Small businesses key to climate interventions on agri-food value chains, flags US study

US-based agriculture experts are calling for greater attention toward agri-food value chains (AVCs), which link input providers (e.g of seeds, fertilizers) to downstream entities (processors, retailers) to drive climate-smart practices in the global food system. In a new study, researchers highlight the essential role of small businesses in driving change through AVCs.

Johan Swinnen, director general of the International Food Policy Research Institute (IFPRI), Loraine Ronchi, global lead for Science, Knowledge and Innovation in Agriculture and Food from World Bank Group and Thomas Reardon, professor, Department of Agricultural, Food, and Resource Economics at Michigan State University and IFPRI have authored the paper, published in Science.

The authors believe structures and incentives within AVCs can “effectively empower farmers” to adopt climate-smart agricultural practices more widely.

“AVCs can drive farmers’ adoption of climate-smart practices through tools like resource provision contracts, technology transfer, and financial incentives,” says Swinnen. 

“Historically, these mechanisms have been used to enhance food quality and safety, suggesting their applicability for addressing climate goals.”

A sharpened focus on these goals is needed as climate change related disasters continue to impact the global food crisis alongside political conflicts. Last week, the UAE and the US governments said they would invest US$29.2 billion in building “climate-smart agricultural food systems” to tackle the climate crisis, global hunger and food insecurity.

MSME firms can support climate-smart agriculture by providing small farmers with essential inputs and training.The findings come as scientists warn of the impact of global warming and climate change on the cultivation and quality of beer and wine, with the FAO predicting a surge in coffee and cocoa prices due to climate change risks.

“The hidden middle”

Despite the potential of AVCs, the study flags that climate mitigation and adaptation efforts have centered around large multinational firms and certification schemes for export markets. These include the “Green Deal” of the EU, new requirements for reporting Scope 3 emissions under the EU Corporate Sustainability Reporting Directive and other government and civil society initiatives.

However, the study highlights micro, small, and medium enterprises (MSMEs) as the “hidden middle,” whose role has either contributed to the pessimism regarding the potential of agriculture and the food system for change, or has been “neglected altogether” in the climate debate. 

“A key factor is that it is usually thought that these smaller companies lack the motivation to provide incentives and capacity to farmers to be climate-smart; and especially in the Global South, they are often considered stagnant, inefficient and an impediment to change,” reads the study.

“MSMEs, which make up 80–90% of AVC companies in the Global South, have a vital role to play,” states Reardon. He believes these firms can lead to “grassroots transformation by providing small farmers with essential inputs, training, credit and logistics in support of climate-smart agriculture.”

Role of policy frameworks

The study also highlights the crucial role of policy frameworks in strengthening AVCs’ ability to bolster climate-smart methods.

They propose a range of policy measures, including de-risking private investments through public procurement programs and the redirection of agricultural subsidies toward sustainable initiatives.

Enabling private sector investment in the sector, making business-friendly investments in transport and regulating emissions reporting within supply chains while helping smaller enterprises with compliance costs to “ensure inclusiveness” are other methods suggested by the authors.

They also urge that “power imbalances in AVCs” must be addressed to promote fair income distribution and foster competition.

Methane-reducing animal feed and efficient irrigation systems can bolster climate-smart agriculture.“Agrifood value chains represent a significant, but still largely untapped opportunity to drive climate-smart agriculture and build sustainable food systems,” underscores Ronchi.

“Given that processing and retail operations in AVCs share an interest in supply assurance and continuity, they are natural champions for supporting climate-smart, resource-wise approaches from their primary suppliers, who are farmers.”

She believes robust scientific effort on affordable technologies for smallholders, effective policy design and inclusive stakeholder collaboration can support these measures.

Bolstering climate-smart innovations

The study underlines that policies, science, and innovation are also useful in tapping the potential of AVCs to promote climate-smart agriculture at the farm level. Economic and social science, as well as engineering and digital sciences, can help AVCs send effective “climate practice signals” to farmers.

“Public and private R&D must prioritize accessible and affordable technologies such as climate-resilient seeds, methane-reducing animal feed and efficient irrigation systems,” note the authors.

Moreover, collaborative initiatives, such as those between research institutions and AVC firms in the dairy sector, exemplify how science can “simultaneously reduce farm-level emissions and boost productivity.”

Recent innovations focused on addressing climate change risks include HowGood’s climate reporting tool for calculating the environmental impact of sustainable farming practices and Helios AI’s crop tracking platform, which provides agrifood buyers and traders with access to the climate risks impacting crops to predict “where and why” disruptions are likely to occur.