Home Science New Business Models in Food & Agriculture Could Create US$2.3 Trillion Annual Windfall in 2030

New Business Models in Food & Agriculture Could Create US$2.3 Trillion Annual Windfall in 2030

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New Business Models in Food & Agriculture Could Create US$2.3 Trillion Annual Windfall in 2030

New research shows sustainable business models could also generate 80 million jobs by unlocking opportunities across 14 areas, including food waste, low-income markets, aquaculture and urban agriculture.

London – Companies could unlock US$2.3 trillion a year in the food and agriculture sectors with an annual investment of US$320 billion in sustainable business models by 2030, a 7-fold return on investment. This could also lead to more than 80 million jobs, according to a new report, Valuing the SDG Prize in Food & Agriculture, from the Business and Sustainable Development Commission. The release of the report coincides with World Food Day 2016 (which is Sunday 16 October).

The opportunities are broken down across 14 areas, including food waste, farming technology, low-income food markets, micro-irrigation, restoring land and forests, product reformulation, changing diets, aquaculture, reducing package waste, cattle intensification and urban agriculture. Researchers estimate a range of value for each opportunity; the lowest in the range is US$15 billion per year (for cattle intensification) while the highest goes up to US$405 billion per year (for reducing food waste across the production process, or value chain).

Of the 80 million jobs the report estimates could be created by 2030, 90% could be in developing countries, including 21 million in Africa and more than 49 million in Asia. The report further breaks down job creation potential in Asia to 22 million in India, 12 million in China, and the remaining 15 million in developing Asia. There could also be an additional 5 million new jobs in Latin America.

“As the world’s population is expected to increase by another one billion by 2030, the global food and agriculture system requires a new way of doing business, and new approaches to feed more than 800 million people who today suffer from chronic hunger as well as to meet future demand,” said Lord Mark Malloch-Brown, Chair of the Business and Sustainable Development Commission. “This report makes clear both the social and economic incentives for companies to seize upon the SDGs as compelling growth opportunities. It is part of our larger argument for why the private sector must accelerate new business models that open truly sustainable and inclusive markets.”

The authors caution that the annual investments needed to open these market opportunities must be scaled significantly, requiring an estimated US$320 billion a year to unlock these opportunities by 2030. They argue that the current capital base in 31 leading agriculture funds is just under US$4 billion a year—less than 1.5% the annual investment needed to capture these opportunities. Partnering with government will also be critical to put in place enabling policies and the right regulatory frameworks as well as to advance research for facilitating product innovation.

The report looks at how food and agriculture businesses can experience growth by pursuing sustainable and inclusive business models aligned with the Sustainable Development Goals (SDGs), or Global Goals. Launched in 2015, the SDGs are 17 time-bound targets for ending poverty and hunger, reducing inequality and tackling urgent challenges such as climate change, by 2030. The food and agriculture sectors directly relate to SDGs 2 (ending hunger), 3 (health & well-being), 8 (decent work and economic growth), 10 (reduced inequalities), 12 (responsible consumption and production), 13 (climate action), 14 (protect life below water) and 15 (protect life on land), but they are cross-cutting sectors that also affect the remaining Global Goals.

The research shows that developing countries have the most to gain from SDG-aligned business opportunities, capturing more than two-thirds of the estimated economic value due to their large shares of arable land, high future consumption growth and large potential efficiency gains. Across regions, the biggest business opportunity in developing Asia is in cutting food waste across the value chain; while in developed Asian countries like South Korea and Japan, the opportunity is greatest in consumer waste. In India, low-income food markets are the strongest opportunity for businesses, and in Latin America and Africa, it is forest ecosystem services.

Paul Polman, CEO of Unilever and member of the Business and Sustainable Development Commission, urges more food and agriculture companies to integrate sustainability practices into their models: “Unilever’s experience clearly demonstrates that business, can create value by putting sustainability at its very heart and adopting inclusive growth models. At Unilever, we have helped hundreds of thousands of smallholder farmers improve agricultural practices enabling them to double or even triple their yields. All stakeholders can share in the benefits: Smallholder farmers improve their livelihoods; suppliers gain increased security of supply with improved quality; and we reduce volatility and uncertainty with a more secure and sustainable supply chain. The SDGs present a clear moral case for change, but companies must recognise that they represent the business opportunity of a lifetime too and must adapt to take advantage of it.”

Companies will need to operationalize sustainability across its supply chain and internalize social and environmental costs, while transforming consumption. Unlocking social and economic rewards in food and agriculture will require closer collaboration among business, government and society, and new ways of working together to advance common social, economic and environmental objectives.

If the private sector can put these prerequisites in place, the social benefits, including food security, job creation and health outcomes, could be significant. Improving technology in smallholder farms and restoring degraded land, for example, could double the incomes of smallholder farmers in the world, who are among the poorest in the global economy, the report finds. According to the UN, of the 2.5 billion people in poor countries living directly from the food and agriculture sector, 1.5 billion people live in smallholder households.

“The best way to build an enduring business is to put sustainability at its heart. Value is then unlocked for all, from shareholder to supplier, and nature is not depleted.  Values and value creation do not have to, and actually should not be, traded in the long-term.” said Sunny Verghese, Co-Founder and Group CEO of Olam, a global agribusiness with a portfolio of 47 agri-commodities, and a member of the Business Commission.

“Many commentators have incorrectly perceived the SDGs to represent an additional headwind to growth and profitability. The reality is that in many cases the SDGs offer a new and higher quality channel for economic growth and business profitability,” said Dr. Fraser Thompson, Director, AlphaBeta, which conducted the research for the Business Commission. “This is particularly the case in these sectors. This study is the first attempt to provide a holistic assessment and quantification of the business opportunities related to the SDGs in food and agriculture.”

Valuing the SDG Prize in Food & Agriculture is part of a larger body of research that quantifies the value of business opportunities across four key systems, including cities, health and well-being, and energy and materials. The findings for these systems will be revealed in the Business Commission’s flagship report, to be launched in January 2017. The report will show how the Sustainable Development Goals (SDGs) —17 objectives to end poverty, reduce inequality and tackle climate change and other urgent challenges by 2030—provide the private sector with the framework for achieving sustainable and inclusive growth. The report will also cover the new business models and financing required to open these opportunities, and will include key action points for the private sector to take the findings forward and accelerate.

Valuing The SDG Prize In Food And Agriculture – Unlocking Business Opportunities To Accelerate Sustainable And Inclusive Growth

Jobs in India, 12 million jobs in China, and 15 million jobs in the rest of Asian developing countries.

The food system faces an unprecedented set of challenges

The food system to 2030 is faced with a number of challenges related to innovation, demand, supply and regulation. A step change in innovation is needed to meet future demand, given that growth rates in agricultural yields have been declining and are currently below world population growth, and with crop yields approaching theoretical maximums in developed countries. In terms of demand, over 800 million people are hungry, and over 2 billion suffer from micronutrient deficiencies. From a supply perspective, to meet 2030 food, feed and fuel demand would require 175 million to 220 million hectares of additional cropland, and over half of remaining land is subject to both infrastructure and political risks. Four of the nine planetary boundaries that have been exceeded relate to food systems (climate change; loss of biosphere integrity; land system change; altered biochemical cycles). Approximately 46-58 thousand squares miles of forests, which play a crucial role in the resilience of the food system, are lost each year. Water constraints will also be significant for agricultural production, given roughly 70 per cent of global water demand is related to agriculture. At least 20 per cent of the world’s aquifers are overexploited, including in important production areas such as the Upper Ganges (India) and California (US). From a business perspective, financial returns in agricultural sector are already low (5 per cent) – if negative externalities are taken account of, they become negative (-10 per cent). From a regulatory perspective, there is increasing pressure to deal with the obesity impact (which has a social cost of US$2 trillion currently and is rising rapidly) and pricing of natural resource inputs (e.g., water and energy).

The Sustainable Development Goals provide a new vision for the food system

Launched in 2015, the Sustainable Development Goals (SDGs) are 17 targets for ending poverty and hunger, reducing inequality and tackling urgent challenges such as climate change, by 2030.

The SDG agenda proposes to meet these profound challenges by shifting the food system onto a sustainable development pathway. This shift will transform the entire food system, with major impacts throughout the value chain. Mapping these impacts provides a vision for a new, SDG-compatible food system (Exhibit E1).

The private sector will be crucial to delivering the SDGs and there are potentially over US$2.3 trillion of business opportunities

The public sector will play a critical part in creating the enabling environment for the implementation of the SDGs, but business needs to do much of the “heavy lifting.” In fact, in the food system alone, businesses can play a key role in delivering more than a quarter of the 169 SDG targets. The participation of the private sector in the implementation of the SDGs can also lead to the development of specific business opportunities. We find that 14 opportunities in food could be worth collectively over US$2.3 trillion annually by 2030 (Exhibit E2). More than two-thirds of the value of identified opportunities is concentrated in developing countries, reflecting both the large share of arable land in these countries, the high future consumption growth and the large potential upside in efficiency gains.

Our sizing of opportunities is based on current prices (except for forest ecosystem services, which includes carbon pricing). However, these largely do not reflect the cost of a range of externalities, in particular greenhouse gas (GHG) emissions, and they incorporate various subsidised and unpriced resources, including water, fossil fuels and food. To understand the impact of removing subsidies and properly pricing resources, we repriced a subset of our top opportunities for three factors for which reliable data is available: carbon, water and food. This increases the overall value of opportunities by over 90 per cent in the case of some opportunities, such as the reduction of food waste.

Business Models, Food, Agriculture

See the full PDF below.

Business and Sustainable Development Commission

Our mission is to make a powerful case for why business should seize upon sustainable development as the greatest economic opportunity of a lifetime. The Business Commission’s flagship report, to be launched in January 2017, will quantify the economic prize of the Sustainable Development Goals (SDGs), as well as articulate how the private sector can realise this opportunity and drive inclusive growth. The report will serve as the foundation for launching initiatives to inspire and mobilise companies to achieve the SDGs. To learn more visit www.businesscommission.org.

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