European Bank for Reconstruction and Development on October 9 held a business dinner for top managers of agricultural companies on sustainability as a necessary part of doing business today.
Participants learned about global business trends from respected speakers: Philippe Joubert and Andrew Voysey.
Philippe Joubert – founder and CEO of the University of Cambridge’s Earth on Board program, told participants why traditional business approaches no longer work. In particular, Philippe Joubert noted:
As pollinators, bees are at the beginning of a massive agri-food industry. Because of our agricultural practices and climate change, we are depleting their populations. We are currently trying to replace them either with human work or drones, but can we really replace the billions of bees that pollinate our nuts and fruit tress every year?
This is a concrete example that we are living beyond our means. Earth overshoot day happened on July 29th in 2019 . After this date, our resource consumption and emission of waste overshoot the Earth capacity to renew those resources and absorb this waste in one year. This overshoot is the consequence of the great acceleration of human impact on the earth system – such as the accumulation of carbon dioxide in the atmosphere, forest loss, marine fish capture- as a result of an exponential increase in socio-economic trends since 1950s’ – such as an increase in global population, GDP, water use, energy use, fertilizer consumption.
2015 is a turning point. At COP21 in Paris, 196 countries acknowledged the need to limit the global temperature increase to well below 2°C and aim for a net zero carbon emission world in the second half of the century. With the Sustainable Development Goals, the United Nations countries have committed to end extreme poverty, fight inequality and injustice and fix climate change. Alongside these two landmark events, business has been recognized as a solution but needed to drastically change its operating model.
But recent Amazon fires with priceless ecosystem value loss remind us that we are not on track to achieve those goals, and that a new business model is needed driven by new risks, opportunities and resources.
Let’s look first at risks. Because of climate change and our great water use, we have disrupted the water cycle: we see increase in floods affecting global supply chains; water scarcity affecting both agriculture and industries such as water-dependant thermal plants; salinity intrusion in the Mekong Delta disrupting rice production. This nexus of interconnected water, energy and food issues in a changing climate presents new challenges impacting all business activities. On top of those physical risks, legal risks are strengthening with an increase both in sustainability regulations and environmental-related lawsuits.
Those risks also bear emerging opportunities. For example, the growing waste consciousness attested by South-East Asia bans on waste imports and EU ban on single-use plastics is draws a new era for innovation to develop new materials or consumption habits.
Finally, the allocation of talents and financial resources companies rely on are shifting. Young talents want to work for sustainable companies, as showed by the recent student wake-up call on the environment led by top French universities. Financial players too are changing the way they evaluate assets and investing in the transition, from insurers to private-sector banking and international institutions (such as the EBRD focus on environment). The growth of carbon pricing mechanisms, although too slow, will accelerate this shift in investments.
To conclude, it is clear to us that business as usual is dead and the ongoing transition will reveal winners and losers. Losers will be the one not recognising that carrying on as if nature were unlimited and free is economically stupid, socially unacceptable and legally dangerous. Winners will be the one acknowledging that business can be part of the solution to our collective challenges if it changes drastically. How much business leaders will follow the winning but difficult path or reinventing business will decide on our common fate since in the end, there is no business in a world in chaos.
Business as usual is dead – Philippe Joubert, October 9, 2019.
Andrew Voysey – Head of Business and Government Solutions at Soil Capital – shared with participants how healthy soil can be a driver of profitability in the agribusiness sector. Below are a few points from his speech:
- The changing climate is already leading to increased incidence and intensity of droughts in Ukraine, which is in turn associated with yield (and therefore revenue) volatility which is higher than many of the country’s competitors.
- In parallel, soil erosion – enabled by heavy soil disturbance and caused by wind and water – is removing the layers of soil that provide most functional value to farmers. It is therefore costing more in inputs to maintain yields.
- These economics are moving in the wrong direction for Ukrainian farmers for the same reason – modern, industrial agriculture destroys life in the soil that provides vital services.
- With increased biological life in the soil – from earthworms to bacteria and fungi – soil can absorb and retain more water (providing resilience against drought), it can withstand more erosion and it can make elements vital for plant growth available from the soil for free.
- Regenerative agriculture practices that achieve this shift in mindset are already being adopted around the world by farmers. Soil Capital has proven through its own farm management across multiple continents that transitioning from conventional to regenerative practices can be done in such a way as to improve profitability of the farm from the very first year.
- Markets are now starting to respond. Leading buyers and investors have taken action to preference regenerative farming and their peers are now following. Governments are also acting.
- There is no doubt that Ukraine’s fabulous Chernozem soils have been a blessing for its farmers. But the question is – will this lead to complacency such that, by the time the economic consequences of agricultural practices that destroy that soil become impossible to ignore, the cost of changing direction will be too great?
Soil health: driver of profitability in the agribusiness sector – Andrew Voysey, 9 October 2019.