Sustainable Agriculture 2010

1. Benjamin Warr
Senior Research Fellow, Sustainability
benjamin.warr@insead.edu
INSEAD Social Innovation Centre
http://www.insead.fr/facultyresearch/centres/isic/
Sustainable Agriculture
Challenges for Business
Athens January 26th 2010

2. 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)

3. What is the urgency: new imperatives for business?

4. Agricultural GHG emissions
32% of total GHG
emissions related
to land use and
agriculture
Source: IPCC

5. The global population: feeding 9 billion by 2050
From 6.80bn today reaching 9.1bn in
2050 and over 10 bn by 2100

6. A changing diet will
exacerbate pressures
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.

7. Potential
undesirable
impacts of
biofuels
need for land
deforestation
monoculture
biodiversity loss
price pressures
water use

8. Biofuels and forest cover loss in Borneo 1950-2020

9. 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.

10. The environmental food crisis: extension possibilities?

11. Projected cropland and yield losses

12. Feeding the planet – what are the options?
• 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)

13. Competitive Environmental Strategies
Competitive Advantage
Lower costs
STRATEGY 4
STRATEGY 1 Environmental Cost
Eco-Efficiency
Leadership
Differentiation STRATEGY 2 STRATEGY 3
Beyond Compliance
Eco-Branding
Leadership
Organizational Processes Products and Services
Competitive Focus
R.J. ORSATO (2006) ©

14. Example: Efficiency and productivity through site-
specific management and precision farming.
• Farmstar, a precision agriculture service for Europe by
Infoterra and Arvalis.

15. Intrinsic (spatial) vs. Idiosyncratic (management)
Variability
Relative Performance of Agricultural Enterprises
(Source: James Moody, WANTFA Conference, Perth,
Australia, February 2005)

18. Example: Agricultures participation in carbon
markets via innovative eco-efficiency
• Eco-N, Eco-efficiency (Strategy 1) meets environmental cost
leadership (Strategy 4)

19. Nitrate ions (NO3-) are not held by soil particles and can
easily be leached when drainage occurs
NH4+
----
Cation exchange
NO3-
R.J. ORSATO (2006) ©

20. NH4+
----
Cation exchange
Nitrification
inhibitor ‘eco-n’
slows down the
rate of nitrate
production and
thus reduces the NO3-
nitrate leaching
loss
R.J. ORSATO (2006) ©

21. Eco-n reduced nitrate Farm eco-n from below urine
Lincoln University Dairy leaching lysimeter trial
patches on season (data not published yet)
2004/05 the Lincoln University Dairy Farm
(data unpublished yet)
100
90
80
NO3-N leached kg N/ha
70
60
50
40 81 % 79 %
30 reduction reduction
20
10
0
Paparua: Urine Paparua: Urine Eyre: Urine + Eyre: Urine
+ eco-n only eco-n only
R.J. ORSATO (2006) ©

22. The extra nitrogen retained in the soil produces
more pasture.
Me an Annual Pasture Y ie ld: LUDF Drainage Plots
Seasons: 2002/03, 2003/04, 2004/05
20000
21 % 23 %
Pasture Yield (kg DM ha )
-1
16000
Non-Urine
12000 Non-Urine+eco-n
Urine
8000 Urine+eco-n
4000
0
Treatment R.J. ORSATO (2006) ©

23. • Reduce nitrate leaching
by 60%
• Reduce Nitrous Oxide
emissions by 75%
• Reduce cation leaching
by 50%
• Increase annual pasture
production 15%
R.J. ORSATO (2006) ©

24. Eco-Efficiency And E-Cost Leadership
• Resource productivity based • Eco-efficiency when:
on ecological prerogatives 1.Supplying industrial markets
can push the levels of 2.Relatively high levels of:
efficiency beyond normal • resource utilisation
standards • processing costs
• generation of by-products
• Multiple dividends from spin- 3.Under pressure to reduce both
off effects of eco-efficient environmental impacts and costs of
practices processes
• Within the firm: Lean • E-cost leadership when:
Thinking 1.Required to present ever increasing
environmental performance
• Beyond the borders:
2.Can only compete on the basis of cost
Industrial Symbiosis
3.Radical process redesign and
• In the skies: Carbon Credits dematerialization are possible without
compromising performance.

25. Waste and inefficiency in the food supply chain
Required above-ground phytomass exergy
(human)
CROPS PASTURE
48 GJ GE /capita/year 19 GJ GE /capita/year
Feed and Product Commodity
Feedstock generation utilisation
utilisation efficiency efficiency
efficiency
US: 0.64 US: 0.16 US: 0.55
Food end-use per capita Non-eaten food
(GJ/capita/year) (enduse-intake)
ME1 (US) : 5.5 (GJ/capita/year)
GE1 (US) : 6.9 ME (US) : 2.2
GE (US) : 3.1
Food intake per capita Faeces and urine
(GJ/capita/year) (sum of intake GE2-
sum of intake ME2)
ME2 (US) : 3.3
0.4 GJ/capita/year
GE2 (US) : 3.7

26. Competitive Environmental Strategies
Competitive Advantage
Lower costs
STRATEGY 4
STRATEGY 1 Environmental Cost
Eco-Efficiency
Leadership
Differentiation STRATEGY 2 STRATEGY 3
Beyond Compliance
Eco-Branding
Leadership
Organizational Processes Products and Services
Competitive Focus
R.J. ORSATO (2006) ©

27. Beyond Compliance
Leadership
Beyond Compliance
Leader
Non-Compliance Average
laggard
VEIs - Green Clubs
Negative Positive
Reputation
From To
Beyond Compliance Sustainability leader in the industry
Avoiding Negative Reputation Building Positive Reputation
Reactive and Defensive Reflexive
Stakeholder opposition and confrontation Stakeholder criticism, negotiation and dialogue
Consumer boycotts Consumer engagement
R.J. ORSATO (2006) ©

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

29. Labels?
Global Sourcing of Processed Foods Is Ubiquitous
Making Tracing Country of Ingredient Labeling Difficult
NutriGrain
Source: Roth, Tsay, Pullman, Gray, Journal of Supply Chain Management, 2008

30. When does Beyond Compliance Leadership and
Eco-Branding Pay?
• Beyond Compliance Leadership • Eco-branding
1. Firms supplying industrial markets 1. are difficult to imitate by competitors
under pressure to improve their 2. do not depend on sophisticated and
environmental performance controversial information about their
2. Exporting companies coping with environmental performance
non-tariff environmental trade
barriers 3. can obtain price-premium for their
differentiation.
3. Firms dependent on loans from
international banks environmental
impact assessment
4. Multinationals susceptible to
shareholder environmental pressure
in their home country

31. Beyond Competition towards Sustainable Value
Innovation Couts
Economic Costs Environmental
Impacts
New Business Models
New Markets
ENTREES STRATEGIE RESULTATS
5
New Clients
New Value Proposition
Value to Contibution
clients to Society
Valuer

32. 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.

35. 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

36. If this apple represents the
Earth…

37. And of this apple…
¼ is land, of which…
1/8 is productive
But ¾ are sealed by roads, cities,
towns, parking or protected leaving
3% for 6 billion souls
Soils are Scarce!

38. And if this apple represented the Earth…
…only this much for 6 billion today and
8 million in 2020.