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Sustainability and the need to be more sustainable is – and should be – of paramount importance to all stakeholders in the agri-food supply chain.
But to be truly sustainable, we need standards and policies that advocate for sustainability at every stage of food production, from primary production (cultivation and harvesting), through to secondary production (slaughter, sorting and transport) and further stages of processing, packaging, storage and distribution.
We’re seeing increasing inclusion in supply contracts and product specifications of social and environment aspects of how food items have been produced or transformed at different stages of the supply chain. As a result, agri-food governance needs to establish and retain public trust in food and the wider food supply chain.
There are two primary governance structures that take different approaches to driving sustainability in the agri-food supply chain.
Supranational governance
Supranational governance involves global bodies such as the World Trade Organization (WTO), the Food and Agriculture Organization (FAO) and the United Nations Framework Convention on Climate Change (UNFCCC).
These governance architectures directly influence global, regional and national public policy, leading to the enshrining of sustainability issues in law, such as the implementation of net-zero carbon policies and regulatory strategies to reduce nutrient pollution and biodiversity loss.
“However, because these policy initiatives typically rely on consensus, supranational institutions can be slow to act and the policies created can be inflexible, technocratic and lacking in accountability to individual sovereign powers,” says Dr Louise Manning, professor of sustainable agri-food systems at the University of Lincoln.
Hybrid governance
Hybrid governance, on the other hand, combines public and private sector efforts to deliver public goods, often through public-private partnerships (PPPs) or quasi-public-private partnerships (QPPPs). This hybrid approach allows for more innovative, flexible and dynamic governance compared with purely regulatory or market controls.
In agri-food systems, public-private governance can strengthen collaboration between stakeholders and align their interests. However, the needs of some stakeholders can be elevated above others.
Put simply, green finance can be defined as any structured financial activity that has been created to ensure an improved environmental outcome. It is also a key driver in delivering public goods that may not have a conventional market value to encourage their delivery.
Green finance can provide both public and private financial flows to promote Sustainable Development Goals, green growth and other climate mitigation strategies.
Publicly funded green finance
Publicly funded green finance schemes are designed to deliver more sustainable agri-food production and greater protection of biodiversity and the wider environment. Examples of publicly funded green products include agri-environment schemes and environmental land management schemes, such as the Sustainable Farming Incentive in the UK and the Conservation Reserve Program in the US.
Private-sector-funded green finance
Private sector finance can be mobilised in a multitude of ways to promote improved sustainability practices. Examples include premium payments for the production of sustainability certified products, investments in ecosystem services and green loans.
Private mechanisms for delivering sustainable food-production practices can also be delivered via higher market prices for food products that demonstrate environmental and social benefits, such as foods and food products certified as organic.
However, acceptance into premium payment schemes isn’t an easy feat, with stakeholders increasingly required to verify their commitment to achieving more sustainable agriculture.
“Food supply chain businesses, and the degree to which they have embedded sustainable practices, will directly affect their access to investment capital and operating capital from financial institutions and/or market returns in a fast-changing geopolitical and socioeconomic environment,” says Dr Aleksandra Kowalska, associate professor at Poland’s Maria Curie-Skłodowska University.
Despite their promise, policies developed by supranational institutions can be slow, inflexible and lack accountability, in turn making their implementation quite complex. In addition, supranational polices can – in some instances – fail to reflect the regional needs and concerns of stakeholders, resulting in their reluctance to comply with the changes put forward.
Balancing the interests of multiple stakeholders can be extremely challenging, with potential ethical concerns over public funds benefiting private enterprises. As previously stated, public-private governance structures can result in the needs of some stakeholders being placed above others, with some seen as passive recipients of policy, rather than active co-creators.
Transitioning to a green finance model isn’t easy, and the decision to do so should never be made on a whim. Transitioning involves significant changes to a financial institution’s risk profile and investment strategies, such as the need to consider environmental risks and impacts on natural capital in assessing credit risk.
Policy development and the continued commitment to refining legislative frameworks, such as the European Green Deal and the Sustainable Finance Disclosure Regulation, are both integral to driving sustainability standards in the agri-food supply chain.
But perhaps equally important as the development of sustainability standards is the appropriate governance of them, particularly in an era where consumers expect a level of business transparency.
As consumers, we want to know the journey of our food from farm to fork, how the clothes on our backs came to be, and the environmental impact of our modes of transportation. However, the desire for this transparency can lead to companies and businesses making the wrong, and sometimes harmful, decisions.
Greenwashing is a term that we’re all far too familiar with now – so familiar, in fact, that it was officially added to the Merriam-Webster dictionary in 2022. The emergence of greenwashing – and the power it carries – is surely evidence enough to warrant the development and implementation of sustainability standards.
And, as Manning states: “Without suitable oversight and governance, how can consumers be protected from greenwashing through unsubstantiated, misleading or potentially fraudulent sustainability claims?”
This article has been adapted from a chapter on the role of governments in driving sustainability standards: governance structures and green finance, by Dr Louise Manning and Dr Aleksandra Kowalska, in Manning’s book: Improving Standards And Certification In Agri-Food Supply Chains: Ensuring Safety, Sustainability And Social Responsibility
Dr Louise Manning is professor of sustainable agri-food systems at the University of Lincoln, and Dr Aleksandra Kowalska is an associate professor in the department of microeconomics and applied economics at Poland’s Maria Curie-Skłodowska University. This article was compiled by Katherine Lister, marketing and communications manager at Burleigh Dodds Science Publishing
