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Repurposing Agribusiness for a Circular Future

Agriculture contributes 20% of global greenhouse gas emissions and about 45% of high-temperature absorbing methane emissions. Besides, more than 75% of the world’s deforestation activities, more than 80% of ecosystem services and biodiversity losses, and about 70% of freshwater consumption can be directly attributed to this sector. The severity of these adverse impacts on the planet is projected to grow as the demand for agricultural output is expected to double in the next three decades to feed the 9+ billion population. Such a scenario may damage our planet irreparably and derail the world from its 1.5°C pathway. Hence, a complete transformation of the existing agricultural practices is essential to limit increasing global temperature. In agriculture, a circular economy (CE) approach can minimize resource consumption and waste generation while restoring ecosystems and enhancing economic performance.

Options for adopting CE in agriculture

In the biological arena, creating value from the rejected materials is critical. Typical examples include nutrient-based recycling of agriculture by products and food waste. It can significantly reduce discharges into the environment, replace virgin resource extraction, and promote efficiency. Presently, the applications of such biological cycles in manufacturing organic manure, pharma ingredients, food processing, and animal feed manufacturing seem most feasible. Also, applications of high-energy content waste materials in clean energy sectors should also be promoted to leverage economies of scale in bio-digestion or bio-gasification. For the technological bit, farming-as-a-service (FaaS) offers a promising solution to promote circularity. This involves deploying innovative business models to reduce the burden of high upfront capital investments on smallholder farmers. It promotes sharing and reusing models for agriculture machinery and implements that are typically facilitated by digital interfaces. FaaS aims at increasing productivity and efficiency in agriculture while achieving cost savings and minimization of waste.

CE in urban farming: promising results from pilot projects

By 2050, 4/5th of the food is expected to be consumed in urban areas. Hence, there is a growing interest in regenerative farming in fringe/abandoned areas adjoining large cities and semi/peri-urban regions. Such pilot projects aim to supplement mainstream agriculture by enhancing the local environment and creating local value chains that have a smaller ecological footprint. Such projects thrive on recapturing the nutrient value of municipal waste in growing specific symbiotic crops. Such business models promote efficiency in waste collection, transportation, processing, and crop inputs like water, nutrients, and pesticides. It promotes land-use efficiency and matches food demand with supply almost in real time. Urban farming facilities typically use renewable energy, further contributing to CE.

Barriers to adopting CE in agriculture

Although there are numerous techno-financial models to adopt the CE approach in agriculture, several barriers exist to adopting them. These barriers typically pertain to profitability, public policy and institution, logistics and infrastructure, operation, knowledge and skill barriers, and technology. The profitability barriers are associated with real and perceived apprehensions of bearing high capital and operational costs for CE practices in agriculture. The indifferent and ineffective rules and regulations and public funding do not offer any incentive to transition to CE in agriculture. The lack of technical capacity among the players, farmers in particular, impedes the adoption of CE in agriculture practices. The uncertainty of quantity and quality, low waste collection, and lack of waste treatment facilities in the agriculture chain constraints implementing CE initiatives. The agri-food supply chain faces numerous operational risks, including inventory management of perishable goods and food distribution that impede CE transformation. In addition, the lack of awareness and understanding is a significant obstacle to adopting CE in agriculture. Agri-food items have a shorter life span, and the non-availability of relevant technologies makes it impossible to extend the life phase while maintaining the quality of the agri-food items. This makes CE practices in agriculture challenging.

How can we address those challenges?

The transition to CE in agriculture warrants a systems-level approach tempered with local sensitivities and imbibing of crop-specific requirements at the value-chain design stages. The transition from linear to CE practices in agriculture warrants serious interventions from the government and other public institutions. Concessional financing or grants and other financial incentives (such as lower taxes and subsidies) from public institutions can incentivize stakeholders in the agriculture supply chain to adopt CE practices. Stringent laws, development of technical capacity, and strong focus by the government on waste collection can nudge stakeholders to follow CE practices. The development of robust logistics and infrastructure can improve waste collection rate and better waste treatment and increase the life span of food items. The spread of awareness of CE in agriculture and the development of skill sets regarding reuse and recycling among stakeholders can accelerate its adoption. Investments in new technologies that can extend the life phase of agricultural items without compromising their quality are also needed. The government’s intervention is critical to stimulate CE in agriculture, particularly in developing countries where farmers have limited financial wherewithal to transition to CE practices. The government must provide financial incentives, design effective rules and regulations, develop infrastructure and logistical facilities, and provide technical assistance to nudge stakeholders, particularly farmers, to adopt CE.

Global cooperation is necessary for infusing CE principles into agribusiness.

For making CE in agribusiness a reality, cross-functional, multi-stakeholder, and global collaboration is imperative. Multilateral agencies should proactively exercise their convening roles to mobilize and pool resources from the private sector, civil society, academia, and the startup communities. Such mutually beneficial partnerships can provide natural entry points for the dissemination of innovations like precision agriculture solutions, cashless banking, digital marketplaces, remote sensing, drone technologies, the creation of standards/accreditations/certifications, and so on. Moreover, technical assistance in the form of techno-commercial feasibility analysis, environmental impact assessments, and behavioural change programs for agricultural communities is critical for mobilizing resources from agriculture finance institutions. Global best practices in evidence-based agro-economic and climate advisory solutions can maximize farm yields and reduce losses. Such services should be customized and personalized for smallholder farming communities and can be made available through digital channels.

The adoption of CE principles in agribusiness tries to address the ever-increasing concern about the unsustainability of global food supply chains. Additionally, it can contribute towards rejuvenating soils, significantly reducing biodiversity loss and species depletion while curbing pollution of our air, water, and land resources. It will bring back to centre stage the philosophy of conducting our agricultural activities in alignment with nature rather than against it.

Prasad Ashok Thakur, IIT Bombay, and IIM Ahmedabad alumnus and Labanya Prakash Jena, Senior Manager, and Head, Centre for Sustainable Finance, Climate Policy Initiative