Danone to expand investment in pioneering US regenerative agriculture programme
In March 2018, food titan Danone announced a series of commitments centred on regenerative agriculture called 'The Soil Health Initiative'. In addition to funding scientific research at Ohio State University and Cornell University, Danone also committed to improving the financial security of its 58,000 smallholder farmers through the provision of stable long-term contracts. The added security enables farmers to invest in regenerative agricultural techniques and implement the knowledge gleaned through academic research. Three years later, Danone is expanding the program to over 100,000 acres. But what does regenerative agriculture actually involve, and how does it intersect with ESG investing?
What is it?
Regenerative agriculture covers a range of approaches to sustainable food production which deliver yield while also improving resiliency. In this way, regenerative practices provide a necessary and viable corrective to ‘intensive farming’ methods which, though prevalent, are known to degrade the carrying capacity of soil over time. The core point, is that regenerative farming techniques materially insure the long-term productive value of arable land. In doing so, this underwrites the socio-economic fabric of farming communities, while simultaneously bolstering the agricultural supply-chains on which many trans-national corporations, like Danone, depend.
“With all life beginning and ending in soil, there is urgency to promote agricultural practices that can help regenerate soils."¹
How does it work?
Regenerative agriculture is not monolithic. It encompasses a wide range of techniques which can be deployed flexibly as context requires. The common thread however is a ‘systems-thinking’ approach which treats farmland as an integrated ecosystem. Just as human physiology depends on a range of tissues and organs in order to support life, the farm is an ecosystem which comprises a layered web of biotic and abiotic components - collectively mediating the ability of land to sequester carbon and produce food sustainably. Regenerative methodologies are a domain of real scientific innovation. Research into the true potential of sustainable food production is continually advancing, being refined and then being implemented in the real world.
What are the benefits?
By improving the intrinsic fertility of the soil, regenerative techniques produce crops while reducing dependence on petrochemical fertilisers. This improves food security, while also reducing fertiliser seepage and its adverse downstream impacts such as river eutrophication.
By enhancing rooting systems, regenerative techniques also improve water drainage; slowing the rate of percolation and expanding hydrological storage. This is critical for stabilising water supplies in times of drought, reducing water stress and ensuring adequate water supply for high consumption industries.
Regenerative agriculture has also been shown to reverse desertification in arid climates, transforming low-value unproductive land assets into fertile regions capable of supporting food production economies. It is now known that desertification & loss of soil fertility is not simply a threat to food security but – fascinatingly - is directly related to linear extraction of carbon from the biosphere & pedosphere into the atmosphere. Soil regeneration not only aids food production therefore, but by its very process helps re-sequester carbon – highly relevant considering that >20% of global GHG emissions stem from agriculture.
“We believe that regenerative agriculture – a series of innovative farming practices that help to lock carbon in the ground where it belongs – is a key solution to tackling climate change.”²
Improved soil fertility
Reduced need for industrial fertilisers
Sequestration of carbon into soils
Improved food & water security
Improved socio-economic security
Reduced revenue risk for food corporations
Why is this important for ESG investing?
Regenerative agriculture should be highly attractive from the standpoint of ESG investing. Socially, soil regeneration is critical to both food and water security – enabling not just direct subsistence, but the flourishing of livelihoods and economic communities of smallholder farmers on whom over 70-80% of world food production depends. Environmentally, the enhancements to water drainage protect against both drought and flood risk, while also helping sequester carbon into soils.
From an investment standpoint these combined factors may also increase the value of currently unproductive land by enabling a transition to sustainable food production – increasing asset values while simultaneously reducing revenue risk for food and drink companies. It is also worth mentioning here, that by increasing the carrying-capacity of currently unproductive land, the impetus to clear new land through harmful practices such as deforestation can be greatly reduced. As a corporation, why take on the reputational risk of deforestation, when you could instead regenerate unproductive land, reduce revenue risk and lift asset values in the process? Sustainability pays.
Finally, as carbon-pricing / carbon taxation becomes more prevalent, the ability of regenerative agriculture to lower CO₂ footprints will itself become economically attractive for food production industries.
FOOTNOTES & LINKS
¹ Dr. Rattan Lal, The Ohio State University (accessed at: https://www.danonenorthamerica.com/news/regenerative-agriculture/)
² Nicholas Camu, vice president of agriculture at Danone North America (accessed at: https://www.prnewswire.com/news-releases/danone-north-america-expands-the-most-comprehensive-regenerative-agriculture-program-in-the-dairy-industry-301196286.html)