Eyes on the $2.3 Trillion Prize: Will the Food Industry Tap into the SDG’s Business Opportunities?
Why should corporations pay attention to the Sustainable Development Goals? For two major reasons: there are financial and environmental benefits to be had by companies that align their business models with them.
More than 190 world countries last year adopted the UN’s 17 Sustainable Development Goals (SDGs) that aim to tackle climate change, provide clean water and end poverty, among other ambitious targets, by 2030.
Achieving these goals will require private sector investment — and could unlock new business opportunities worth about $2.3 trillion annually in the food and agriculture sector alone, according to research published today.
The study, commissioned by the Business and Sustainable Development Commission, finds 14 business opportunities in food and agriculture. It says while these would require an annual investment of $320 billion, companies that take advantage of these opportunities will yield a seven-fold return on investment.
According to the study, the biggest of the 14 business opportunities is in reducing food waste in the value chain, which could yield up to $405 billion annually in economic benefits.
“Let’s start with food waste in the value chain,” says report author Fraser Thompson, director at AlphaBeta, in an interview. “Between 20 and 30 percent of food is wasted somewhere along the value chain, even before allowing for food waste at the point of consumption. The majority of losses in the value chain occur in developing countries, where poor storage facilities and inadequate transport infrastructure mean that a significant share of food is wasted after harvest.”
This, Thompson says, presents a range of business opportunities related to cold storage systems and food transportation.
“Pilot efforts in Benin, Cape Verde, India, and Rwanda have documented reductions of food loss by more than 60 percent during field trials of a variety of low-cost storage techniques and handling practices,” he said. “Of those available techniques, 81 percent were found to be able to increase the incomes of smallholders by more than 30 percent.”
Paul Polman, CEO of Unilever and member of the Business and Sustainable Development Commission, says the SDGs present a “clear moral case for change” as well as the “business opportunity of a lifetime.” He points to Unilever’s sustainability practices as proof.
“At Unilever, we have helped hundreds of thousands of smallholder farmers improve agricultural practices enabling them to double or even triple their yields,” he said in a statement. “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.”
Another business opportunity lies in technology to improve yields and conserve resources in large-scale farms — an $180 billion opportunity, the report says.
“This is another area with significant potential for environmental and financial benefits,” Thompson said. “Our research found the potential for a 40 percent improvement in large-scale farm yields over the next 20 years. One of the key strategies is to improve the diffusion of technologies.”
The Brazilian Agricultural Research Corporation, known as Embrapa, for example, has pioneered more than 9,000 technology projects, he says. These include including designing tropical strains of soybean and other crops that can thrive in Brazil’s climate.
“Other applications of technology associated with this opportunity include using big data techniques to optimize crop yield, fitting tractors with global-positioning-systems and multispectral sensors to allow precise application of nitrogen, farm-management software, drone technology, and advanced robotics.”
Some of the other financial opportunities highlighted in the report include:
- Restoring forest ecosystems: up to $365 billion
- Reducing food waste at consumer level: up to $220 billion
- Sustainable aquaculture: up to $125 billion
- Expanding micro-irrigation: up to $85 billion
- Reducing packaging waste: up to $65 billion
So how do companies tap into these opportunities? The first priority is investment to the tune of about $320 billion a year.
Current assets under management of investment funds focused on ecological and regenerative agriculture and food systems.
Currently funds that focus specifically on ecological and regenerative agriculture and food systems have just over $500 million in assets under management, according to Thompson.
“Even if we consider broader agricultural funds, the capital base of the 31 leading funds amounts to just under $4 billion,” he said. “While large, this is less than 1.5 percent of the annual investment requirements.”
In addition to capital investment, these SDG opportunities require a shift in business strategy. Companies need to engage with public policy and internalize social and environmental costs — such as internal carbon and water fees. This shift will also require corporations to work with their suppliers to drive sustainability efforts across the value chain.
“A business-as-usual approach will not only fail to address these challenges, it will also create exposure to companies on issues ranging from regulatory risk to supply chain vulnerabilities,” Thompson said. “The good news is that there is a large potential prize for businesses worth up to $2.3 trillion in 2030 but this will only come with a radical departure from current approaches.”
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