Future fit food and agriculture

Our key takeaway: A huge shift is ahead in the food and agriculture sector. Food systems are responsible today for 18-20 GtCO2e of greenhouse gas (GHG) emissions annually. As things stand, food system emissions will rise to 21 GtCO2e per year by 2030. This needs to change – and reducing emissions will cost money. But who will pay the price? As things stand, the costs of reaching the Paris Agreement “fall unequally across value chains, landing most heavily on farmers, who are the least able to pay” – according to the Food and Land Use Coalition, the We Mean Business Coalition and the World Business Council for Sustainable Development. Large food and agricultural companies – for which Scope 3 emissions account for 90% of their total emissions – will need to step up and start to take on some of the financial burden. This includes offering their suppliers financing that allows access to low- or no-cost capital, as well as partnering with financial institutions to do this; signing off-take agreements with farmers to establish and guarantee demand for sustainably produced commodities; offering premium prices and better contract terms for these commodities; and innovating within existing business models, for instance by putting processing facilities nearer to production hotspots. Taking the cost off of the farmers’ shoulders is the only way ahead – plus it will come with significant longer-term benefits for companies.

The Food and Land Use Coalition, the We Mean Business Coalition and the World Business Council for Sustainable Development published Future Fit Food and Agriculture: The Financial Implications of Mitigating Agriculture and Land Use Change Emissions for Businesses (March 2024):

• “Today’s food systems are damaging the environment”: Food systems are responsible today for 18-20 GtCO2e of greenhouse gas (GHG) emissions annually. The report projects that – “as things stand” – food system emissions will rise to 21 GtCO2e per year by 2030. Of this, 75 % (16 GtCO2e) will be caused by companies in the formal economy. The bulk of these emissions (around 10 out of the 16) will be the result of agricultural production and associated land use change. The report finds that to achieve up to 9 GtCO2e of mitigation per year by 2030, the food and agriculture sector will need to spend an additional US$205 billion per year between 2025 and 2030. Setting Scope 3 emissions targets will be crucial for companies, since these emissions account for more than 90% of total emissions for many food and agriculture companies. For the average company, 55-75% of emissions come from food products and ingredients purchased from suppliers, with the majority of these Scope 3 emissions coming from agriculture. According to the report, “[t]his shows that even food companies not directly involved in growing, harvesting or rearing food share responsibility for reducing agricultural emissions, because these sit within their Scope 3 GHG emissions inventory.”
  

• “Complexity cannot be an excuse for inaction”: When “emissions are outside the direct control of food and agriculture companies [this] can make it hard to take swift and decisive action when implementing mitigation solutions.” Companies can use frameworks like ACT-D (created by the Capitals Coalition, Business for Nature, WBCSD, and others) to take action through four steps. (1) Assess Scopes 1, 2 and 3 emissions and the emissions intensity of commodities in corporate portfolios. This requires understanding the drivers of emissions by different types of commodities. (2) Commit to setting “transparent, time-bound, science-based targets that simultaneously address emissions reductions and removals alongside nature goals.” (3) Transform how commodities are produced. For example, companies can eliminate nature loss by identifying the commodities that are the greatest drivers of land conversion, and collaborating with suppliers, local governments and communities. Companies can also prioritise sourcing commodities with the lowest emissions and emission-intensity, and can incentivise suppliers to introduce more sustainable practices. And finally, (4) Disclose “risks, impacts, dependencies and other relevant climate- and nature-related information.”
  

• “Inequitable division of costs is slowing sector-wide progress” – what can companies do?: The report finds that the burden of reducing food sector emissions will mostly fall on farmers, who are least equipped to absorb the upfront costs required and often have limited access to innovations and markets for sustainable goods. “Farmers will carry most of the risks inherent in changing practices, including learning new skills and practices, and investing in and establishing new infrastructure. In many cases, financial returns to farmers will also be slow to accrue, as with several solutions – such as switching to agroforestry – it will take time before revenues compensate for upfront investments. Of all the food and agriculture sector actors, farmers are often the least able to pay for mitigation solutions. They usually operate on the smallest margins and profit the least from the global food system.” Large and downstream food and agriculture companies can take on their fair share of the effort by incentivising “ambitious action” from farmers. For example, companies can offer their suppliers financing that allows access to low- or no-cost capital, as well as partnering with financial institutions to do this. They can also sign off-take agreements to "establish and guarantee demand for sustainably produced commodities” and “offer premium prices and better contract terms for these commodities.” Finally, companies can innovate within existing business models, for instance by putting processing facilities nearer to “production hotspots.” Businesses also need to ask policymakers to accelerate food systems change – and the report provides a number of policy asks for companies to consider.