The Food and Ag Sector Needs to Change their Approach to "Climate Smart"

Food and ag leaders in industry and government need to revisit IPCC guidance and globalized food and ag businesses’ incentives as revealed in their financial disclosures to craft smarter climate action plans. The latest IPCC guidance and assessments justify focusing more on fossil fuel removal and nitrogen fertilizer and less on soil carbon for more effective and achievable climate action in agriculture.

Food and ag businesses and the USDA are focusing on the wrong things in their climate action funding. Despite increasing frequency of climate disruption, globalization still protects and even allows multinational food and ag businesses that dominate the sector to benefit from extreme events like droughts or floods. Recent research suggests this may continue to be the case. However, there is an actionable opportunity for food and ag businesses that want to invest in meaningful,  measurable 1.5°C-aligned changes. Focus on removing fossil fuels from their supply chains and agricultural production. A recently published national inventory suggests CO2 emissions from fossil fuel combustion account for nearly a full third of greenhouse gas emission in Canadian agriculture. Other regions that share a similarly mechanized input-intensive system likely share similarly fossil fuel CO2 heavy emissions profiles that would benefit from decarbonizing both on-farm energy and input manufacturing - a measurable and actionable path.

Why is there such a disconnect between the state of the climate and corporate climate action, especially in the food and ag sector?

Companies in the food and ag sector, and increasingly even the government have rallied around a narrative that climate change is here, impacting the sector, and driving change, but also that agriculture can serve as a “solution”. Yet, actions in the sector and even words in the companies’ own disclosures reveal a different reality.

Over the last 6 months I’ve done a couple projects that have brought me to read the annual reports, CDP disclosures, and other ESG reporting from a few dozen of the largest food and ag businesses, from input manufacturers and ag retailers to CPGs and grocery retail. These companies, even those making these rosy commitments to “climate smart” commodities and even 1.5°C via SBTi and CDP, are indeed also seeing climate change related disruptions in their value chains - droughts, floods, extreme weather - all widely predicted to increase in frequency as climate change accelerates. This is why driving fossil fuel emissions down 95% or more, as is needed to hold warming to 1.5°C, is so critical - it’s about risk avoidance, not upside. Yet, these same companies’ disclosures brush off impacts of any extreme weather events, from floods in the midwestern US in 2019 to droughts in Australia, as immaterial in the context of their broader business in disclosures to their investors. They explain in text and demonstrate in financial statements that they are indeed protected from these shocks by their multinational structure. Ag input manufacturers and retailers explain to their investors, if climate disrupts planting in one region, they can simply sell their inputs at higher prices in other regions, maintaining or even increasing their profitability overall (Nutrien p.18, Syngenta p.2, among others). Multinational food retailers share similar statements in their investor disclosures, brushing off climate and/or water risks to their supply chains by noting their suppliers' source from many regions around the globe giving them high confidence in their ability to maintain supply continuity and profitability, in spite of recognized disruptive events in certain regions.

In short, these businesses, while they may have headquarters in the U.S. or Switzerland, are not really American, or Swiss, or whatever. They are global, and their globalism is, so far, buffering them from climate consequences, and in some ways continues to reward them for consequences felt more painfully by their customers, raw material producers, and/or communities in which they operate. 

So, when I saw the paper, ‘Age of Disruption: How Ecological Breakdown Could Alter Globalization’ published last week by University of Ottawa scholars, Ryan Katz-Rosene and Andrew Hefferna, I was eager to read their insights on where, when, how and why this perverse incentive for increased globalization to capture greater profits from disruption might break down. After all, it would make sense that floods, fires, and droughts are fundamentally bad for businesses of all scales. Interestingly, while they did note the potential for an increased frequency of disruption, they do not forecast a breakdown. Rather they foresee “an increasing velocity of oscillation between regionalization and globalization strategies in response to supply chain disruption” that will increase costs to end consumers and society, but not necessarily profits of global business.

In the end, Katz-Rosene and Hefferna’s article provides some helpful and important guideposts for everyone working to try to support the very necessary market and policy transitions required for a livable climate future. Understanding the scales at which most of the dominant private sector players exist, and how that buffers them from ecological disruption is important to appreciate in order to try to develop more effective solutions. The IPCC makes it very clear those solutions are businesses removing fossil fuels from their operations and supply chains. In agriculture, especially commercial systems in North America, Europe, China, and South America, this means shifting some of our climate action focus that has been overly-consumed with cover crops, soil carbon sequestration and livestock to fossil fuels.

Another study also out this week that inventories Canada’s agricultural emissions provides good justification for shifting focus to fossil fuel removals in agriculture. This inventory found Canadian ag sector emissions continue to rise, driven primarily by an increase in synthetic nitrogen fertilizer use, but also from rising fuel and energy use - a larger component than previously understood. CO2 emissions from fuel and energy use on farms nearly doubled from 11% in 1990 and even 2005 to 18.6% of emissions in 2020. Additionally, fossil fuel emissions related to equipment manufacturing also rose. Together, they found nearly one-third of total agricultural emissions are related to fossil fuels and CO2 stemming from farm fuel use (18.6%), nitrogen fertilizer (and other inputs) manufacture, and equipment manufacturing (14%, combined). The researchers concluded that relative to strategies to a) decrease N2O emissions, b) decrease livestock methane emissions, or c) increase soil carbon sequestration; “fossil fuel use may eventually yield the largest reductions.” 

So, for food and agriculture businesses serious about their Scope 3 impacts, step away from the soil carbon and take another look at the opportunity to decarbonize energy in ag. Scope 3 emissions are the emissions from companies’ suppliers and customers. They include emissions generated in the production, transport, storage, and primary processing of food companies’ ingredients, as well as emissions from their customers’ landfilled food waste. However, current discourse is overly focused primarily on biogenic emissions related to deforestation, ruminant livestock, manure, and nitrification/denitrification in crop production. Assessments like the recently published Canadian one highlight the importance of reallocating much of that focus on the sector’s fossil fuel emissions. The scale of the ag sector’s fossil fuel emissions, as understood in this Canadian assessment, far exceed the sector’s soil carbon sequestration. And, in contrast to the downward trend in soil carbon sequestration, ag’s fossil fuel emissions continue to increase. Pulling the fossil fuels out of on-farm use and input manufacturing are critical to achieving the greater than 90% CO2 emissions reduction the IPCC clearly articulates as necessary, and may allow 30% or greater total GHG emissions reductions in the sector. Additionally, focusing on largely eliminating fossil fuels will require reducing synthetic nitrogen fertilizer use, which will also carry additional benefits such as reduced N2O emissions, reduced fugitive CH4 emissions from the natural gas used to manufacture fertilizer, and improved water quality. Shifting focus from soil carbon that will become increasingly difficult to retain with rising global temperatures (consensus is that soil carbon will be a source, not sink - here, here, here,  and here) to easily measurable and manageable fossil fuel use offers a better path for the food and ag sector to achieve IPCC-consistent emissions reductions.