Warr Athens 26 Jan 2010 Sustainable Agriculture

Sustainable AgricultureChallenges for Business

Athens January 26th 2010

Benjamin WarrSenior Research Fellow, Sustainability

[email protected]

INSEAD Social Innovation Centre

http://www.insead.fr/facultyresearch/centres/isic/

Topics for Discussion

•Urgency – Options – Innovation

•Extension – Intensification – Efficiency ?

•Supply / Demand focus, or Systems of Production and Consumption?

“ Feeding a hungrier world gets harder, even with all the tools…the way we manage the global agriculture and food security system doesn’t work ” (FAO, 2009)

What is the urgency: new imperatives for business?

32% of total GHG emissions related

to land use and agriculture

Agricultural GHG emissions

Source: IPCC

The global population: feeding 9 billion by 2050

From 6.80bn today reaching 9.1bn in 2050 and over 10 bn by 2100

Source: The Independent, Nov 1st 2009 from report by Robert Goodland, a former lead environmental adviser to the World Bank, and Jeff Anhang, World Bank.

A changing diet will exacerbate pressures

Potential undesirable impacts of biofuels

need for land

deforestation

monoculture

biodiversity loss

price pressures

water use

Biofuels and forest cover loss in Borneo 1950-2020

Water requirements and regions of physical and economic water scarcity

Source: IMWI, Insights from the Comprehensive Assessment of Water Management in Agriculture, 2006 and FAO.

The environmental food crisis: extension possibilities?

Projected cropland and yield losses

• Science (Another ‘more sustainable’ green revolution)

• Market-based solutions (example: reducing subsidies and trade barriers)

• Community-based solutions and sustainable agriculture (example: agriculture cooperatives)

• Supply chains (example: waste in food supply chains)

• Sustainable consumption (example: the Tesco SCI program)

• Self regulation (eco-labels, eco-brands) and Government regulation (license to produce)

Feeding the planet – what are the options?

STRATEGY 1Eco-Efficiency

STRATEGY 4Environmental Cost

Leadership

STRATEGY 3Eco-Branding

STRATEGY 2Beyond Compliance

Leadership

Com

petit

ive

Adv

anta

ge

Competitive Focus

Organizational Processes Products and Services

Lower costs

Differentiation

R.J. ORSATO (2006) ©

CompetitiveCompetitive Environmental StrategiesEnvironmental Strategies

Example: Efficiency and productivity through site-specific management and precision farming.

• Farmstar, a precision agriculture service for Europe by Infoterra and Arvalis.

Intrinsic (spatial) vs. Idiosyncratic (management) Variability

Relative Performance of Agricultural Enterprises (Source: James Moody, WANTFA Conference, Perth,

Australia, February 2005)

Example: Agricultures participation in carbon markets via innovative eco-efficiency

• Eco-N, Eco-efficiency (Strategy 1) meets environmental cost leadership (Strategy 4)

NH4+

- - - -

NO3-

Cation exchange

Nitrate ions (NO 3-) are not held by soil particles and can

easily be leached when drainage occurs


NH4+

- - - -

NO3-

Cation exchange

Nitrification inhibitor ‘ eco-n’slows down the rate of nitrate

production and thus reduces the nitrate leaching

lossR.J. ORSATO (2006) ©

Lincoln University Dairy Farm eco-n lysimeter trial 2004/05 season (data not published yet)

0

10

20

30

40

50

60

70

80

90

100

Paparua: Urine+ eco-n

Paparua: Urineonly

Eyre: Urine +eco-n

Eyre: Urineonly

NO

3-N

leac

hed

kg N

/ha

81 % reduction

79 % reduction

Eco-n reduced nitrate leaching from below urine patches on the Lincoln University Dairy Farm

(data unpublished yet)


The extra nitrogen retained in the soil produces more pasture.

Mean Annual Pasture Y ie ld: LUDF Drainage PlotsSeasons: 2002/03, 2003/04, 2004/05

0

4000

8000

12000

16000

20000

Treatment

Pas

ture

Yie

ld (k

g D

M h

a-1

)

Non-Urine

Non-Urine+eco-n

Urine

Urine+eco-n

21 % 23 %


• Reduce nitrate leaching by 60%

• Reduce Nitrous Oxide emissions by 75%

• Reduce cation leaching by 50%

• Increase annual pasture production 15%


Eco-Efficiency And E-Cost Leadership• Resource productivity based

on ecological prerogatives can push the levels of efficiency beyond normal standards

• Multiple dividends from spin-off effects of eco-efficient practices

• Within the firm: Lean Thinking

• Beyond the borders: Industrial Symbiosis

• In the skies: Carbon Credits

• Eco-efficiency when:1.Supplying industrial markets

2.Relatively high levels of:• resource utilisation • processing costs • generation of by-products

3.Under pressure to reduce bothenvironmental impacts and costs of processes

• E-cost leadership when:1.Required to present ever increasing

environmental performance

2.Can only compete on the basis of cost

3.Radical process redesign and dematerialization are possible without compromising performance.

Waste and inefficiency in the food supply chainRequired above-ground phytomass exergy

(human)

Food end-use per capita(GJ/capita/year)

ME1 (US) : 5.5

GE1 (US) : 6.9

Non-eaten food(enduse-intake)

(GJ/capita/year)

ME (US) : 2.2

GE (US) : 3.1

Faeces and urine(sum of intake GE2-sum of intake ME2)

0.4 GJ/capita/year

Food intake per capita(GJ/capita/year)

ME2 (US) : 3.3

GE2 (US) : 3.7

Feed and Feedstock utilisation efficiency

US: 0.64

Commodity utilisation efficiency

US: 0.55

Product generation efficiency

US: 0.16

CROPS

48 GJ GE /capita/year

PASTURE

19 GJ GE /capita/year

STRATEGY 1Eco-Efficiency

STRATEGY 4Environmental Cost

Leadership

STRATEGY 3Eco-Branding

STRATEGY 2Beyond Compliance

Leadership

Com

petit

ive

Adv

anta

ge

Competitive Focus

Organizational Processes Products and Services

Lower costs

Differentiation


CompetitiveCompetitive Environmental StrategiesEnvironmental Strategies

Negative Positive

Reputation

Beyond Compliance Leadership

VEIs - Green Clubs

Beyond Compliance

Non-Compliancelaggard

Leader

Average

Consumer engagementConsumer boycotts

Stakeholder criticism, negotiation and dialogue Stakeholder opposition and confrontation

ReflexiveReactive and Defensive

Building Positive ReputationAvoiding Negative Reputation

Sustainability leader in the industryBeyond Compliance

ToFrom


Business Responses: Linking sustainable consumption to sustainable supply: Example: E.g. Walmart

Labels?Global Sourcing of Processed Foods Is Ubiquitous

Making Tracing Country of Ingredient Labeling Diffi cult

NutriGrain

Source: Roth, Tsay, Pullman, Gray, Journal of Supply Chain Management, 2008

When does Beyond Compliance Leadership and Eco-Branding Pay?

• Beyond Compliance Leadership

1. Firms supplying industrial markets under pressure to improve their environmental performance

2. Exporting companies coping with non-tariff environmental trade barriers

3. Firms dependent on loans from international banks environmental impact assessment

4. Multinationals susceptible to shareholder environmental pressure in their home country

• Eco-branding

1. are difficult to imitate by competitors

2. do not depend on sophisticated and controversial information about their environmental performance

3. can obtain price-premium for their differentiation.

New Value Proposition

Valuer

Couts

STRATEGIE 5

New Clients

New Business Models

Value to clients

Economic Costs

Contibutionto Society

EnvironmentalImpacts

ENTREES RESULTATS

New Markets

Beyond Competition towards Sustainable Value Innovation

Example: Stimulate productivity, the use of fragmented unused land and new markets.

• The example of Vayugrid Inc. leveraging fragmented supply chains via business-to-community social entrepreneurship in India.

Thoughts for the Future

• A systems view is essential to understanding risk and sustainability (soil, water, energy, climate, industry, society…)

• Opportunities to extend are constrained

• Opportunities to intensify face scarcity of other resources (water, oil, phosphate, environmental resilience)

• Resource Use Efficiency is required

• site specific land management• culture specific business models

• A way to do this is through agro-industrial symbiosis (energy-food-land-climate nexus)

• Collaborations are critical for risk avoidance and sharing

If this apple represents the Earth…

And of this apple…

¼ is land, of which…

1/8 is productive

3% for 6 billion souls

Soils are Scarce!

But ¾ are sealed by roads, cities, towns, parking or protected leaving

And if this apple represented the Earth…

…only this much for 6 billion today and 8 million in 2020.