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Nurturing natural capital

nurturing natural capital

Joseph Harris-Confino of the Natural Capital Coalition and Dustin M. Wenzel from The Economics of Ecosystems and Biodiversity’ (TEEB) Office, UN Environment, provide an overview of the holistic capitals approach to managing agricultural production systems.

Global agricultural systems are fundamentally dependent on the health of the natural world and the services it provides. Fertile soils, clean water, pollination, nutrient cycling and pest control (among numerous others) are all produced by or flow from the natural world, and agriculture could not exist in their absence. At the same time, the policies and practices adopted by the sector can negatively impact on the health of the ecosystems that provide these ‘services’, and can consequently affect their ability to provide the natural ‘inputs’ (ecosystem services) that underpin productive and profitable agricultural systems.

The Food and Agriculture Organization of the United Nations (FAO) estimates that, by 2050, the world’s population will reach 9.1bn (medium variant), 34% higher than today’s global population[1]. Even today, up to 57% of global greenhouse-gas emissions come from agriculture-related activities, which include land clearing, growing, grazing, gathering, processing and packaging, transporting goods, disposing of waste and so on.

According to the UN Convention to Combat Desertification’s (UNCCD) Global Land Outlook report[2], one third of Earth’s soil has already been acutely degraded due to agriculture; the world may have as little as sixty harvests remaining (on average)[3]. In an ‘agriculture as usual’ scenario, a significant increase in production, in the absence of a similarly significant shift towards more sustainable practices, could have potentially devastating consequences for ecosystems and climate, with correspondingly significant risks for agricultural production systems and societies around the world.

Simply put, natural capital is another term for the stock of renewable and non-renewable resources (e.g. plants, animals, air, water, soils, minerals) that combine to yield a flow of benefits (via ecosystem services) to people. If managed effectively, a renewable natural capital stock (for instance pollinators and pollinator habitat) can continue to deliver benefits or ‘dividends’ (in the form of the provision of pollination services) in perpetuity.

If the stock itself is eroded past a sustainable level (for instance, if pollinator habitat is destroyed to make room for marketable crops), then the provision of ecosystem services will be reduced or disappear completely, with subsequent impacts on those dependent on pollination services and other services provided by the stock.

Framing relevant parts of the natural world as stocks of natural capital can help organisations to understand the complex, dynamic and sometimes opaque ways in which their success is dependent on natural systems, organisms and phenomena, how their activities across these systems are impacting on their abilities to be successful, and what information and actions are necessary to help preserve these resources.

Once dependence on certain ecosystems and their services is understood, the rationale to protect and conserve them can be fed into traditional risk management and strategic decision-making processes.

Based on this understanding, subsequent actions may focus on the identification of areas for targeted investment or conservation, the development of more efficient, holistic and resilient agricultural policies and practices, or the identification of opportunities for innovative holistic solutions.

A natural capital approach can also be applied to identify cost-effective nature-based solutions, which provide cost-free co benefits for society and the natural world alongside the creation of business value. For instance, the restoration of pollinator habitat may provide a net saving when compared with the cost of trucking expensive artificial beehives onto farmland, but provide equal levels of service provision, while additionally creating recreational space for local communities and providing further ecosystem services.

While those engaged in the agricultural sector possess a strong conceptual understanding of their direct impacts and dependencies on natural capital, this understanding alone is often not enough to enable them to successfully address issues and make informed decisions in the absence of a standardised framework to guide them, and an enabling economic and policy environment.

The Natural Capital Coalition (the Coalition) was created in order to address this gap in knowledge and implementation. The Coalition is an international collaboration, made up of almost 300 organisations, that unites the global natural capital community. Coalition organisations have a common vision of a world that conserves and enhances natural capital.

In July 2016, the Natural Capital Coalition released the Natural Capital Protocol (the Protocol), an internationally standardised decision-making framework that enables organisations to identify, measure and value their direct and indirect impacts and dependencies on natural capital in order to inform decisionmaking.

The Protocol was developed by a core team of 38 organisations[4], while over 450 organisations provided input over the course of the two-year project. Organisations and professionals from across six continents offered over 3,200 comments during consultation. The Protocol was piloted by 50 leading businesses including Nestle, the Coca-Cola Company, Olam, Nespresso, Dow, Shell, Kering, Hugo Boss, Yorkshire Water and Interface. Several Sector Guides and supplements have been developed to accompany the Protocol, including the Food and Beverage Sector Guide, which provides additional guidance and sector-specific insights to those carrying out a natural capital assessment. It identifies natural capital impacts and dependencies most relevant to businesses operating in the sector and offers practical guidance and examples to demonstrate Protocol applications.

Just as those in the agriculture sector must understand their impacts and dependencies on natural capital, it is becoming increasingly clear that other forms of capital need to be considered in order to understand impacts and dependencies across the entire value chain. The Natural Capital Coalition is working with the newly formed Social & Human Capital Coalition to ensure that economic, environmental and social issues are addressed within a single interconnected system.

This move towards further integration is also the rationale for the TEEBAgriFood Evaluation Framework set out below.

Simply put, natural capital is another term for the stock of renewable and non-renewable resources (e.g. plants, animals, air, water, soils, minerals) that combine to yield a flow of benefits (via ecosystem services) to people.

A holistic, capitals-based and value chain approach to food and agriculture

The idea that nature is fundamental to human wellbeing is incontestable. Yet much of the value that we attribute to ecosystem services or natural capital is not accurately reflected or accounted for in markets.

Narrow metrics like GDP growth, for example, ignore the contribution that nature makes towards achieving that growth, as well as its impacts on environmental and human welfare. As a result, decision-makers are left to rely on partial, often misleading, information to make key business and policy choices that continue to exacerbate these problems. This ‘economic invisibility of nature’ is precisely what sparked ‘The Economics of Ecosystems and Biodiversity’ (TEEB) initiative in response to the need to mainstream the values of nature in decision-making.

TEEB brought global attention to this problem through a series of reports in 2010 targeting key end users in academic, business and policy circles. In an effort to dig deeper, TEEB later focused on the agriculture and food sector in order to illuminate the integral and invisible role that nature plays on our farms, and the far-reaching impacts of agriculture on our natural environment. Evidence was abundant for the ‘usual suspects’ in terms of drivers (such as greenhouse gas emissions, deforestation, pollution, soil degradation, and eutrophication) leading to negative environmental outcomes (such as biodiversity loss and the decline of pollinators) Yet research was quickly unravelling a complex web of hidden costs of agri-food systems going unchecked: food insecurity, malnutrition and obesity, contamination and pathogens, occupational hazards, food loss and wastage, child labour, gender inequality, rural poverty, land conflicts, farmer suicides, animal mistreatment – not to mention the flip side of the coin, where achieving positive strides in system resilience, worker welfare, consumer health, or ecological sustainability was being largely unrewarded. Indeed, our focus on single metrics for agricultural performance, such as yields or profits per hectare, were as reductive and narrow-minded as GDP, overlooking vast swathes of negative and positive interactions. By failing to recognise these and demonstrate their values in economic terms, businesses and policymakers would also fail to capture them. The end result is a significantly and dangerously distorted perception of the economic environment in which farmers, agribusinesses, consumers and decision-makers operate.

Change in the form of a more holistic approach is needed – one where ecological, social and human values are taken into account and the true cost of agriculture and food is reflected across the entire value chain, from the inputs to production to the impacts of consumption, including waste at each stage. This is a complex undertaking, as illustrated by Figure 1, which gives a general impression of how truly important agriculture and food systems (represented by the value chain) are for human well-being, and how deeply intertwined their linkages (both visible and invisible) are with our economic systems (represented by the four capitals).

Figure 1 Links between agriculture and food value chain and four capital bases[5]

‘TEEB for Agriculture & Food’ (TEEBAgriFood) responds to this need by calling on a systems thinking approach in designing a new lens through which agriculture and food systems can be viewed. A group of experts have developed an Evaluation Framework (Figure 2) that seeks to provide a clear and common starting point for assessments of agriculture and food systems, practices, products and policy scenarios against a comprehensive range of impacts and dependencies along value chains.

Figure 2 Elements of the TEEBAgriFood Evaluation Framework[5]

Utilising a comprehensive and universal Framework provides a common basis to compare assessments, a tool for decision-makers to understand what information is missing, and a means to identify areas of further research. By including all categories of material interactions in a given food system, the Framework can offer entry points to many people – for example, researchers focusing on social impacts of food systems can use social capital related outcomes as a starting point, and then make linkages to the other three capitals to buttress their work. In essence, no matter what the starting point or purpose, the Framework can allow researchers to contextualise their assessments within a broader and more holistic set of interactions, bringing transparency to their assessments, but also highlighting synergistic opportunities to link with others.

TEEBAgriFood and its  practice is pilot-testing various applications of this approach and Framework in order to build up a solid foundation of evidence as proof of concept. Over time, it is anticipated that the research findings and the growing community of practice behind them, will contribute to a powerful case for change of today’s prevailing yet outdated agricultural and economic paradigm. Disseminating such a counter-narrative is essential in order to drive much-needed political support for more effective agenda-setting and policy action.

From theory to practice: applying the Framework to maize value chains

The TEEBAgriFoodEvaluation Framework set out above seeks to support the evaluation of all positive and negative impacts and dependencies of eco-agrifood systems across the value chain. This is neither a simple nor straightforward task, as it must bring together natural and social scientists, environmental and agricultural economists, and experts in health and nutrition, to name but a few. Moreover, the methodologies and tools applied to both the valuation and evaluation will vary significantly between contexts and applications. While TEEBAgriFood makes a tremendous effort to address these challenges (among others), there is a serious and immediate need to begin putting the Framework to the test in order to learn – for the betterment of not only research, but its implications in terms of policy, business and behavioural change.

The Global Alliance for the Future of Food has supported the report-writing phase of TEEBAgriFood, including the development of the Framework, and is continuing to support the implementation of pilot-testing applications. Two examples of pilot studies of two maize systems are described below. UN Environment, with support from the European Union and Germany, is also taking forward a number of country study applications[6] in Brazil, China, Colombia, India, Indonesia, Kenya, Malaysia, Mexico, Tanzania and Thailand.

The first study aimed to understand the value links between produced, social, human and natural capital in corn productions systems in the Mississippi basin in the US. It evaluated the true costs and benefits associated with conventional and organic production systems by examining all impacts and dependencies within the value chain of corn.

The study evaluated the four capitals in corn production systems in Minnesota. Produced capital includes all production inputs and outputs from a corn farm. There are about 24,000 conventional corn farms that generate a corn crop value of more than $4.5bn for Minnesota. Minnesota also has over 500 certified organic farms. Social capital includes farmer networks, market linkages, norms and trust amongst the rural community and the private and public sectors. These enable farmers to act together more effectively to pursue shared objectives. In Minnesota, corn growers have an extensive network from individuals to communities and from farms to national level. This network extends in both private and public sectors of the corn-based economy in the US. Human capital includes farming knowledge, skills of farmers and farm workers, and individual attributes that facilitate the creation of social and economic well-being of the rural community. There is a growing divide between rural and urban population in Minnesota due to urban migration trends since 1900. The average age of farmers is more than 55. A majority of the rural population has a high school qualification, as opposed to those in urban areas, where qualifications are higher. Rural residents have a high rate of obesity and hearth diseases compared to those in urban areas. As a component of human capital, health of residents around corn farms in Minnesota was investigated. There are significant non-financial health costs associated with GM corn production in Minnesota. Impacts on natural capital associated with corn production were evaluated in terms of climate change and water, air and soil quality. There is a high total environmental cost associated with GM corn production in Minnesota.

This information can be used to develop policy and practice to improve corn production systems and minimise impacts on environment and human health in the Mississippi basin.

The linkages between the four capitals in corn production systems are being further investigated to analyse farm, environmental and health policies and other system drivers related to corn production.

Maize systems in Malawi

Maize is widely considered to be central to food security development’ has so far produced disappointing outcomes. Despite being one of the few countries to meet the goals of the Comprehensive Africa Agriculture Development Programme (CAADP), and notable increases in average national maize yields, human development indicators have scarcely budged and, in some cases, are deteriorating. High volatility characterises maize markets; diets are poorly diversified, malnutrition among children remains high and poverty levels have increased in recent years. In addition, environmental resource stocks, such as agrobiodiversity and soil fertility, which are particularly critical to smallholder farmers who are not able to easily access purchased inputs, are deteriorating due to the continuous cropping of hybrid maize on small tracts of land.

Maize is a notoriously finicky and demanding plant that can only produce well under a narrow range of conditions. This suggests that the focus on maize is disproportionate to the benefits it provides, especially in light of the devastating and widespread predicted impacts of climate change. This study used the TEEBAgriFood Framework to explore the costs of continuing with a maize-centric agri-food system, as well as the factors that keep this system in place despite calls for agricultural diversification.

Chief among those factors is the Farm Input Subsidy Programme (FISP). Both maligned and celebrated, FISP has consumed the majority of Malawi’s agricultural budget since 2004. Most often blamed for the renewal of FISP each year is the farmers’ cultural attachment to maize in combination with a system of political patronage. In addition, this study looked beyond the borders of Malawi to assess how a wider set of historical and contemporary interests perpetuates maize-centrism.

The study illustrated how a broader analysis can identify opportunities for strengthening the agri-food sector in Malawi. The overall effect of FISP has been to increase maize monocropping, thus reducing the adaptive capacity of the agri-food system. Most studies on food systems in Malawi are disciplinary in nature and do not necessarily shed light on the relationships between a maizecentric agricultural system and outcomes related to human or environmental wellbeing. In addition, few studies have attempted to unpick the various dependencies in systems and how they entrench practices and stagnate system evolution.

The TEEBAgriFoodFramework provides an alternative that can improve understanding of food-society-environment relationships and the outcomes they produce. Recommendations include refocusing agri-food systems development to address the infrastructural and institutional capacity of Malawi’s food economy and investment in so-called ‘lost’ or indigenous crops that are more suited to local environments and can withstand a greater range of agroecolocial conditions.

The costs and benefits identified by application of the TEEBAgriFood Framework to the two different corn production systems will be used to develop recommendations and guidance for end users, i.e. farmers and policy makers.

Conclusions

A more holistic, systems approach is required to ensure that ecological, social and human values are taken into account in assessing the true cost of agriculture and food across the entire value chain. The Natural Capital Protocol has been developed to enable organisations to identify, measure and value their direct and indirect impacts and dependencies on natural capital.

This work is complemented by the TEEB for Agriculture & Food Evaluation Framework, which provides a common basis for assessing produced, social, human and natural capitals in order to compare food systems, practices, products and policy scenarios. Such frameworks and tools can allow more informed decision-making and help to manage our renewable stock of natural capital more effectively.

Pilot studies testing the Framework are providing recommendations and guidance for stakeholders to improve food-society-environment relationships.

Joseph Harris-Confino, Natural Capital Coalition

The Natural Capital Coalition is an international collaboration that unites the global natural capital community. It is made up of almost 300 organisations (and engages many thousands more) who together represent all parts of society and span the global economy.

Email Joseph.Confino@naturalcapitalcoalition.org

Web naturalcapitalcoalition.org

Dustin M. Wenzel, The Economics of Ecosystems and Biodiversity (TEEB)

TEEB, hosted by UN Environment, is a global initiative focused on “making nature’s values visible”. Its principal objective is to mainstream the economic values of biodiversity and ecosystem services into decision-making at all levels.

Email dustin.wenzel@un.org

Web teebweb.org

References

1. http://www.fao.org/news/story/en/item/35571/icode/

2. https://www.unccd.int/actions/global-land-outlook-glo

3. https://www.scientificamerican.com/article/only-60-years-of-farming-left...

4. https://naturalcapitalcoalition.org/natural-capital-protocol-launched/

5. Obst, C. and Sharma, K. (2018). The TEEBAgriFood Framework: towards comprehensive evaluation of eco-agri-food systems. In TEEB for Agriculture & Food: Scientific and Economic Foundations. Chapter 6, 203-245. Geneva: UN Environment.

6. http://teebweb.org/agrifood/projects/



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