Agriculture in transition – A new Net Zero focus?

COP26 saw a welcome recognition of the importance of nature and its relationship to climate change. Urgent action on land use is needed as demand for food increases, as the world is currently losing forests, damaging soils, and rapidly destroying other ecosystems that play critical roles in carbon uptake and the cooling of the planet. As commitments to action multiply, could collaboration within large companies lead the way?

The IPCC has estimated that 23% of global GHG emissions are associated with land use, including 11% of global GHG emissions from deforestation and conversion of natural ecosystems. One of the most salient points of discussion at COP26 was the need to establish more sustainable food systems, as changes in temperature and climate can disrupt supply chains, affect productivity and drive up prices. commodities.

Many promising announcements were made at COP26 regarding the importance of deforestation – for example, 100 world leaders representing 85% of forest cover pledged to halt and reverse deforestation and land degradation here 2030. Twenty-eight governments announced commitments through the Forest, Agriculture and Commodity Trade (FACT) Dialogue Roadmap for Action, which called on governments to increase sustainable trade in agricultural products while protecting forests and others. critical ecosystems. Days later, forty-five UK-led governments pledged urgent action and investment to protect nature and shift to more sustainable modes of farming at COP26 Nature and Land-Use Day. But how exactly is such rhetoric going to turn into action?

Private finance has a role to play because by redirecting capital, financial institutions can play a crucial role in the global transition to a nature-friendly economy. Through Race to Zero, more than 30 financial institutions with more than $ 8.7 trillion in assets under management (AUM) have committed to work on eliminate the risks of deforestation linked to agricultural raw materials in their investment and loan portfolios by 2025. Thanks to the Innovative Financing Initiative for the Amazon, Cerrado and Chaco (IFACC), eight other financial institutions and agri-food companies have announced a commitment of 3 billion – with more than $ 200 million in disbursements by 2022 – to deforestation and land conversion free soybean and livestock production in South America. There are, however, significant obstacles to building a more sustainable agricultural system.

There is a lack of positive incentives to encourage sustainable agricultural practices, which is evidenced by the fact that over the past decade around 40 times more funding has been spent on land use practices. destructive rather than forest protection, conservation and sustainable agriculture combined. There are other challenges related to market leakage, lack of transparency and traceability, sensitivity to food prices and affordability and, of course, market concentration and dynamics. of power between the actors of the world market.

The problem with commitments to deforestation or sustainable land use is that if the structure of the economic system is geared towards exploiting resources on a purely short-term financial basis, it can be difficult for policy makers. to successfully implement effective change or for financiers to use their money effectively. The Food and Land Use Coalition (FOLU) has estimated that while the world’s 500 largest companies spend less than 0.1% of their total revenues and less than 1.5% of their total profits on large-scale investments in the nature per year, that would suffice. to save the forests on which all life on earth depends. It could be that the structure of the market itself and its disaggregation are the biggest obstacles – making the net zero engagement of ten major agricultural commodity players a potential change.

Net zero liabilities can be a problem, as we have seen at the country and company level. Questions abound regarding the timing, the baseline, the extent to which the offsets will be used. As different sectors become aware of the social and economic challenge of climate change and commit to reducing their emissions, it will become more and more important to transparently understand which companies are taking effective action, which speak a good line while not doing so. not doing much. and who still ignore market signals.

In the energy sector, for example, according to the latest evaluation of the Transition Pathway Initiative (TPI), only one in ten 1 in 10 of the largest energy companies is aligned on a path of 1.5 ° C in 2050, out of 140 assessed by TPI. Only three oil and gas companies, TotalEnergies, Occidental Petroleum and Eni are aligned with 1.5 ° C. The majority, at 57%, have not aligned with any of TPI’s temperature benchmarks, including one reflecting the new benchmark of national commitments – 66% are not even aligned with the Paris Agreement.

So what we need to see in the agricultural sector is clear action that will better understand where emissions and resource dependencies occur, and the most effective ways to address them. One of the challenges that many net zero commitments face is the overwhelming importance (and lack of understanding) of the supply chain, or Scope 3 emissions. Yet a company’s Scope 3 emissions are those of scope 1 or 2 of another company – the important thing is to create understanding, alignment and action. This is the potential offered by the commitment of large commodity companies to the 1.5 ° C path, with plans to create a sectoral path by COP27 in Egypt.

The ten companies that came together – ADM, Amaggi, Bunge, Cargill, Golden Agri-Resources, JBS, Louis Dreyfus Company, Olam, Wilmar and Viterra – handle large volumes of global trade in key agricultural commodities, including more than half of soybean exports and the global palm oil trade, both known to be major drivers of deforestation.

When governments, businesses, civil society, philanthropy, science and innovation come together, it can create unprecedented change. Global commitments to deforestation will lead to systemic changes in finance, trade in agricultural priorities, and the rights of local communities and indigenous peoples. But it is by leveraging the actions of companies on the ground and encouraging collaboration between supply chains and even between competitors that we can build a more sustainable path into the future.

Policies to realign capital, price emissions and promote a net zero agenda are needed to provide the framework and certainty for private sector action. Yet over the past two years, several sectors have overtaken countries in terms of understanding the challenges and willingness to meet them. New action agreements, aligned with 1.5 ° C and science with clear delivery times, could signal the start of the transition of the global agricultural market – a market as comprehensive and disruptive as the one to which the energy is facing today.