'Staying alive' approach for companies
September, 2015 in Issue 2 - 2015, Markets
Sustainability is most acutely described as the ability to continue a defined behaviour indefinitely. However, moving beyond that sweeping statement and finding agreement on what is sustainable when it comes to producing and distributing food has been more difficult. Indeed, one complaint is that a plethora of eco-branding certification bodies use disparate metrics and likely only confuse consumers.
For years, there has been criticism by companies of ‘green mail’ initiated by environmental groups; and now there are complaints that groups start out in eco-labelling offerings with moral ambitions, but the reality of competition causes them to evolve into an economic ‘stay alive’ approach to their craft.
Activists initially took a blunt intuitive approach and declared ‘industrial’ (e.g. scale or extensive) agriculture as unsustainable. Their preference is small and local as the standard-bearers of sustainability. While small and local may have a place in the larger food chain, this over-simplification led to concerns about food security, especially from development specialists in poor countries.
Understanding the socio-political constraints that compel small farms – and concurrently, the need to increase the use of inputs – development specialists instead proclaimed the pursuit of ‘sustainable intensification’. This has now morphed into agro-ecology, or the goal to make agriculture more environmentally friendly.
Whether large or small, inputs from soil to water to seehttps://gofbonline.com/wastage that is a loss both to the farmer and the environment. Since agriculture has yet to perfect the science of optimal disbursement and plant uptake, the current focus is a two-prong approach:
There is ample retail demand for the ‘sustainable’ moniker, as evidenced by the success of companies such as Whole Foods and Chipotle. Whether they are better at it than other firms or approaches is another matter, but they have forced companies as large as Walmart to reconsider their approaches to the market.
Investor interest in companies pledging sustainability goals has picked up, particularly in Europe and developed countries. Of course, trends and profits do not perfectly align, and so their returns will depend greatly on how a specific underlying asset performs.
Government rights and wrongs
Sustainability is not a 21st century concept. Conservation was a key US government response to the 1930s Dust Bowl, and a great expansion in programmes to assist farmers was codified in the 1985 Farm Bill.
So-called cross-compliance, whereby farmers must commit to sustainability practices in exchange for benefits from government crop support programmes, remains a contentious issue for farm groups. There is exceptionally strong pushback from them over government environmental mandates where there is no quid pro quo of economic support.
It should be noted that producers are now turning lemons into lemonade by marketing their regulatory obligations as a reason why consumers, especially the eco-conscious in Europe, should be buying American.
This shift is against the backdrop of farmers in South America who are rapidly expanding their production into new, previously unploughed land. Indeed, given the over US$60 billion worth of investment planned for Brazilian highways, railways and ports in the coming years, higher-cost producers in the US will need some kind of advantage if they are going to compete.
European ‘greening measures’ for agriculture may have overshot their political sustainability. With the best of intentions, Brussels has sought to condition its economic support for the sector on better conservation practices, including the imposition of ‘Ecological Focus Areas’. In essence, a share of each farm (rising to 7% in 2016) must be chemical-free and focused on environmental benefits such as biological diversity.
Farmers, and consequently many of their political representatives, complain that it is too blunt an instrument, delivering little benefit on some farm types but at great cost to the farmer in conjunction with large amounts of paperwork and fear of penalty due to non-compliance.
Gary Blumenthal
World Perspectives Inc, Ag Review, July 2015
