How food and agri businesses can harness soil to store carbon and create value
Andrew Voysey, Head of Business and Government Solutions at Soil Capital
A striking feature of the IPCC’s most recent report is that every single one of the pathways they analysed to limit warming to 1.5°C requires taking carbon out of the atmosphere and storing it in various ‘sinks’.
Put another way, if the atmosphere is a bath filling up with carbon, not only must we eliminate the inflow by reducing emissions to as close to zero as possible, but we cannot hold the level low enough unless we also pull out the plug.
Yet beyond vital work on reforestation or avoided deforestation, efforts across the food and agriculture sector to use all of the soil within its value chains as a natural carbon sink are not well developed. This is despite the knowledge that if we increased soil carbon in the world’s agricultural soils by an average of just 0.4% per year, it could make a meaningful dent in offsetting emissions from human-related activities and buy us time over the coming decades to achieve the broader transition to a net-zero carbon economy.
One group looking to bridge this gap is the ‘4 per 1,000’, which was launched by the French government at the COP21 Paris Climate Summit in 2015. It aims to encourage carbon storage in agricultural soils by 0.4% each year to help mitigate climate change and increase food security.
But how does this carbon storage work in practice? As plants photosynthesise, they take carbon dioxide from the air and convert it into carbohydrates. They then give away up to half of these carbohydrates by pumping them out of their roots as ‘exudates’. Why? They have symbiotic relationships with bacteria and fungi in the soil whereby these micro-organisms feed on the carbohydrates and exchange them for essential nutrients the plant could not otherwise access. When these micro-organisms thrive in healthy, living soils, they work to lock up carbohydrates in the soil organic matter.
Practices commonly deployed in modern, industrial farming systems tend to cause the soil’s micro-organisms to degenerate. Their services are replaced by synthetic inputs. Meanwhile, farming systems that actively regenerate the biological health of the soil work to restore the natural fertility of the soil, boost plant immunity to disease and increase resilience to drought, because living soil absorbs and retains more water.
Improving farmer profitability
One of the most important reasons why regenerative farming practices are not more common today is the assumption that transitioning to this model of agriculture from industrial practices will cost money up front. The belief is that making the shift requires several years of financial hardship, which farmers can ill afford.
The truth is there are different ways to transition to regenerative practices: aggressively or gradually.
Soil Capital has executed regenerative agriculture transition strategies for 30 farms across 15 countries – some 80,000 Ha or more – and have ensured that, in almost all cases, the profitability of the farm is improved from the very first year.
This is achieved by reducing unnecessary input and land disturbance costs upfront and reinvesting a portion of these no-regrets savings into manageable yet meaningful regenerative practice trials. As the soil biology begins to recover and provide services like fertility and disease resistance, further reductions in inputs are unlocked and so the process continues.
There are many examples of the impact this transition strategy can have for farmers. One relates to a coalition of Belgian farmers that collaborate to transition to regenerative practices – Regenacterre. In 2016, the group was just 16 farmers. Today it comprises 63 farmers and they expect to grow beyond 100 this year. The driver for this growth is simple. As a result of Soil Capital’s independent agrochemical advice, the founding members saved at least €50 per hectare, sometimes up to €150, in the first year alone of their transition to regenerative practices without any yield penalty.
This shows there is not an inevitable trade-off between farming systems that sequester carbon and profitability.
Commercial proposition
A well-managed transition to regenerative agriculture practices offers a strong value creation strategy for supermarkets and consumer goods manufacturers and an opportunity to increase supplier ‘stickiness’, or loyalty.
It starts with increased resilience to a range of risks. Suppliers with biologically healthy soils are better protected against variable weather, because soil with more organic matter absorbs and retains much more water. And as the tide of consumer and regulatory opinion moves increasingly against certain synthetic inputs, growers that fail to implement alternative production strategies in sufficient time will struggle to maintain yields without them. Healthy soils in the value chain enables better cost management, as well alignment with changing market norms.
In terms of reward, produce from healthy soils can deliver a range of additional value to consumers. This will drive volume and, in certain circumstances, the ability to command a premium. Meanwhile, if sensible transition strategies have systematically reduced a supplier’s cost structure, the cost of goods to the retailer need not necessarily increase, while the farmer still benefits.
If transitioning to farming systems that secure these benefits is done in a manner that is thoughtfully structured to improve farmer profitability from the outset, it can increase supplier stickiness.
Getting started
There are three key issues that need to be addressed early on for food and agri businesses to secure the potential of soil to help achieve the goals of the Paris Agreement and secure new value for themselves.
- Move beyond the J-curve. It will be much harder to scale up the use of soil as a natural carbon sink if transitioning farming practices to regenerative systems does, or is believed to, cost more than current practices. Soil Capital’s farm management experience has shown us it does not have to be this way. Yet this is the belief that persists in the market. The first step, then, should be to consider alternative transition strategies, ideally with a day or two in the field for those that have done it already.
- The commercials of the strategy are as important as the ecological objectives. Currently, there are precious few examples of food and agri brands articulating a commitment to regenerative agriculture as a core component of their financial value creation strategy. This is a huge missed opportunity, both for organisational and investor engagement. An early design step we know is important is to crunch the numbers on the likely margin improvement that can be expected from implementing a sensible transition to regenerative practices.
- Farmer ownership. Too often, brands set lofty goals, fail to think through how suppliers will achieve them in practice and impose them as a new cost of doing business, risking supplier loyalty. With a well-managed transition to regenerative agriculture that improves farmer profitability from the outset, it doesn’t have to be this way. When we support brands to transition their supply base, we start by engaging their farmer-suppliers through peer-led events that generate ownership from the beginning.
Locking up carbon in agricultural soils is not only a necessity, but can be a value creation strategy for food and agri businesses. Managed correctly, it’s farmers who will benefit first.
Andrew Voysey is Head of Business and Government Solutions at Soil Capital – farm managers with experience of transitioning large-scale, industrial farming operations around the world to regenerative practices, improving profitability from the first year.