow but systemic changes can be implemented. They are a good forum to share learnings and therefore, in an ideal scenario, enable actors to skip over the hurdles their peers ran into. The International Trade Centre provides information on over 200 standards, codes of conduct, audit protocols addressing sustainability hotspots in global supply chains.³²²

Phase 4: institutionalization - ensuring a level playing field through legislation and coercive self-regulation

When multi-stakeholder initiatives are successful, a lot can be achieved. Agricultural practices can become structurally more sustainable, farmer incomes can increase, and governments can be incentivized to improve the enabling environment. Civil society, workers movement and community-based organizations can share their knowledge in multi-stakeholder initiatives and scale their impact. Eventually, the majority of private sector actors is on board with the new sustainability agenda and has convinced the government to align policies and spending. The last remaining step is to take the new, “soft” norms, and turn them into “hard” laws, levelling the playing field and forcing even the laggards to change behavior.

To a large extent, environmental norms for agricultural production have been institutionalized in developed countries, prominently through EU directives for members of the EU, as well as in North America, Australia and New Zealand.³²³ Legislation covers issues as diverse as soils, water treatment, animal stocking rates, and acceptable nitrate emissions. In Europe for example, this has led to improvements in water quality,³²⁴ and greenhouse gas emissions from agriculture have decreased by 20% between 1995 and 2015.^32:1 In fact, countries with a relatively high degree of institutionalization of these norms are a top producer for 11 of the world’s 20 most important crops and livestock products highlighted before. An overview of the initiatives is presented in Figure 4.16.

The question here is, what will be the collective response? Will political leaders stick their heads in the sand, play a blame game, point to “bigger problems”? Will business leaders try to absolve themselves of their

Figure 4.16 The agricultural sector takes action.

responsibilities or engage in “greenwashing” activities, much like going back to phase 1 with its symptom-addressing projects? It’s impossible to tell, but the point is: market transformation is never over.

How to move the sector forward

In the previous section, it was shown that the agricultural sector has various initiatives and interventions in each of the four phases of market transformation. Looking close at the governance mode of the sustainability programs, most adopt a partnership approach. Many large companies take their own initiatives and develop their own sustainability programs. They tend to work towards the same goals as their competitors in the food sector, but many appear to work not in a coordinated manner. This corresponds with the middle of Phase 2: for many agricultural products actors in the market learn how to reward good behavior made visible by voluntary sustainability standards. What is required next? How can the collective action in the sector move towards Phase 3? Looking at the current state of the agricultural sector, we can therefore apply the multistakeholder matrix and recommend that the following actions be implemented by various stakeholders.

Governments

In order to move towards Phase 3, it is important that governments develop a policy towards sustainable agriculture with clear goals and measures. For example, in the Netherlands, the food industry — in this case an association of Dutch supermarkets — have penned an open letter directed at the minister for food, agriculture and nature protection demanding not just a general vision but a concrete translation of that vision into coherent policies and clear demands to the industry³²⁶. Such a policy should focus on creating an enabling environment to leverage the proven models developed in Phase 2, including knowledge transfer and innovation dissemination in the value chain, supporting scalable standards with laws and regulations and linking the financial services and support schemes for agriculture to the dominant sustainability issues. Developing such policies have two main purposes: first, to create a level playing field for private producers or processors; second, to institutionalize societal expectations when it comes to food quality and nutrition, but also increasingly on issues such as animal welfare or a product’s environmental footprint.

A good example is the adoption of organic certification. This is a production standard for growing, storage, processing, packaging and shipping food and other agricultural products that comply with requirements like avoidance of synthetic chemical inputs (e.g. fertilizer, pesticides, antibiotics, food additives), avoidance of genetically modified seed and animal welfare of livestock, including feed, housing, and breeding. This started as a voluntary sustainability standard, but countries like the United States, the European Union, Canada and Japan have comprehensive organic standards which are formulated and overseen by the government. As a consequence, the term "organic" may be used only by certified producers creating an enabling environment that stimulates trust in this standard.

In summary:

• • Develop a policy towards sustainable agriculture with clear goals and measures;
• • Link proven models to the enabling environment;
• • Prevent the inappropriate use of certification programs and standards.

The industry

The above discussion has shown the imbalance in the setup of the value chain in agriculture with billions of clients, millions of producers and a few globally operating companies in the middle of the value chain. This dominant position of these global companies makes it clear where to find some leverage points to move towards Phase 3. Big food companies, such as manufacturers, retailers and traders have been able to leverage scale towards steady and cheap food supply. How to use that capacity to move towards steady, cheap and sustainable food supply? Looking at the commitments of the largest food and beverages companies one recognizes that all these firms adopted sustainable and responsibility strategies. These sustainable policies and principles seem not a way of window dressing. Companies such as Coca Cola, Nestle and Unilever are aligning their operations with the principles and policies that should work towards supply chain resilience and responsible and transparent business operations.

The main pattern shown by these companies is that they set higher norms for the upcoming years and request their suppliers to comply with their Code of Conducts. Furthermore, there is momentum towards full traceability of their supply chains. These companies already need a tracking and tracing system in order to comply with health regulation. And since this system is already in place, it can facilitate the adherence to sustainability norms as well. As an indirect effect, this changes the relationships in the agricultural value chain. Large companies were used to procure from spot markets and short-term relations, but for driving sustainability, some companies already choose suppliers based on their values and their ability to give transparency and verify their supply chains.

Furthermore, companies continue to develop alternative approaches for food production, often based on short, local supply chains. This generates an alternative systemic change that focuses much more on small-scale farming compared to making the current global supply chains sustainable. For example, Moyee Coffee shifted the roasting of coffee beans to the cooperatives in Ethiopia where the beans are grown and harvested as well. Such an integration of the supply chain takes out the need to involve big global companies and results in much more added value in the local countries.³²⁷ Another example of an initiative of food production adapted to local circumstances, is the Sahara Forest Project, which proposes to use restorative practices to establish vegetation in arid areas and reverse the trend of desertification. The Sahara Forest Project combines already existing and proven environmental technologies, such as the evaporation of saltwater to create cooling and distilled fresh water (i.e. in a saltwater cooled greenhouse) and solar thermal energy technologies. The technological combination is designed to utilize the locally available resources, ‘that what we have enough of’ like deserts, saltwater, sunlight and C02, to produce food, freshwater and energy. With currently 3 locations in Jordan, Tunisia and Qatar. These initiatives create diminishing dependencies in a changing world with uncertainties regarding future developments.

It is strong that companies are embedding these commitments to sustainability in their strategies, but to stimulate ongoing transformation and healthy development of the food sector, coordination is needed. That’s where governments can step in as seen in the previous section. Also, the previously described efforts in relation to the roundtables provide effective examples of self-governance towards Phase 3.

In summary:

• • Build upon the leverage points in the setup of the agricultural value chain;
• • Use the existing tracking and tracing system for sustainability issues;
• • Continue learning about alternative models for food production;
• • Through existing platforms, collaborate with other stakeholders on the more complex challenges.

Civil society, knowledge institutes and other stakeholders

Some additional roles in moving towards Phase 3 are supporting frontrunners and pressure laggards and increasing objectivity about the impacts of the sustainability standards. This is where non-governmental organizations, knowledge institutes and other stakeholders can fulfil crucial roles. Transparency is a powerful mechanism to make sure that those who have publicly stated their commitment to the issues on the agenda also follow through. This mechanism is triggered in the agricultural sector by benchmarks like the Access to Seeds Index, Access to Nutrition Index, the Seafood Stewardship Index and Food and Agriculture Index. Most of these indices are organized by the World Benchmarking Alliance. They measure, compare and rank the performance of about 2,000 of the world’s most influential companies in order to give companies the inspiration and guidance to change and create accountability for those who don’t change. A strong mechanism that fits with the competition on sustainability in Phase 2 but hampers the collaboration when a sector moves to Phase 3. Then, benchmarks on corporate performance should be turned into sector reports to assess collective action.

Next to benchmarks, transparency can also be created on a product or company level. A promising development is opening the box with information about externalities with methodologies like True Cost Accounting (TCA), True Price, True Value or TruCost and supporting organisations like the Impact Institute. These methodologies have in common that they compare the market price with the real price if all costs linked to externalities are included. For example, Eosta — the European market leader for organic products — compares the true price of organic products with non- organic products. This raises awareness about the hidden costs in a value chain and stimulates the willingness of consumers to pay a price premium, which is relevant for Phase 2. However, it also generates crucial information needed for the debates about collective action in Phase 3. Since frontrunning companies use these methodologies, you might wonder why this is not mentioned in the previous section about the roles of industry? The reason is that this information can be easily criticized or ignored if companies collect and provide this information themselves. It is much stronger if independent organizations like knowledge institutes provide it. Trust is key and that’s what these actors can add to the market transformation process.

And there is another role for civil society and knowledge actors. With a growing urban population, more initiatives are needed for local food production. Promising developments are vertical farming, urban farming, community gardens, cooperatives, farm shops and roof gardens. These initiatives increase access to nutritious food and close the gap between producers and consumers. These are examples of alternative setup of food production chains that work towards using the positive aspects of small scale farming combined with high productivity, diverse crops instead of monoculture, healthy soil, adaptation to local circumstances, balance with eco-systems, and translating these qualities to large scale accessibility of healthy nutritious food for the total world. A concrete example of urban farming is the aquaponics system which developed a smart system that has demonstrated to be a self-sustainable, cost-effective, and eco- friendly urban farming method that can attract both commercial farmers and home gardeners. But what do these initiatives need to become a dominant force in the agricultural sector? Visibility and objective information about the impact of these alternative models are key. That’s where NGOs and knowledge institutes come into play, next to financial institutes who can support these alternative models if they can indeed continue their growth path towards more sustainable forms of food production.

In summary:

• • Support frontrunners and create accountability for laggards by benchmarks;
• • Stop benchmarks and turn towards sector reports when a sector moves to Phase 3;
• • Provide information about the true price of products and true value of companies;
• • Assess and create transparency about alternative models for food production.

In the next 40 years, the global food system needs to produce more food than we have produced in the past 6000 years taken together, as the need for food will increase by 70% until 2050. In the same period, the area available for agriculture will decrease by 23%. The central question that we must ask ourselves is therefore: How do we sustainably secure a nutritious food supply for the expected world population of nine billion by 2050?

This will require technical as well as social innovation and different and better governance, because at present, the way how we produce our food has resulted in the most unsustainable sector. Whether we focus on climate change, biodiversity decline, health problems, poverty or land grabbing, the agricultural sector is one of the main causes behind it. How can such an important sector also be so unsustainable? The four systems loops are useful for understanding this:

Loop I: market dynamics

Agricultural products are often produced and traded as commodities. Price is then the most important factor in this market. This triggers farmers to increase productivity by applying agrochemicals and lower costs by saving on employee salaries. Differentiating on more sustainable practices just doesn’t work as long as the product is a commodity.

Loop II: enabling environment

National governments often benefit from the current practices in agriculture. Either by taxing a steady demand as long as prices of products are comparatively low, by avoiding protests as long as food prices are low or by path dependency due to choices in the past. Firefighting symptoms is possible but creating an enabling environment towards sustainability is more challenging.

Loop III: mismatched benefits and effects

Most people who experience the negative sustainability effects of the current agricultural practices have little power. Thus far, these effects have been limited in their impact to trigger collective awareness and a willingness to change.

Loop IV: lack of alternatives

Due to the poverty trap and lack of other employment opportunities, many people farm because they have to, not because they want to. And in high-income markets alternative sustainable products are available, but these farmers are often facing a mismatch between societal demands and consumer’s willingness or trust to pay for these sustainable products.

Still, change is possible. Even more so it is already on the way and the dominant characteristics of the agricultural sector fit with Phase 2. In order to continue this path to more sustainable food practices, actors in multi-stakeholder initiatives need to step up and develop policies towards sustainable agriculture with clear goals and measures. That is possible now that it becomes more clear what standards are effective in the agricultural sector. This is also due to the knowledge institutes and non-governmental organizations providing objective information in benchmarks and studies on product or company level. And the setup of the agricultural supply chain has created certain leverage points that can be used to move towards the next phase. Especially the big global firms in agriculture have already publicly expressed their commitments and can use the existing tracking and tracing system for sustainability issues. Additionally, the continued learning about alternative models for food production like vertical farming and organic production requires collaboration between the different market actors. In other words, we need to change the way we grow food and what we consume, meaning almost every person on earth has a role to play in changing their everyday behavior, be it as a consumer or as an agricultural professional.